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<H5 style="FLOAT: right" class=details>September 14, 2010</H5></DIV>
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<H1>Pending tax deals could cost Idaho $75 million</H1>
<DIV class="details nested grid-8"><SPAN><A
href="http://www.spokesman.com/staff/betsy-russell/">Betsy Z. Russell</A><BR>The
Spokesman-Review </SPAN></DIV>
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<DIV class="tag-details details-top"><SPAN
style="MARGIN-RIGHT: 3px">Tags:</SPAN> <SPAN><A
href="http://www.spokesman.com/tags/idaho-state-tax-commission">idaho state
tax commission</A></SPAN> <SPAN><A
href="http://www.spokesman.com/tags/secret-tax-deals">secret
tax deals</A></SPAN> <SPAN><A
href="http://www.spokesman.com/tags/shirley-ringo">Shirley Ringo</A></SPAN>
<SPAN><A
href="http://www.spokesman.com/tags/stan-howland">stan howland</A></SPAN>
<SPAN><A
href="http://www.spokesman.com/tags/whistleblower">whistleblower</A></SPAN>
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<H5>Documents</H5>
<P>• <A
href="http://media.spokesman.com/documents/2010/09/TaxDeals-Aug31-LetterAffidavits.pdf">Aug.
31 letter to Idaho’s attorney general, plus affidavits from
whistleblowers</A> (PDF)</P>
<P>• <A
href="http://media.spokesman.com/documents/2010/09/TaxDeals-Sept8-Letter-PlaneDecision.pdf">Sept.
8 letter to the attorney general and Tax Commission’s pending
decision</A> (PDF)</P></DIV>
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<P>BOISE - Idaho stands to lose more than $75 million just from tax compromises
that are now in the works, according to a group of whistleblowers who are
current and former employees of the state Tax Commission - including one
$203,000 tax break about to be handed to a taxpayer on his $7 million private
plane.</P>
<P>“This is the worst scandal I’ve seen in Idaho since I first came here in
1950,” declared Robert Huntley, the former Idaho Supreme Court justice who’s
representing Rep. Shirley Ringo, D-Moscow, for free in her lawsuit against the
state over the deals.</P>
<P>Ringo has offered to put the lawsuit on hold in favor of an immediate state
investigation, along with job protection for the current Tax Commission auditors
and managers who came forward with sworn statements about the deals. But so far,
the state hasn’t taken her up on the offer.</P>
<P>“It’s our office policy not to comment on pending litigation,” said Bob
Cooper, spokesman for the Idaho Attorney General’s office. “What we have to say
to the court will be said to the court.”</P>
<P>There’s a Nov. 4 hearing scheduled in Ada County district court on the
state’s motion to dismiss the lawsuit, charging that Ringo doesn’t have standing
to sue as a state legislator, a contention Huntley disputes.</P>
<P>“They’ve stated that they were rejecting our offer but the lines of
communication should remain open, and that they had no counter-offer at that
time,” Huntley said. “I think we have just hit the tip of the iceberg on what’s
gone wrong here. Most of the employees are terribly afraid to speak.”</P>
<P>Longtime senior state tax auditor Stan Howland sent lawmakers, the governor
and the attorney general a 17-page whistleblower report in 2008, 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.
He said the deals have become so frequent that corporations routinely protest
their state taxes to get their “Idaho tax break.”</P>
<P>Since then, two state investigations have concluded no laws were broken, but
seven more longtime Tax Commission employees have come forward with sworn
statements about the tax deals, including three current commission employees who
came forward in the past two weeks. All said reform legislation enacted in 2009
after Howland’s revelations didn’t fix the problem, and may even have made it
worse.</P>
<P>Among the deals they’ve described in affidavits:</P>
<P>– Paul Chugg, a tax auditor for the commission for the past 28 years and a
CPA, said he was threatened with disciplinary action when he objected to waiving
$400,000 in penalties for a taxpayer who falsely claimed more than $5 million in
Idaho tax credits. The penalties were waived in full. “A few years later, I was
subpoenaed to testify by the U.S. Department of Justice at the criminal trial of
the taxpayer’s former employee who was responsible for the fraudulent claims,”
Chugg said in his affidavit.</P>
<P>– Three auditors said a large, multistate taxpayer with sales affiliates in
Idaho wrongly claimed the affiliates weren’t taxable in the state, and the
commission decided to settle the case for $1.2 million less than the amount
owed, though the auditors said there was “absolutely no legal support for this
extremely troubling compromise.”</P>
<P>– Former longtime auditor Gary Mattox said a golf club owed more than
$700,000 in sales taxes on high-priced membership fees, but the commission
forgave the full amount and didn’t pursue it.</P>
<P>– Barbara Nichols, manager of multistate income tax audits for the commission
and an employee since 1983, said a taxpayer wrongly claimed non-business income,
and the commission decided to compromise by allowing 50 percent of that income
to be treated that way. “This compromise was made in direct violation of Idaho
law and cost the state approximately $680,000,” according to her affidavit. </P>
<P>Most of the compromises described in the affidavits are secret deals that
until 2009, a single tax commissioner could reach with a taxpayer. The 2009
legislation added some new requirements to the process, but the deals remain
secret.</P>
<P>But the deal involving the private plane is even more troubling, Huntley
said, because it is a pending formal, published decision and will set precedent.
In that case, the owner of the $7 million plane claimed an Idaho investment tax
credit on the full value of the plane, though by law, the credit is available
only for use of the plane in Idaho. The portion of a plane’s value eligible for
the credit is determined by the ratio between Idaho departures and out-of-state
departures; according to its flight log, the plane had 45 Idaho departures among
its 107 total departures.</P>
<P>But the taxpayer argued he should be able to get investment tax credits for
the full value of the plane, because many of the out-of-state departures
occurred when he’d leased the plane out for use by others, and he received that
leasing income in Idaho. In the proposed decision, the commission agrees, allows
the additional investment tax credit and waives all penalties, excusing the
taxpayer from $202,252 in taxes, penalties and interest.</P>
<P>“The statute and rule involved has been to the Idaho Supreme Court two times,
approved both times,” Huntley said. “That’s slam-dunk.” Huntley and Ringo have
asked the Attorney General’s office to immediately intervene in that case.</P>
<P>Ringo said she fears that Idaho’s Republican leaders are discounting her
lawsuit as a political ploy - not only is she a Democrat, but Huntley was the
Democratic candidate for governor in 1998 - but she said it’s not. “We keep
learning more and more, and it’s abundantly clear that there’s a pervasive
problem there that we need to solve and it’s costing the state all kinds of
money,” Ringo said, “and that affects every single taxpayer who’s not getting
those breaks.”</P>
<P>Huntley, who has represented Howland for free since he first walked into
Huntley’s Boise law office two years ago, said, “It really gripes me when these
guys accuse me of politics - it’s good government.”</P>
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<DIV><FONT size=2>________________________________________</FONT></DIV><FONT
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