Can a state tax agency refuse a public records request for a company's corporate tax exemption application?

Official title

16-IB04 3/10/2016 FOIA Opinion Letter to Ms. Kaitlyn Collyer re: FOIA Complaint Concerning the Delaware Department of Finance

Plain-English summary

A requester asked the Delaware Division of Revenue for three companies' applications for exemption from corporate income tax (Victoria's Secret, The Sherwin Williams Company, and Gore Enterprise Holdings). The Division refused, citing Delaware's tax secrecy statute, 30 Del. C. § 368(a), which bars Division employees from disclosing information in a tax "return" or "report" required under Title 30. The requester petitioned the Attorney General's office to review that denial under FOIA.

The AG concluded the Division did not violate FOIA. The application at issue, a Form 1902-AP, is the document a corporation files to seek tax-exempt status under 30 Del. C. § 1902(b)(8). The opinion reasoned that the form counts as a "report" (an official document giving information about a particular subject) and that filing it is "required" in the sense that a corporation cannot obtain the exemption without submitting it. Because the form qualified as a report required under Title 30, Section 368(a) barred its disclosure, and FOIA's exemption for records "specifically exempted from public disclosure by statute" (29 Del. C. § 10002(l)(6)) applied.

Currency note

This opinion was issued in 2016. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

Q: Can the public get a copy of a company's Delaware tax exemption application through a records request?
A: At the time of this opinion, no. The AG concluded that a Form 1902-AP submitted under 30 Del. C. § 1902(b)(8) was a "report" required under Title 30, so Delaware's tax secrecy statute barred the Division of Revenue from disclosing it, and FOIA's exemption for records exempted by other statutes applied.

Q: Does it matter that a company files the exemption application voluntarily?
A: The requester argued that a corporation is not required to seek tax-exempt status, so the form couldn't be "required under this title." The opinion rejected that reading, concluding that once a corporation chooses to seek the exemption, the Division requires the form as the vehicle for that request, which was enough to make it "required" for purposes of the secrecy statute.

Q: What if a state agency won't confirm whether the records even exist?
A: In this matter, the Division of Revenue would not confirm or deny that the requested applications existed, citing its policy that Section 368 barred it from even acknowledging their existence. The opinion did not need to resolve whether that "neither confirm nor deny" posture was itself proper, because it concluded the underlying records, if they existed, were exempt in any event.

Background and statutory framework

Delaware's FOIA defines "public record" broadly, but 29 Del. C. §10002(l)(6) removes from that definition "any records specifically exempted from public disclosure by statute or common law." The Division of Revenue pointed to 30 Del. C. § 368(a), which makes it unlawful for Department of Finance personnel to disclose "the amount of income or any particulars set forth or disclosed in any report or return required under this title." Because Section 368 doesn't define "report" or "return," and the opinion found no prior AG opinion or Delaware court decision squarely on point, the AG turned to dictionary definitions and to Section 563 of Title 30, which authorizes the Division to prescribe the form and contents of returns or other required documents, to conclude that a Form 1902-AP filed under 30 Del. C. §1902(b)(8) fit within the statute's confidentiality mandate.

Citations and references

Statutes:

• 29 Del. C. §10002(l)(6), FOIA exemption for records specifically exempted by other statute
• 30 Del. C. § 368(a), tax secrecy statute barring disclosure of return/report information
• 29 Del. C. § 10005(b), 60-day appeal period to Superior Court
• 30 Del. C. §1902(b)(8), corporate income tax exemption for certain holding companies
• Section 563 of Title 30, Division's authority to prescribe the form and contents of required documents

Source

• Landing page: https://attorneygeneral.delaware.gov/2016/03/10/16-ib04-3102016-foia-opinion-letter-to-ms-kaitlyn-collyer-re-foia-complaint-concerning-the-delaware-department-of-finance/
• Original PDF: not linked from landing page

Original opinion text

OFFICE OF THE ATTORNEY GENERAL OF THE STATE OF DELAWARE

Attorney General Opinion No. 16-IB04

March 10, 2016

VIA EMAIL and FIRST CLASS MAIL

Kaitlyn Collyer

902 N. Pennsylvania Street

Apt. 306

Indianapolis, IN 46204

[email protected]

Re: FOIA Request to the Delaware Division of Revenue Dated November 3, 2015

Dear Ms. Collyer:

We write in response to your “Request for Public Records,” which we received on November 23, 2015 (the “Petition”).  We treat the submission as a petition to review the decision of the Delaware Division of Revenue (the “Division”) to deny your November 3, 2015 request to inspect public records under the Delaware Freedom of Information Act, 29 Del. C. §10001-10007 (“ FOIA ” or “the Act”).  We have determined that the Division did not violate FOIA because the requested records, if they exist, would be exempt from disclosure pursuant to Section 10002(l)(6).

