October 12, 1977

Honorable Ben 2.Grant Opinion No. H-1070 Chairman, Judiciary Committee Texas House of Representatives Re: Validity of financial 'P.0. Box 2910 disclosure ordinance applyAustin, Texas 78769 ing to officials and candidates in a home rule city.

Dear Chairman Grant:

You have submitted to us aproposed financial disclosure ordinance and asked whether itwould, if enacted by a home rule city, conform tovarious provisions of state and federal law. The proposed ordinance would require themayor, city council members, the citymanager and other specified high ranking city officials and candidates for city office to file
an annual statement reflecting the official's financial status and financial activity during the reporting period. The financial statement would include a list of all sources of in**come** over $1,000 received by the official or family members, identification of all business entities inwhich the official is significantly interested and certain customers of that entity, a listing of real property owned within the city, a list of all debts owed or notes held of over $10,000, a list of certain gifts received, identification of any financial interest in or transaction with a city franchise holder, and
aportion of the official's income tax return.

We have recently considered the authority of a home rule city to require its officials to file a financial disclosure statement as a condition of holding office. Attorney General Opinion H-969 (1977)concluded that a home rule city is authorized to require such disclosure, so long as the disclosure ordinance is not inconsistent with the city's charter or state law.

You ask if theproposed ordinance would conflict with state law because itsdisclosure provisions aremore extensive than those of article 6252-9b, V.T.C.S. Article 6252-9b applies only to state officers and employees, and we do not believe it either explicitly or implicitly restricts theHonorable Ben 2.Grant - Page 2 (H-1070)

power of a home rule city to enact financial disclosure requirements applicable to city officials. We perceive no conflict between article **6252-933** and the proposed ordinance.

You ask if theproposed ordinance would unconstitutionally burden the right of free speech and expression or the right to seek office. YOU also question whether the ordinance might invade constitutionally protected zones of privacy, constitute an unreasonable search and seizure, or violate the prohibition against compelled self-incrimination. Similar constitutional challenges have been considered by the courts of various states. The case traditionally cited by those who would find financial disclosure laws unconstitutional isCity of Carmel-by-the-Sea v. InAttorney General Opinion ?f"f;g;l$;;,;.;zX2,;",;1. 1970).

In light of

. . . [Steinv. Howlett, 289 N.E.Zd 409 (111.1972), appeal dismissed forwant of substantial federal question, 412 U.S. 925 (197311,we now believe the Carmel-by-the Sea opinion overbalanced the scales in favor of private rights, and that a different shift in the balance will be found by the Texas Supreme Court and the United States Supreme Court when such questions reach them.

Id. at 2. Our belief in this regard has been reinforced by a Gtual barrage of recent court decisions upholding financial disclosure requirements in the face of constitutional challenges similar to-those you suggest. Illinois State Employees Ass'n **V.** Walker, 315N.E.2d 9 (Ill.), cert. denied, 419 s 1058 (1974). **Montgomery** County v. Walsh, 336A.2d 97 (Md. 19;:); appeal dis-‘ missed for want of substantial federal question, 424 U.S. 901 (1976);Chamberlin v. Missouri Elections Comm'n, 540 S.W.2d 876 **(MO.** 1976); Kenny v. Byrne, 365 2d 211 (Super.Ct. App. Div. 19761, cert. (N.J. 1977);Lehrhaupt v.

__- _..-_-.-- ..- Fritz v. Gorton, 5ficp.2d iii (Wash:), appeal dismissed forwant of substantial federal question, 417 U.S. 902 (1974); In re
iF?? 235 N.W.2d 409 (Wise. 1976). Even the Supreme Court of
a iornia has distinguished its previous Carmel-by-the-Sea decision inupholding a new financial disclosure law. County of Nevada v. MacMillen, 522 P.2d 1345 (Cal. 1974). We have examined the nrooosed ordinance in light of these decisions, and
we do not belle& the courts would find it toviolate any of the constitutional provisions about which you inquire.

