Gov. Bill Haslam’s administration is at odds with a key business lobby over a legislative effort to make public Department of Revenue rulings on tax issues that have been kept secret since a policy change instituted by former Gov. Phil Bredesen’s administration in 2008.
The conflict over SB902, pushed by the National Federation of Independent Business, provides at least the third example of how the road to making state government more business-friendly, an oft-stated goal of Haslam and leaders of the Legislature’s Republican majority, is proving not always smooth.
Jim Brown, state director of NFIB, said 180 “letter rulings” by the revenue commissioner have been issued and kept confidential since the policy change instituted under Bredesen. The letters are issued in response to specific taxpayer requests for how the department would interpret the state tax consequences of a given business decision.
Those rulings, Brown said, would provide much-needed insight for other business taxpayers facing similar situations. As things stand now, he said, businesses facing an administrative hearing on their tax liability are left “blinded” – even on specific requests – to the position the department has taken in similar matters.
“They’re being held to the standards in these rulings, but they’re not being told what the rulings are,” said Sen. Bo Watson, R-Hixson, Senate sponsor of the bill. “That’s just not fair.”
The bill calls for information in a letter ruling that could identify the taxpaying business that made the request for a ruling to be redacted before the ruling is published on the Department of Revenue website. But Revenue Commissioner Richard Roberts said there often are situations in which the taxpayer could be identified by deduction even with redacting, violating the long-standing principle of protecting an individual taxpayer’s confidentiality.
Roberts told the Senate Finance Committee that the department is exploring a policy change from the Bredesen era’s flat ban – which in turn was a reversal of previous policy making the rulings open. Basically, Roberts proposes that the publication of a ruling be left to his discretion and argues that a mandate for publication from the General Assembly goes too far.
In response to a reporter’s request for comment, the commissioner sent this response by email:
“Statutory requirements that protect all taxpayers – from the individual to the small business – maintain the confidentiality of taxpayer information.
“The department believes the bill would negatively affect potential job growth by impinging on taxpayer confidentiality. It also believes that rulings with applicability to multiple taxpayers and rulings in which the identity of taxpayers can remain confidential should be publicly available. It is the intended policy of the department to resume publication of such rulings.”
A vote on the bill was delayed in committee this week, with Watson saying he hopes to find some compromise. As drafted, the bill calls for publishing all the now-secret rulings dating to Jan. 1, 2008. An already-proposed amendment would eliminate the reach-back provision and require only future rulings to be made public.
Watson suggested another possible compromise – requiring publication, but giving the commissioner the right to refuse in specific cases. The commissioner’s decision, he suggested, could be subject to review by another, independent official – perhaps the state comptroller.
The Haslam administration is not opposing a separate bill that would increase the cost of issuing a revenue ruling in response to a taxpayer’s request. Currently, it costs $200 to get a Revenue Department ruling. HB1108, by Rep. Mike Stewart, D-Nashville, would increase that to $500 and also authorize issuance of a special, expedited ruling for $10,000.
There is currently no deadline on the department for responding to a request for a ruling. An expedited ruling would have to be issued within 60 days under the bill, which won a House subcommittee’s approval this week. Stewart said such ruling would be infrequent – typically involving a business planning a multimillion dollar investment.
The NFIB, meanwhile, appears to be losing its lobbying battle against HB761 by Rep. Richard Montgomery, R-Sevierville, which mandates that private health insurance policies cover at least $1,000 of the cost for a hearing aid needed by a child under age 18.
The House approved the measure 82-12 on Thursday, with some legislators sharply criticizing NFIB for “intimidating” and “threatening” them in an email alert that said a yes vote likely would count against legislators when the organization rates them to determine which deserve political support in the next election. Lt. Gov. Ron Ramsey said he expects the bill to pass the Senate as well.
Brown said the NFIB has always opposed mandates on private insurance benefits, believing they drive up premium costs and are unfair – even when the benefit to be provided is popular.
The most publicized clash between business lobbyists and the Republican majority has been over HB1378, part of a package of bills targeting illegal immigration. The measure would require all employers to use the federal “E-Verify” to assure that new employees – starting Jan. 1 – are legally in the United States.
A broad coalition of business interests, ranging from the Tennessee Chamber of Commerce and Industry to the Tennessee Hospitality Association and the Tennessee Farm Bureau, have adamantly opposed the measure as a costly mandate that puts employers unnecessarily at risk for financial penalties and even loss of business license.
Nonetheless, the bill has been approved by committees of both the House and Senate. There have been some concessions to business lobbyists via amendment – for example, the Senate version was amended to allow the commissioner of the Department of Labor and Workforce Development to waive or reduce penalties that, as the bill was introduced, would be mandatory and start at $1,000.
While supporting such modifications, business lobby spokesmen said they still oppose the measure. But sponsor House Rep. Joe Carr, R-Lascassas, said supporters are determined to press ahead with an idea that has strong support from the general public.