Posted on Aug 26, 2020 in Formal Opinions

Opinion Ltr. No. F21-01
August 26, 2020
Closing Agreements

Requester made a request for the closing agreements between the Department of Taxation (TAX) and the taxpayers in two litigations filed in the Hawaii Tax Appeal Court.  TAX denied the request in its entirety on the basis that the closing agreements contain confidentiality provisions which prohibit the taxpayer and TAX from disclosing information related to the settlement of the case.  Requester then filed this appeal.

OIP first found that closing agreements are “tax return information” as that term is defined in tax laws.  Tax returns and tax return information are protected from disclosure by several confidentiality statutes in Title 14, HRS, titled “Taxation,” namely, sections 237-34(b), 235-116, 237D-13, and 238-13, HRS.  Section 92F-13(4), HRS, allows an agency to withhold records protected by a confidentiality statute.  As the tax return information at issue falls within at least one of the confidentiality statutes claimed by TAX, presumably the general excise tax confidentiality provision at section 237-34(b) HRS, OIP found that section 92F-13(4), HRS, allows TAX to withhold them in this instance.

OIP noted that “written opinions,” which are not at issue here and which contain tax return information, are required to be disclosed by section 231‑19.5(a), HRS, which states, in relevant part, “[e]xcept as provided in subsection (f), regarding the disclosure of the text of written opinions, chapter 92F shall not apply to tax returns and tax return information.”  OIP examined the legislative history of this provision, which made clear that its purpose was not to remove TAX records from the category of “government records” subject to the UIPA, but rather to open TAX opinions to public disclosure under limited conditions, while maintaining confidentiality of tax return information in order to keep the tax system viable through voluntary compliance with the tax laws.  Thus, OIP believes the Legislature has repeatedly set forth its intent that tax returns and tax return information remain confidential with very limited exceptions not raised here.

OIP further noted that it asked TAX twice for copies of the closing agreements for OIP’s in camera review.   TAX declined to provide the requested closing agreements for in camera review because TAX was uncomfortable providing them without a court order.  TAX did provide a sample draft of a typical closing agreement.  For this appeal, the sample closing agreement was sufficient for OIP to determine whether closing agreements must be disclosed as a rule, and thus to meet TAX’s burden under the UIPA to justify the nondisclosure.  However, in future cases OIP may find that an agency refusing to provide in camera records has failed to meet its burden to demonstrate the applicability of a claimed exception, or may go to court to enforce its right to examine the records at issue.

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