Retreating from a position adopted during former Gov. Phil Bredesen’s administration, the state Department of Revenue has moved to partially raise a veil of secrecy that has covered official interpretations of Tennessee tax law since 2008.
The so-called “letter rulings” are provided on request to taxpayers, typically companies, willing to pay a fee for an answer to questions on the state tax consequences in a given situation.
Apparently, Amazon.com got a secret letter ruling late last year on its desire to be exempt from collecting Tennessee sales taxes. Gov. Bill Haslam has said there are “ongoing negotiations” with Amazon that could lead to another, clarifying letter ruling.
The policy change will not directly impact the Amazon situation, but it will mean the partial opening of a door completely closed three years ago.
As of Wednesday, the Department of Revenue has issued 40 “letter rulings” this year and has decided that redacted versions of 17 will be made public and posted on the department’s website, according to Deputy Commissioner Glen Page.
Another 15 of this year’s rulings remain “under review,” he said, and eight will be kept secret, typically because of concerns that the taxpayer could be identified because of specific information in the ruling, even if the name is deleted.
As for the rulings issued under Bredesen, the department has selected five rulings deemed of enough interest to make public but will “not to go back and re-hash” the rest, Page said, unless a particular reason becomes apparent.
State Comptroller Justin Wilson had clashed with the Bredesen policy of non-disclosure, saying the officials would not even provide information that he felt need by auditors and others in his office.
“They were very difficult about disclosing information to me,” said Wilson, who praised the recent policy change, though saying he would prefer going even further in making documents public.

State Senate Finance Committee Chairman Randy McNally, R-Oak Ridge, noted that the federal Internal Revenue Service makes public all similar rulings that it provides on federal tax issues.
Keeping the rulings confidential, the senator said, could give one business an advantage over another. Also, he said some law firms have collected rulings they requested and thus build up a library of decisions that give them an advantage over other law firms.
But McNally also said the change is a step forward and may lessen the need for legislation mandating that the rulings be made public, after taxpayer names are redacted.
“As a matter of principle, I believe that rulings are an important tool in the administration of the State’s tax laws,” said Revenue Commissioner Richard Roberts in a statement responding to a reporter’s questions. “Accordingly, where taxpayer confidentiality can be protected, rulings should be published.”
“In order to confirm taxpayer confidentiality, the Department’s policy is to work with the taxpayer on an agreed redacted version of the published ruling,” Roberts said. “In the limited circumstances where the Department cannot protect taxpayer confidentiality, the Department will not publish a ruling.
“In addition to those circumstances where confidentiality limits publication, the Department will not publish rulings that are no longer valuable to the taxpayer due to law changes,” he said.
The commissioner also the department would avoid making public “duplicative rulings” that cover essentially the same ground.
National Federation of Independent Businesses pushed a bill during the past legislative session to mandate making the letter rulings public, but Gov. Bill Haslam’s administration opposed the measure. It failed.
NFIB State Director Jim Brown said the organization has adopted a “wait and see” attitude toward the new policy, but it is at least a step forward from the practice of sealing all letter rulings adopted during Bredesen’s administration.
Currently, the standard fee for a letter ruling is $500, though up to $10,000 can be charged for an “expedited” ruling. With a letter ruling comes the department’s commitment to honor the legal interpretation as applied to the requesting taxpayer.
Since 1988, the Department of Revenue has issued 849 letter rulings and 421 of them have been made public and are available on the department’s website, according to information provided by the department. Apparently, none were made public until 1994, though Page said he was uncertain why that was the case.
A majority of the rulings were public until 2004, when the Bredesen administration began keeping more under wraps. The policy of making all of them secret was adopted in mid-2008.
Of the eight 2011 rulings that will not be made public so far, four are being withheld because taxpayer confidentiality could be compromised, according to a document provided by the Department of Revenue. Three were deemed to be duplicative or previous rulings, the document says, while one was “rescinded and replaced” with a new ruling.
“The revenue rulings are supposed to be a way to instruct the taxpayer onwhat the law is,” said Wilson, who has worked as a tax lawyer. “I think people should be able to know what the law is.”
The comptroller said he believes even the identify of taxpayers should be public, so long as proprietary information and trade secrets are redacted.
“The vast majority — I’d say that 95 percent, if not higher — should be public,” Wilson said. “There should be equal information to all taxpayers.”
—
More information: Department of Revenue statement on letter rulings HERE, policy statement HERE.