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You ask if requiring a city officer or candidate for city office to file certain portions of his income tax return with the city secretary would violate either 26U.S.C, 5 7213(a)(2)

or (a)(3), or section 7of the Privacy Act of 1974, 88 Stat. 1896, 1909, 5U.S.C.A. 9 552a note. Section 7213(a)(2)and (a)(3)of title 26 of the United States Code (the Internal Revenue Code) makes itunlawful for any state officer to disclose "any return or return information

. . .acquired by him or another person under section 6103(d) or (1)(61." Section 6103(d) concerns information disclosed by-the Internal Revenue Service to state officers charged with the administration of state tax laws. Section 6103(l)(6)relates to information disclosed by the I.R.S. to chiTd support enforcement agencies. These provisions do not appear to relate to any state or local requirement thatmight be enacted requiring public officers or candidates to reveal their individual tax returns. Whether the proposed ordinance should be enacted is, of course, a question of policy to be determined by the policy makers. We do not believe the proposed ordinance, if enacted, would violate these provisions of the Internal Revenue Code or subject the city secretary topenalties thereunder for disclosure of any information subsequently released by him. We have also examined 26U.S.C. 9 6103(p)(4) and (p)(8). Those provisions concern the security of information obtained by state authorities charged with administering state tax collections, and do not appear to relate to the type of disclosure involved here.

Section 7of the Privacy Act of 1974, about which you specifically inquire, addresses the disclosure of social security numbers. We note that the proposed ordinance requires only the filing of designated portions of the city official's 'orcandidate's income tax return. Under theproposal, the official or candidate would need file only those portions of his return showing occupation, gross income, net income, and income from investments. The taxpayer's social security number need not be disclosed under the proposed ordinance. Protection Study Commission, See **wm;f;;icY** Personal Privacy in an Society,at 613 (1977).

Section 43-3 (a)(8)of the proposed ordinance would require a public official or candidate to include the following information in his financial disclosure statement:

[Plrovided such information is not privileged by law, if the person filing the statement is the owner of five (5)per cent or **more** of any corporation, trust, partnership, firm or business association, suchperson shall list all **customers** of

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such entities with whom five thousand dollars ($5,000.00) ormore business
was transacted during the reporting period, stating the dollar value of business transacted.

. . .
You ask whether an attorney or aphysician could legally or ethically disclose the names of clients or patients and **com** pensation received from them as required by this provision. The identity of a client andmatters involving the receipt of fees from a client are not normally within the scope of the attorney-client privilege, 521 F.2d 179 (10th Cir.), cert. denied, 423U.S ;United States v. Ponder, 475 F.2d 37 (5thCir. 1973). While certain medical records may bemade confidential either by statute, seeV.T.C.S. arts. 695j-1, S 10 (namesof persons receiving publicssistance); 4445c, S 4 (noticeof laboratory information indicating venereal disease); 5547-87 (patients ofmental hospitals); 5547-202, S 2.23 (identity of persons studied in connection with mental disorders), or ,bya constitutional or common law right of privacy, see Industrial Foundation of the South v. Texas Industrial Axdent Board, 540 S.W.2d 668 (Tex.1976), cert. denied, U.S. (March 21, 1977) (No. 76-840),
we do not believe aphysicianwould in every case be legally
or ethically barred from revealing the name-and dollar amount of his sources of professional income over $5,000. See Biggers
v. State, 358 S.W.2d 188, 191 (Tex.Civ. App. -- Dal=), writ ref'd n.r.e., 360 S.W.Zd 516 (Tex. 1962) (thedoctrine of sileged communication does not extend to physician and patient). See generally Annot., 20A.L.R. 3d 1109 (1968). But cf. Texas Employers' Ins.Ass'n v. Marshall, 436 S.W.2d 617(Tex.Cr APP. -- Eastland 1969, writ ref'd n.r.e.)(information obtained by physician doing examination on behalf of Social Security Administration protected from disclosure by federal law).

