Oklahoma Tax Commission v. Clendinning

OSBORN, J. The Oklahoma Tax Commission has filed this proceeding in this court for a writ of prohibition to prevent the district court of Tulsa county from enforcing an order directing the production by the Tax Commission of income tax returns of some 50 citizens of Oklahoma, residents of some 25 or more counties of the state, for inspection by and exhibition before a grand jury in session in said county. Subpoena duces tecum was served on the Honorable J. Frank Martin, Chairman of said Tax Commission, directing him to produce said returns, and upon his refusal to produce and exhibit same he was adjudged guilty of contempt of court, but the court deferred sentence for said alleged contempt pending application to this court for a determination of the right to require such production for such purposes. This application was therefore filed and this court assumed original jurisdiction. This is not a proceeding by any of the persons f whose income tax returns are sought to be exhibited, and none of them is a party hereto. The Tax Commission, as a public body, asserts that by a specific legislative provision said returns are “confidential and privileged,” except as to specific persons and except for specific purposes and in a specific manner, and the Legislature provided that a wrongful disclosure by them of said tax returns would subject them to a criminal prosecution punishable by fine not exceeding $1,000 or by imprisonment in the county jail for a term not exceeding one year, or by both such fine and imprisonment, as well as removal or dismissal from office. Attended with such serious consequences it would seem therefore that the public officials constituting the Tax Commission should proceed with the greatest caution in disclosing said returns in consonance with the legislative declaration as to their confidential and privileged character. This court in this proceeding is in no wise concerned judicially as to the contents of said retui'ns, but the sole question for determination is whether the production thereof for inspection and exhibition before the grand jury can be required. On the other hand, the county attprney of Tulsa copnty, representing the respondent district judge, asserts the right to said production, and therefore the validity of the order of the court, and is insisting upon the punishment of the chairman of the Tax Commission for contempt. As preliminary to the consideration of the determinative question, let us examine the power and duties of a grand jury. By 22 O. S. 1941 § 311, it is provided: “A grand jury is a body of men consisting of twelve jurors impaneled and sworn to inquire into and true presentment make of all public offenses against the State committed or triable within the county for which the court is holden.” Section 331, Id., provides: “The grand jury has power to inquire into all -public offenses committed or triable in the county or subdivision, and to present them to the court, by indictment or accusation in writing.” Section 324, Id., provides, in part: “ . . . You, as foreman of this grand jury, shall diligently inquire into, and true presentment make, of all public offenses against this State, committed or triable within this county (or subdivisions), of which you shall have or can obtain legal evidence. . . By specific statutory enactment it seems clear that the power and authority of a grand jury is to investigate only crimes committed or triable within its county. While a grand jury has wide powers of investigation and indictment, definite limits have been placed thereon. It may not concern itself with investigation and indictment for offenses bccurring wholly outside of the county wherein it is impaneled. Such functions are delegated by other provisions of the *273 Constitution and statutes to the county attorney of such other county or to a grand jury duly impaneled therein. A grand jury is an arm of the court impaneling it and is, in some respects, subject to its supervisory action. Burke v. Territory, 2 Okla. 499, 37 P. 829. See, also, annotation in 22 A. L. R. 1361 and 106 A. L. R. 1384. It is not contended by the county attorney herein that the grand jury is empowered to investigate crimes not committed or triable within the county, but he contends that it is for the grand jury to say in the first instance whether or not a violation of the law has occurred, and if so, whether or not it was committed within the county or whether or not it is triable in said county. In this connection it is alleged by the Tax Commission, and duly verified, and not denied by respondent, that none of the named citizens resides in Tulsa county or has any place of business in saicl county, and none of said returns was verified in said county. It is at once apparent, therefore, that the grand jury cannot concern itself with a violation of the income tax laws by said citizens unless the statutory provisions give such authority. We therefore set out the pertinent statutes: 68 O. S. 1941 § 1486 provides that exclusive venue is in the county court of the county of the taxpayer’s residence for failure to file return, and is as follows: “Any taxpayer who, with intent to defraud the State or evade the payment of any tax, fee, penalty or interest which shall be due pursuant to the provisions of this Act, or of any State tax law, shall fail or refuse to file any report or return required to be filed pursuant to the provisions of any State tax law, or shall fail or refuse to furnish a supplemental return or other data required by the Tax Commission, shall be guilty of a misdemeanor and, upon conviction, shall be punished by a fine of not exceeding One Thousand Dollars ($1,000-.00) for each offense. “The venue for presecutions arising under this Section shall be in the county court of any county in which such person resides or, if such person is not a resident of this State, any county in