Bill Text: AZ SB1385 | 2018 | Fifty-third Legislature 2nd Regular | Chaptered
Bill Title: Tax appeals; administrative hearings; confidentiality
Spectrum: Partisan Bill (Republican 1-0)
Status: (Passed) 2018-04-12 - Chapter 218 [SB1385 Detail]
Download: Arizona-2018-SB1385-Chaptered.html
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House Engrossed Senate Bill |
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State of Arizona Senate Fifty-third Legislature Second Regular Session 2018
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CHAPTER 218
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SENATE BILL 1385 |
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AN ACT
Amending sections 42-1251, 42-1253 and 42-1254, Arizona Revised Statutes; amending section 42-2003, Arizona Revised Statutes, as amended by Laws 2017, chapter 96, section 1, chapter 258, section 43 and chapter 340, section 2; amending section 42-2003, Arizona Revised Statutes, as amended by Laws 2017, chapter 96, section 1, chapter 139, section 4, chapter 258, section 43 and chapter 340, section 2; amending section 42-2059, Arizona Revised Statutes; relating to tax appeal confidentiality.
(TEXT OF BILL BEGINS ON NEXT PAGE)
Be it enacted by the Legislature of the State of Arizona:
Section 1. Section 42-1251, Arizona Revised Statutes, is amended to read:
42-1251. Appeal to the department; hearing
A. Except in the case of individual income taxes, a person from whom an amount is determined to be due under article 3 of this chapter may apply to the department by a petition in writing within forty‑five days after the notice of a proposed assessment made pursuant to section 42‑1109, subsection B or the notice required by section 42‑1108, subsection B is received, or within such additional time as the department may allow, for a hearing, correction or redetermination of the action taken by the department. In the case of individual income taxes, the period is ninety days from the date the notice is mailed. The petition shall set forth the reasons why the hearing, correction or redetermination should be granted and the amount in which any tax, interest and penalties should be reduced. If only a portion of the deficiency assessment is protested, all unprotested amounts of tax, interest and penalties must be paid at the time the protest is filed. The department shall consider the petition and grant a hearing, if requested. To represent the taxpayer at the hearing or to appear on the taxpayer's behalf is deemed not to be the practice of law.
B. Except in the case of individual income taxes, at any time during which an appeal to the department under subsection A of this section is pending, a person that has conferred with a designated appeals officer of the department to clarify any fact or legal issue in dispute and to discuss the availability of additional documentation that may assist in resolving outstanding issues may bypass the hearing process before the office of administrative hearings and either:
1. Appeal to the state board of tax appeals by filing a notice of appeal in writing pursuant to section 42-1253, subsection A.
2. Bring an action in tax court by filing a notice of appeal in writing pursuant to section 42-1254, subsection C.
C. If the department fails to schedule a meeting within forty-five days of the time a person files a written request with the department to confer with a designated appeals officer about bypassing the hearing process before the office of administrative hearings, the person may bypass the meeting and appeal directly to the board of tax appeals or bring an action in tax court.
B. D. If the taxpayer does not file a petition for hearing, correction, or redetermination or appeal within the period provided by subsection A, B or C of this section, the amount determined to be due becomes final at the expiration of the period. The taxpayer is deemed to have waived and abandoned the right to question the amount determined to be due, unless the taxpayer pays the total deficiency assessment, including interest and penalties. The taxpayer may then file a claim for refund pursuant to section 42‑1118 within six months of after payment of the deficiency assessment or within the time limits prescribed by section 42‑1106, whichever period expires later.
C. E. All orders or decisions made on the filing of a petition for a hearing, correction or redetermination under subsection A of this section become final thirty days after notice has been received by the petitioner, unless the petitioner appeals the order or decision to the state board of tax appeals.
Sec. 2. Section 42-1253, Arizona Revised Statutes, is amended to read:
42-1253. Appeal to state board of tax appeals; definition
A. Except as provided in for the provisions of section 42-1251, subsection B and section 42‑1254, subsection C that provide for an option to bypass all or part of the administrative appeals process in certain tax disputes, a person aggrieved by a final decision or order of the department under section 42‑1251, article 3 of this chapter or section 42‑2065, 42‑2068, 42‑2069, 42‑2074, 42‑2201 or 42‑2202 may appeal to the state board of tax appeals by filing a notice of appeal in writing within thirty days after the decision or order from which the appeal is taken has become final.
B. The board shall take testimony and examine documentary evidence as necessary to determine the appeal, all pursuant to administrative rules to govern such appeals.
C. On determining the appeal the board shall issue a decision consistent with its determination. The board's decision is final on the expiration of thirty days from the date when notice of its action is received by the taxpayer, unless either the department or the taxpayer brings an action in tax court as provided in section 42‑1254.
D. If the amount in any single dispute before the board is less than twenty‑five thousand dollars, a taxpayer may be represented in that dispute before the board by:
1. A certified public accountant.
2. A person who is enrolled to practice before the United States internal revenue service and is recognized as an enrolled agent.
3. Any other person who is authorized by the taxpayer under a properly executed power of attorney and who was previously or is currently retained by the taxpayer for purposes other than representation in a hearing before the board.