FACTS

On November 3, 2015, you requested the following documents from the Division:

Victoria Secret Application for Exemption from Corporate Income Tax;

The Sherwin Williams Company Application for Exemption from Corporate Income Tax; and

Gore Enterprise Holdings, Inc. Application for Exemption from Corporate Income Tax.

We refer to these documents, collectively, as the “Applications.”  The Division denied your request in its entirety, arguing that Section 368 of Title 30, the so-called “tax secrecy statute,” prohibits the Division from providing the requested Applications or any information disclosed therein.  You exchanged several emails with personnel from the Division but were not able to obtain the requested documents.

The Petition to this office attached your email correspondence with the Division and attached a blank sample Application for Exemption from Corporation Tax, also known as a Form 1902-AP.  We notified the Division of your Petition to this office and requested a formal response.  The Division, responding through counsel, argued that if such documents exist, [1] the Applications are not public records, because they are “specifically exempted from public disclosure by statute” and are therefore exempt from FOIA.  Letter from J. Noel to K. Makowski dated Dec. 9, 2015 (quoting 29 Del. C. § 10002(l)(6)) (the “Response”).  The statute in question is Section 368 of Title 30, the same statute that the Division relied upon when initially denying your Request.  Following our review of the Response, we asked the Division to address whether the Applications constitute “returns” or “reports” as those terms are used in Section 368.  The Division’s supplemental response contends that the Applications are both “returns” and “reports.”   See Letter from J. Noel to K. Makowski dated Feb. 8, 2016. [2]

RELEVANT LAW

FOIA defines a “public record” as “information of any kind, owned, made, used, retained, received, produced, composed, drafted or otherwise compiled or collected, by any public body, relating in any way to public business, or in any way of public interest, or in any way related to public purposes, regardless of the physical form or characteristic by which such information is stored, recorded or reproduced.”  29 Del. C. §10002(l).  FOIA further exempts from the definition of public record “[a]ny records specifically exempted from public disclosure by statute or common law.”  29 Del. C. §10002(l)(6).  The Division argues that Section 368 (a) is such a statute.  It provides:

Except in accordance with proper judicial order or as otherwise provided by law, it shall be unlawful for any officer or employee of the Department of Finance, or for any other officer or employee of this State who has access to tax returns or information from tax returns under this title (other than Chapters 30 [except §§ 3004 and 3005], 51 and 52) to disclose or make known to any person in any manner the amount of income or any particulars set forth or disclosed in any report or return required under this title (other than Chapters 30 [except §§ 3004 and 3005], 51 and 52) including any copy of any portion of a federal income or estate tax return or report, or any information on a federal return or report which is required to be attached to or included in a state tax return.

30 Del. C. § 368 (a) (emphasis added).

LEGAL ANALYSIS

The Petition filed with this office attached a blank sample Application for Exemption from Corporation Tax, also known as a Form 1902-AP.  If a Form 1902-AP is a “report or return required under this title,” the Division may not disclose any information contained therein in response to a FOIA request.

Section 368 does not define “report” or “return.” [3]   Neither have we been directed to or uncovered any prior decision from this office or the Delaware courts that squarely addresses the issue.  Nevertheless, relying upon the common understanding of the term “report,” we conclude that the Division is prohibited from disclosing any information disclosed on a Form 1902-AP under FOIA.

The Law Dictionary (featuring Black’s Law Dictionary Free Online Legal Dictionary 2 nd Ed.) defines “report” as “[a]n official or formal statement of facts or proceedings.” [4]   Merriam-Webster defines “report” as “an official document that gives information about a particular subject.” [5]   A Form 1902-AP is clearly an “official document.”  The form is promulgated by the Division pursuant to the authority granted in Section 563 of Title 30. [6]   Likewise, a completed Form 1902-AP would contain “formal statements of fact.”  Accordingly, we conclude that a submitted Form 1902-AP is a “report.”  We have not considered whether a submitted Form 1902-AP would be a “return.”

