Court Opinion

ID: 3720267
Source: CourtListenerOpinion
Date Created: 2016-07-06 06:51:33.826674+00
Date Added: 2024-06-11T18:01:14.580217
License: Public Domain

Grogan challenges the trial court's entry of summary judgment in favor of the City on his claim that the City had violated R.C. Chapter 718, R.C. Chapter 5747, and Section 6103, Title 26, U.S. Code, by improperly disclosing his city tax returns and his attached federal tax returns. According to Grogan, the City was not entitled to use his tax returns as supporting documents when it filed its nuisance action.  (While the City raised the issue of immunity in a filing captioned "Citation of Additional Authority" in support of its motion for summary judgment, the trial court did not address this issue, nor has the City asserted it in its appellate brief.)
In support of its summary-judgment motion on Grogan's counterclaim, the City filed an affidavit in which the audit supervisor of Cincinnati's Income Tax Bureau stated that he had released the tax records concerning Nate's Café to the City Prosecutor's office to be used by that office in its official capacity pursuant to Cincinnati Municipal Code 311-61 and R.C. 718.07.  The affidavit further stated that the tax records were kept in the ordinary course of the City's business and were released only for use in connection with the City's official business.
The trial court determined that the attachment of Grogan's tax returns was proper as a part of the official business of the City and as a reasonably necessary part of its pleadings.  The court found that an attempt to abate a nuisance was within the City's official business, and that the tax returns appropriately showed the ownership of the premises and the extent of activity on the premises.  The majority decision of this court agrees with the trial court's conclusion.  I do not.
The issue put before this court is whether the City violated R.C. Chapter 718, R.C. Chapter 5747, and Section 6103, Title 26, U.S. Code, by improperly disclosing Grogan's city and federal tax returns.  The City has answered Grogan's appeal by claiming that Cincinnati Municipal Code 311-61 authorized the disclosure.
Generally, the information provided in tax returns is confidential.48
That confidentiality, however, is not absolute.  Under Section 6103, Title 26, U.S. Code, federal tax returns and the information in the returns are confidential unless one of the enumerated exceptions is applicable.  Under the "Procedure and recordkeeping" section of the federal statute regarding confidentiality, pertinent state-law requirements are set forth.49  As a safeguard, Section 6103(p)(8)(A), Title 26, U.S. Code requires that no federal employee disclose federal tax returns or return *Page 757 
information "to any officer or employee of any State which requires a taxpayer to attach to, or include in, any State tax return a copy of any portion of his Federal return, or information reflected on such Federal return, unless such State adopts provisions of law which protect the confidentiality of the copy of the Federal return (or portion thereof) attached to, or the Federal return information reflected on, such State tax return."  (Cincinnati is a "State" as defined by the federal statute.)  Nothing in these provisions, however, "shall be construed to prohibit the disclosure by an officer or employee of any State of any copy of any portion of a Federal return or any information on a federal return which is required to be attached or included in a State return to another officer or employee of such State (or political subdivision of such State) if such disclosure is specifically authorized by State law."
Under the applicable state law, disclosure of tax-return information is allowed "in accordance with a proper judicial order or in connection with the performance of [the disclosing] person's official duties or the official business of the municipal corporation as authorized by [R.C. Chapter 718] or the charter or ordinance authorizing the levy."
Cincinnati Municipal Code 311-61 states,
  Any information gained as a result of any returns, investigations, hearings or verifications required or authorized by this chapter shall be confidential and no disclosure thereof shall be made except to municipal, county, state or federal taxing agencies, or, except for official purposes, or except in accordance with proper judicial order.  No person shall otherwise divulge such information.
  I agree with the City that R.C. Chapter 5747 is inapplicable to the tax returns at issue to the extent that the chapter relates to state income-tax returns. State tax returns are not at issue here.  In this case, it appears that Grogan released his federal income-tax returns to the City as allowed by the Cincinnati Municipal Code.  Thus, the issue to be determined is whether the City violated Cincinnati Municipal Code 311-61 and R.C. 718.07 as they relate to the confidentiality requirements of Section 6103(p)(8)(b), Title 26, U.S.Code.
R.C. 718.07 limits disclosure of tax information except in connection "with the performance of [the divulging] person's official duties or the official business of the municipal corporation as authorized by [R.C. Chapter 718]" or as authorized by "the charter or ordinance authorizing the levy."  R.C. Chapter 718 regulates the subject of municipal taxation, including the levy and collection of municipal income taxes.50  Thus, the "official duties" or "official business" of the municipal corporation or its employees "as authorized under the statute" clearly limits the *Page 758 
disclosure of tax information by the City to tax-related matters contained in R.C. Chapter 718.
