Untitled Texas Attorney General Opinion ( 1977 )


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  •                    October 12, 1977
    Honorable Ben 2. Grant               Opinion No. H-1070
    Chairman, Judiciary Committee
    Texas House of Representatives       Re: Validity of financial
    'P. 0. Box 2910                       disclosure ordinance apply-
    Austin, Texas 78769                  ing to officials and candi-
    dates in a home rule city.
    Dear Chairman Grant:
    You have submitted to us a proposed financial disclosure
    ordinance and asked whether it would, if enacted by a home
    rule city, conform to various provisions of state and federal
    law. The proposed ordinance would require the mayor, city
    council members, the city manager and other specified high
    ranking city officials and candidates for city office to file
    an annual statement reflecting the official's financial status
    and financial activity during the reporting period. The fi-
    nancial statement would include a list of all sources of in-
    come over $1,000 received by the official or family members,
    identification of all business entities in which the official
    is significantly interested and certain customers of that
    entity, a listing of real property owned within the city, a
    list of all debts owed or notes held of over $10,000, a list
    of certain gifts received, identification of any financial
    interest in or transaction with a city franchise holder, and
    a portion of the official's income tax return.
    We have recently considered the authority of a home rule
    city to require its officials to file a financial disclosure
    statement as a condition of holding office. Attorney General
    Opinion H-969 (1977) concluded that a home rule city is autho-
    rized to require such disclosure, so long as the disclosure
    ordinance is not inconsistent with the city's charter or state
    law.
    You ask if the proposed ordinance would conflict with
    state law because its disclosure provisions are more exten-
    sive than those of article 6252-9b, V.T.C.S.  Article 6252-9b
    applies only to state officers and employees, and we do not
    believe it either explicitly or implicitly restricts the
    Honorable Ben 2. Grant           - Page 2       (H-1070)
    power of a home rule city to enact financial disclosure re-
    quirements applicable to city officials.   We perceive no
    conflict between article 6252-933 and the proposed ordinance.
    You ask if the proposed ordinance would unconstitutionally
    burden the right of free speech and expression or the right to
    seek office. YOU also question whether the ordinance might in-
    vade constitutionally protected zones of privacy, constitute an
    unreasonable search and seizure, or violate the prohibition
    against compelled self-incrimination.  Similar constitutional
    challenges have been considered by the courts of various states.
    The case traditionally cited by those who would find financial
    disclosure laws unconstitutional is City of Carmel-by-the-Sea v.
    ?f"f;g;l$;;,;.;z X2,;",;1. 1970). In Attorney General Opinion
    In light of . . . [Stein v. Howlett, 289
    N.E.Zd 409 (111. 1972), appeal dismissed
    for want of substantial federal question,
    
    412 U.S. 925
    (197311, we now believe the
    Carmel-by-the Sea opinion overbalanced
    the scales in favor of private rights,
    and that a different shift in the balance
    will be found by the Texas Supreme Court
    and the United States Supreme Court when
    such questions reach them.
    
    Id. at 2.
    Our belief in this regard has been reinforced by a
    Gtual      barrage of recent court decisions upholding financial dis-
    closure requirements in the face of constitutional challenges
    similar to-those you suggest.      Illinois State Employees Ass'n V.
    Walker, 
    315 N.E.2d 9
    (Ill.), cert. denied, 419         s 1058 (1974).
    Montgomery    County v. Walsh, 
    336 A.2d 97
    (Md. 19;:); appeal dis-‘
    missed for want of substantial federal question, 
    424 U.S. 901
     (1976); Chamberlin v. Missouri Elections Comm'n, 
    540 S.W.2d 876
     (MO.   1976); Kenny v. Byrne, 365    2d 211 (Super. Ct. App. Div.
    19761, cert.                            (N.J. 1977) ; Lehrhaupt v.
    __-   _..-_-.--      ..-
    Fritz v. Gorton, 5ficp.2d iii (Wash:), appeal dismissed for want
    of substantial federal question, 
    417 U.S. 902
    (1974); In re
    
    235 N.W.2d 409
    (Wise. 1976). Even the Supreme Court of
    iF??
    a i ornia has distinguished its previous Carmel-by-the-Sea
    decision in upholding a new financial disclosure law. County
    of Nevada v. MacMillen, 
    522 P.2d 1345
    (Cal. 1974). We have
    examined the nrooosed ordinance in light of these decisions, and
    we do not belle& the courts would find it to violate any of
    the constitutional provisions about which you inquire.
