[Vision2020] Idaho Senator Calls For Tax Commission Investigation

[Tom Hansen]

>From today's (May 31, 2008) Spokesman Review -

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Recurring Issue 

The problem alleged by the whistleblower was highlighted in a legislative 
audit in 1996. In response, the Tax Commission agreed to require a review 
by at least two other commissioners when one proposes a settlement to 
excuse more than $50,000 in taxes

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Idaho senator calls for Tax Commission investigation 
Whistleblower says corporations get deals

BOISE – Idaho's Senate tax chairman is calling for a full investigation 
into a whistleblower's allegations that state tax commissioners have cut 
secret deals with out-of-state corporations to excuse them from paying 
millions in Idaho taxes.

"There've been some accusations made, and I don't think we should take 
them lightly," said Sen. Brent Hill, R-Rexburg. "I think a thorough 
investigation is appropriate. … We're not going to let this drop."

Stan Howland, a state tax auditor who's worked for the Idaho Tax 
Commission for 28 years, sent lawmakers, the governor and the attorney 
general a 17-page report this week charging that tax commissioners 
routinely excuse large sums in taxes owed by large, multistate 
corporations, and confidentiality laws prevent anyone from finding out 
about it.

"The process by which this has occurred is relatively straightforward," he 
wrote. "A corporation files an incorrect Idaho income tax return, it is 
corrected by the audit staff, the additional tax liability is protested by 
the taxpayer, and then a tax commissioner allows the taxpayer to pay only 
a percentage of what is really owed."

The practice, which uses a confidential settlement approach rather than a 
published ruling that sets precedent, has been going on for 17 years, 
Howland wrote, but it's gotten to the point in the past year to where "the 
commission has settled almost all multistate corporate protests in the 
past year in this manner."

"These special deals are available primarily to those companies that are 
aware of the commission's willingness to compromise audited tax returns," 
Howland wrote. "The number of corporations receiving these 'deals' has 
increased over the years to a point where most large corporations now 
automatically protest all audits in anticipation of receiving their 'Idaho 
tax break.' "

The Idaho governor's office, which appoints and oversees the state Tax 
Commission, and the Idaho attorney general's office said they're still 
reviewing the whistleblower's report.

"We're reviewing it and looking it over and don't have any comment on it 
at this point," said Jon Hanian, spokesman for Gov. Butch Otter.

Bob Cooper, spokesman for Idaho Attorney General Lawrence Wasden, 
said: "Anything that a citizen or an employee takes the time to deliver to 
us or to prepare, we're going to take seriously and we're going to look at 
it. But until we have a chance to review it and fully understand the 
complaints and the processes, it really would be premature to either 
validate or dismiss."

Sen. Hill, a certified public accountant who routinely takes cases before 
the Tax Commission but hasn't been involved in any multistate corporate 
audits, said he's skeptical that tax commissioners and staffers have acted 
illegally. "I just have a real hard time believing that these competent 
people would conspire together to do an illegal act that has absolutely no 
benefit to them," he said.

But, he said, "We need to look at some of those compromises … look at the 
facts, the circumstances and the amounts, and if as a result of that we 
feel that the commission has been too lenient in allowing these 
compromises for the amounts they have, then we need to give them better 
guidance and instruction on what to do."

Hill said multistate tax law has grown increasingly complex in recent 
years. "I think that most large corporations automatically protest all 
audits, period, now – much more than they used to," he said. "And that's 
true whether they are multistate operations or in-state. Our clients just 
do."

Hill said he has contacted Senate leadership about a possible legislative 
audit to investigate the allegations.

Rep. Jim Clark, R-Hayden Lake, a member of the House Revenue and Taxation 
Committee and chairman of the House Judiciary Committee, said he'd support 
that. Clark said he was particularly concerned about the idea of 
confidentiality laws preventing anyone from knowing about the excused 
taxes.

"We've got to fix that, that's for sure," he said. "That's just not right."

Howland, in his report, wrote, "This secret environment is due in part to 
legislation that considered the privacy of non-compliant taxpayers to be a 
priority at the expense of those that do comply."

Howland called the confidential settlements "the commission's best-kept 
secret from the residents of the state," and said they've become such a 
problem in his work that, "Many multistate companies refuse to provide 
legally required substantiation to the Idaho auditors, stating openly that 
they will protest the audit and get relief from the commission."

Hill said confidentiality laws, both state and federal, have caused 
problems in many financial areas in recent years. "The privacy laws that 
we passed in this nation have caused some inconveniences for a lot of 
these processes, whether it's with taxes or credit or a lot of other 
problems," he said. "I don't think that Idaho's intent is to have these 
things be more confidential than they are in other places in the nation. … 
If we are interpreting it more strictly than other states or the federal 
government is, I think we ought to look into this, to see if that's what 
the Legislature really wants."

Boise CPA Rich Jackson said he was surprised by the charges. But, he 
said, "I would seriously doubt if the commissioners stepped across the 
line."

Jackson said he's seen no evidence in his practice that confidential 
settlement agreements have become more pervasive, though he hasn't handled 
large multistate corporate audit cases.

Hill said, "There's kind of a joke around our office that if you get 
audited, you'd rather be audited by IRS than the state, because the state 
in most cases interprets the law more strictly. … I just have not found 
them pushovers on anything." 

Jackson agreed. "I'd be complimenting 'em rather than shooting at 'em," he 
said, for pushing for compliance with state tax laws. "And they've done it 
with a very small staff."

The same problem was highlighted in a legislative audit in 1996. Howland 
wrote in his report that the 1996 audit was softened at the behest of then-
Attorney General Al Lance's office, and the problems continued and 
worsened.

The 1996 audit stated: "The delegation of sole authority to compromise 
millions of dollars of contingent tax liabilities creates the opportunity 
for malfeasance especially when those compromises are not subject to 
public disclosure. We know of no other position in state government where 
one individual has sole and complete authority, in confidential 
circumstances, to determine the outcome of millions of dollars of revenue 
to the State General Fund."

In response to the 1996 audit, which the Tax Commission disputed, the 
commission did agree to require a review by at least two other 
commissioners when one proposes a settlement to excuse more than $50,000 
in taxes. Carl Olsson, deputy attorney general for the Tax Commission, 
said Friday that that policy was implemented right away and remains in 
effect. "That is then reviewed by the other commissioners," he said.

Hill said he's not ready to pass judgment, but wants the allegations 
checked out. "We want to investigate it. There's no intent to ignore it," 
he said. "Let's find out, and make sure that the interest of the taxpayer 
and the interest of the citizens are both being taken care of. I just 
think that's really important."

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Seeya at Farmers' Market, Moscow.

Tom Hansen
Moscow, Idaho

"People who ridicule others while hiding behind anonymous monikers in chat-
room forums are neither brave nor clever." 

- Latah County Sheriff Wayne Rausch (August 21,
2007)

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