E. If a practitioner who represents a taxpayer before the board pursuant to subsection D of this section fails to comply with an order or rule of the board, the board may impose sanctions including one or both of the following:
1. Order that the stipulation of the facts proposed by the department of revenue be accepted.
2. Suspend the practitioner from further practice before the board either for a specific period of time or until the board removes the suspension.
F. For the purposes of this section, "practitioner" means a person, other than a party, who files documents with or appears before the board in connection with a matter before the board.
Sec. 3. Section 42-1254, Arizona Revised Statutes, is amended to read:
42-1254. Appeal to tax court
A. The department or a taxpayer aggrieved by a decision of the state board of tax appeals may bring an action in tax court.
B. If the department is aggrieved by a decision of the board and the amount in dispute is less than five thousand dollars, the department may not bring an action in tax court unless the department determines that the decision of the board involves an issue of substantial significance to the state. A taxpayer aggrieved by a determination of the department that an issue is of substantial significance to the state may file a motion with the tax court to dismiss the action brought by the department on the grounds that the determination constitutes an abuse of discretion.
C. Except in the case of individual income tax cases in which the amount in dispute is less than five thousand dollars, a person who is aggrieved by a final decision or order of the department under section 42‑1251 or article 3 of this chapter may, in lieu of appealing to the state board of tax appeals under section 42‑1253, may bring an action in tax court by filing a notice of appeal in writing within thirty days after the decision or order from which the appeal is taken has become final. In addition, as provided by section 42-1251, subsections B and C, a person may bypass all or part of the administrative appeals process in certain tax disputes by bringing an action in tax court by filing a notice of appeal in writing within the time prescribed by section 42-1251, subsection B.
D. Any appeal that is taken to tax court pursuant to this section is subject to the following provisions:
1. No An injunction, writ of mandamus or other legal or equitable process may not issue in an action in any court in this state against an officer of this state to prevent or enjoin the collection of any tax, penalty or interest.
2. The action shall not begin more than thirty days after the order or decision of the board or department becomes final. Failure to bring the action within thirty days after the order or decision of the board or department becomes final constitutes a waiver of the protest and a waiver of all claims against this state arising from or based on the illegality in the tax, penalties and interest at issue, except that within the time limits set forth in section 42‑1106, a taxpayer who fails to bring an action within thirty days may pay the tax under protest stating the grounds of objection to the legality of the tax and then file a claim for refund of the taxes paid. The refund claim shall then be governed by section 42‑1119 and this section.
3. The tax court shall hear and determine the appeal as a trial de novo.
4. Either party to such an action may appeal to the court of appeals or supreme court as provided by law.
5. If a final judgment is rendered in favor of the taxpayer in the action, the amount or such portion of the judgment as may be necessary shall first be credited to any taxes, penalties and interest due from the plaintiff taxpayer, and the amount of the balance remaining due the taxpayer shall be certified by the department of revenue to the department of administration, with a certified copy of the final judgment and a claim for refund authenticated by the department of revenue. On receipt, the department of administration shall draw a warrant payable to the taxpayer in an amount equal to the amount of the tax found by the judgment to be illegal, less minus the amount of any taxes, penalties and interest due from the taxpayer. The department of administration shall draw a separate warrant payable to the taxpayer in an amount equal to the interest and other costs recovered against the department of revenue by the judgment, which shall be paid from the appropriate tax account.
Sec. 4. Section 42-2003, Arizona Revised Statutes, as amended by Laws 2017, chapter 96, section 1, chapter 258, section 43 and chapter 340, section 2, is amended to read:
42-2003. Authorized disclosure of confidential information
A. Confidential information relating to:
1. A taxpayer may be disclosed to the taxpayer, its successor in interest or a designee of the taxpayer who is authorized in writing by the taxpayer. A principal corporate officer of a parent corporation may execute a written authorization for a controlled subsidiary.
2. A corporate taxpayer may be disclosed to any principal officer, any person designated by a principal officer or any person designated in a resolution by the corporate board of directors or other similar governing body. If a corporate officer signs a statement under penalty of perjury representing that the officer is a principal officer, the department may rely on the statement until the statement is shown to be false. For the purposes of this paragraph, "principal officer" includes a chief executive officer, president, secretary, treasurer, vice president of tax, chief financial officer, chief operating officer or chief tax officer or any other corporate officer who has the authority to bind the taxpayer on matters related to state taxes.
3. A partnership may be disclosed to any partner of the partnership. This exception does not include disclosure of confidential information of a particular partner unless otherwise authorized.
4. A LIMITED LIABILITY COMPANY MAY BE DISCLOSED TO ANY MEMBER OF THE COMPANY OR, IF THE COMPANY IS MANAGER‑MANAGED, TO ANY MANAGER.
4. 5. An estate may be disclosed to the personal representative of the estate and to any heir, next of kin or beneficiary under the will of the decedent if the department finds that the heir, next of kin or beneficiary has a material interest that will be affected by the confidential information.
5. 6. A trust may be disclosed to the trustee or trustees, jointly or separately, and to the grantor or any beneficiary of the trust if the department finds that the grantor or beneficiary has a material interest that will be affected by the confidential information.