    P.   4584
    L   .
    1
    .
    Honorable Ben 8. Grant   - Page 3   (H-1070)
    You ask if requiring a city officer or candidate for city
    office to file certain portions of his income tax return with
    the city secretary would violate either 26 U.S.C, 5 7213(a) (2)
    or (a) (3), or section 7 of the Privacy Act of 1974, 88 Stat.
    1896, 1909, 5 U.S.C.A. 9 552a note. Section 7213(a) (2) and
    (a) (3) of title 26 of the United States Code (the Internal
    Revenue Code) makes it unlawful for any state officer to disclose
    "any return or return information . . . acquired by him or
    another person under section 6103(d) or (1) (61." Section
    6103(d) concerns information disclosed by-the Internal Revenue
    Service to state officers charged with the administration of
    state tax laws. Section 6103(l) (6) relates to information
    disclosed by the I.R.S. to chiTd support enforcement agencies.
    These provisions do not appear to relate to any state or local
    requirement that might be enacted requiring public officers or
    candidates to reveal their individual tax returns. Whether
    the proposed ordinance should be enacted is, of course, a
    question of policy to be determined by the policy makers. We
    do not believe the proposed ordinance, if enacted, would violate
    these provisions of the Internal Revenue Code or subject the
    city secretary to penalties thereunder for disclosure of any
    information subsequently released by him. We have also examined
    26 U.S.C. 9 6103(p)(4) and (p) (8). Those provisions concern the
    security of information obtained by state authorities charged
    with administering state tax collections, and do not appear to
    relate to the type of disclosure involved here.
    Section 7 of the Privacy Act of 1974, about which you
    specifically inquire, addresses the disclosure of social security
    numbers. We note that the proposed ordinance requires only the
    filing of designated portions of the city official's 'or candi-
    date's income tax return. Under the proposal, the official or
    candidate would need file only those portions of his return
    showing occupation, gross income, net income, and income from
    investments.  The taxpayer's social security number need not
    be disclosed under the proposed ordinance.  See wm;f;;icY
    Protection Study Commission, Personal Privacy in an
    Society,at 613 (1977).
    Section 43-3 (a) (8) of the proposed ordinance would re-
    quire a public official or candidate to include the following
    information in his financial disclosure statement:
    [Plrovided such information is not privi-
    leged by law, if the person filing the
    statement is the owner of five (5) per
    cent or more of any corporation, trust,
    partnership, firm or business association,
    such person shall list all customers of
    P. 4585
    Honorable Ben 2. Grant   - Page 4   (H-1070)
    such entities with whom five thousand
    dollars ($5,000.00) or more business
    was transacted during the reporting
    period, stating the dollar value of
    business transacted. . . .
    You ask whether an attorney or a physician could legally or
    ethically disclose the names of clients or patients and com-
    pensation received from them as required by this provision.
    The identity of a client and matters involving the receipt of
    fees from a client are not normally within the scope of the
    attorney-client privilege,                 
    521 F.2d 179
    (10th
    Cir.), cert. denied, 423 U.S              ; United States v.
    Ponder, 
    475 F.2d 37
    (5th Cir. 1973). While certain medical
    records may be made confidential either by statute, see V.T.C.S.
    arts. 695j-1, S 10 (names of persons receiving publicssis-
    tance); 4445c, S 4 (notice of laboratory information indicating
    venereal disease); 5547-87 (patients of mental hospitals);
    5547-202, S 2.23 (identity of persons studied in connection
    with mental disorders), or ,by a constitutional or common law
    right of privacy, see Industrial Foundation of the South v.
    Texas Industrial Axdent    Board, 
    540 S.W.2d 668
    (Tex. 1976),
    cert. denied,       U.S.         (March 21, 1977) (No. 76-840),
    we do not believe a physicianwould    in every case be legally
    or ethically barred from revealing the name-and dollar amount
    of his sources of professional income over $5,000. See Biggers
    v. State, 
    358 S.W.2d 188
    , 191 (Tex. Civ. App. -- Dal=),      writ
    ref'd n.r.e., 360 S.W.Zd 516 (Tex. 1962) (the doctrine of si-
    leged communication does not extend to physician and patient).
