Elliott v. Montana Department of Revenue

No. 05-336

IN THE SUPREME COURT OF THE STATE OF MONTANA

2006 MT 267

JIM ELLIOTT,

Petitioner and Appellant,

v.

MONTANA DEPARTMENT OF REVENUE,

Respondent and Respondent,

and

MONTANA TAXPAYERS’ ASSOCIATION,

Intervenor.

APPEAL FROM: The District Court of the First Judicial District,
In and For the County of Lewis and Clark, Cause No. CDV 2004-777,
Honorable Thomas C. Honzel, Presiding Judge

COUNSEL OF RECORD:

For Appellant:

Peter Michael Meloy (argued), Robin A. Meguire, Meloy Trieweiler,
Helena, Montana

For Respondent:

David L. Ohler (argued), Special Assistant Attorney General,
Helena, Montana

For Intervenor:

John Alke (argued), Cherche Prezeau, Hughes, Kellner, Sullivan & Alke,
Helena, Montana
 For Amicus Curiae:

Elizabeth L. Griffing, Visiting Assistant Professor, University of
Montana School of Law, Missoula, Montana

Heard at Oral Argument: May 3, 2006
Submitted: June 13, 2006
Decided: October 24, 2006

Filed:

__________________________________________
Clerk

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Justice Patricia O. Cotter delivered the Opinion of the Court.

¶1 State Senator Jim Elliott (Elliott) requested certain state tax information from the

Montana Legislative Auditor (Auditor) for “C” corporations doing business in Montana.

The Auditor, based on information provided by the State Department of Revenue (DOR),

compiled the requested information for tax year 2002 and provided it to Elliott. Later,

DOR denied the Auditor and Elliot access to similar tax information for other tax years.

Elliott filed a Petition to Obtain Public Documents (Petition), which the District Court

denied. Elliott appeals. We affirm.

ISSUE

¶2 The restated issue on appeal is:

Did the District Court err when it denied public disclosure of Montana “C” corporations’

state tax records?

FACTUAL AND PROCEDURAL BACKGROUND

¶3 In January 2004, Elliott, in his capacity as Chairman of the Senate Taxation

Committee and Vice-chairman of the Legislative Audit Committee, requested tax

information for “C” corporations with $1,000,000.00 or more in Montana sales for all tax

years for which DOR had the information. Elliott sought the information because he

believed a “responsible legislator needs to be informed so as to make responsible and

accurate decisions on the part of the public.”

¶4 Initially, Elliott asked the Auditor to provide him with tax information about all

corporations that paid less than $150.00 in Montana taxes in 2002. After inspecting the

information, Elliott requested tax information for the top 500 “C” corporations in terms

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of Montana sales. (See “C” corporation definition at § 15-30-101(3), MCA.) DOR

provided the information to the Auditor on Elliott’s behalf. The Auditor compiled for

Elliott spreadsheets containing information for tax year 2002. Corporate taxpayers,

however, were not identified by name on the spreadsheets.

¶5 Elliott then researched the identities of some of the corporations by matching up

the tax information he received for 2002 with financial information he located on the

internet from such sources as the U.S. Securities Exchange Commission’s published

filings and corporate financial reports. Elliott disclosed the results of his research to his

constituents and other Montana citizens.

¶6 Elliott testified that “the compelling reason for the people of the state of Montana

[to have access to state corporate tax records] is that a just, equitable taxation policy is

important. For every dollar that one person avoids illegally . . . in paying taxes, the

citizens of the state of Montana make up for that in increased taxes or in decreased

services.” Subsequently, Elliott reiterated his request for tax records from all available

tax years. DOR refused Elliott’s request because he had disclosed to the public corporate

tax information previously provided.

¶7 Elliott petitioned the District Court to order disclosure of the state corporate tax

records. On April 6, 2005, the District Court denied Elliott’s Petition after holding an

evidentiary hearing on November 23, 2004, and oral arguments on February 11, 2005.

Elliott appeals.

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 STANDARD OF REVIEW

¶8 We review a district court’s conclusion of law regarding a constitutional

question to determine whether it is correct. Bryan v. District, 2002 MT 264, ¶ 16, 312

Mont. 257, ¶ 16, 60 P.3d 381, ¶ 16.

DISCUSSION

¶9 Did the District Court err when it denied public disclosure of Montana “C”
corporations’ state tax records?