7. A government entity may be disclosed to the head of the entity or a member of the governing board of the entity, or any employee of the entity who has been delegated the authorization in writing by the head of the entity or the governing board of the entity.
6. 8. Any taxpayer may be disclosed if the taxpayer has waived any rights to confidentiality either in writing or on the record in any administrative or judicial proceeding.
7. 9. The name and taxpayer identification numbers of persons issued direct payment permits may be publicly disclosed.
10. Any taxpayer may be disclosed during a meeting or telephone call if the taxpayer is present during the meeting or telephone call and authorizes the disclosure of confidential information.
B. Confidential information may be disclosed to:
1. Any employee of the department whose official duties involve tax administration.
2. The office of the attorney general solely for its use in preparation for, or in an investigation that may result in, any proceeding involving tax administration before the department or any other agency or board of this state, or before any grand jury or any state or federal court.
3. The department of liquor licenses and control for its use in determining whether a spirituous liquor licensee has paid all transaction privilege taxes and affiliated excise taxes incurred as a result of the sale of spirituous liquor, as defined in section 4‑101, at the licensed establishment and imposed on the licensed establishments by this state and its political subdivisions.
4. Other state tax officials whose official duties require the disclosure for proper tax administration purposes if the information is sought in connection with an investigation or any other proceeding conducted by the official. Any disclosure is limited to information of a taxpayer who is being investigated or who is a party to a proceeding conducted by the official.
5. The following agencies, officials and organizations, if they grant substantially similar privileges to the department for the type of information being sought, pursuant to statute and a written agreement between the department and the foreign country, agency, state, Indian tribe or organization:
(a) The United States internal revenue service, alcohol and tobacco tax and trade bureau of the United States treasury, United States bureau of alcohol, tobacco, firearms and explosives of the United States department of justice, United States drug enforcement agency and federal bureau of investigation.
(b) A state tax official of another state.
(c) An organization of states, federation of tax administrators or multistate tax commission that operates an information exchange for tax administration purposes.
(d) An agency, official or organization of a foreign country with responsibilities that are comparable to those listed in subdivision (a), (b) or (c) of this paragraph.
(e) An agency, official or organization of an Indian tribal government with responsibilities comparable to the responsibilities of the agencies, officials or organizations identified in subdivision (a), (b) or (c) of this paragraph.
6. The auditor general, in connection with any audit of the department subject to the restrictions in section 42‑2002, subsection D.
7. Any person to the extent necessary for effective tax administration in connection with:
(a) The processing, storage, transmission, destruction and reproduction of the information.
(b) The programming, maintenance, repair, testing and procurement of equipment for purposes of tax administration.
(c) The collection of the taxpayer's civil liability.
8. The office of administrative hearings relating to taxes administered by the department pursuant to section 42‑1101, but the department shall not disclose any confidential information without the taxpayer's written consent:
(a) Regarding income tax or withholding tax.
(b) On any tax issue relating to information associated with the reporting of income tax or withholding tax.
9. The United States treasury inspector general for tax administration for the purpose of reporting a violation of internal revenue code section 7213A (26 United States Code section 7213A), unauthorized inspection of returns or return information.
10. The financial management service of the United States treasury department for use in the treasury offset program.
11. The United States treasury department or its authorized agent for use in the state income tax levy program and in the electronic federal tax payment system.
12. The Arizona commerce authority for its use in:
(a) Qualifying renewable energy operations for the tax incentives under sections 42‑12006, 43‑1083.01 and 43‑1164.01.
(b) Qualifying businesses with a qualified facility for income tax credits under sections 43‑1083.03 and 43‑1164.04.
(c) Fulfilling its annual reporting responsibility pursuant to section 41‑1511, subsections U and V and section 41‑1512, subsections U and V.
(d) Certifying computer data centers for tax relief under section 41‑1519.
13. A prosecutor for purposes of section 32‑1164, subsection C.
14. The office of the state fire marshal for use in determining compliance with and enforcing title 37, chapter 9, article 5.
15. The department of transportation for its use in administering taxes, surcharges and penalties prescribed by title 28.
16. The Arizona health care cost containment system administration for its use in administering nursing facility provider assessments.
17. The department of administration risk management division and the office of the attorney general if the information relates to a claim against this state pursuant to section 12-821.01 involving the department of revenue.
18. Another state agency if the taxpayer authorizes the disclosure of confidential information in writing, including an authorization that is part of an application form or other document submitted to the agency.
19. The department of economic security for its use in determining whether an employer has paid all amounts due under the unemployment insurance program pursuant to title 23, chapter 4.
C. Confidential information may be disclosed in any state or federal judicial or administrative proceeding pertaining to tax administration pursuant to the following conditions:
1. One or more of the following circumstances must apply:
(a) The taxpayer is a party to the proceeding.
(b) The proceeding arose out of, or in connection with, determining the taxpayer's civil or criminal liability, or the collection of the taxpayer's civil liability, with respect to any tax imposed under this title or title 43.
(c) The treatment of an item reflected on the taxpayer's return is directly related to the resolution of an issue in the proceeding.
