H. B. 2826


(By Delegates Nichols, Michael, Bennett, Kominar, Cann and Prunty)

(Originating in the House Committee on Government Organization)

[February 28, 1995]




A BILL to amend and reenact section five-d, article ten, chapter eleven of the code of West Virginia, one thousand nine hundred thirty-one, as amended, relating to confidentiality of tax returns and return information; permitting disclosure of tax information upon subpoena issued by a state agency authorized to conduct fraud investigations or investigations of criminal wrongdoing by officers or employees of the state.

Be it enacted by the Legislature of West Virginia:
That section five-d, article ten, chapter eleven of the code of West Virginia, one thousand nine hundred thirty-one, as amended, be amended and reenacted to read as follows:
ยง11-10-5d. Confidentiality and disclosure of returns and return information.

(a) General rule. -- Except when required in an official investigation by the tax commissioner into the amount of tax due under any article administered under this article or in any official investigation conducted by any fraud unit of any state agency wherein that unit has probable cause to believe that a person has engaged in an act or activity which is subject to prosecution under the law of this state or in any proceeding in which the tax commissioner is a party before a court of competent jurisdiction to collect or ascertain the amount of such tax and except as provided in subsections (d) through (n) of this section, it shall be unlawful for any officer or employee of this state to divulge or make known in any manner the tax return, or any part thereof, of any person or disclose information concerning the personal affairs of any individual or the business of any single firm or corporation, or disclose the amount of income, or any particulars set forth or disclosed in any report, declaration or return required to be filed with the tax commissioner by any article of this chapter imposing any tax administered under this article or by any rule or regulation of the tax commissioner issued thereunder, or disclosed in any audit or investigation conducted under this article.
(b) Definitions. -- For purposes of this section:
(1) Background file document. -- The term "background file document," with respect to a written determination, includes the request for that written determination, any written material submitted in support of the request and any communication (written or otherwise) between the state tax department and any person outside the state tax department in connection with the written determination received before issuance of the written determination.
(2) Disclosure. -- The term "disclosure" means the making known to any person in any manner whatsoever a return or return information.
(3) Inspection. -- The terms "inspection" and "inspected" mean any examination of a return or return information.
(4) Return. -- The term "return" means any tax or information return or report, declaration of estimated tax, claim or petition for refund or credit, or petition for reassessment that is required by, or provided for, or permitted, under the provisions of this article (or any article of this chapter administered under this article) which is filed with the tax commissioner by, on behalf of, or with respect to any person, and any amendment or supplement thereto, including supporting schedules, attachments, or lists which are supplemental to, or part of, the return so filed.
(5) Return information. -- The term "return information" means:
(A) A taxpayer's identity; the nature, source or amount of his income, payments, receipts, deductions, exemptions, credits, assets, liabilities, net worth, tax liability, tax withheld, deficiencies, overassessments or tax payments, whether the taxpayer's return was, is being, or will be examined or subject to other investigation or processing, or any other data received by, recorded by, prepared by, furnished to or collected by the tax commissioner with respect to a return or with respect to the determination of the existence, or possible existence, of liability (or the amount thereof) or by any person under the provisions of this article (or any article of this chapter administered under this article) for any tax, additions to tax, penalty, interest, fine, forfeiture, or other imposition or offense; and
(B) Any part of any written determination or any background file document relating to such written determination. "Return information" does not include, however, data in a form which cannot be associated with, or otherwise identify, directly or indirectly, a particular taxpayer. Nothing in the preceding sentence, or in any other provision of this code, shall be construed to require the disclosure of standards used or to be used for the selection of returns for examination, or data used or to be used for determining such standards.
(6) Tax administration. -- The term "tax administration" means:
(A) The administration, management, conduct, direction and supervision of the execution and application of the tax laws or related statutes of this state, and the development and formulation of state tax policy relating to existing or proposed state tax laws, and related statutes of this state, and
(B) Includes assessment, collection, enforcement, litigation, publication and statistical gathering functions under the laws of this state.
(7) Taxpayer identity. -- The term "taxpayer identity" means the name of a person with respect to whom a return is filed, his mailing address, his taxpayer identifying number or a combination thereof.
(8) Taxpayer return information. -- The term "taxpayer return information" means return information as defined in subdivision (5) of this subsection (b) which is filed with, or furnished to, the tax commissioner by or on behalf of the taxpayer to whom such return information relates.
