Opinion
Opinion By: Jack Conway, Attorney General; Amye L. Bensenhaver, Assistant Attorney General
Open Records Decision
The question presented in this appeal is whether the Department of Revenue violated the Open Records Act in denying Timothy J. Eifler's July 19, 2010, request for:
a list or lists of the names, addresses, and dates of registration of all taxpayers currently registered with the KDOR for the Utility License Tax.
Alternatively, Mr. Eifler requested access to:
all documents, materials, computer software/databases, or other records containing the names, addresses, and/or dates of registration of all taxpayers currently registered with the KDOR for the Utility License Tax.
Pursuant to KRS 61.878(4), 1 Mr. Eifler acknowledged KDOR's authority to redact "private information such as gross receipts, profits, taxes, deductions, social security or federal employer identification numbers, Kentucky tax account numbers, etc."
We find that because the registration applications contain the information Mr. Eifler seeks, and the remainder of the applications can be redacted, he is entitled to inspect or obtain copies of the redacted applications reflecting the names, addresses, and dates of registration of all taxpayers currently registered with the KDOR for the Utility License Tax. KDOR's construction of KRS 131.190(1)(a) and 131.081(15) was overbroad and resulted in the improper withholding of information that does not have to do with the affairs of the taxpayers' business as that phrase is generally interpreted. KDOR therefore violated the Open Records Act in denying Mr. Eifler access to redacted utility license tax registration applications.
In her July 23, 2010, denial, Open Records Coordinator Sarah E. Pence invoked KRS 61.878(1)(l), incorporating KRS 131.190(1) and 131.081(15) into the Open Records Act, advising Mr. Eifler that "a list that includes the taxpayer's name, address, and, in particular, the date of registration is tied to a report, the registration form filed with KDOR . . . [but] divulging it would amount to an improper disclosure of the taxpayers' business affairs. " Continuing, Ms. Pence observed:
If the Department created a query for its database enabling it to sort and extract a list of currently registered taxpayers, the list would include those consumers who have elected to assume responsibility for the tax because they are eligible for an exemption allowed "for [the] furnishing [of] energy or energy-producing fuels, used in the course of manufacturing, (3%) of the cost of production." KRS 160.613(1). Thus, "direct pay authorization" arises out of, and is directly related to, a taxpayer's filing status. See 04-ORD-042 at # 2 (Ky. A.G.). Divulging that a taxpayer has direct pay authorization would also effectively be divulging a taxpayer's business affairs regarding its energy-consumption. Id. at # 3; see also, 98-ORD-120 (Ky. A.G.) On the other hand, redaction of these taxpayers from a created list would effectively identify those taxpayers who are not registered directly for the tax and instead have customers who have registered for the tax through direct pay authorization. In other words, redacting those taxpayers from the list effectively identifies by process of elimination, the direct pay authorization status.
Ms. Pence thus denied Mr. Eifler's request because no pre-existing query or filter exists that can extract the requested information and because disclosure of the information would constitute a breach of taxpayer confidentiality.
Shortly thereafter, Mr. Eifler initiated this appeal, attempting to make a prima facie showing that the requested information resides in KDOR's database and that he is entitled to a hearing to refute KDOR's claim that it does not.
Bowling v. Lexington-Fayette Urban County Government, 172 S.W.3d 333 (Ky. 2005). Because the parties agree that the requested information appears on the utility license tax registration applications, and there is a factual dispute as to the existence of the same information in KDOR's database that this office cannot resolve, we focus on KDOR's denial of the redacted registration applications rather than on a database which may or may not contain the same information.
Mr. Eifler disputes KDOR's characterization of the requested information as confidential under KRS 131.190(1)(a) and 131.081(5), noting that the Attorney General has rejected this claim under the cited provision, as well as KRS 67.790(8)(a), 2 on at least eleven occasions. He then cites a series of open records opinions/decisions of this office recognizing:
The public has a right to know whether or not a person or business is licensed by state or local government to practice the particular business or occupation. The public also has the right to know whether a person is enrolled on the tax roll . . . .
OAG 82-2. He rejects KDOR's claim that disclosure of the information would identify registrants that have elected direct pay authorization status pursuant to KRS 160.613(1), noting that the utility tax is "not limited to public utilities furnishing utility services and that a number of non-utilities furnishing utility services have registered for and are paying the tax" because, for example, "they purchase natural gas, electricity, or water in large volumes and periodically sell some of the excess." Thus, Mr. Eifler asserts, "there is no basis under the Open Records Act to deny disclosure on the basis of an inconclusive 'inference,'" and, more importantly, there is "no blanket exemption for taxpayer's 'filing status. '" In support, he cites a number of open records opinions/decisions issued by this office recognizing the public's right to know the name and address of a taxpayer as well as whether the taxpayer is delinquent in paying taxes. In closing, Mr. Eifler urges this office to consider "whether the interest of the public in which businesses are registered for the Utility Tax, where they are located, and when they registered for the tax is superior to any privacy interest asserted . . . ."
