Legislature(1997 - 1998)

04/17/1997 08:15 AM House FIN

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
  HOUSE BILL 94                                                                
       "An  Act   relating  to   confidentiality  of   certain                 
       municipal tax records."                                                 
  94  would   allow  local  governments  to  classify  certain                 
  financial information submitted as confidential if requested                 
  to do so by the taxpayer.                                                    
  Under State law,  income information submitted to  the State                 
  by the taxpayer as part of  a tax return or report would  be                 
  held  confidential.    AS  43.05.230 prohibits  officers  or                 
  agents of the State from disclosing the "amount of income or                 
  the particulars" listed in a return.  However, when the same                 
  or similar information  is submitted  to a local  government                 
  for  the  purposes of  a tax  assessment,  there is  no such                 
  protection.   HB 94 would  extend the protection  for income                 
  information   submitted  to   the  State  to   also  protect                 
  information submitted to local governments.                                  
  Mr. Logan continued, HB 94 would not change, alter, amend or                 
  in any way restrict the authority that local government  has                 
  to assess  a tax.   It simply  says that once  the financial                 
  information is provided  to the  local taxing authority,  it                 
  must  be  held confidential  if  the taxpayer  makes  such a                 
  Mr.  Logan commented, following  discussion on  the proposed                 
  legislation with borough assessors throughout the State, the                 
  sponsor submitted a work draft, #0-LS0419\F, Cook,  4/16/97,                 
  to be the  version for the  Committee's consideration.   The                 
  previous versions include civil penalties for the release of                 
  confidential    information.        Upon    the    assessors                 
  recommendation,  that  information  was   deleted  from  the                 
  proposed committee substitute.  He  added, the penalties for                 
  the release of information could be found in AS 11.56.860.                   
  Mr. Logan summarized the intent  of the proposed legislation                 
  which clarifies  when a  taxpayer submits  information to  a                 
  local  government  for  the  purposes   of  a  property  tax                 
  assessment, the information related to the earnings, income,                 
  profit, losses or expenditures of that taxpayer must be held                 
  confidential should the taxpayer make a written request.                     
  Mr.  Logan   commented  that   following  discussions   with                 
  statewide   assessors   and    the   legislative    drafter,                 
  Representative  Green  had   attempted  to  determine   what                 
  information would justify confidentiality, those items which                 
  we would not want other competitors to see.                                  
  Representative  J. Davies  suggested  current language,  "is                 
  acquired",  was too broad.   Mr. Logan  replied that current                 
  language would  be  the  default which  would  result  in  a                 
  penalty of a Class A misdemeanor.                                            
  Co-Chair  Hanley  asked  if the  "valuation"  would  be kept                 
  confidential.  Mr. Logan stated  that determination would be                 
  public information.   Representative  J. Davies pointed  out                 
  that  information  from  the appeal  process  would  also be                 
  confidential.   Mr. Logan  advised that  had been  discussed                 
  with the drafter, Ms. Cook  from Legislative Legal Services.                 
  The  State does provide some  confidentiality if a tax payer                 
  has a tax assessment which  they challenge; that information                 
  is held tightly.  He believed that it would be fair  for the                 
  taxpayers to have the same privilege.                                        
  Representative  J.  Davies  agreed that  should  be  true in                 
  practice, although,  only the administrative  step had  been                 
  undertaken.  He believed that would not work in the judicial                 
  step.    The  first  Statute   includes  both  judicial  and                 
  administrative steps not requiring the State's involvement.                  
  Representative  G.  Davis  asked  how  widely  the  proposed                 
  approach  would be  used.  Mr.  Logan understood  that there                 
  were three basic approaches to the valuation of property:                    
       1.   The market approach  determined on the  value                      
            of the neighborhood property;                                      
       2.   Replacement approach; and                                          
       3.   Income approach based on how much income  the                      
            property generates.                                                
  MATSU  BOROUGH, MAT-SU,  voiced  concern  that  the  initial                 
  language  was so  broad  that it  would  include any  entity                 
  beyond  the  mining community.    Once the  information goes                 
  before  the Board of Equalization  (BOE), it would no longer                 
  be confidential.                                                             
  Co-Chair  Therriault  asked the  number of  assessments that                 
  address  financial information.   Mr.  Borglum  replied that                 
  income  information   was  mostly  relative   to  commercial                 
  buildings and the income  that they can expect  to generate.                 
  The information  would not  be applicable  to single  family                 
  Representative  G.  Davis  questioned   owners  response  to                 
  documents when declassification occurs.  Mr. Borglum replied                 
  that he has  never experienced a situation  in which someone                 
  appealed the  confidential information  process.   Although,                 
  there have been circumstances when the person has not wanted                 
  their information made public.                                               
  Representative J. Davies asked if a person sold their house,                 
  would  that  income be  construed  as income  and/or profits                 
  under this  section.  Mr. Borglum replied  that when dealing                 
  with  a  company   whose  business   includes  real   estate                 
  investment, that information could easily be construed to be                 
  earnings,  income  profits/losses  or   expenditures.    The                 
  acquisition of the property could  fall under information of                 
  the  bill.  He  noted concern with  the manner  in which the                 
  assessor acquires information.                                               
