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Confidentiality of Tax Records
Upheld by
John Alke, Hughes, Kellner, Sullivan & Alk, representing intervenor
Montana Taxpayers Association in Jim Elliott v. Montana Department of Revenue.
On October 24th the Montana Supreme Court rejected State
Senator Jim Elliott’s demand that the confidential income tax records of some 500 companies doing business in
Montana be publicly disclosed. The decision affirmed an earlier Montana District Court ruling which also rejected Senator Elliott’s unreasonable demands.
Income tax records are confidential under both state and federal statute. Senator Elliott claimed that the
Montana courts were obligated to ignore those state and federal statutes, and meet his demand for public disclosure, because of the “Right to Know” provision in the Montana Constitution, Article II, Section 9. According to Senator Elliott, the state and federal statutes, which clearly specify that income tax records are confidential, can simply be ignored to meet his demand for public disclosure of the income tax records of the companies he is targeting.
The Montana District Court ruled that the federal statutes protecting the confidentiality of the income tax records for which Senator Elliott was demanding public disclosure controlled over any possible interpretation of state law. In other words, the District Court held that federal law preempted any interpretation of
Montana law requiring public disclosure. The Montana Supreme Court took a somewhat different approach. It ruled that Senator Elliott was bound by the confidentiality provisions of the
Montana statutes.
Senator Elliott wanted to be seen as the protector of the “little guy”, whose sole interest in the litigation was the public disclosure of the income tax records of large publicly traded companies. He did not want to be seen as the person who made the income tax returns of every partnership, subchapter S corporation, and trust a matter of public record. He knew if he successfully contended the state confidentiality statutes were unconstitutional, that ruling would, in the absence of federal preemption, make the income tax returns of every partnership, subchapter S corporation, and trust a matter of public record.
Since Senator Elliott didn’t want to be blamed for the end result of his own advocacy, he tried to straddle the fence. He did not contend that the state confidentiality statute was unconstitutional. Instead, he argued that the
Montana courts could simply ignore it for purposes of meeting his demand for the public disclosure of the income tax records of the companies he was targeting.
The decision of the Montana Supreme Court makes very clear that it both understood and disapproved of Senator Elliott’s attempt to straddle the fence. It held that since he was not contending the state confidentiality statute was unconstitutional, the Court had no basis for ignoring it simply to meet his demands. According to the Court, the legislature’s duly enacted confidentiality statute was binding upon it, and Senator Elliott had no reasoned basis for demanding the public disclosure of confidential income tax information.
Ed. Note: The Montana Taxpayers Association would like to commend
John Alke for successfully defending the right of every business in
Montana to have their income tax records kept confidential. Income tax systems are based on voluntary reporting with the expectation the information reported will be kept confidential by the taxing agency. The Supreme Court’s decision will ensure
Montana remains a good place to do business.
Montana Taxpayers Association commentary on confidentiality - May, 2006
History of the Litigation and case files
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