In supplemental correspondence, Staff Attorney Bethany A. Rice responds that "[c]onfidential taxpayer information has consistently been interpreted by [KDOR] to include the filing status of a taxpayer, the taxpayer's name, and the taxpayer's address." She distinguishes the open records opinions/decisions cited by Mr. Eifler, noting that all but one "relates to a request for records of the names and addresses of persons or businesses paying occupational or other license fees for the privilege of conducting business in a city" or "includes an exemption allowed for the use of energy in manufacturing, or any other exemption where eligibility for the exemption requires a particular business practice." Acknowledging that the information Mr. Eifler requested "is tied to a report, i.e., the registration form filed with [KDOR]," Ms. Rice reasserts that disclosure of the registration form "would amount to the improper disclosure of the business affairs of many taxpayers." While we traditionally accord deference to KDOR in its interpretation of KRS 131.190(1)(a) and 131.081(15), we find that here the agency's construction of these confidentiality provisions is overbroad when viewed in light of recent authority.
KDOR relies on the confidentiality provisions codified at KRS 131.190(1)(a) and KRS 131.081(15). The first of these statutes provides:
No present or former commissioner or employee of the Department of Revenue, present or former member of a county board of assessment appeals, present or former property valuation administrator or employee, present or former secretary or employee of the Finance and Administration Cabinet, former secretary or employee of the Revenue Cabinet, or any other person, shall intentionally and without authorization inspect or divulge any information acquired by him of the affairs of any persons, or information regarding the tax schedules, returns, or reports required to be filed with the department or other proper officer, or any information produced by a hearing or investigation, insofar as the information may have to do with the affairs of the person's business.
(Emphasis added.) KRS 131.081(15) echoes KRS 131.190(1)(a) and provides:
Taxpayers shall have the right to privacy with regard to the information provided on their Kentucky tax returns and reports, including any attached information or documents. Except as provided in KRS 131.190, no information pertaining to the returns, reports, or the affairs of a person's business shall be divulged by the department to any person or be intentionally and without authorization inspected by any present or former commissioner or employee of the Department of Revenue, member of a county board of assessment appeals, property valuation administrator or employee, or any other person.
These statutes are incorporated into the Open Records Act by KRS 61.878(1)(l), authorizing public agencies to withhold "[p]ublic records or information the disclosure of which is prohibited or restricted or otherwise made confidential by enactment of the General Assembly."
Against this legislatively recognized policy protecting taxpayer information that pertains to the affairs of that person or that person's business we weigh the competing public interest that supports the Open Records Act. In an early open records opinion/decision affirming the public's right to records identifying by name and address all coal companies that paid coal severance taxes, the Attorney General observed:
[T]he purpose[] of the Open Records Act is to allow any person to check on the operation of the government by inspecting the records of the various cabinets, departments, and agencies. Whether taxes are being paid by persons and companies legally obligated to pay them is a legitimate interest and any person has a right to check on that matter.
OAG 86-11, p. 2. In a subsequent open records decision affirming the public's right of access to records identifying delinquent taxpayers, we quoted from a supreme court opinion from another jurisdiction recognizing that:
Public disclosure of the lists of tax delinquents does involve some invasion of personal privacy. Publication of one's name on such a list would certainly result in personal embarrassment to an individual of normal sensibilities . . . . However, we cannot say that disclosure publicized "intimate details" of a "highly personal nature . . . . The records disclose whether an owner is meeting his public responsibilities. While an owner of property may have some expectancy of privacy in real estate tax records, he does not have the same expectation of privacy concerning his legal obligation as he has in his private financial affairs.
. . .
[A]ny invasion of privacy resulting from disclosure of the records of tax delinquents is also outweighed by the public right to know whether the burden of public expenses is equitably distributed, and whether public employees are diligently collecting delinquent accounts. The public has an interest in knowing whether public servants are carrying out their duties in a efficient and law-abiding manner.
Attorney General v. Collector of Lynn, 377 Mass. 151, 158, 385 N.E.2d 505 (1979); see also,
Kentucky Board of Examiners of Psychologists v. Courier-Journal and Louisville Times Co., 826 S.W.2d 324, 328 (Ky. 1992) (recognizing that "[t]he public's 'right to know' under the Open Records Act is premised upon the public's right to expect its agencies properly to execute their statutory functions. In general, inspection of records may reveal whether the public servants are indeed serving the public, and the policy of disclosure provides impetus for an agency steadfastly to pursue the public good").
In a recent opinion issued by the Kentucky Court of Appeals, the court spoke directly to the value of limited transparency vis-a-vis taxpayer information in the context of an occupational license application. In Kenton County Fiscal Court v. Kentucky Enquirer, 2008-CA-002064-MR (Ky. App. 2010), 3 the court extended protection to "items which reveal the affairs of the business" under the tax district counterpart to KRS 131.190(1)(a), KRS 67.790(8)(a), but reaffirmed its position that:
[I]t is in the interest of public policy for the public to have access to occupational license applications however limited the information may be once redacted to provide the name and location of the business.