¶10 Elliott invokes the right to know provisions of Article II, Section 9, of the

Montana Constitution in support of his contention that state corporate tax records are

subject to public disclosure. Article II, Section 9 provides:

Right to know. No person shall be deprived of the right to examine
documents or to observe the deliberations of all public bodies or agencies
of state government and its subdivisions, except in cases in which the
demand of individual privacy clearly exceeds the merits of public
disclosure.

However, state law prohibits the disclosure of tax records provided to DOR by Montana

corporate taxpayers. Section 15-31-511, MCA, provides:

Confidentiality of tax records. (1) Except as provided in this section in
accordance with a proper judicial order or as otherwise provided by law, it
is unlawful to divulge or make known in any manner:
(a) the amount of income or any particulars set forth or disclosed in
any return or report required under this chapter or any other information
relating to taxation secured in the administration of this chapter; or
(b) any federal return or information in or disclosed on a federal
return or report required by law or rule of the department of revenue under
this chapter.

¶11 In briefs to this Court, Elliott highlights the conflict between the provisions of

Article II, Section 9, and § 15-31-511, MCA, but dismisses the statute by arguing that,

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“Obviously, state statutory law must yield to constitutional law.” We agree with this

cardinal premise. However, statutes are presumed constitutional absent proof beyond a

reasonable doubt to the contrary. Ravalli County v. Erickson, 2004 MT 35, ¶ 17, 320

Mont. 31, ¶ 17, 85 P.3d 772, ¶ 17 (citation omitted).

¶12 Notably, Elliott has mounted no constitutional challenge—either facial or as

applied—to invalidate § 15-31-511, MCA. Indeed, Elliott’s counsel stated

unequivocally, both in briefs to this Court and during oral argument, that Elliott does not

challenge the constitutionality of the statutory prohibition on disclosure of corporate tax

information. Rather, he views the statute as “a nullity” in light of case law interpreting

Article II, Section 9.

¶13 Elliott seeks precisely the information the disclosure of which is directly

prohibited by § 15-31-511(1), MCA. Elliott asked the District Court to order disclosure

of information for “C” corporations with $1,000,000.00 or more in Montana sales,

including: the name of the corporation; Montana sales; total sales; Montana property;

total property; Montana payroll; total payroll; apportionment factor; adjusted taxable

income; Montana taxable income before net operating loss; Montana taxable income;

Montana corporate tax liability; and the date the tax return was received. While Elliott

concedes the statute prohibits such disclosure, he maintains that the constitutional right to

know in essence “trumps” these statutory restrictions, and that we may so rule without

per se declaring the statute unconstitutional.

¶14 The Legislature has exercised its constitutional power to enact a statute. Article

V, Section 1, Montana Constitution. The role of the courts in construing a statute is well

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established. We are to ascertain a statute’s terms and substance, but we are not to insert

what has been omitted or omit what has been inserted. Section 1-2-101, MCA. Thus, we

may not simply disregard the provisions of a duly enacted statute unless we first conclude

that it is unconstitutional.

¶15 As already stated, the unconstitutionality of a statute must be demonstrated

beyond a reasonable doubt. Ravalli County, ¶ 17. In that no demonstration of

unconstitutionality has been offered—much less proven—here, we may not declare this

statute unconstitutional, nor will we undertake to do so sua sponte. Absent a successful

constitutional challenge to the propriety of a statute, we are obligated to apply it. State v.

Finley, 276 Mont. 126, 149, 915 P.2d 208, 223 (1996) (Gray, J., specially concurring).

¶16 Without a direct constitutional challenge to § 15-31-511, MCA, we have no

basis for confronting, much less disturbing, its prohibition on disclosure of state corporate

tax records. Therefore we conclude we cannot grant the relief Elliott seeks.

CONCLUSION

¶ 17 For the foregoing reason, we affirm.

/S/ PATRICIA COTTER

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We concur:

/S/ KARLA M. GRAY
/S/ W. WILLIAM LEAPHART
/S/ JIM RICE
/S/ JAMES C. NELSON

/S/ MARC G. BUYSKE
District Court Judge Marc G. Buyske
sitting for Justice Brian Morris

Justice John Warner concurs.

¶18 I concur with the result of the Court’s opinion. I write to address the reason Elliott

claims it is not necessary to find § 15-31-511, MCA, unconstitutional in order to secure

the tax information he prays for.