This leaves for determination whether a Form 1902-AP is “required under this title.”  Again, the term is not defined in the Code, but we rely on the words’ ordinary meaning to conclude that the Division is prohibited by Section 368 from disclosing any information contained on a Form 1902-AP.  Definitions of “required” include “necessary,” “obligatory” and “compulsory.” [7]   The Form 1902-AP is the application by which recognition of tax-exempt status is sought.  The Division will not recognize a tax exemption claimed by a corporation organized in conformity with Section 1902(b)(8) [8] unless the corporation has first submitted a Form 1902-AP, the contents of which is prescribed by the Division pursuant to the authority granted in Section 563 of Title 30.  We believe this satisfies the requirement that submission of the form is “required under this title.” [9]

CONCLUSION

We conclude that the Division did not violate FOIA by refusing to release any Application that may exist.  For the reasons set forth above, the Applications are exempt from FOIA pursuant to 29 Del. C. § 10002(l)(6) and 30 Del. C. § 368(a).  You may file an appeal to the Superior Court within 60 days of the date of this determination.  See 29 Del. C. § 10005(b).

This determination is directed solely to the parties identified herein.  It is based on the facts relevant to this matter.  It does not constitute precedent and should not be cited as such by future parties.

Yours truly,

/s/ Danielle Gibbs

Danielle Gibbs

Chief Deputy Attorney General

cc:        Jennifer R. Noel, Deputy Attorney General (by email)

[1] The Division neither confirms nor denies that any such documents exist or that the Division has copies of such documents.  The Division’s long-held policy is that Section 368 of Title 30 prohibits the Division from even confirming whether such documents exist.

[2]   Copies of the Division’s Response and supplemental response were provided to you via email.

[3] Other subsections of Section 368 not directly applicable in this matter suggest that the terms might properly be given a broad construction.  For example, Section 368(c) provides that “[t]he term ‘return’ or ‘report’ shall include reports of the Internal Revenue Service or other competent federal authority containing tax return information.”  Section 368(e) identifies only a narrow range of information that does not fall within the definition of “return”:  “For purposes of this section, the terms ‘return’ and ‘return information’ shall not be construed to include any information appearing on or to appear on the face of a license required to be displayed under § 2109 of this title or the name or mailing address of the licensee of said license.”

[4]   http://thelawdictionary.org/report .

[5] www.merriam-webster.com/dictionary/report .

[6] Section 563 provides that the Division “may prescribe the form and contents of any return or other document required to be filed under this title…..”  Merriam-Webster defines “prescribe” as “to lay down as a guide, direction or rule of action: ordain: to specify with authority.”  http://www.merriam-webster.com/dictionary/prescribe .

[7]   http://www.thefreedictionary.com/required .

[8] 30 Del. C. §1902(b)(8) provides that the following corporations shall be exempt from taxation under this chapter . . . [c]orporations whose activities within this State are confined to the maintenance and management of their intangible investments or of the intangible investments of corporations or statutory trusts or business trusts registered as investment companies under the Investment Company Act of 1940, as amended (15 U.S.C. 80a-1 et seq.) and the collection and distribution of the income from such investments or from tangible property physically located outside this State. For purposes of this paragraph, “intangible investments” shall include, without limitation, investments in stocks, bonds, notes and other debt obligations (including debt obligations of affiliated corporations), patents, patent applications, trademarks, trade names and similar types of intangible assets[.]

[9]  It appears that you may contend that the filing of the Form 1902-AP is not “required under this title,” because a corporation is not required to seek tax-exempt status.  See email from K. Collyer to P. Carter dated Nov. 4, 2015 (“The Application is something a corporation would submit out of its own volition to attempt to receive classification as an exempt corporation under 30 Del. C. § 1902(b)(8).”).

We find it unlikely that any such meaning of “required” was contemplated or intended by the legislature.  The General Assembly has determined as a matter of policy that a Delaware corporation should be permitted to seek tax-exempt status and that the Division should have the power to determine what corporations must disclose under this or any other circumstance.  This office is reluctant to interpret Section 368 and its intersection with FOIA in a manner that could discourage a Delaware corporation from seeking or obtaining tax-exempt status.