(d) Return information directly relates to a transactional relationship between a person who is a party to the proceeding and the taxpayer and directly affects the resolution of an issue in the proceeding.
2. Confidential information may not be disclosed under this subsection if the disclosure is prohibited by section 42‑2002, subsection C or D.
D. Identity information may be disclosed for purposes of notifying persons entitled to tax refunds if the department is unable to locate the persons after reasonable effort.
E. The department, on the request of any person, shall provide the names and addresses of bingo licensees as defined in section 5‑401, verify whether or not a person has a privilege license and number, a tobacco product distributor's license and number or a withholding license and number or disclose the information to be posted on the department's website or otherwise publicly accessible pursuant to section 42‑1124, subsection F and section 42‑3401.
F. A department employee, in connection with the official duties relating to any audit, collection activity or civil or criminal investigation, may disclose return information to the extent that disclosure is necessary to obtain information that is not otherwise reasonably available. These official duties include the correct determination of and liability for tax, the amount to be collected or the enforcement of other state tax revenue laws.
G. If an organization is exempt from this state's income tax as provided in section 43‑1201 for any taxable year, the name and address of the organization and the application filed by the organization on which the department made its determination for exemption together with any papers submitted in support of the application and any letter or document issued by the department concerning the application are open to public inspection.
H. Confidential information relating to transaction privilege tax, use tax, severance tax, jet fuel excise and use tax and any other tax collected by the department on behalf of any jurisdiction may be disclosed to any county, city or town tax official if the information relates to a taxpayer who is or may be taxable by a county, city or town or who may be subject to audit by the department pursuant to section 42‑6002. Any taxpayer information released by the department to the county, city or town:
1. May only be used for internal purposes, including audits.
2. May not be disclosed to the public in any manner that does not comply with confidentiality standards established by the department. The county, city or town shall agree in writing with the department that any release of confidential information that violates the confidentiality standards adopted by the department will result in the immediate suspension of any rights of the county, city or town to receive taxpayer information under this subsection.
I. The department may disclose statistical information gathered from confidential information if it does not disclose confidential information attributable to any one taxpayer. The department may disclose statistical information gathered from confidential information, even if it discloses confidential information attributable to a taxpayer, to:
1. The state treasurer in order to comply with the requirements of section 42‑5029, subsection A, paragraph 3.
2. The joint legislative income tax credit review committee, the joint legislative budget committee staff and the legislative staff in order to comply with the requirements of section 43‑221.
J. The department may disclose the aggregate amounts of any tax credit, tax deduction or tax exemption enacted after January 1, 1994. Information subject to disclosure under this subsection shall not be disclosed if a taxpayer demonstrates to the department that such information would give an unfair advantage to competitors.
K. Except as provided in section 42‑2002, subsection C, confidential information, described in section 42‑2001, paragraph 1, subdivision (a), item (ii), may be disclosed to law enforcement agencies for law enforcement purposes.
L. The department may provide transaction privilege tax license information to property tax officials in a county for the purpose of identification and verification of the tax status of commercial property.
M. The department may provide transaction privilege tax, luxury tax, use tax, property tax and severance tax information to the ombudsman‑citizens aide pursuant to title 41, chapter 8, article 5.
N. Except as provided in section 42‑2002, subsection D, a court may order the department to disclose confidential information pertaining to a party to an action. An order shall be made only on a showing of good cause and that the party seeking the information has made demand on the taxpayer for the information.
O. This section does not prohibit the disclosure by the department of any information or documents submitted to the department by a bingo licensee. Before disclosing the information the department shall obtain the name and address of the person requesting the information.
P. If the department is required or permitted to disclose confidential information, it may charge the person or agency requesting the information for the reasonable cost of its services.
Q. Except as provided in section 42‑2002, subsection D, the department of revenue shall release confidential information as requested by the department of economic security pursuant to section 42‑1122 or 46‑291. Information disclosed under this subsection is limited to the same type of information that the United States internal revenue service is authorized to disclose under section 6103(l)(6) of the internal revenue code.
R. Except as provided in section 42‑2002, subsection D, the department of revenue shall release confidential information as requested by the courts and clerks of the court pursuant to section 42‑1122.
S. To comply with the requirements of section 42‑5031, the department may disclose to the state treasurer, to the county stadium district board of directors and to any city or town tax official that is part of the county stadium district confidential information attributable to a taxpayer's business activity conducted in the county stadium district.
T. The department shall release to the attorney general confidential information as requested by the attorney general for purposes of determining compliance with or enforcing any of the following:
1. Any public health control law relating to tobacco sales as provided under title 36, chapter 6, article 14.
2. Any law relating to reduced cigarette ignition propensity standards as provided under title 37, chapter 9, article 5.
3. Sections 44‑7101 and 44‑7111, the master settlement agreement referred to in those sections and all agreements regarding disputes under the master settlement agreement.
