Last month, Reed Smith, acting for its client, Tax Analysts, struck a blow for transparent tax administration, by convincing the California Franchise Tax Board (the “FTB”) to disclose certain forms used by FTB auditors. In addition, the FTB agreed to pay Tax Analysts’ legal fees connected with the lawsuit. This result vindicates taxpayers’ right of access to tax-agency documents that may disclose useful information related to tax policy and tax administration.
Tax Analysts is a global publisher of weekly magazines and daily online journals on tax policy and administration and regularly reports on state tax developments through its publications. It has a history of actively promoting transparency in tax administration at the federal and state level.
On February 12, 2014, Tax Analysts submitted a written request to the FTB, seeking disclosure of FTB Form 6861, entitled “Relativity Sheet,” and FTB Form 6685, entitled “Test Check for Combination.” The FTB uses Form 6861 to determine the amount of income or apportionment factor adjustment that would be necessary to generate a specified tax change as well as to estimate the materiality of potential audit adjustments. FTB Form 6685 is used to determine the tax effect of combining affiliated companies. Although the California Public Records Act required the FTB to disclose such forms upon written request, the FTB denied Tax Analysts’ request, claiming that the documents were exempt.1
On June 11, 2014, Tax Analysts, represented by a Reed Smith team, including Marty Dakessian, Kyle Sollie, and Shirley Wei sued the FTB, arguing that the forms were public documents that the FTB was required to release under California’s Public Records Act.2
In the face of this suit, the FTB relented and released the forms to Tax Analysts.
For more information on the California Public Records Act and other state freedom of information statutes, and taxpayers’ rights to access documents created by state taxing authorities, contact one of the authors of this alert or another member of the Reed Smith State Tax Group.
About Reed Smith State Tax Reed Smith’s state and local tax practice is composed of more than 30 lawyers across seven offices nationwide. The practice focuses on state and local audit defense and refund appeals (from the administrative level through the appellate courts), as well as planning and transactional matters involving income, franchise, unclaimed property, sales and use, and property tax issues. View our State Tax team. For more information on Reed Smith’s California tax practice, visit State Tax – California.
- Cara Griffith, News Analysis: Can a State Decline to Disclose Tax Forms? California Says Yes, Tax Analysts Featured News (March 5, 2014).
- Tax Analysts v. Franchise Tax Board, Case No. BS149089. See also David Sawyer, Tax Analysts Files Suit to Compel Disclosure of California Tax Audit Worksheets, Tax Analysts Featured News (June 12, 2014).
Client Alert 2015-108