Proposed legislation would make private tax rulings public

For years, companies have been able to see favorable tax treatment through "private letter rulings." Sen. Tamara Barringer, R-Wake, wants the public to have access to those determinations.

Posted 9:50 a.m. Jun 15, 2016 — Updated 9:50 a.m. Jun 15, 2016

Mark Binker

RALEIGH, N.C. — Senators will likely attach legislation requiring the North Carolina Department of Revenue to disclose a trove of private tax rulings that companies have requested over the past six years to a crowd-funding bill due to be heard in the Senate Finance Committee on Wednesday.

So-called private letter rulings give specific interpretations of North Carolina tax law to companies that request them. However, those rulings are not released as a matter of course, meaning most other companies, even those in the same business, don't know they exist or if they might be giving competitors an advantage.

"How can we have fair taxation if one taxpayer is getting one deal and another taxpayer is paying something else?" asked Sen. Tamara Barringer, R-Wake.

Private letter rulings most recently came to light during discussions of the Senate tax plan. Sen. Bob Rucho, R-Mecklenburg, pointed to a special ruling granted to media companies as a tax break that allowed the corporations in question to duck millions of dollars in obligations. At the time, Rucho suggested that senators wanted to bring all these special rulings to light.

Barringer said Tuesday that she would do just that by asking the Senate Finance Committee to attach a private letter transparency measure to Senate Bill 481, a bill that would allow entrepreneurs to raise capital in $5,000 chunks from small investors. Such a crowd-funding bill has long been sought by the McCrory administration as well as local businessmen, but it has been thwarted over the last few years by quarrels between the House and the Senate over economic development measures.

Barringer's amendment would require the Department of Revenue to publish such rulings reaching back to Jan. 1, 2010. Going forward, the department would have 90 days from issuing such a ruling to publish it on the department's website.

According to the Department of Revenue, officials have issued 15 private letter rulings concerning corporate income tax since 2010, one letter related to whether a corporation had nexus in the state, one letter with regards to gross premiums and 63 determinations related to tax credits of various kinds. During the same period, the department has issued 412 requests for private letter rulings on sales and use taxes, although it's unclear how many determinations in those categories were eventually issued.

All of those rulings have essentially been kept private.

"We need to have open government," Barringer said, noting that she is a lawyer who deals with tax issues by profession.

Not having access to what the rules are is a "real handicap" to those trying to understand how the law applies to their clients, she said.

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