State Ex Rel. Oklahoma Tax Commission v. Daxon , 607 P.2d 683 ( 1980 )

HARGRAVE, Justice.

On August 24,1979, the Attorney General of the State of Oklahoma issued Opinion No. 79-251 in response to a query posed him by Tom Daxon, the State Auditor and Inspector. As the Attorney General rephrased the query it is:

Does the State Auditor and Inspector have the authority to examine the records and files deemed by the Oklahoma Tax Commission to be confidential and privileged?

The opinion of the Attorney General begins with 1979 Okl. Session Laws, Ch. 30 § 138,¹ amending 74 O.S.1971 § 212 as it provides in part:

“The State Auditor and Inspector . shall examine .the books and accounts of the state officers whose duty it is to collect, disburse or manage funds of the State, at least once each year.”

Next the opinion notes that 1979 Okl. Sess.Laws, Ch. 30 § 114 ² specifically authorizes the State Auditor and Inspector to audit the accounts of the Oklahoma Tax Commission:

“The State Auditor and Inspector is hereby authorized and directed to make a continuous examination and audit of the books and accounts of the Tax Commission, making separate reports for each fiscal year ending June 30.”

The next following section; the 1979 Okl. Sess.Laws, Ch. 30 § 115 ³ provides for confidentiality and exceptions thereto of the records and files of the Tax Commission. Material excerpts from that statute are:

“(a) The records and files of the Tax Commission concerning the administration of this article, or any state tax law, shall be considered confidential and privileged, except as provided otherwise by law and neither the Tax Commission nor any employee engaged in the administration thereof or charged with the custody of any such records or files, nor any person who may have secured information therefrom, shall divulge or disclose any information obtained from said records or files or from any examination or inspection of the premises or property of any person.

“(b) Neither the Tax Commission nor any employee . . . shall be required . to produce any oif them for the inspection of any person . . . Nothing herein contained shall be construed to prevent:

(1) The delivery to a taxpayer . . . ;

(2) The publication of statistics . . ;

(3) The examination of such records and files by the State Auditor and Inspector, or his duly authorized agents;”

The Attorney General’s opinion notes that the statute providing for the confidentiality of the Tax Commission’s records also expressly provides that the confidentiality so created shall not be construed to prevent examination of these records by the State Auditor and Inspector in addition to the proviso in (a) that these records are confidential except as otherwise provided by law.

In closing, the opinion notes that under (c) of the same section the criminal penalties therein provided for unauthorized disclosure of information obtained from these records apply to all persons securing information from the records and files of the Commission.

Thirteen days after the issuance of this Attorney General’s Opinion the State of Oklahoma Ex Rel The Oklahoma Tax Commission filed an Application to Assume Original Jurisdiction, Petition for a Writ of Prohibition, and a Motion to Stay the Effectiveness of Attorney General’s Opinion # 79-251. The application and petition allege this Court has superintending control over the Tax Commission and the State Auditor.⁴ The application and petition allege the issue presented by Attorney General’s Opinion # 79-251 is publici juris, affecting all taxpayers, the applicant and its employees, and is also of urgent public concern. The applicant Tax Commission admits it is required to comply with the mandate of the Attorney General until overruled in a court of competent jurisdiction.⁵ The Commission alleges that enforcement of the Oklahoma Tax Code, 68 O.S. § 2351, et seq. is dependent upon a reciprocal agreement between it and the United States Internal Revenue Service and that the applicant has agreed with the Service to maintain the confidentiality of the information obtained therefrom. The applicant also alleges the disclosure would amount to a breach of the State’s compact to its taxpayers that the returns will be kept confidential.⁶

The State Auditor and Inspector alleges in his response to the application to assume original jurisdiction and petition for a writ of prohibition that 68 O.S.1971 § 106 as amended by 68 O.S.Supp.1979 § 106 requires the office of State Auditor and Inspector to perform a continuous audit of the State Tax Commission and that a preliminary audit of the Tax Commission has “shown that there are serious flaws in the internal controls of the Oklahoma Tax Commission which could potentially have an adverse effect upon the collection and apportionment of taxes.” The Auditor concedes that he and his agents are subject to criminal penalties (as above noted) for violation of the privilege. He states the only intended purpose of his examination of these records is to audit the Tax Commission and correcting, if need be, the “conduct of the tax collectors.” Additionally, the Auditor and Inspector alleges the Commission does not have standing to raise the privilege accorded to taxpayers inasmuch as the privilege is designed only to protect the taxpayer and not the tax collector.

