Jan 23 2009

A tax review?

Published by at 10:55 am under Idaho

Last May Stan Howland, a veteran corporate income tax auditor for Idaho Tax Commission, delivered a startling 17-page report on what he argued was an inappropriate activity at the commission: Making secret (as in not disclosed to the public) deals with out of stat corporations that allow them to pay to the state a fraction of the taxes they owe. The argument in favor of this approach is that the legal action needed to collect the taxes might, at least in some cases, exceed what could be collected.

The report caused a flurry of discussion, most of which seemed to lead to three conclusions: (1) the activity he describes does in fact go on; (2) it appears to be legal; and (3) nothing more seemed likely to come of it, since the commission is arguing it is doing the right thing, and no one else in a position to impose their clout seems interested in forcing them to do otherwise.

But is the current economic crunch, alongside the crunch in state revenues, leading to a reconsideration of that outcome?

The subject came up Thursday at the state Senate Local Government and Taxation Committee, and the upshot didn’t look so good for the commission. From the Idaho Statesman‘s Kevin Richert blog post on the meeting:

The commission didn’t deliver an annual report on its “compromise and closing agreements” — the deals reached with out-of-state businesses who contest their tax bills. Gov. Butch Otter asked for just such a report on Aug. 20, and set a January deadline. Shouldn’t that be enough to get the ball rolling?

And yet it gets worse. The reason these deals are controversial — aside from the fact that they are shrouded in secrecy — is that they allow businesses to settle their tax bills for less that what they owe. So Boise Democratic Sen. Elliot Werk asked a reasonable enough question: How much money is the state giving up? The commission didn’t say.

That’s inexcusable. Legislators — and the taxpayers they represent — need some basic information so they can weigh the pros and cons of these settlements, which are designed to allow the state to avoid going to court. The current budget crunch ought to lend a little urgency to the process.

(We would add to the cause for controversy the point if disparity in tax law administration: Evidently, if you have an attorney or two on your staff, you can get a big tax break from Idaho; if you don’t, you’re actually liable for the taxes you owe. You might think individual Idaho taxpayers would be outraged about that as a conceptual matter.)

Step one might be for the commission to deliver the raw numbers – the amount of taxes foregone by the settlements. if the numbers are actually small, all this might not be such a big deal. But as long as they’re not made available, you have to wonder how small they are.

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