¶19 Senator Elliott argues the “or as otherwise provided by law” exception in § 15-31-

511(1), MCA, renders the statute ineffective because “law” includes Article II, Section 9

of the Montana Constitution. 1

¶20 Section 15-31-511(1), MCA, provides:

1
This argument is clearly articulated in Elliot’s opening brief to the District Court, as
well as his appellate briefs and oral argument before this Court.
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 Except as provided in this section in accordance with a proper judicial order
or as otherwise provided by law, it is unlawful to divulge or make known in
any manner[.]

(Emphasis added.) Elliott points out that the “or as otherwise provided by law” exception

in § 15-31-511, MCA, encompasses the Montana Constitution’s Right to Know

provision, Article II, Section 9, which is set forth at ¶ 10 of the Court’s Opinion.

Although what constitute “documents . . . of all public bodies” is not defined in Article II,

Section 9, this Court has interpreted the phrase to encompass “documents generated or

maintained by a public body which are somehow related to the function and duties of that

body.” Becky v. Butte-Silver Bow Sch. Dist. No. 1, 274 Mont. 131, 138, 906 P.2d 193,

197 (1995). Thus, Article II, Section 9, is applicable to “public documents.” Becky, 274

Mont. at 138, 906 P.2d at 197.

¶21 The only limitation on the constitutional right to view public documents,

according to Elliott, is an individual’s constitutional right to privacy. Elliott goes on to

point out that this Court has held that a for-profit corporation has no individual right to

privacy under the Montana Constitution. Great Falls Tribune v. Mont. Pub. Serv.

Commn., 2003 MT 359, ¶ 39, 319 Mont. 38, ¶ 39, 82 P.3d 876, ¶ 39. Thus, Elliott

adroitly argues that there is a loop-hole in the law which requires that the public be able

to examine a for-profit corporation’s tax records. This is because Article II, Section 9, is

a law which provides that the tax records of for-profit corporations are available to the

public, and thus the exception in § 15-31-511(1), MCA, applies to abrogate the statute’s

requirement of confidentiality.

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¶22 Under this interpretation, the exception in § 15-31-511(1), MCA, would render the

statute ineffective. Elliott’s counsel did not dispute this conclusion at oral argument, and

acknowledged that the exception essentially swallows the statute. He pointed out,

however, that the statute was effective until this Court’s decision in Great Falls Tribune. 2

¶23 I do not conclude that the exception to § 15-31-511(1), MCA, renders the statute

without effect. An interpretation that gives effect to a statute is always preferred to one

that makes a statute void or treats a statute as mere surplusage. Missoula Rural Fire Dist.

v. Missoula Co., 222 Mont. 178, 182, 720 P.2d 1170, 1173 (1986).

¶24 Even assuming, arguendo, that under Great Falls Tribune a for-profit corporation

has no privacy interest to be weighed against the public’s right to know, the analysis does

not end there. The right to privacy is not the only constitutional provision that may

circumscribe the right to know provided by Article II, Section 9.

¶25 In State ex rel. Smith v. Dist. Ct., 201 Mont. 376, 654 P.2d 982 (1982), this Court

considered whether the right to know could be circumscribed by the right to a trial by an

impartial jury. We explained in Smith:

the “Right to Know” provision of the Montana Constitution . . . is not
absolute. It can be properly circumscribed when the right or interest
against which it competes is weighty or compelling.

Smith, 201 Mont. at 383, 654 P.2d at 986 (emphasis added). In Smith, this Court held

that a pretrial suppression hearing could be excluded from the public eye “only if

2
Mt. States Tel. and Telegraph Co. v. Dept. of Pub. Serv. Reg., 194 Mont. 277, 288, 634
P.2d 181, 188 (1981) (assuming the framers of Article II, Sections 9 and 10 surely
intended non-human entities to have the same constitutional rights to privacy as do
human individuals). Mt. States was overruled by Great Falls Tribune, ¶ 38.
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dissemination of information acquired at the hearing would create a clear and present

danger to the fairness of defendant’s trial and no reasonable alternative means can be

utilized to avoid the prejudicial effect of such information.” Smith, 201 Mont. at 385,

654 P.2d at 987.

I acknowledge that in Great Falls Tribune Co., Inc. v. Great Falls Pub. Schools,

255 Mont. 125, 841 P.2d 502 (1992), this Court concluded that “pursuant to the clear

language of Article II, Section 9, meetings may be closed only when the need for

individual privacy exceeds the merits of public disclosure.” Great Falls Pub. Schools,