U. For proceedings before the department, the office of administrative hearings, the board of tax appeals or any state or federal court involving penalties that were assessed against a return preparer, an electronic return preparer or a payroll service company pursuant to section 42‑1103.02, 42‑1125.01 or 43‑419, confidential information may be disclosed only before the judge or administrative law judge adjudicating the proceeding, the parties to the proceeding and the parties' representatives in the proceeding prior to its introduction into evidence in the proceeding. The confidential information may be introduced as evidence in the proceeding only if the taxpayer's name, the names of any dependents listed on the return, all social security numbers, the taxpayer's address, the taxpayer's signature and any attachments containing any of the foregoing information are redacted and if either:
1. The treatment of an item reflected on such return is or may be related to the resolution of an issue in the proceeding.
2. Such a return or the return information relates or may relate to a transactional relationship between a person who is a party to the proceeding and the taxpayer that directly affects the resolution of an issue in the proceeding.
3. The method of payment of the taxpayer's withholding tax liability or the method of filing the taxpayer's withholding tax return is an issue for the period.
V. The department and attorney general may share the information specified in subsection T of this section with any of the following:
1. Federal, state or local agencies located in this state for the purposes of enforcement of the statutes or agreements specified in subsection T of this section or for the purposes of enforcement of corresponding laws of other states.
2. Indian tribes located in this state for the purposes of enforcement of the statutes or agreements specified in subsection T of this section.
3. A court, arbitrator, data clearinghouse or similar entity for the purpose of assessing compliance with or making calculations required by the master settlement agreement or agreements regarding disputes under the master settlement agreement, and with counsel for the parties or expert witnesses in any such proceeding, if the information otherwise remains confidential.
W. The department may provide the name and address of qualifying hospitals and qualifying health care organizations, as defined in section 42‑5001, to a business classified and reporting transaction privilege tax under the utilities classification.
X. The department may disclose to an official of any city, town or county in a current agreement or considering a prospective agreement with the department as described in section 42‑5032.02, subsection G any information relating to amounts subject to distribution required by section 42‑5032.02. Information disclosed by the department under this subsection:
1. May only be used by the city, town or county for internal purposes.
2. May not be disclosed to the public in any manner that does not comply with confidentiality standards established by the department. The city, town or county must agree with the department in writing that any release of confidential information that violates the confidentiality standards will result in the immediate suspension of any rights of the city, town or county to receive information under this subsection.
Y. Notwithstanding any other provision of this section, the department may not disclose information provided by an online lodging marketplace, as defined in section 42‑5076, without the written consent of the online lodging marketplace, and the information may be disclosed only pursuant to subsection A, paragraphs 1 through 6, 8 and 10, subsection B, paragraphs 1, 2, 7 and 8 and subsections C and D of this section. Such information:
1. Is not subject to disclosure pursuant to title 39, relating to public records.
2. May not be disclosed to any agency of this state or of any county, city, town or other political subdivision of this state.
Sec. 5. Section 42-2003, Arizona Revised Statutes, as amended by Laws 2017, chapter 96, section 1, chapter 139, section 4, chapter 258, section 43 and chapter 340, section 2, is amended to read:
42-2003. Authorized disclosure of confidential information
A. Confidential information relating to:
1. A taxpayer may be disclosed to the taxpayer, its successor in interest or a designee of the taxpayer who is authorized in writing by the taxpayer. A principal corporate officer of a parent corporation may execute a written authorization for a controlled subsidiary.
2. A corporate taxpayer may be disclosed to any principal officer, any person designated by a principal officer or any person designated in a resolution by the corporate board of directors or other similar governing body. If a corporate officer signs a statement under penalty of perjury representing that the officer is a principal officer, the department may rely on the statement until the statement is shown to be false. For the purposes of this paragraph, "principal officer" includes a chief executive officer, president, secretary, treasurer, vice president of tax, chief financial officer, chief operating officer or chief tax officer or any other corporate officer who has the authority to bind the taxpayer on matters related to state taxes.
3. A partnership may be disclosed to any partner of the partnership. This exception does not include disclosure of confidential information of a particular partner unless otherwise authorized.
4. A LIMITED LIABILITY COMPANY MAY BE DISCLOSED TO ANY MEMBER OF THE COMPANY OR, IF THE COMPANY IS MANAGER‑MANAGED, TO ANY MANAGER.
4. 5. An estate may be disclosed to the personal representative of the estate and to any heir, next of kin or beneficiary under the will of the decedent if the department finds that the heir, next of kin or beneficiary has a material interest that will be affected by the confidential information.
5. 6. A trust may be disclosed to the trustee or trustees, jointly or separately, and to the grantor or any beneficiary of the trust if the department finds that the grantor or beneficiary has a material interest that will be affected by the confidential information.
7. A government entity may be disclosed to the head of the entity or a member of the governing board of the entity, or any employee of the entity who has been delegated the authorization in writing by the head of the entity or the governing board of the entity.
6. 8. Any taxpayer may be disclosed if the taxpayer has waived any rights to confidentiality either in writing or on the record in any administrative or judicial proceeding.
7. 9. The name and taxpayer identification numbers of persons issued direct payment permits may be publicly disclosed.
10. Any taxpayer may be disclosed during a meeting or telephone call if the taxpayer is present during the meeting or telephone call and authorizes the disclosure of confidential information.