    See generally Annot., 
    20 A.L.R. 3d 1109
    (1968). But cf. Texas
    Employers' Ins. Ass'n v. Marshall, 436 S.W.2d 617(Tex.Cr
    APP. -- Eastland 1969, writ ref'd n.r.e.) (information obtained
    by physician doing examination on behalf of Social Security
    Administration protected from disclosure by federal law).
    The Missouri Supreme Court has expressly upheld such a
    reporting requirement for attorneys, finding that "the attorney-
    client privilege generally will remain inviolate."   Chamberlin
    v. Missouri Elections Comm'n, 540 S.W.Zd 876, 880 (MO. 1976).
    In those cases where disclosure might present a legal or ethi-
    cal problem, however, the proposed ordinance has left room for
    evaluation of any claim of privilege by requiring disclosure
    only "provided such information is not privileged by law." Any
    assertion of privilege must be evaluated on a case-by-case
    basis, and will require a "particularized concern with the facts
    of each case."   In-re Grand-Jury Proceedings, 
    517 F.2d 667
    , 671
    n.2 (5th Cir. 1975).
    P. 4586
    .   ,
    ..    ;   .
    Honorable Ben 2. Grant     - Page 5     (H-1070)
    Finally, we must consider your inquiry whether a city
    could exempt from public inspection the income tax returns or
    customer lists filed in the disclosure statements, or could
    exempt from public inspection the entire financial statement
    of city employees such as assistant city managers and depart-
    ment heads. The disclosure of information collected, assembled
    or maintained by governmental bodies is generally controlled
    by the Texas Open Records Act, V.T.C.S. art 6252-17a.    Section
    3 of that Act requires that all such information shall be
    available to the public unless specifically excepted therein,
    As previously discussed, we do not believe the portions of
    income tax returns filed with the city secretary would be
    "deemed confidential by law,”   and thus generally excepted
    from public disclosures by section 3(a) (1) of the Open Records
    Act. The release of portions of the returns would not
    generally constitute an "unwarranted invasion of privacy,"
    as provided by the exception to disclosure in section 3(a) (2)
    of the Open Records Act. See Heathman v. United States District
    Court, 
    503 F.2d 1032
    (9th G.     1974). While the list of cus-
    tomers required of an attorney or physician might be confiden-
    tial by law in some cases, those lists would not always be
    excepted from disclosure by section 3(a) (1) or 3(a)(2). The
    release of a list of an official's or candidate's customers
    might in some cases be excepted from disclosure under sections
    3(a) (4) or 3(a) (10) of the Open Records Act, but such a situation
    must be addressed on a case-by-case basis. See Open Recorda
    Decision No. 89 (1975). We believe that any-tempt      to exea&t
    entirely the portions of income tax returns or customer lists
    included in the proposed financial disclosure statement weuld
    violate the Texas Open Records Act.
    Information contained in the financial disclosure state-
    ments of city employees such as assistant city manager% and
    department heads would also be subject to the Open Uecordr,
    Act. Such information might, of course, be excepted from
    disclo,sure in individual cases under one or more of the pro-
    visions of section 3 of that Act.   We believe, howwer,   thag
    any attempt to make the information contained in the proposed
    financial disclosure statements per se exempt from public
    disclosure would run afoul of the ODE Records Act and be of
    no effect. See Industrial Foundation of the~South v. Texas
    Industrial AcTdent   Hoard, supra at 677.
    SUMMARY
    A proposed financial disclosure ordinance
    would not, if enacted by a home rule city,
    conflict with state law or violate the
    constitutional rights of city officials
    P.   4587
    Honorable Ben 2. Grant    - Page 6   (H-1070)
    and candidates required to file financial
    statements. Requiring the attachment of
    portions of an official's or candidate's
    income tax return to the financial state-
    ment would ndt violate federal law. An
    attorney or physician may in some instances
    reveal large fees received from clients
    or patients without violating ethical or
    legal obligations. Public access to finan-
    cial disclosure statements filed with the
    city secretary would be controlled by the
    Texas Open Records Act.  Whether such an
    ordinance as has been suggested should be
    enacted is a question of policy which can-
    not be addressed in the context of an attor-
    ney general opinion.
    APPROVED:
    DAVID M. KENDALL, First Assistant
    C. ROBERT HEATH, Chairman
    Opinion Committee
    P. 4588