A report from state Auditor Troy Kelley found no improper governmental activity in the Department of Revenue's decision not to seek $2 million in use taxes from an unspecified taxpayer. A whistle blower had alleged that the agency initially determined the tax was owed but that an 11-month hold was put on the tax assessment , which caused the window of time for tax collections to lapse.
The report released Monday said auditors did not find evidence the tax was ever assessed or that a hold was put on it. The allegation was that the delay was done purposefully in 2011 because of the identity of the taxpayer - implying the taxpayer was influential.
The audit report does not identify the taxpayer, and the tax agency does not typically release the names of individual taxpayers.
Investigators laid out their reasoning this way:
We found no reasonable cause to believe an improper governmental action occurred. During our investigation we reviewed the entire case file and case notes for the potential assessment under question. In addition, we reviewed e-mails and phone records of the three subjects and interviewed multiple witnesses. We found the case was discussed by Department personnel involved, but an assessment was never created. We interviewed the regional compliance manager who reviewed the case details presented by the agent. The regional compliance manager stated that he concluded there was not enough evidence to move forward with an assessment, despite the agent and the agent’s manager originally believing there was enough evidence to create an assessment. Additionally, the regional compliance manager stated there were two items that increased the level of proof required to create an assessment for this case:A conservative news site had reported on the whistle blower complaint during last year's governors race. It did not identify the taxpayer but said the tax in question dealt with the taxpayer’s jets.
ï‚· At the request of the taxpayer, the Department had already issued a binding letter ruling regarding the use tax issue to the client in 2009.
ï‚· There was a similar tax case the same year that was appealed and the assessment overturned by the Department, in the taxpayer’s favor.
Our review of email and case notes found the case was discussed between the regional compliance manager, the agent’s manager and the agent through June 2011. The regional compliance manager stated that, after that time, he received no additional evidence or documentation on the case before the statutory time bar to assess use tax on this case expired on December 31, 2011.
In review of the case notes and the subjects’ e-mail, phone records and statements from witnesses and subjects, we found the Department never made the determination that use tax was owed by the taxpayer in this case. Our investigation found no hold was placed on the case that prevented an assessment from being issued. Additionally, we found no evidence that any employee of the Department intentionally delayed the case in order to allow the statutory time bar to expire.
UPDATE: As Jerry Cornfield reports, the issue also arose in the 1st Congressional District race last year where Republican candidate John Koster linked Democrat and eventual winner Suzan delBene to the allegations. DelBene had served as state revenue director during the time of the alleged tax favoritism at Revenue, but she labeled the allegations as baseless.