B. Confidential information may be disclosed to:
1. Any employee of the department whose official duties involve tax administration.
2. The office of the attorney general solely for its use in preparation for, or in an investigation that may result in, any proceeding involving tax administration before the department or any other agency or board of this state, or before any grand jury or any state or federal court.
3. The department of liquor licenses and control for its use in determining whether a spirituous liquor licensee has paid all transaction privilege taxes and affiliated excise taxes incurred as a result of the sale of spirituous liquor, as defined in section 4‑101, at the licensed establishment and imposed on the licensed establishments by this state and its political subdivisions.
4. Other state tax officials whose official duties require the disclosure for proper tax administration purposes if the information is sought in connection with an investigation or any other proceeding conducted by the official. Any disclosure is limited to information of a taxpayer who is being investigated or who is a party to a proceeding conducted by the official.
5. The following agencies, officials and organizations, if they grant substantially similar privileges to the department for the type of information being sought, pursuant to statute and a written agreement between the department and the foreign country, agency, state, Indian tribe or organization:
(a) The United States internal revenue service, alcohol and tobacco tax and trade bureau of the United States treasury, United States bureau of alcohol, tobacco, firearms and explosives of the United States department of justice, United States drug enforcement agency and federal bureau of investigation.
(b) A state tax official of another state.
(c) An organization of states, federation of tax administrators or multistate tax commission that operates an information exchange for tax administration purposes.
(d) An agency, official or organization of a foreign country with responsibilities that are comparable to those listed in subdivision (a), (b) or (c) of this paragraph.
(e) An agency, official or organization of an Indian tribal government with responsibilities comparable to the responsibilities of the agencies, officials or organizations identified in subdivision (a), (b) or (c) of this paragraph.
6. The auditor general, in connection with any audit of the department subject to the restrictions in section 42‑2002, subsection D.
7. Any person to the extent necessary for effective tax administration in connection with:
(a) The processing, storage, transmission, destruction and reproduction of the information.
(b) The programming, maintenance, repair, testing and procurement of equipment for purposes of tax administration.
(c) The collection of the taxpayer's civil liability.
8. The office of administrative hearings relating to taxes administered by the department pursuant to section 42‑1101, but the department shall not disclose any confidential information without the taxpayer's written consent:
(a) Regarding income tax or withholding tax.
(b) On any tax issue relating to information associated with the reporting of income tax or withholding tax.
9. The United States treasury inspector general for tax administration for the purpose of reporting a violation of internal revenue code section 7213A (26 United States Code section 7213A), unauthorized inspection of returns or return information.
10. The financial management service of the United States treasury department for use in the treasury offset program.
11. The United States treasury department or its authorized agent for use in the state income tax levy program and in the electronic federal tax payment system.
12. The Arizona commerce authority for its use in:
(a) Qualifying renewable energy operations for the tax incentives under sections 42‑12006, 43‑1083.01 and 43‑1164.01.
(b) Qualifying businesses with a qualified facility for income tax credits under sections 43‑1083.03 and 43‑1164.04.
(c) Fulfilling its annual reporting responsibility pursuant to section 41‑1511, subsections U and V and section 41‑1512, subsections U and V.
(d) Certifying computer data centers for tax relief under section 41‑1519.
13. A prosecutor for purposes of section 32‑1164, subsection C.
14. The office of the state fire marshal for use in determining compliance with and enforcing title 37, chapter 9, article 5.
15. The department of transportation for its use in administering taxes, surcharges and penalties prescribed by title 28.
16. The Arizona health care cost containment system administration for its use in administering nursing facility provider assessments.
17. The department of education for the purpose of verifying income eligibility to be classified as a low‑income student pursuant to section 15‑2402, subsection M.
18. The department of administration risk management division and the office of the attorney general if the information relates to a claim against this state pursuant to section 12-821.01 involving the department of revenue.
19. Another state agency if the taxpayer authorizes the disclosure of confidential information in writing, including an authorization that is part of an application form or other document submitted to the agency.
20. The department of economic security for its use in determining whether an employer has paid all amounts due under the unemployment insurance program pursuant to title 23, chapter 4.
C. Confidential information may be disclosed in any state or federal judicial or administrative proceeding pertaining to tax administration pursuant to the following conditions:
1. One or more of the following circumstances must apply:
(a) The taxpayer is a party to the proceeding.
(b) The proceeding arose out of, or in connection with, determining the taxpayer's civil or criminal liability, or the collection of the taxpayer's civil liability, with respect to any tax imposed under this title or title 43.
(c) The treatment of an item reflected on the taxpayer's return is directly related to the resolution of an issue in the proceeding.
(d) Return information directly relates to a transactional relationship between a person who is a party to the proceeding and the taxpayer and directly affects the resolution of an issue in the proceeding.
2. Confidential information may not be disclosed under this subsection if the disclosure is prohibited by section 42‑2002, subsection C or D.
D. Identity information may be disclosed for purposes of notifying persons entitled to tax refunds if the department is unable to locate the persons after reasonable effort.
E. The department, on the request of any person, shall provide the names and addresses of bingo licensees as defined in section 5‑401, verify whether or not a person has a privilege license and number, a tobacco product distributor's license and number or a withholding license and number or disclose the information to be posted on the department's website or otherwise publicly accessible pursuant to section 42‑1124, subsection F and section 42‑3401.
