Local Government Tax Audit Confidentiality Standards

The act establishes uniform confidentiality standards for the protection of taxpayer information used or obtained in connection with a sales or use tax investigation performed by a third-party auditor on behalf of a local taxing jurisdiction. Except for certain limited circumstances, the act prohibits third-party auditors from divulging or making known in any way to any person information that is obtained from a sales or use tax investigation on behalf of a local taxing jurisdiction or disclosed in any document, report, or return filed in connection with local sales or use taxes. Third-party auditors may disclose taxpayer information in certain limited circumstances, including disclosure to:

• An official, employee, hearing officer, attorney, or other public agent of the local taxing jurisdiction who is authorized to receive such information in connection with the local taxing jurisdiction's sales or use tax investigation performed by the third-party auditor;
• A requesting taxpayer, or the taxpayer's authorized agent, of the taxpayer's own tax filings;
• The department of revenue (department) for purposes of statistical analysis and publication as authorized by current law; and
• The department and the federal internal revenue service as necessary and pertinent to a taxpayer's compliance or failure to comply with state or federal tax law.

A taxpayer may waive the confidentiality requirements for the taxpayer's own filings. A violation of the confidentiality provisions is a misdemeanor punishable by a fine of not more than $1,000 per violation.

The act also clarifies the scope of the authority of the executive director of the department to share taxpayer information with statutory local governments, special districts, and requesting home rule jurisdictions as necessary to facilitate dispute resolution, coordination, intergovernmental agreements, and information sharing between the department and such local governments consistent with law, which prohibits the disclosure of any such shared information to any third party.

(Note: This summary applies to this bill as enacted.)