The Cincinnati Municipal Code uses the phrase "official purposes" to describe when tax returns or tax information may be disclosed.  That term is not defined.  The phrase has been judicially defined, however, as it is used in R.C. 5747.18.  R.C. Chapter 5747 directs that any undefined term used in R.C. Chapter 5747 "has the same meaning as when used in a comparable context in the internal revenue code, and all other statutes of the United States relating to federal income taxes."51  The Tenth District Court of Appeals has determined that "federal income tax returns are open to inspection solely by public officials lawfully charged with the administration of state laws, and only if the inspection is for the purpose of administering such laws."52 Consequently, in that court's view, "any exception to the confidentiality principle of information included in income tax returns [can] be rationalized only when the requesting party's inspection is directly related to the administration of any state or local tax law."53  Thus, tax returns should not be released to other public officials "unless it is affirmatively demonstrated that they must have access to them to perform legally delegated duties of administering or enforcing tax laws of the state of Ohio or a political subdivision thereof."54  The fact that this definition of "official purpose" is consistent with the federal income-tax policy of confidentiality confirms its desirability, when Section 6103(p)(8)(A), Title 26, U.S. Code requires the Cincinnati Municipal Code to protect the confidentiality of federal returns.
To accept the City's argument that bringing a nuisance-abatement action is an "official purpose" allowing disclosure of confidential tax information would destroy any semblance of confidentiality.  Under the City's interpretation of "official purpose," any city official could obtain tax records for any civil or criminal prosecution without regard to whether the prosecution related to tax matters.  A court cannot presume that a legislative body "intended to enact a law producing unreasonable or absurd consequences."55  The City's interpretation would abrogate the confidentiality accorded tax returns under both Federal and local law. *Page 759 
The remaining provisions of Cincinnati Municipal Code Chapter 311 support this conclusion.  The chapter deals with the City's income tax and authorizes the tax commissioner to collect and receive taxes imposed by the chapter, to keep accurate records, and to enforce the provisions of the chapter.56  The chapter also authorizes the tax commissioner, or any authorized agent of the tax commissioner, to examine federal income-tax returns to verify accuracy.
Cincinnati Municipal Code 311-69 creates a board of review consisting of the city manager or his representative, a designated city official, and the director of finance to conduct private hearings on decisions by the tax commissioner.  That same section states that "[t]he provisions of Section 311-61 hereof with reference to the confidential character of information required to be disclosed by this chapter shall apply to such matters as may be heard before the board of appeal."  It seems obvious that the "official purpose" referred to in Cincinnati Municipal Code 311-61 pertains to the duties and responsibilities of the tax commissioner, his agents, and the board of review relating to the investigation and administration of local taxes.
This interpretation is supported by decisions of courts in other jurisdictions regarding their state laws requiring public officials to maintain the confidentiality of income-tax returns.57  State statutes that make tax-return information confidential by "prohibiting tax or other governmental officials from divulging information contained in income tax returns [have] been not only to protect the individual taxpayer's privacy or his privilege against self-incrimination, but also to facilitate tax enforcement by encouraging the taxpayer to make full and truthful declarations in his returns, without fear that his statements will be revealed or used against him for other purposes."58
Similarly, Section 6103, Title 26, U.S. Code was enacted to "protect taxpayers' reasonable expectations of privacy" and "to ensure maximal compliance with the Federal tax laws."59
Further, I would conclude that Cincinnati Municipal Code 311-61's use of "for official purposes" does not specifically authorize the release of tax information as provided in Section 6103(p)(8)(b), Title 26, U.S. Code.  Obviously, if the drafters of the municipal code had wanted specific exemptions to the confidentiality section concerning taxation, the drafters could have included such specific authorization.  To hold that the term "for official purposes" is so broad as to specifically *Page 760 
authorize an exemption to confidentiality for proceedings unrelated to tax issues would allow the exemption to swallow the general provision for confidentiality.
The City also asserts that Grogan provided tax returns as a result of discovery requests.  The record does not clearly demonstrate this. (Although some reference was made to tax returns in Grogan's deposition, it is not clear exactly what was being discussed, and Grogan's counsel did object to the production of "personal tax returns.")  If the record had sufficiently demonstrated that the tax returns at issue had been produced in discovery or that the City had sought the tax records under a proper judicial order, it might have affected my determination to sustain Grogan's assignment.  But, based on the record, I would conclude that the trial court erred in granting summary judgment to the City on Grogan's counterclaim asserting improper disclosure.  The parties did not raise, and the trial court did not address, what remedy, if any, a violation of this section would occasion.  I would leave that issue to be resolved by the trial court.  Thus, I would sustain Grogan's third assignment as it relates to this claim and remand this case to the trial court for further consideration.
48 See R.C. 718.07.
49 See Section 6103(p)(8), Title 26, U.S.Code.
50 See Cincinnati Imaging Venture v. Cincinnati (1996),116 Ohio App. 3d 1, 686 N.E.2d 528.
51 See R.C. 5747.01.
52 See Collins v. Ferguson (1976), 48 Ohio App. 2d 255, 261,357 N.E.2d 51, 55.
53 See id.
54 See id.  (Emphasis added.)
55 See State ex rel. Cooper v. Savord (1950), 153 Ohio St. 367,92 N.E.2d 390.
56 See Cincinnati Municipal Code 311-53.
57 See Annotation, Validity, Construction, and Effect of State Laws Requiring Public Officials to Protect Confidentiality of Income Tax Returns or Information (1980), 1 A.L.R. 4th 959.
58 See id. at 963.
59 See Commonwealth v. Burgess (1997), 426 Mass. 206, 208,688 N.E.2d 439, 442.