F. A department employee, in connection with the official duties relating to any audit, collection activity or civil or criminal investigation, may disclose return information to the extent that disclosure is necessary to obtain information that is not otherwise reasonably available. These official duties include the correct determination of and liability for tax, the amount to be collected or the enforcement of other state tax revenue laws.
G. If an organization is exempt from this state's income tax as provided in section 43‑1201 for any taxable year, the name and address of the organization and the application filed by the organization on which the department made its determination for exemption together with any papers submitted in support of the application and any letter or document issued by the department concerning the application are open to public inspection.
H. Confidential information relating to transaction privilege tax, use tax, severance tax, jet fuel excise and use tax and any other tax collected by the department on behalf of any jurisdiction may be disclosed to any county, city or town tax official if the information relates to a taxpayer who is or may be taxable by a county, city or town or who may be subject to audit by the department pursuant to section 42‑6002. Any taxpayer information released by the department to the county, city or town:
1. May only be used for internal purposes, including audits.
2. May not be disclosed to the public in any manner that does not comply with confidentiality standards established by the department. The county, city or town shall agree in writing with the department that any release of confidential information that violates the confidentiality standards adopted by the department will result in the immediate suspension of any rights of the county, city or town to receive taxpayer information under this subsection.
I. The department may disclose statistical information gathered from confidential information if it does not disclose confidential information attributable to any one taxpayer. The department may disclose statistical information gathered from confidential information, even if it discloses confidential information attributable to a taxpayer, to:
1. The state treasurer in order to comply with the requirements of section 42‑5029, subsection A, paragraph 3.
2. The joint legislative income tax credit review committee, the joint legislative budget committee staff and the legislative staff in order to comply with the requirements of section 43‑221.
J. The department may disclose the aggregate amounts of any tax credit, tax deduction or tax exemption enacted after January 1, 1994. Information subject to disclosure under this subsection shall not be disclosed if a taxpayer demonstrates to the department that such information would give an unfair advantage to competitors.
K. Except as provided in section 42‑2002, subsection C, confidential information, described in section 42‑2001, paragraph 1, subdivision (a), item (ii), may be disclosed to law enforcement agencies for law enforcement purposes.
L. The department may provide transaction privilege tax license information to property tax officials in a county for the purpose of identification and verification of the tax status of commercial property.
M. The department may provide transaction privilege tax, luxury tax, use tax, property tax and severance tax information to the ombudsman‑citizens aide pursuant to title 41, chapter 8, article 5.
N. Except as provided in section 42‑2002, subsection D, a court may order the department to disclose confidential information pertaining to a party to an action. An order shall be made only on a showing of good cause and that the party seeking the information has made demand on the taxpayer for the information.
O. This section does not prohibit the disclosure by the department of any information or documents submitted to the department by a bingo licensee. Before disclosing the information the department shall obtain the name and address of the person requesting the information.
P. If the department is required or permitted to disclose confidential information, it may charge the person or agency requesting the information for the reasonable cost of its services.
Q. Except as provided in section 42‑2002, subsection D, the department of revenue shall release confidential information as requested by the department of economic security pursuant to section 42‑1122 or 46‑291. Information disclosed under this subsection is limited to the same type of information that the United States internal revenue service is authorized to disclose under section 6103(l)(6) of the internal revenue code.
R. Except as provided in section 42‑2002, subsection D, the department of revenue shall release confidential information as requested by the courts and clerks of the court pursuant to section 42‑1122.
S. To comply with the requirements of section 42‑5031, the department may disclose to the state treasurer, to the county stadium district board of directors and to any city or town tax official that is part of the county stadium district confidential information attributable to a taxpayer's business activity conducted in the county stadium district.
T. The department shall release to the attorney general confidential information as requested by the attorney general for purposes of determining compliance with or enforcing any of the following:
1. Any public health control law relating to tobacco sales as provided under title 36, chapter 6, article 14.
2. Any law relating to reduced cigarette ignition propensity standards as provided under title 37, chapter 9, article 5.
3. Sections 44‑7101 and 44‑7111, the master settlement agreement referred to in those sections and all agreements regarding disputes under the master settlement agreement.
U. For proceedings before the department, the office of administrative hearings, the board of tax appeals or any state or federal court involving penalties that were assessed against a return preparer, an electronic return preparer or a payroll service company pursuant to section 42‑1103.02, 42‑1125.01 or 43‑419, confidential information may be disclosed only before the judge or administrative law judge adjudicating the proceeding, the parties to the proceeding and the parties' representatives in the proceeding prior to its introduction into evidence in the proceeding. The confidential information may be introduced as evidence in the proceeding only if the taxpayer's name, the names of any dependents listed on the return, all social security numbers, the taxpayer's address, the taxpayer's signature and any attachments containing any of the foregoing information are redacted and if either:
1. The treatment of an item reflected on such return is or may be related to the resolution of an issue in the proceeding.
2. Such a return or the return information relates or may relate to a transactional relationship between a person who is a party to the proceeding and the taxpayer that directly affects the resolution of an issue in the proceeding.