Kenton County at 6. Fundamental to the court's opinion was its recognition that "[t]he law is clear that free and open examination of public records is in the public interest, " KRS 61.871, and the Attorney General's longstanding position that "it is in the public interest to know what business and professions have been licensed to exist and operate within the boundaries of the governmental unit." Id. at 5. Ultimately, the court concluded that the fiscal court interpreted KRS 67.790(8)(a), which virtually mirrors KRS 131.190(1)(a), "overbroadly in this instance so as to exclude from disclosure the name and address of businesses and professions . . . ." Id. at 6.
The referenced authorities, along with the statutes themselves, confirm that KRS 131.190(1)(a), 131.081(15) and their local counterpart, KRS 67.790(8)(a) do not erect an impenetrable barrier to disclosure of taxpayer information. Only that information that reveals the affairs of any person or any person's business is excluded from public inspection. As this office, and now the courts, have determined, this does not include the name and address of a business or profession. In Kenton County, above, the Court of Appeals agreed that such items as profits, salaries, deductions, and taxes were appropriate for redaction as information that reveals the affairs of a person or a person's business, but refused to extend blanket protection to the application. Although factually distinguishable, we find the court's analysis persuasive insofar as it imposes limits on the rule of confidentiality found in these provisions that is consistent with the express statutory language.
We will dispense with any discussion of the necessity of records creation. KDOR denies the existence of any query or filter capable of extracting information from its database to produce a record that identifies taxpayers registered for the Utility License Tax by name, address, and date of registration. KDOR acknowledges that the requested information appears on the utility license tax registration application, and this document satisfies Mr. Eifler's alternative request for "other records containing the names, addresses, and/or dates of registration of all taxpayers currently registered with the KDOR for the Utility License Tax. " Production of a redacted copy of the application that identifies the taxpayers by name, address, and date of registration will facilitate the public's ability to monitor KDOR's efficacy, ensure that its statutory duties are being fulfilled, and documents compliance with licensing requirements.
Having dispensed with the issue of the necessity of records creation, we can also dispense with KDOR's argument that creation of a record from its database that includes or excludes taxpayers with direct pay authorization will divulge the taxpayer's business affairs. KDOR makes no such argument with respect to the registration forms filed with the Department that satisfy Mr. Eifler's request. Nor does KDOR offer any explanation as to how disclosure of the taxpayer's date of registration reveals the affairs of a person or a person's business. It is our understanding that the date of registration is so irrelevant to KDOR's administration of the utility tax that it is not entered in KDOR's database. Mr. Eifler, on the other hand, successfully distinguishes 04-ORD-042 and 98-ORD-78 as decisions arising out of disputes involving access to lists of taxpayers who qualified for specific tax benefits as opposed to a list of all taxpayers registered to pay a certain tax. The appeal before us is closely analogous to OAG 86-11 in which the requester sought access to companies registered to pay coal severance tax, and in which the Attorney General determined that "[w]hether taxes are being paid by persons and companies legally obligated to pay them is a legitimate interest and any person has a right to check on the matter." OAG 86-11, p. 2. Whatever "inconclusive inferences" can be drawn from redacted applications, Mr. Eifler has "a right to check on the matter."
Accordingly, we find that KDOR construed KRS 131.190(1)(a) and 131.081(15) too broadly in denying Mr. Eifler's request in toto. Although KDOR is not obligated to, nor can it, create a record from its database that conforms to the parameters of the request, the agency maintains documents that contain the information sought, and can be produced for inspection upon redaction of all information except name, address, and date of registration. Its refusal to do so constituted a violation of the Open Records Act. We cannot accord deference to KDOR's interpretation of these confidentiality provisions when that interpretation is at odds with recent legal authority.
A party aggrieved by this decision may appeal it by initiating action in the appropriate circuit court pursuant to KRS 61.880(5) and KRS 61.882. Pursuant to KRS 61.880(3), the Attorney General should be notified of any action in circuit court, but should not be named as a party in that action or in any subsequent proceeding.
Timothy J. EiflerSarah E. PenceBethany A. Rice
Footnotes
Footnotes
1 KRS 61.878(4) provides:
If any public record contains material which is not excepted under this section, the public agency shall separate the excepted and make the nonexcepted material available for examination.
2 In 2003, the General Assembly enacted KRS 67.790(8)(a), a nearly identical provision prohibiting disclosure of information "of the affairs of any person" and the "affairs of the person's business" acquired by a present or former employee of a tax district.
3 Kenton County Fiscal Court v. Kentucky Enquirer is an unpublished opinion rendered on March 12, 2010, that, pursuant to CR 76.28(4)(c) may be cited for consideration if there is no published opinion that adequately addresses the issue.