(9) Written determination. -- The term "written determination" means a ruling, determination letter, technical advice memorandum or letter or administrative decision issued by the tax commissioner.
(c) Criminal penalty. -- Any officer or employee (or former officer or employee) of this state who violates this section shall be guilty of a misdemeanor, and, upon conviction thereof, shall be fined not more than one thousand dollars or imprisoned for not more than one year, or both, together with costs of prosecution.
(d) Disclosure to designee of taxpayer. -- Any person protected by the provisions of this article may, in writing, waive the secrecy provisions of this section for such purpose and such period as he shall therein state. The tax commissioner may, subject to such requirements and conditions as he may prescribe, thereupon release to designated recipients such taxpayer's return or other particulars filed under the provisions of the tax articles administered under the provisions of this article, but only to the extent necessary to comply with a request for information or assistance made by the taxpayer to such other person. However, return information shall not be disclosed to such person or persons if the tax commissioner determines that such disclosure would seriously impair administration of this state's tax laws.
(e) Disclosure of returns and return information for use in criminal investigations.
(1) In general. -- Except as provided in subdivision (3) of this subsection, any return or return information with respect to any specified taxable period or periods shall, pursuant to and upon the grant of an ex parte order by a federal district court judge, federal magistrate or circuit court judge of this state, under subdivision (2) of this subsection, be open (but only to the extent necessary as provided in such order) to inspection by, or disclosure to, officers and employees of any federal agency, or of any agency of this state, who personally and directly engaged in:
(A) Preparation for any judicial or administrative proceeding pertaining to the enforcement of a specifically designated state or federal criminal statute to which this state, the United States or such agency is or may be a party;
(B) Any investigation which may result in such a proceeding; or
(C) Any state or federal grand jury proceeding pertaining to enforcement of such a criminal statute to which this state, the United States or such agency is or may be a party.
Such inspection or disclosure shall be solely for the use of such officers and employees in such preparation, investigation, or grand jury proceeding.
(2) Application of order. -- Any United States attorney, any special prosecutor appointed under Section 593 of Title 28, United States Code, or any attorney in charge of a United States justice department criminal division organized crime strike force established pursuant to Section 510 of Title 28, United States Code, may authorize an application to a circuit court judge or magistrate, as appropriate, for the order referred to in subdivision (1) of this subsection. Any prosecuting attorney of this state may authorize an application to a circuit court judge of this state for the order referred to in subdivision (1) of this subsection. Upon such application, such judge or magistrate may grant such order if he determines on the basis of the facts submitted by the applicant that:
(A) There is reasonable cause to believe, based upon information believed to be reliable, that a specific criminal act has been committed;
(B) There is reasonable cause to believe that the return or return information is or may be relevant to a matter relating to the commission of such act; and
(C) The return or return information is sought exclusively for use in a state or federal criminal investigation or proceeding concerning such act, and the information sought to be disclosed cannot reasonably be obtained, under the circumstances, from another source.
(3) The tax commissioner shall not disclose any return or return information under subdivision (1) of this subsection if he determines and certifies to the court that such disclosure would identify a confidential informant or seriously impair a civil or criminal tax investigation.
(4) The tax commissioner may disclose return or return information pursuant to a subpoena or subpoena duces tecum issued by a state agency having authority under this code to conduct fraud investigations or investigations of criminal wrongdoing, malfeasance or misfeasance in office by an employee or officer of the state wherein the fraud unit or agency certifies to the tax commissioner in writing that there is probable cause:
(A) To believe, based upon information believed to be reliable, that a specific criminal act has been or is being committed,
(B) There is reasonable cause to believe that the return or return information is or may be relevant to a matter relating to the commission of such act; and
(C) The return or return information is sought exclusively for use in a state or federal criminal investigation or proceeding concerning such act, and the information sought to be disclosed cannot reasonably be obtained, under the circumstances, from another source.
(f) Disclosure to person having a material interest. -- The tax commissioner may, pursuant to legislative regulations promulgated by him, and upon such terms as he may require, disclose a return or return information to a person having a material interest therein: Provided, That such disclosure shall only be made if the tax commissioner determines, in his discretion, that such disclosure would not seriously impair administration of this state's tax laws.
(g) Statistical use. -- This section shall not be construed to prohibit the publication or release of statistics so classified as to prevent the identification of particular returns and the items thereof.