3. The method of payment of the taxpayer's withholding tax liability or the method of filing the taxpayer's withholding tax return is an issue for the period.
V. The department and attorney general may share the information specified in subsection T of this section with any of the following:
1. Federal, state or local agencies located in this state for the purposes of enforcement of the statutes or agreements specified in subsection T of this section or for the purposes of enforcement of corresponding laws of other states.
2. Indian tribes located in this state for the purposes of enforcement of the statutes or agreements specified in subsection T of this section.
3. A court, arbitrator, data clearinghouse or similar entity for the purpose of assessing compliance with or making calculations required by the master settlement agreement or agreements regarding disputes under the master settlement agreement, and with counsel for the parties or expert witnesses in any such proceeding, if the information otherwise remains confidential.
W. The department may provide the name and address of qualifying hospitals and qualifying health care organizations, as defined in section 42‑5001, to a business classified and reporting transaction privilege tax under the utilities classification.
X. The department may disclose to an official of any city, town or county in a current agreement or considering a prospective agreement with the department as described in section 42‑5032.02, subsection G any information relating to amounts subject to distribution required by section 42‑5032.02. Information disclosed by the department under this subsection:
1. May only be used by the city, town or county for internal purposes.
2. May not be disclosed to the public in any manner that does not comply with confidentiality standards established by the department. The city, town or county must agree with the department in writing that any release of confidential information that violates the confidentiality standards will result in the immediate suspension of any rights of the city, town or county to receive information under this subsection.
Y. Notwithstanding any other provision of this section, the department may not disclose information provided by an online lodging marketplace, as defined in section 42‑5076, without the written consent of the online lodging marketplace, and the information may be disclosed only pursuant to subsection A, paragraphs 1 through 6, 8 and 10, subsection B, paragraphs 1, 2, 7 and 8 and subsections C and D of this section. Such information:
1. Is not subject to disclosure pursuant to title 39, relating to public records.
2. May not be disclosed to any agency of this state or of any county, city, town or other political subdivision of this state.
Sec. 6. Section 42-2059, Arizona Revised Statutes, is amended to read:
42-2059. Additional audits or proposed assessments prohibited; exceptions
A. When the department completes an audit or the findings of a managed audit are accepted by the director or approved on appeal and a deficiency has been completely determined under section 42‑1108 or chapter 1, article 6 of this title, the taxpayer's liability for the particular tax for the period subjected to the audit is fixed and determined, and no an additional audit may not be conducted except under the following circumstances:
1. If A taxpayer files a claim for refund under section 42‑1251, subsection B C or any other provision authorizing a claim for refund. Any departmental audit of the claim is limited to the issues presented on the claim for refund.
2. Changes or corrections are required to be reported to the department by section 43‑327. The department may audit any such reports or any periods for which a report was required notwithstanding this section and may determine a tax deficiency or a refund.
3. If the taxpayer failed to disclose material information during the audit, or has falsified books or records or otherwise engaged in an action that prevented the department from conducting an accurate audit, the applicability of this subsection may be part of a subsequent protest and may be contested by the taxpayer pursuant to chapter 1, article 6 of this title.
4. If a managed audit is completed under the terms of a limited managed audit agreement, the department may audit the issues not covered by the limited managed audit agreement within the statute of limitations prescribed by section 42‑1104.
B. If the department issues a notice of proposed assessment of taxes imposed by chapter 5, article 1 or 4 of this title or title 43, chapter 10, the department may not increase the amount of the proposed assessment except in one or more of the following circumstances:
1. The taxpayer has made a material misrepresentation of facts.
2. The taxpayer has failed to disclose a material fact to the auditor.
3. The department has requested information and the taxpayer fails to provide that information to the department.
4. After issuing the notice of proposed assessment but before the assessment becomes final the tax court, court of appeals or supreme court issues a decision, the application of which causes the tax initially proposed to increase.
C. Subsection B of this section does not apply to changes or corrections that are required to be reported to the department by section 43‑327.
Sec. 7. Retroactivity
A. Sections 42-1251, 42-1253, 42-1254 and 42-2059, Arizona Revised Statutes, as amended by this act, apply retroactively to all tax disputes filed pursuant to section 42-1251, Arizona Revised Statutes, pending on or arising from and after December 31, 2016.
B. Section 42-2003, Arizona Revised Statutes, as amended by Laws 2017, chapter 96, section 1, chapter 258, section 43, chapter 340, section 2 and this act, applies retroactively to from and after May 22, 2015.
Sec. 8. Conditional enactment; retroactivity
Section 42-2003, Arizona Revised Statutes, as amended by Laws 2017, chapter 96, section 1, chapter 139, section 4, chapter 258, section 43, chapter 340, section 2 and this act, is effective, and applies retroactively to from and after May 22, 2015, only if Laws 2017, chapter 139, the subject of referendum petition R-02-2018, is approved by a vote of the people at the next general election or fails to be referred to the voters at the next general election.
APPROVED BY THE GOVERNOR APRIL 12, 2018.
FILED IN THE OFFICE OF THE SECRETARY OF STATE APRIL 13, 2018.
