Qualities of a Fair State Tax Administration Part 5 – Transparency via Published Letter Rulings and

This is the fifth and final posting in a series about the qualities of a fair state tax administration.  These measurements were used by the Council on State Taxation (COST) to analyze each state’s fairness in administering its taxes.  Their fifth published report is found here.

How difficult is it to comply with a law that has no published guidance?  States who seek to put into place a fair tax administration for their constituents recognize that transparency in published rulings and in tribunal or administrative decisions equates to a more informed, and thus, more law-abiding public.  While many states cite privacy concerns, rulings or decisions can be redacted so that all personal or confidential information is removed before publication.

The Argument against Private Letter Rulings Remaining Private
While a private letter ruling is most certainly guidance that is only applicable to an individual taxpayer with a unique fact pattern, it could still offer a wealth of information on application of law for similar fact patterns.  Some taxpayers perceive that their advantage in obtaining a beneficial ruling private to themselves (and typically obtained after they paid the cost in man-hours of research and in attorney’s fees) is being taken away when private letter rulings are published.  Ultimately, however, COST argues, “the taxpaying public pays the price for inconsistency in the application of tax laws.”  

Tax Tribunal Decisions and Other Proceedings
In some areas of tax, states may want to elaborate on tax law that seems complicated, ambiguous, or otherwise error-prone.  Publication of administrative proceedings, tax tribunal decisions or other administrative decisions establishes a record which can be useful to taxpayers’ decisions.  There may be limits on publication to protect identities and to avoid redundancy of issues, but a meaningful library of information in the form of decisions and other proceedings establishing a record is helpful and appreciated by constituents.  Withholding pertinent information from the general public that would assist in compliance is unfair and burdensome to taxpayers.

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