(h) Disclosure of amount of outstanding lien. -- If notice of lien has been recorded pursuant to section twelve of this article, the amount of the outstanding obligation secured by such lien may be disclosed to any person who furnishes written evidence satisfactory to the tax commissioner that such person has a right in the property subject to such lien or intends to obtain a right in such property.
(i) Reciprocal exchange. -- The tax commissioner may, pursuant to written agreement, permit the proper officer of the United States, or the District of Columbia or any other state, or any political subdivision of this state, or his authorized representative, who is charged by law with responsibility for administration of a similar tax, to inspect reports, declarations or returns filed with the tax commissioner or may furnish to such officer or representative a copy of any such document, provided such other jurisdiction grants substantially similar privileges to the tax commissioner or to the attorney general of this state. Such disclosure shall be only for the purpose of, and only to the extent necessary in, the administration of tax laws: Provided, That such information shall not be disclosed to the extent that the tax commissioner determines that such disclosure would identify a confidential informant or seriously impair any civil or criminal tax investigation.
(j) Inspection of business and occupation tax returns by municipalities. -- The tax commissioner shall, upon the written request of the mayor of any West Virginia municipality having a business and occupation tax or privilege tax, allow the duly authorized agent of such municipality to inspect and make copies of the state business and occupation tax return filed by taxpayers of such municipality. Such inspection or copying shall only be for the purposes of securing information for municipal tax purposes and shall only be allowed if such municipality allows the tax commissioner the right to inspect or make copies of the municipal business and occupation tax returns of such municipality.
(k) Release of administrative decisions. -- The tax commissioner shall release to the public his administrative decisions, or a summary thereof: Provided, That unless the taxpayer appeals the administrative decision to circuit court or waives in writing his rights to confidentiality, any identifying characteristics or facts about the taxpayer shall be omitted or modified to such an extent so as to not disclose the name or identity of the taxpayer.
(l) Release of taxpayer information.
(1) If the tax commissioner believes that enforcement of the tax laws administered under this article will be facilitated and enhanced thereby, he shall disclose, upon request, the names and address of persons:
(A) Who have a current business registration certificate.
(B) Who are licensed employment agencies.
(C) Who are licensed collection agencies.
(D) Who are licensed to sell drug paraphernalia.
(E) Who are distributors of gasoline or special fuel.
(F) Who are contractors.
(G) Who are transient vendors.
(H) Who are authorized by law to issue a sales or use tax exemption certificate.
(I) Who are required by law to collect sales or use taxes.
(J) Who are foreign vendors authorized to collect use tax.
(K) Whose business registration certificate has been suspended or canceled or not renewed by the tax commissioner.
(L) Against whom a tax lien has been recorded under section twelve of this article (including any particulars stated in the recorded lien).
(M) Against whom criminal warrants have been issued for a criminal violation of this state's tax laws.
(N) Who have been convicted of a criminal violation of this state's tax laws.
(m) Disclosure of return information to office of child advocate.
(1) State return information. -- The tax commissioner may, upon written request, disclose to the director of the office of child advocate created by article two, chapter forty-eight-a of this code:
(A) Available return information from the master files of the tax department relating to the social security account number, address, filing status, amounts and nature of income, and the number of dependents reported on any return filed by or with respect to, any individual with respect to whom child support obligations are sought to be enforced, and
(B) Available state return information reflected on any state return filed by, or with respect to any individual described in paragraph (A) of this subdivision (1) relating to the amount of such individual's gross income, but only if such information is not reasonably available from any other source.
(2) Restrictions on disclosure. -- The tax commissioner shall disclose return information under subdivision (1) of this subsection only for purposes of, and to the extent necessary in, collecting child support obligations from, and locating individuals owing such obligations.
(n) Disclosure of names and addresses for purposes of jury selection.
The tax commissioner shall, at the written request of a circuit court or the chief judge thereof, provide to the circuit court within thirty calendar days a list of the names and addresses of individuals residing in the county or counties comprising the circuit who have filed a state personal income tax return for the preceding tax year. The list provided shall set forth names and addresses only. The request shall be limited to counties within the jurisdiction of the requesting court.
The court, upon receiving the list or lists, shall direct the jury commission of the appropriate county to merge the names and addresses with other lists used in compiling a master list of residents of the county from which prospective jurors are to be chosen. Immediately after the master list is compiled, the jury commission shall cause the list provided by the tax commissioner and all copies thereof to be destroyed and shall certify to the circuit court and to the tax commissioner that the lists have been destroyed.
NOTE: The purpose of this bill is to permit the tax commissioner to disclose return and return information pursuant to a state agency that is investigating fraud and has issued a subpoena for the requested information.