Legislature(1997 - 1998)
04/17/1997 08:15 AM House FIN
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HOUSE BILL 94 "An Act relating to confidentiality of certain municipal tax records." JEFF LOGAN, STAFF, REPRESENTATIVE JOE GREEN, noted that HB 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 request. 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. 2 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. KARL BORGLUM, (TESTIFIED VIA TELECONFERENCE), ASSESSOR, 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. 3 The information would not be applicable to single family housing. 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. MICHAEL GATTI, (TESTIFIED VIA TELECONFERENCE), MATSU BOROUGH 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 reworked. 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. CYNTHIA KLEPASKI, ASSISTANT BOROUGH ATTORNEY, FAIRBANKS 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 4 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 properties. 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 disclosure. 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). PAT CARLSON, (TESTIFIED VIA TELECONFERENCE), ASSESSOR, KODIAK, spoke to the defined narrowness of the document. In order to address these concerns, he suggested that 5 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. DAVE HEIER, (TESTIFIED VIA TELECONFERENCE), NORTH SLOPE 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.