Under the facts as set forth above, this Court concludes a justiciable controversy exists and the issues concern the citizens of the state and the performance of public duties charged by law to each of the state agencies above named. The controversy, in our determination, is a sufficiently broad public concern that this court has chosen to exercise its discretionary power to assume original jurisdiction in this publici juris cause. Oklahoma Association of Municipal Attorneys v. State of Oklahoma, 577 P.2d 1310 (Okl.1978), Wiseman v. Boren, 545 P.2d 753 (Okl.1976).

The Oklahoma Tax Commission asserts that 68 O.S.1971 § 106 was not changed insofar as it specifies the duties to be performed by the office, but the title of the State Examiner and Inspector was changed to the State Auditor and Inspector by 68 O.S.Supp.1979 § 106. In view of the fact that 68 O.S.1971 §§ 106 and 205 have remained substantially the same since the enactment of the State Tax Uniform Procedure Act in 1937, the long continued construction of these statutory provisions by the department of government charged with their execution should not be overturned without urgent reason.⁷ Additionally, the Commission contends the long period of administrative construction of these statutes as establishing these records to be confidential is to be regarded as legislative acquiescence to such construction in the face of legislative silence. It is the Tax Commission’s position that the Examiner’s request is beyond the pale of his statutory duties as historically interpreted, and the amended statutes do not change the accepted construction of those duties.

The statutes do provide that the Auditor and Inspector is authorized and directed to “make a continuous examination and audit of the books and accounts of the Tax Commission.” 68 O.S.Supp.1979 § 106. Title 74 O.S.Supp.1979 § 212 also provides that the Auditor “shall examine the books and accounts of the state officers whose duty it is to collect . . . funds of the state It is also provided in 74 O.S. Supp.1979 § 215, the title of which Section is: “Facilities for investigations — Exhibits and information — Offenses—Powers and duties of State Auditor and Inspector” that “All officers of the State . . . must make written exhibits to the Auditor . under oath in such form . . as he may prescribe . . . . The State Auditor and Inspector shall have full power and authority for the various purposes named to examine books, papers, accounts, bills, vouchers, and any other documents, or property of any or all of the aforesaid institutions, all State officers . . This section additionally makes misrepresentation and failure to produce the requested information a crime. Additionally, as previously noted, 68 O.S.Supp.1979 § 205(b)(3) excepts the records and files of the Commission from the privilege and confidentiality conferred by that same statute. It is therefore apparent that in no less than four separate statutes enacted in the 1979 Okl. Session Laws is it provided that the Auditor and Inspector shall have the power to examine the documents held by the Tax Commission.

The Tax Commission’s argument that the Auditor is limited to acquiring information found in the “books and accounts of the Tax Commission” as specified in 68 O.S. Supp.1979 § 106 or the “records and files of the Tax Commission,” specified in 68 O.S. Supp.1979 § 205, is based upon two premises; one, that a taxpayer’s return is not part of the books and records referred to, and two, that the- privilege found in 68 O.S. Supp.1979 § 205 extends to all remaining classes of documents. While the first assumption is at least dubious, the second is expressly negated by the only substantive change made in subsection (a) of 68 O.S. 1971 § 205 by 1976 Okl.Sess.Laws, Ch. 123 § 1. That change is the addition of the following emphasized language:

“(a) The records and files of the Tax Commission concerning the administration of this article, or of any state tax law, shall be considered confidential and privileged, except -as provided otherwise by law . . . ”

