The Kentucky Department of Revenue has been ordered to release by July 22 approximately 450 unappealed final rulings in tax administration cases.
In a July 10 order, Judge Phillip J. Shepherd of the Franklin Circuit Court, Division 1, dismissed the DOR's argument that it couldn't release the documents as required under a 2017 appellate court decision until the plaintiffs seeking them — Mark F. Sommer of Frost Brown Todd LLC, and Tax Notes — certified that the rulings wouldn't be used for "commercial purposes" as defined by the state's Open Records Act.
Cornish Hitchcock, counsel for Tax Notes, said July 18 that the department’s push for confirmation that the plaintiffs weren’t seeking the rulings for commercial purposes “seemed like a last-ditch effort to hold off the inevitable.” He said the “commercial purposes” definition in the law doesn’t apply to requests by news organizations or the use of records for litigation purposes and is largely aimed at information brokers who seek public records in order to sell the documents for a profit.
In his order, Shepherd wrote that the parties “verified on the record that the statute regarding commercial purposes . . . is not applicable to the present case. Accordingly, the court orders the Cabinet provide the requested records to the Plaintiffs by July 22, 2019.”
The department was required to produce redacted versions of the rulings after the state supreme court decided in April not to reconsider its 2018 decision affirming the 2017 appellate court's ruling in favor of the plaintiffs.
On July 1, months after the judgment requiring the DOR to hand over the rulings became final, the plaintiffs made a motion in court to compel the documents. In a July 9 response the DOR said that "the only impediment to compliance is Petitioners' refusal to certify their intended use."
Shepherd's order appears to resolve the final obstacle to the release of the rulings.
“We’re glad that these letter rulings will finally see the light of day,” Hitchcock said. “It’s too bad that the Department of Revenue kept throwing up roadblocks every step of the way.”
Hitchcock said the public has an interest in the rulings because they “help taxpayers and tax professionals understand how the tax laws are being applied.” He also said the department's tax decisions can cite unreleased final rulings to which tax practitioners don’t have access, handicapping taxpayer representatives in disputes.
Shepherd's latest order to hand over the documents comes after "years of pursuing the several hundred redacted final rulings, an affirmation by the court of appeals and the supreme court, and a legislative endorsement of the transparent nature of these types of rulings in April,” Sommer told Tax Notes. “We hope to see them within the week thanks to the Franklin Circuit Court’s recent order.”
Seeking to compel Kentucky’s Finance and Administration Cabinet and DOR to publish final tax rulings, Sommer filed an open records request with the agencies in 2012. After the issue went to court, Tax Notes intervened in the case on behalf of Sommer in July 2013.
Notably, after Shepherd ruled in August 2014 that the DOR needed to release its letter rulings, the department turned over roughly 250 final rulings that were appealed by taxpayers to the state Board of Tax Appeals (now the Kentucky Claims Commission) and were thus public record. The department argued in its appeal of Shepherd's decision that final rulings that hadn't been appealed were not public record and couldn't be adequately redacted to protect private information— a claim the appellate court rejected.
The Cabinet did not immediately provide a comment on the order.