Pa. Dep't of Revenue v. Wagaman

Pennsylvania Department of Revenue, Petitioner v. Andrew Wagaman and The Morning Call, Respondents

No. 1494 C.D. 2019

COMMONWEALTH COURT OF PENNSYLVANIA

Argued: September 17, 2020

February 19, 2021

BEFORE: HONORABLE PATRICIA A. McCULLOUGH, Judge HONORABLE J. ANDREW CROMPTON, Judge HONORABLE BONNIE BRIGANCE LEADBETTER, Senior Judge

OPINION BY JUDGE CROMPTON

The Pennsylvania Department of Revenue (Department) petitions for review from the Office of Open Records (OOR) final determination granting, in part, access to records Andrew Wagaman (Media Requester), a reporter for The Morning Call, sought under the Right-to-Know Law (RTKL).¹ The Department argued that cumulative totals of certain taxes generated by businesses located in the Allentown Neighborhood Improvement Zone (NIZ) were exempt by the Tax Reform Code of 1971² (Tax Code) and Section 731 of The Fiscal Code, 72 P.S. §731.³ OOR determined that totals of tax revenue for tax types paid by three or more taxpayers in the NIZ were subject to disclosure because a taxpayer's liability was not readily discernible, whereas totals corresponding to one or two taxpayers were exempt in the interest of retaining their confidentiality. Based on this record, we affirm.

I. Background

On July 8, 2019, Media Requester submitted a RTKL request (Request) to the Department's Open Records Officer for totals of tax revenues corresponding to each type of tax generated in the NIZ (Tax Totals). Specifically, the Request sought:

A breakdown, by type of tax, of the [(A)] total business trust fund tax revenue attributable to the NIZ for the years 2016, 2017 and 2018, including but not limited to employer withholding and sales/use tax from businesses and contractors.

A breakdown, by type of tax, of the [(B)] total corporate tax revenue and miscellaneous tax revenue attributable to the NIZ for the tax years 2016, 2017 and 2018, including but not limited to the personal income tax, bank shares tax, gross receipts tax, cigarette tax, unemployment compensation and malt beverage tax.

Reproduced Record (R.R.) at 6a (emphasis added). The Department denied the Request in its entirety, citing statutory exemptions in Section 731 of The Fiscal Code, 72 P.S. §731, and Sections 274, 353(f),⁴ and 408(b) of the Tax Code, 72 P.S. §§7274, 7353(f), 7408(b) (collectively, Tax Statutes). It stated: "While [the Department] does release cumulative data with respect to both (A) business trust fund taxes attributable to the NIZ[,] and (B) corporate and miscellaneous taxes attributable to the NIZ[,] . . . to break that information down by tax type would violate the [Tax Statutes'] confidentiality provisions." R.R. at 4a (Denial).

Media Requester appealed the Denial to OOR pursuant to Section 1101(a) of the RTKL, 65 P.S. §67.1101(a). The appeal explained the Request sought totals of tax revenues, by type, underlying the NIZ certifications posted on the Department website. Media Requester asserted that aggregate amounts of a type of tax gleaned from NIZ tax reports did not reveal confidential information, emphasizing he did "not reques[t] any information about any individual taxpayers." R.R. at 3a.

OOR assigned an appeals officer, advised the Department to notify interested third parties about the appeal,⁵ and invited the parties to support their respective positions. See R.R. at 7a-8a. The Department submitted a position statement citing Section 1908-B in Article XIX-B of the Tax Code (NIZ Article),⁶ 72 P.S. §8908-B, entitled "Confidentiality," as another basis for its Denial. R.R. at 13a-16a. It also submitted an affirmation of its Economic Development Coordinator (ED Coordinator), R.R. at 18a-20a (Affirmation), and a copy of the 2019 certification letter provided to the Secretary of the Budget pursuant to Section 1904-B(b) of the Tax Code,⁷ 72 P.S. §8904-B(b), R.R. at 22a-23a.

In the Affirmation, the ED Coordinator explained the certification process under the NIZ Article whereby he verifies revenues from the NIZ by comparing the tax reports submitted by qualified businesses with their tax returns. Businesses located in the 128-acre NIZ file annual information reports regarding the State and local taxes paid. State and local tax revenues from the NIZ are paid into a fund designated for repayment of debt service and bonds issued by the local development authority to fund economic development projects in the zone, including an arena (Fund). The Department certifies the state taxes to be transferred to the Fund.