We hold the effect of this proviso is to mandate that the prohibition against disclosure made by 68 O.S.Supp.1979 § 205 does not operate to restrict the classes of information the Auditor and Inspector may obtain under the broader provisions of 74 O.S.Supp.1979 § 215. To hold otherwise would render the referenced amendment mere surplusage, and to do so would violate the principle that a statute should be construed if possible so that every word, phrase, clause and sentence are operative rather than a construction which renders some words or phrases idle and nugatory. Independent School District # 1 of Tulsa County v. Albus, 572 P.2d 554 (Okl.1977); Street v. Bethany Firemen’s Relief and Pension Fund Board, 555 P.2d 1295 (Okl.1976); General Motors Corp., Argonaut Division v. Cook, 528 P.2d 1110 (Okl.1974); C. H. Leave// & Company v. Oklahoma Tax Commission, 450 P.2d 211 (Okl.1968).

The legislature has mandated that the State Auditor conduct a continuous audit of the State Tax Commission. Our examination of the statutory duties placed upon the State Auditor and Inspector leads us to conclude that the continuous audit provision of 68 O.S.Supp.1979 § 106 legislatively mandates the Auditor to scrutinize the activities of the Tax Commission in detail. The phrase “except as otherwise provided by law”, added to the statutory grant of privileged and confidential status of the records of the Commission removes any doubt that the Auditor has the power under 74 O.S. Supp.1979 § 215 to “examine books, papers, accounts, bills, vouchers, and any other documents, or property of any or all of the. aforesaid State institutions.”

The Tax Commission cautions us that divulgence of certain information in its hands may, or possibly could, result in revocation of certain information sharing privileges which have the effect of considerably minimizing the trouble and expense of collecting and verifying the amount due in certain state taxes. Thus the Tax Commission states the Attorney General’s opinion 79-251 was issued without regard to the law (26 U.S.C. § 6103) and the reciprocal agreement between the Oklahoma Tax Commission and the Internal Revenue Service.

It is plain under the provisions of the Oklahoma Constitution, Article 5 § 36 that: “The authority of the Legislature shall extend to all rightful subjects of legislation and any specific grant of authority in this Constitution, upon any subject whatsoever, shall not work a restriction, limitation, or exclusion of such authority upon the same or any other subject or subjects whatsoever.” In extending the power of the legislature to “all rightful subjects” the legislature of the state of Oklahoma is constitutionally vested with the power and authority to pass legislation on any subject not withheld by the Constitution of this State or the Federal. Constitution. Spearman v. Williams, 415 P.2d 597 (Okl.1966); Dobbs v. Board of County Commissioners of Okl. County, 208 Okl. 514, 257 P.2d 802 (Okl.1953); Wentz v. Thomas, 159 Okl. 124, 15 P.2d 65 (1932). Given the restriction imposed only through the United States and Oklahoma Constitutions, the legislature is empowered to pass such legislation as it deems beneficial to the public weal. State ex rel. Grand Jury of McCurtain County v. Pate, 572 P.2d 226 (Okl.1977). Indeed there is a constitutionally mandated policy requiring the legislature of the State of Oklahoma to provide an efficient and effective audit of the revenue collecting arm of the state government found in Article 5 § 60 of the Oklahoma Constitution:

“The Legislature shall provide by law for the establishment and maintenance of an efficient system of checks and balances between the officers of the Executive Department and all commissioners and superintendents, and boards of control of State institutions, and all other officers entrusted with the collection, receipt, custody, or disbursement of the revenue or moneys of the State whatsoever.” (E.A.)

To limit the State Auditor and Inspector’s right to access to primary tax revenue documents as the Tax Commission urges would seriously hamper, if not forestall, the Auditor’s ability to account for revenue received. Without the ability to determine what funds are coming into the state in the first instance from the primary documents containing that information, the Auditor and Inspector would have no means by which to account for all funds in the hands of the Commission. To so limit the access of the Auditor would at once amount to a usurpation of legislative power clearly given and of the mandate of the last-mentioned article of the State Constitution, and this Court will not so act. It appears, therefore, the State Auditor has full Legislative authority to audit the Tax Commission and in doing so may examine for audit purposes the “books, papers, accounts, bills, vouchers, and any other documents, or property” in the manner he chooses. Such a statement does not alter the fact that the only State agency authorized to administer the tax laws and collect taxes in this State is the Oklahoma Tax Commission. The watchdog is not the master of the house.