  ATTORNEY, MAT-SU, commented on the proposed legislation.  He                 
  explained  that  the  Board  of  Equalization  was  a  board                 
  consisting of professional individuals  who are charged with                 
  deliberating fairly on challenged  assessments.  Information                 
  submitted to the Board is open to the public.                                
  He  continued,  one   of  the   most  important   principles                 
  underlining  State  government,  AS  44.62.312,  is  titled:                 
  "State policy  regarding  meetings".   That policy  requires                 
  open   deliberation   for   people   invoking  the   Board's                 
  jurisdiction.   Mr. Gatti  submitted that  such a  procedure                 
  should  be  the policy  of the  State.   In  addition, there                 
  exists  a  strong   public  record  policy,  listed   in  AS                 
  09.25.110.  The Alaska Supreme Court has been  protective of                 
  the  public's right  to receive  those  public records.   It                 
  would not be in  the public's best interest to  increase the                 
  number of records which are confidential, particularly, when                 
  harsh   criminal   penalties   are   associated   with   the                 
  distribution.  He urged that the legislation have the  scope                 
  Mr. Gatti added,  the proposed legislation would  be another                 
  "unfunded" mandate burden placed on the local boroughs.   He                 
  suggested  that passage of the bill would increase the costs                 
  of  the assessor  in bringing  matters before  the  Board of                 
  Equalization.  No more revenue exists to pay those costs.                    
  NORTH  STAR BOROUGH,  FAIRBANKS, stated  that  the Fairbanks                 
  North Star  Borough is  not against  the confidentiality  of                 
  information.  There are good reasons  to provide a degree of                 
  confidentiality of  records provided  to tax  payers at  the                 
  assessors request.  However, she stated,  the scope of HB 94                 
  is overly  broad  and the  bill  would severely  impact  the                 
  proceedings of the Board of Equalization.                                    
  HB  94  would  prohibit  disclosure   of  a  wide  range  of                 
  information acquired from any source.   The bill would add a                 
  new subsection (c) to statute.  That language is interpreted                 
  that the source  of the information  is public, even if  the                 
  taxpayer   provided   the   information   voluntarily,   the                 
  information becomes  confidential when the  assessor has it.                 
  She stated that there  is no reason to require  the assessor                 
  to keep the information confidential.                                        
  Ms. Klepaski added that HB  94 would severely impact appeals                 
  to  the  Board   of  Equalization  (BOE)  and   the  courts.                 
  Subsection (c) would add material which would require BOE to                 
  hold executive sessions to consider  whatever is relevant to                 
  the assessed value of the property.  She asked how would the                 
  BOE be able  to make  findings and decisions,  or the  court                 
  determine whether there is substantial  evidence to support.                 
  There  are   legitimate  public  policy  reasons   to  waive                 
  confidentiality  provisions  in   appeals.    Property   tax                 
  assessment procedures are generally public because  property                 
  valuation  for assessment purposes requires a just valuation                 
  of all property.   The assessment must have a  fair relation                 
  to a uniform and equal rate of taxation.   If the procedures                 
  and  records  involved in  property  tax assessment  are not                 
  public, taxpayers will  not be able  to determine whether  a                 
  particular property is fairly valued  in comparison to other                 
  Ms. Klepaski concluded  that similar  income information  is                 
  produced as a matter  of course in  other litigation.  If  a                 
  person  or entity files a  lawsuit, or a property assessment                 
  appeal,  the   relevant  records   must  be   subjected  for                 
  Co-Chair  Therriault asked  if a dis-interested  third party                 
  could  appeal  a  business' tax  assessment.    Ms. Klepaski                 
  stated that they  would not be  able to.   She added that  a                 
  third party could attend a BOD meeting, although, they could                 
  not  participate  unless requested.    A process  for public                 
  comment is not included.                                                     
  (Tape Change HFC 97-102, Side 2).                                            
  KODIAK, spoke to the defined narrowness of the document.  In                 
  order  to   address  these   concerns,  he   suggested  that                 
  information should  be "requested" rather than "required" by                 
  the  assessor.   The  Board  of Equalization  process should                 
  remain open and public,  agreeing that a need does  exist to                 
  have confidential  information on  a municipal  level.   Co-                 
  Chair  Therriault  requested  that Mr.  Carlson  fax  to the                 
  Committee his suggested language.                                            
  BOROUGH, ANCHORAGE, stated that a problem currently does not                 
  exist.    He  questioned  why   the  legislation  was  being                 
  discussed  when it  had been  requested by  only one  mining                 
  interest.  He reiterated that  his association has requested                 
  information regarding the current problems  and that to date                 
  they have received no word.                                                  
  If the legislation  is passed,  it would  be important  that                 
  confidentiality not be carried out to the level of the Board                 
  of Equalization.   He  summarized, open  government is  good                 
  government and is supported by tax payers.                                   
  Co-Chair Therriault  noted  that HB  94 would  be placed  in                 
  Subcommittee with Representative G. Davis  as Chair and with                 
  members Representative Mulder and Representative J.  Davies.                 
  Co-Chair Therriault  stated that  the language  needs to  be                 
  tightened up with regards to  what information covered would                 
  be confidential, clarifying  what the default would  be, how                 
  the information  would be  reviewed on  appeal, whether  the                 
  taxpayer would be required to  waive confidentiality if they                 
  chose to go  to the BOE or it  not, and how the  court would                 
  have access to review the information.                                       
  HB 94 was HELD in Committee for further discussion.                          

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