Tax Commission to see changes

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B>Associated Press Writer

BOISE, Idaho (AP) -- Gov. C.L. "Butch" Otter on Wednesday ordered the Idaho State Tax Commission to clarify settlements of out-of-state corporate tax protests and to report such deals to the Legislature after a recently completed review concluded the agency's existing system creates the perception that commissioners are acting without justification.

Otter's order follows a whistleblower complaint lodged in May by a 28-year Tax Commission auditor. Stan Howland alleged that the four appointed tax commissioners, as well as Idaho deputy attorneys general who advise them, illegally allow large corporations to pay just a percentage of what they owe.

On Wednesday, Howland said Otter's directive falls short of necessary changes.

A 21-page review of Tax Commission settlements, delivered to the governor's office this week, concluded that commissioners violated no laws with the settlements, the results of which are shielded from the public to protect taxpayer confidentiality. But Otter said improvements are still needed to preserve public faith that Idaho collects payments fairly from everybody.

The review "determined that how the Commission decided whether a dispute qualified for the settlement process was ambiguous and undefined -- contributing to a perception that it was acting arbitrarily and without justification," Otter said in a news release. "These next steps reflect the shared commitment of the Legislature and my administration to building trust in our tax system and the public servants who administer it."

In his order, Otter directed the bipartisan tax commissioners -- they are Republican Royce Chigbrow, Democrat Tom Katsilometes, Republican Severina "Sam" Haws, and Coleen Grant, a Democrat -- to outline specific criteria they use for settling protests before Sept. 30.

In addition, starting in January, the commissioners must publicly submit an annual report to the state House and Senate tax committees detailing all protest settlements, to the extent allowed by confidentiality laws.

P. LaVern Gentry, a veteran accountant who practiced for 34 years before retiring, delivered the review of the Tax Commission's settlements to the governor's office on Monday. Otter appointed Gentry in early July to review the disputed settlements, and Gentry said he interviewed 25 people in the Tax Commission over the last six weeks.

In his resulting report, he wrote that tax commissioners did nothing illegal by settling protests -- the same conclusion reached in a separate July 15 report completed by the Idaho attorney general.

Even so, Gentry highlighted several concerns he found with the existing settlement process.

For instance, commissioners should find a way to provide more legal assistance to auditors as they review corporate taxes, he wrote. In addition, settlement agreements with companies that protest their tax bills weren't being properly reviewed by other officials, including the Tax Commission's audit division administrator, the bureau chief, deputy attorneys general and other tax commissioners.

Gentry also said tax commissioners should bolster their communication with staff when settling cases, rather than trying to do the work all on their own.

"The commissioners should not treat independence as isolation and need to improve communication by establishing clear guidelines regarding the proper level of communication," Gentry wrote.

On Wednesday, Howland reiterated his contention that Gentry's review fell short of the standards required of an independent investigation. Because Gentry once represented clients before the Tax Commission and serves on an Idaho Society of Certified Public Accountants committee with Chigbrow and Grant, Howland believes Gentry has a bias against auditors and a conflict of interest.

Howland won backing earlier this month when five other state tax auditors also urged Otter and lawmakers to undertake a new, more extensive review.

"I still want an independent investigation," Howland told The Associated Press, adding Otter's recommendations to revamp settlement criteria and report such compromises to the Legislature were well-intentioned but insufficient.

"It doesn't solve the public accountability issues," he said. "That takes statutory changes and rule changes. I have no problem with what he put there, but they are not steps to cure the problem. There needs to be much more done."

State Sen. Brent Hill, R-Rexburg and chairman of the Senate Local Government and Taxation Committee, said he was satisfied with the integrity of Gentry's report and believes Howland's request for additional scrutiny is unjustified.

Hill, a certified public accountant, said Otter's order to the commissioners will improve the integrity of settlements and bolster public confidence.

"What he's telling them is, there have been some possible weaknesses in the policies of the commission, and let's address them," Hill said. "He's challenging them to go after those things."

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