The Missouri Supreme Court has expressly upheld such a reporting requirement for attorneys, finding that "the attorneyclient privilege generally will remain inviolate." Chamberlin

v. Missouri Elections Comm'n, 540 S.W.Zd 876, 880 (MO. 1976). In those cases where disclosure might present a legal or ethical problem, however, the proposed ordinance has left room for evaluation of any claim of privilege by requiring disclosure only "provided such information isnot privileged by law." Any assertion of privilege must be evaluated on a case-by-case basis, andwill require a "particularized concern with the facts of each case." In-re Grand-Jury Proceedings, 517 F.2d 667, 671 n.2 (5thCir. 1975).

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couldFinally, we must consider your inquiry whether a city exempt from public inspection the income tax returns or customer lists filed in the disclosure statements, or could exempt from public inspection the entire financial statement of city employees such as assistant city managers and department heads. The disclosure of information collected, assembled
ormaintained by governmental bodies is generally controlled **by** the Texas Open Records Act, V.T.C.S. art 6252-17a. Section 3of thatAct requires that all such information shall be available to the public unless specifically excepted therein, As previously discussed, we do not believe the portions of income tax returns filed with the city secretary would be "deemed confidential by **law, ”**  and thus generally excepted from public disclosures by section 3(a)(1)of the Open Records Act. The release of portions of the returns would **not** generally constitute an "unwarranted invasion of privacy,"
as provided **by** the exception to disclosure in section 3(a)(2) of the Open Records Act. See Heathman v. United States District Court, 503 F.2d 1032 (9thG. 1974). While the list **of cus**  tomers required of an attorney or physician might be confidential by law in **some** cases, those lists would not always be excepted from disclosure by section 3(a)(1)or 3(a)(2). The release of a list of an official's or candidate's customers might in some cases be excepted from disclosure under sections 3(a)(4)or 3(a)(10)of the Open Records Act, but such a situation must be addressed on a case-by-case basis. Decision No. 89 (1975). See Open Recorda We believe that any-tempt to exea&t entirely theportions of income tax returns or customer lists included in the proposed financial disclosure statement weuld violate the Texas Open Records Act.

Information contained in the financial disclosure statements of city employees such as assistant citymanager% and department heads would also be subject to the Open **Uecordr,** Act. Such information might, of course, **be** excepted from disclo,surein individual cases under one or more **of** the **pro** visions of section 3of that **Act. We**  **believe, howwer,**  **thag** any attempt tomake the information contained in the proposed financial disclosure statements per se exempt from public disclosure would run afoul of the ODE Records Act and be of
no effect. See Industrial Foundation of the~South v. Texas Industrial AcTdent Hoard, supra at 677.

SUMMARY

A proposed financial disclosure ordinance would not, if enacted **by a**  home rule city, conflict with state law or violate the constitutional rights of city officials

**P. 4587** 

### Honorable

APPROVED:Ben 2.Grant -Page 6 (H-1070)

andcandidatesrequiredto filefinancial statements. Requiringtheattachmentof portionsofanofficial'sorcandidate's incometaxreturntothe financialstatement **would** 

### ndtviolatefederallaw. An attorneyorphysicianmay insomeinstances reveallargefeesreceivedfromclients
orpatientswithoutviolatingethicalor legalobligations. Publicaccessto financialdisclosurestatementsfiledwith the citysecretarywouldbecontrolledby the TexasOpenRecords**Act.** 

### Whether suchan ordinanceashasbeensuggestedshould**be** 

### enactedisaquestionofpolicywhichcannotbeaddressed **in** 

### thecontextof 

### anattorneygeneralopinion.

DAVIDM.KENDALL,FirstAssistant

C.ROBERTHEATH,Chairman OpinionCommittee

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