which such person does business or maintains an established place of business.” For false or fraudulent return the exclusive venue is in the county court of the county where the return was verified, as provided by 68 O. S. 1941 § 1487, as follows: “Any person required to make, render, sign or verify any report, return, statement, claim, application, or other instrument, under the provisions of this Act or of any State tax law who, with intent to defeat or evade the assessment or levy of the tax, shall make a false or fraudulent return, statement, report, claim, invoice, application, or other instrument, or any person who shall aid or abet another in filing with the Tax Commission such a false or fraudulent report or statement, shall be guilty of a misdemeanor and shall, upon conviction, be fined not more than One Thousand Dollars ($1,000.00); Or shall be imprisoned in the county jail not exceeding one (1) year; or shall be punished by both such fine and imprisonment. “The venue of prosecutions arising under this Section shall be in the county court of any county where such return or report was verified.” For false book entries or failure to make required entries, the exclusive venue is in the county court of the county of the taxpayer’s residence, as provided by 68 O. S. 1941 § 1488, as follows: “Any person whether acting for himself or for any other person who wilfully makes any false entry or who fails to make any entry which it is his duty to make in any book, ledger or account required by this Act or any State tax law to be kept, shall be guilty of a misdemeanor and, upon conviction therefor, shall be fined in a sum not more than One Thousand Dollars ($1,-000.00); or shall be sentenced to jail for a term not exceeding one (1) year, or both. “The venue of all prosecutions arising under this Section shall be in the county court of the county in which *274 such person resides, or if such person is not a resident of this State, any county in which such person does business or maintains an established place of business.” It may be that as to prosecution for false or fraudulent returns filed before effective date of the quoted act in 1939, there was also venue in Oklahoma county, where all returns are filed with the Tax Commission, if any such prosecution had been instituted within the applicable limitation period. But further inquiry into that point is not necessary, since it is not here sought to use any of these returns in any prosecution in Oklahoma county for violation of any income tax law. With these specific provisions relating to crimes and prosecutions growing out of a violation of said act, we now quote in full section 1454 of the Uniform State Tax Procedure Act, 68 O. S. 1941: “The records and files of the Tax Commission concerning the administration of this act, or of any State Tax Law, shall be considered confidential and privileged, 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 the said records or files or from any examination or inspection of the premises or property of any person. “Neither the Tax Commission nor any employee engaged in such administration or charged with the custody of any such records or files shall he required by any court of this State to produce any of them for the inspection of any person or for use in any action or proceeding except when the records or files or the facts shown thereby are directly involved in an action or proceeding under the provisions of this Act, or of the State tax law affected, or when the determination of the action or proceeding will affect the validity or the amount of the claim of the State under any State tax law, or when the information contained therein constitutes evidence of the violation of this Act, or any state tax law. Nothing herein contained shall be construed to prevent: “(a) The delivery to a taxpayer or his duly authorized representative, of a copy of any report or any other paper filed by him pursuant to the provisions of this act, or of any State tax law; “(b) The publication of statistics so classified as to prevent the identification of a particular report and the items thereof; “(c) The examination of such records and files by the State Examiner and Inspector, or his duly authorized agents; “(d) The disclosing of information or evidence to the Attorney General or any county attorney when such information or evidence is to be used by such officials to prosecute violations of the criminal provisions of any state tax law or of this act. “(e) The use .toy any division of the Tax Commission of any information or evidence in the possession of or contained in any report or return filed with any other division of the Tax Commission. “(f) The furnishing, at the discretion of the Tax Commission, of any information disclosed by said records or files to any official person or body of any other state or of the United States, who shall be concerned with the administration of any similar tax in that state or the United States. “Any violation of the provisions of this Section shall constitute a misdemeanor, and upon conviction, shall be punishable by a fine not exceeding One Thousand Dollars ($1,000.00) or by imprisonment in the county jail for a term not exceeding one year, or by both such fine and imprisonment; and the offender shall be removed or dismissed from office.” Thus the statute makes it definite and certain that income tax returns are and “shall be considered confidential and privileged.” And that the Tax Commission, under severe penalty, cannot exhibit a tax return or disclose the contents of such a return to anyone except in the manner provided or authorized by law. That statute also makes it definite and certain that the Tax Commission shall not “be required by any court *275 of this state” to produce such tax returns for inspection except in an authorized proceeding, and the statute above quoted points out the character of proceedings in which such tax