Media Requester submitted a position statement asserting that the Department's position that the Tax Statutes protected all information sourced from tax returns was untenable because many reports it generated and disclosed weresourced, at least partially, from tax returns. See R.R. at 26a. He pointed out that the Department did not explain the distinction between the cumulative totals and reports routinely disclosed and posted on its website, and the Tax Totals sought here. Further, he noted the Request did not seek "specific taxpayer identities and/or information gleaned from individual returns." Id. In addition, Media Requester attached a copy of an email from the Department's counsel agreeing to provide substantial compliance with the Request in exchange for withdrawing the OOR appeal. See R.R. at 28a.

When OOR contacted the Department to clarify the record and the basis for confidentiality, the Department provided a spreadsheet showing a breakdown by tax type for all the requested categories, except for "Other Taxes" (Spreadsheet). See Supplemental Certified Record (S.C.R.) at 1. The "Other Taxes" category includes: "Bank Shares Tax, Gross Receipts Tax, Gross Premiums Tax, Cigarette Tax, Tobacco Products Tax, Realty Transfer Tax, Liquor Tax, Malt Beverages Tax, and Vehicle Rental/Public Transportation Assistance Tax." Id.; see also Resp'ts' Br. at 5.

Referring to the Spreadsheet, OOR noted, "the number of taxpayers who [sic] pay each individual tax under the 'other taxes' category is quite low— is it possible for the Department to provide a brief attestation as to the number or estimated number of businesses which pay each tax, without the amount of tax paid?" R.R. at 40a. The Department responded:

the Department has determined that providing the number of businesses which pay each tax, even without the amount of tax paid, would violate taxpayer confidentiality. The Pennsylvania taxes in the 'other taxes' category are taxes specific to particular industries in Pennsylvania. For instance, generally only banks pay bank share tax, only telephone and electric companies pay gross receipts tax, only insurance companies pay gross premiums, etc. The boundaries of the NIZ are publicly available online (see [website address]) so the general public is aware of the location of the NIZ. A simple Google search or merelybeing familiar with the City of Allentown would allow one to easily ascertain how many banks, telephone/electric companies, insurance companies, etc. are within the confines of the NIZ. That information, in conjunction, with a breakdown of the number of taxpayers in each of the 'other taxes' would violate Pennsylvania law, as cited in our July 25, 2019 letter [Denial], since whether or not a taxpayer filed or did not file a tax return is confidential taxpayer information.

R.R. at 39a (emphasis added).

Media Requester emphasized that he specifically "did not ask for the number of entities paying each tax," just the Tax Totals for each type of tax in the NIZ. R.R. at 38a (bold in original). Relevant here, he agreed that the "Department's confidentiality concerns are legitimate when only one or two entities are paying a particular tax. [He]'d accept the 'Other Taxes' bucket if it only included those taxes paid by one or two entities." Id. (emphasis added) (Stipulation). Media Requester thus did not contest that confidentiality protected information sought when taxpayer identity could be discerned, but not "when there are three or more taxpayers." Id.

OOR asked the Department to explain its reasoning for providing cumulative tax information in some cases, and not in this one. Essentially, the Department advised OOR that it could not show "how many entities paid any given tax category, as this would permit the determination of which businesses did or did not file returns." R.R. at 44a (emphasis added).

After multiple extensions, OOR issued a final determination that dismissed the appeal as moot in part, granted it in part, and denied it in part based on the number of taxpayers contributing to the Tax Totals for each tax type. Wagaman & The Morning Call v. Pa. Dep't of Revenue, OOR Dkt. No. AP 2019-1131 (issued Oct. 2, 2019) (Final Determination). As to the Tax Totals contained in the Spreadsheet, which resolved most of the Request, OOR deemed the appeal moot.

OOR evaluated access in light of the parties' conduct during the appeal. Notably, OOR determined that the fact that the requested information was derived in part from tax returns was not grounds for its protection. Critical to its rationale was the Department's voluntary disclosure of the Spreadsheet showed Tax Totals derived from the same source as the tax revenues comprising the "Other Taxes" category that the Department withheld with no statutory distinction. Therefore, OOR concluded the Tax Statutes were not absolute in their protection; rather, the confidentiality provisions were triggered when the total tax revenue was attributable to a small number of taxpayers such that a taxpayer's liability was discernible.

Applying this concept of confidentiality, OOR reasoned the Department properly protected the Tax Totals for certain taxes in the Other Taxes category when the type of tax (e.g., bank shares tax) was paid by fewer than three businesses. However, OOR underscored that the Department did not substantiate or explain how aggregated⁸ totals from tax types with three or more taxpayers would divulge a business's tax liability to render such totals...