SD27 - A Study of the Secrecy of Tax Information Provision Under Title 58.1

  • Published: 1991
  • Author: Department of Taxation
  • Enabling Authority: Senate Joint Resolution 128 (Regular Session, 1990)

Executive Summary:
Senate Joint Resolution 128 of the 1990 Session of the General Assembly requested the Department of Taxation to study the provisions of Va. Code § 58.1-3 relating to the secrecy of tax information and their interaction with the Virginia Freedom of Information Act.

The Secrecy of Information statute is designed to protect Virginia taxpayers from the disclosure of confidential tax information. The statute provides very few circumstances where confidential tax information may be disclosed. The information contained in the statute which is to remain confidential is very broad and protective and only that information that is specifically excepted may be disclosed.

Since its original enactment in 1926, the Secrecy of Information statute remained basically the same for almost 50 years. From 1972 to the present, the statute has been amended 10 times to provide exceptions to the general rule of confidentiality. The changes over the past 18 years have been enacted primarily to enhance state and local tax enforcement, and to provide information for the administration of state fiscal affairs.

The exceptions allow the disclosure of confidential tax information or allow the exchange of information with not only the Internal Revenue Service, but also with other state agencies, local governing bodies and other states. This enables Virginia to collect debts of the state that would be otherwise uncollectible.

The Virginia Freedom of Information Act was also studied to determine its interaction with the secrecy statutes. It was found that any information protected from disclosure under the secrecy statutes would be exempt from the Freedom of Information requirements. There is no apparent conflict among these two statutes; however, there is no guarantee that attempts to secure confidential tax information under the Freedom of Information Act will not be attempted.

A state survey was conducted which canvassed all states and the District of Columbia. The results of the survey may be found in Appendix C. It was found that the Virginia secrecy statute is slightly less restrictive than those of other states. This is attributable to Virginia's local government involvement in state tax administration, Virginia's Set-Off Debt Collection program, and the programmatic differences of other states' programs. While Virginia law appears to be somewhat broader in terms of disclosure of information than other states, the law is generally consistent with the provisions of the federal statutes.

This study of the laws relating to the secrecy of tax information has led to the formulation of five recommendations: (1) Va. Code § 58.1-3 should be amended to allow local tax officials to disclose information to the Tax Commissioner upon written request; (2) Further broadening of the secrecy statute by the enactment of additional exceptions should be considered only in cases of absolute necessity for the administration of public programs; (3) Future exceptions to the secrecy statute should only be considered after confidentiality can be ensured, cost has been examined, and the public need for such information has been established; (4) Va. Code § 2.1-342(22) should be amended to replace "documents specified in" with "official records contemplated by;" and (5) The Freedom of Information Act should be examined further to ensure that it does not contravene the protection afforded to confidential tax information under Va. Code § 58.1-3. The implementation of these recommendations would ensure the people of the Commonwealth that their right to confidentiality would be protected.