returns maybe used, and definitely excludes all others. No one questions the power of the Legislature to so give tax returns this confidential and privileged status. Similar provisions are applied to income tax returns in the various states, and to federal income returns, and to various other reports and returns to the Federal Internal Revenue Department. It is not pointed out where any authority has ever denied the power to so provide. The meaning of our statute above quoted is unequivocal and it needs no construction. It means what it says and must be followed by all, including this court and the respondent district judge. This act constitutes the state’s compact and pledge to the taxpayer that his tax return shall be kept inviolate, confidential and privileged, and not disclosed to anyone, nor in any manner, except as specifically authorized by the act itself, and will be used only for the purposes specifically provided. The Legislature is in complete control as to the wisdom of the act. Our duty is but to follow it and apply it. We are not at liberty to minimize the declared public policy evinced by these express provisions of the act making the information contained in said returns confidential and privileged. It was specifically intended by the Legislature that the approximately 200,000 annual income tax returns of the taxpayers would be immune to indiscriminate inspections by officials of each of the 77 counties of the state. The manifest purpose of the act was to collect the taxes accruing to the state, and to that end it sought to induce the taxpayer to make the fullest measure of disclosure of his income and the sources thereof, whether arising from honest toil and labor, or from sources of questionable legitimacy. It would seem that this act, which is so comprehensive, would alone furnish ample guide to the conclusion that these tax 'returns are confidential and privileged from the use and disclosure here considered. But the Attorney General has furnished citation of authorities in point from other jurisdictions. In Ex parte Sackett, 74 Fed. 2d 922, the petitioner, a special agent of the Department of Justice, was in possession of certain copies of correspondence and contracts and other private documents of a citizen which he had made or obtained in connection with an investigation for a prosecution for violation of the Sherman Anti-Trust Law. In litigation between the citizen and another, and on account of destruction of the original records of the citizen, it was sought by subpoena duces tecum to obtain and use the copies held by petitioner. By a rule of the Department the documents were regarded as confidential and privileged from such use. For that reason petitioner refused to produce such copies and was committed to the United States Marshal for contempt. Upon habeas corpus he was released, it being said that the rule of the Department of Justice had the force and effect of law, and considering the documents confidential and privileged in law, their production could not be so compelled. In the case of In re Valeria Condensed Milk Co., 240 Fed. 310, the holding was stated as follows in the headnotes: “(1) The Federal and State Governments have power to provide that returns made to their officers to be used in assessing and collecting revenue and taxes shall not be revealed by the officers, and such provisions protect the officers against commitment for contempt for refusal to produce such returns on subpoena by a court. “(2) In St. Wis. 1915, Sec. 1087m24, providing that no commissioner, clerk, or agent shall divulge in any manner, except as provided by law, any information obtained in the discharge of his official duties, or permit any income return to be seen or examined, except as provided by law, the exception does not permit the production of papers whenever required through the processes of law, which would deny their inspection *276 only by those whose motives were idle curiosity, and would violate the plain public policy of the statute to protect such returns, in order that they may be freely made, but the exception refers only to the production of papers before other bodies or in other proceedings relating to the assessment of the tax. “(3) Bankr. Act July 1, 1898, c. 541, 30 Stat. 544, does not require the rules of evidence in proceedings thereunder to be different from such as generally prevail, and does not deprive a witness of his privilege under a state statute to withhold income tax returns by the bankrupt.” And in the body of that opinion it was said: “In re Weeks (D.C.) 82 Fed. 729, was a proceeding by habeas corpus in the district court to obtain the discharge of a collector of internal revenue from commitment for contempt of the state court, for refusing to obey a subpoena requiring him to produce in that court certain records of his office. The refusal to produce was justified by one of the letters above referred to wherein the Commissioner of Internal Revenue had instructed him not to produce papers or give information concerning matters in his office. The court held that such evidence was in control of the federal government, and that the instruction to the collector by his superior officer protected him in his refusal and he was ordered discharged. “In re Huttman (D.C.) 70 Fed. 699, the circumstances were similar to those in the Weeks case. The petitioner for habeas corpus there stated that he had been instructed by the head of his department to decline to make the requested revelation of facts which came to him in his official capacity as collector of internal revenue. The fact of such instruction was uncontroverted. The petitioner there, who stood committed by' the state court for his refusal to make such revelation, was discharged.” In Boske v. Comingore, 177 U. S. 459, 40 L. Ed. 846, the Supreme Court of the United States held: “Regulations of the Treasury Department prohibiting a collector of internal, revenue