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.
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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
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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).
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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
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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
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