255 Mont. at 131, 841 P.2d at 505 (emphasis added); Cf., In re Lacy, 239 Mont. 321, 325,

780 P.2d 186, 188 (1989) (“The only limitation on the right to receive this information is

the constitutional right to privacy.”) (emphasis added). In my view, these statements,

that it is only the right to individual privacy that can circumscribe the public’s right to

know, are both overbroad and unnecessary. Neither Great Falls Pub. Schools nor Lacy

involved matters other than whether an individual’s right to privacy outweighed the

public’s right to know. In Great Falls Pub. Schools the Court did not overrule, nor did it

discuss, Smith. The Court has continued to cite to the language in Smith that the right to

know “can be properly circumscribed when the right or interest against which it competes

is weighty or compelling.” E.g., Great Falls Tribune, ¶ 30 (quoting Smith, 201 Mont. at

383, 654 P.2d at 986). The rule in Smith should control in this case and I would overrule

Great Falls Pub. Schools to the extent it suggests that it is only the right to privacy that

may circumscribe the right to know.

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¶26 In the present case, Elliott’s argument necessarily raises the issue of whether the

State’s authority to tax, and its ability to enforce this authority, which is provided for by

Article VIII of the Montana Constitution, is so sufficiently “weighty or compelling” that

it may in appropriate circumstances circumscribe the right to know. See Lacy, 239 Mont.

at 326, 780 P.2d at 189 (because the judiciary has authority over the interpretation of the

Constitution, it is the courts’ duty to balance the competing interests at issue in order to

determine what, if any, information should be given to a party requesting information

from the government under Article II, Section 9).

¶27 The U.S. Supreme Court has long recognized the importance of the power to tax:

It is admitted that the power of taxing the people and their property, is
essential to the very existence of government, and may be legitimately
exercised on the objects to which it is applicable, to the utmost extent to
which the government may choose to carry it.

McCulloch v. Maryland, 17 U.S. 316, 428 (1819). Article VIII of the Montana

Constitution gives the Legislature the power to tax. At the 1972 Montana Constitutional

Convention, the Revenue and Finance Committee went so far as to suggest that putting

such a power in the Constitution was unnecessary, because “the power to tax is an

inherent power of the state, a power already possessed by the state without any grant of

authority.” Montana Constitutional Convention, Revenue and Finance Committee

Proposal, February 18, 1972, p. 579. In discussing Article VIII, Section 2, Delegate

Rygg stated: “Of course, the power of taxation is the most important power a

governmental body possesses, and it is equally important that this power never be treated

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lightly or bargained away.” Montana Constitutional Convention, Verbatim Transcript,

March 3, 1972, p. 1379.

¶28 The State requires revenue to provide for the common good, and taxation is of

course necessary to raise this revenue. Without the power to tax, the government could

not protect the right to know, the right of individual privacy, or any of the fundamental

rights of the people. Therefore, I conclude that the State’s interest in enforcing its

authority to tax is sufficiently “weighty or compelling” that it may, in limited and

appropriate circumstances, circumscribe the right to know.

¶29 The record establishes that it is a critical component of the current corporate tax

structure of Montana that the United States Internal Revenue Service (I.R.S.) provide

information contained in United States corporate tax returns to the Montana Department

of Revenue. The system would simply not work without such information. 26 U.S.C. §

6103(p)(8) prohibits the I.R.S. from disclosing information about a federal tax return to

any State unless that State adopts a confidentiality provision such as § 15-31-511, MCA.

Thus, if this Court were to conclude that § 15-31-511 is of no effect, it follows that the

I.R.S. would stop providing information to DOR, and the current Montana system for

levying taxes on for-profit corporations would fail.

¶30 The record also establishes that Montana does not have the resources to establish a

tax system which could effectively compile and process the necessary information to levy

and collect taxes from the many for-profit corporations that do business in this State,

without tax information gathered and provided by the I.R.S.

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¶31 I conclude that in this limited circumstance, the confidentiality provisions of § 15-

31-511, MCA, which flow from Article VIII of the Montana Constitution, are sufficiently

weighty and compelling to circumscribe the public’s right to know provided in Article II,

Section 9.

¶32 It is for this reason that I vote to affirm the judgment of the District Court.

/S/ JOHN WARNER

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