from producing records in his office, or copies thereof, in a state court, are within the power conferred upon the Secretary of the Treasury by U. S. Rev. Stat. Sec. 161; and therefore an attempt of a state court to punish him for obeying such regulations will be in violation of his rights under the Constitution and laws of the United States, against which he will be protected by .the Federal courts.” And in the body of the opinion it was said: “The' papers in question, copies of which were sought from the appellee, were the property of the United States, and were in his official custody under a regulation forbidding him to permit their use except for purposes relating to the collection of the revenues of the United States. Reasons of public policy may well have suggested the necessity, in the interest of the government, of not allowing access to the records in the offices of collectors of internal revenue, except as might be directed by the Secretary of the Treasury. The interests of persons compelled, under the revenue laws, to furnish information as to their private business affairs would often be seriously affected if the disclosures so made were not properly guarded. ...” It is asserted, however, by the count'attorney that subsection (d), above quoted, constitutes an exception to the confidential and privileged character of the returns in so far as the county attorney is concerned. Since it is shown herein without contradiction and without further contention to the contrary that these named citizens did not reside or verify their returns in that county, it follows that they could not be prosecuted in that county and that the county attorney has not brought himself within the exceptions to the confidential and privileged character of said returns as provided by said legislative act. It does not appear that such information or evidence could be “used by such official to prosecute violation of the criminal provisions” of such act. We therefore conclude that the income tax returns here involved were *277 confidential and privileged; that the Tax Commission was not authorized to disclose their contents to the county attorney or the grand jury above mentioned; that the grand jury was without authority to examine or investigate such returns for any purpose in the proper scope of its duties; that the court order in reference to production of such returns by the Tax Commission was beyond the authority and jurisdiction of the trial judge by reason of specific statutory provisions, and was an unauthorized application of judicial power; and that respondent should be prohibited by this court from further proceeding in that regard. In justice to the respondent district judge, we should note that he has made clear in the record the circumstances under which he made the order. At a subsequent hearing before him these statements were made a part of the record: “The Court: ... I want the record to show this, as far as the order being originally made, the county attorney came before me, with the application of the grand jury as the order shows, and I understood it had all been presented to the Tax Commission and agreed upon — ” —and later in the same record .the following: “The Court: — so you gentlemen will understand it at this time, at the time I made the original order, I was making an order which I was informed was suggested by the Tax Commission.” As we have seen, however, our statutes, within the power of the Legislature, have made such provision as would prohibit and prevent'the Tax Commission from agreeing to this improper exhibition and disclosure of the contents of individual income tax returns, and would severely punish and remove from office any member of t’he Tax Commission who so acted. While it is not involved in this action, we of course hold that a citizen’s income tax return may be freely and fully used in the administration or enforcement of the income tax law as to him or in a proper prosecution for any violation of the income tax law which he had committed. In the brief filed herein in behalf of the defendant, it is not disputed that the rule is that individual income tax returns may only be used in a prosecution of the taxpayer for violation of the income tax law. There is reasserted the right of the county attorney to inspect tax returns, with a view to an investigation for such a prosecution. But, as we have found, that can have no application to an inspection of these returns, by reason of complete lack of venue as above set out, whatever merit such a contention might otherwise have in a case where venue to prosecute would exist. The Attorney General presents the question whether the Legislature intended to lodge in the Tax Commission the authority and duty of being concerned with or instituting prosecutions for violations of the income tax law by reason of the provisions of the statutes as to general duties of the commission. That question only arises here incidentally, if it arises at all, and it is not necessary that we discuss or determine the question, since our former stated conclusions fully dispose of the questions directly involved here. Final briefs herein indicate the possibility that one of the 50 named citizens may have resided in Tulsa county or had some place of business therein. If the county attorney contends that said taxpayer did so reside or engage in business, and wishes to predicate thereon a right to see that particular return, we will hear him further on the particular point. For the reasons stated, prohibition is granted against any further effort to require the Tax Commission to exhibit, or produce for examination, the income tax returns here involved, with like prohibition against any further proceedings against the Tax Commission, as in contempt, for failure to produce said returns. *278 CORN, C.J., GIBSON, V.C.J., and BAYLESS, WELCH, HURST, and DAVISON, JJ., concur. RILEY and ARNOLD, JJ., dissent.