Inasmuch as this Court is Legislatively and Constitutionally constrained to hold the Auditor and Inspector entitled to inspect all documents in the hands of the Tax Commission, we note that an examination of 26 U.S.C. § 6103 enacted as 1976 Public Law 94-455 effective February 1, 1977, does not confirm the fears voiced by the Tax Commission. In pertinent part the Federal Statute provides:

6103. Confidentiality and disclosure of returns and return information.

(a) General rule — Returns and return information shall be confidential and except as authorized by this title .

(2) no officer or employee of any State

shall disclose any returns or return information obtained by hirti in any manner in connection with his service as such an officer .

(d) Disclosure to State tax officials. — Returns and return information . shall be open to inspection by or disclosure to any State agency . which is charged under the laws of such State with responsibility for the administration of State tax laws for the purpose of, and only to the extent necessary in, the administration of such laws ...

Any doubt that the State Auditor and Inspector is one of the parties entitled to inspect these documents is laid to rest when the provisions last quoted are viewed in the .light of (b)(4)(A)(i) of § 6103.

(4) Tax administration.

The term “tax administration”—

(A) means—

(i) the administration, management, conduct, direction, and supervision of the execution and application of the internal revenue laws or related statutes (or equivalent laws and statutes of a State) . . . (E.A.)

Clearly the State Auditor and Inspector of the State of Oklahoma is charged with the duties of ascertaining that the State tax laws and statutes have been executed, and as such is authorized to inspect the documents in question. Secondly, § 6103(p)(8)(A) & (B) authorize the disclosure of the information in question where, as here, such disclosure is required by state law. It is to be remembered that as required by (A) this State has a law (68 O.S.Supp.1979 § 205(c)) protecting the confidentiality of these records which applies with equal force to all persons who have secured that information. The remaining provision of 26 U.S.C. § 6103 to be examined as noted above is § 6103(p)(8)(A) & (B), reading in part:

(а) State law requirements.—

(A) Safeguards. — Notwithstanding any other provision of this section, no return or return information shall be disclosed ... to any officer or employee of any State which requires a taxpayer to attach to, or include in, any State tax return ... information reflected on such Federal return, unless such State adopts provisions of law which protect the confidentiality of . the federal return information reflected on, such State tax return.

(B) . . . Nothing in Subparagraph (A) shall be construed to prohibit the disclosure by an officer ... of any state of any information on a federal return which is required to be . . included in a state return to another officer or employee of such state if such disclosure is specifically authorized by state law.

It is to be seen that the disclosure the Tax Commission seeks to prohibit is authorized by federal law under (A) and (B) above inasmuch as violation of the confidentiality is a criminal offense as required under (A), and secondly, the disclosure of the information is specifically mandated under 74 O.S.Supp.1979 § 215: “. . . shall have full power ... to examine books, papers, accounts, bills, vouchers and any other documents . . . ” It is to be noted that under other provisions of the statute last mentioned failure to so produce those records when requested by the State Auditor and Examiner is also a criminal offense.

WRIT DENIED.

LAVENDER, C. J., and WILLIAMS, SIMMS and DOOLIN, JJ., concur. IRWIN, V. C. J., and HODGES and BARNES, JJ., concur specially. OPALA, J., dissents.

1 . Now codified as: 74 O.S.Supp.1979 § 212.

2 . Now codified as 68 O.S.Supp.1979 § 106.

3 .Now codified as 68 O.S.Supp.1979 § 205.

4 .Constitution of Oklahoma Article VII, § 4; Post Oak Oil Co. v. Oklahoma Tax Commission, 575 P.2d 964 (Okl.1978); Winters v. Governor’s Special Committee, 441 P.2d 370 (Okl.1967).

5 . Pan American Petroleum Corp. v. Board of Tax-Roll Corrections, 510 P.2d 680 (Okl.1973).

6 . Oklahoma Tax Commission v. Clendinning, 193 Okl. 271, 143 P.2d 143 (1943).

7 . D. L. Peterson v. Oklahoma Tax Commission, 395 P.2d 388 (Okl.1964).