Tax Analysts Blog

Transparency Versus Disclosure of Taxpayer Information

Posted on May 7, 2014

Tax Analysts is obsessed with transparency. We really are, but in a good way, of course. For more than 40 years, Tax Analysts has worked to bring into the open the working law of tax administrators. But while Tax Analysts has been instrumental in shaping Freedom of Information Act law in this country and aggressive in demanding that the IRS release documents that provide insight into the agency’s working law, it has not done so by advocating for the disclosure of confidential taxpayer information as a means of improving transparency in tax administration.

I’ve had the wonderful opportunity to speak on numerous occasions about Tax Analysts’ efforts to promote transparency in state tax administration. At times I have noticed that there is confusion (even concern) that promoting transparency necessarily leads to the disclosure of taxpayer information. In my mind, it is not necessary to disclosure taxpayer information in order to achieve transparency in tax administration.

Tax Analysts has promoted the disclosure of properly redacted documents produced by tax authorities, such as letter rulings and technical assistance memoranda, because they provide insight into how a tax regulator will administer the tax code. By contrast, the disclosure of documents that contain taxpayer information, whether required by state law or the result of litigation, does not encourage transparency in tax administration.

Take letter rulings, for example. Provided they are properly redacted to protect taxpayer confidentiality, letter rulings should be released to the public. They provide valuable guidance to taxpayers and practitioners on how a tax agency will administer the tax laws regarding a specific fact pattern. There will be instances in which the necessary redaction of a letter ruling diminishes its usefulness, but for every one of those instances, there are plenty in which letter rulings provide necessary guidance.

Transparency in tax administration undoubtedly produces a better system. But permitting the disclosure of key details of an entity’s tax return or specific tax situation is a different topic altogether, and one that will not lead to a better system of tax administration.

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