Wales v. Tax Commission
| Decision Date | 23 March 1966 |
| Docket Number | No. 8734,8734 |
| Citation | 412 P.2d 472,100 Ariz. 181 |
| Parties | Harold W. WALES, Willard E. Conn, C.P.A., and Harold L. Cook, Petitioners, v. TAX COMMISSION of the State of Arizona and Waldo DeWitt, John M. Hazelett and W. E. Stanford, as members thereof, Darrell F. Smith, the Attorney General of the State of Arizona, and Norman Green, County Attorney for Pima County, Arizona, Respondents. |
| Court | Arizona Supreme Court |
Lewis, Roca, Scoville, Beauchamp & Linton, Phoenix, for petitioners.
Darrell F. Smith, Atty. Gen., Paul G. Rosenblatt, Asst. Atty. Gen., Norman E. Green, County Atty., for Pima County, for respondents.
This is an original petition seeking to invoke the jurisdiction of this Court pursuant to Article 6, § 5, Constitution of Arizona, A.R.S. It is asserted that the State Tax Commission and Darrell Smith, the Attorney General, are proposing to disclose to Norman Green, County Attorney of Pima County, certain income tax returns or reports contrary to the statutes providing for the secrecy thereof. Respondents answered, setting forth that the disclosures were in compliance with the statute, A.R.S. § 43--145, in that 'they were for the purpose of instituting, or possibly instituting action for the enforcement' of Arizona tax acts. We ordered a stay of the disclosure until this Court could examine into the merits of the controversy.
Respondents moved to vacate the stay, setting forth these additional facts: That there was sitting in Pima County, Arizona, a grand jury; that the judge in charge thereof, the Honorable William C. Frey, inspected, In camera, certain testimony given before the grand jury from which it appeared that there was 'testimony before the Grand Jury dealing with payments of money by various individuals to certain state officials and/or employees' and 'that there is a high likelihood that income so received by said manner of payments was not reported upon the tax returns Of the certain named individuals that the Pima County Grand Jury is presently investigating, * * *.' (Emphasis added.)
The Honorable William C. Frey ordered Norman Green, as Pima County Attorney, to submit to the Attorney General for his inspection the testimony before the grand jury so that he, the Attorney General, might, pursuant to the statutes, direct the Arizona State Tax Commission to permit an inspection of the income tax reports and returns of the named individuals. The Attorney General, after examining the testimony, concluded that the individuals 'may be guilty' of having violated the income tax laws of the State of Arizona and, therefore, that the respondent Norman Green, County Attorney, is 'automatically by statute, § 43--145 A.R.S., entitled to an inspection of the reports and income tax returns * * *.'
We ordered the decision on respondent's motion to vacate continued until disposition of the action by written opinion.
In State ex rel. Ronan v. Superior Court In and For County of Maricopa, 95 Ariz. 319, 390 P.2d 109, we detailed the circumstances which justify a disclosure of the testimony given before a grand jury. One of the grounds recognized by Rule 107, Rules of Criminal Procedure, 17 A.R.S., is 'when permitted by the court in the furtherance of justice.' In Ronan, we held that where there is need for access to grand jury testimony, a judge of the superior court should examine the transcript of testimony, In camera, to determine whether the disclosure would be within the purview of Rule 107. Manifestly, the prosecution of tax offenders is for the purpose of furthering justice. The limited disclosure to the Attorney General, the chief law enforcement agent of the State, is within the public interest, outweighing testimonial secrecy required of the proceedings before the grand jury.
As stated, the response suggests that the Pima County Grand Jury is presently investigating certain named individuals. The function of a grand jury is to investigate criminal offenses, not the conduct of individuals. Rule 92, Rules of Criminal Procedure, 17 A.R.S. It is not permitted to speculate that some person might have committed an offense and, therefore, to investigate individuals to determine what, if any, offenses may possibly have been committed by them.
Petition of McNair, 324 Pa. 48, 187 A. 498, 504, 106 A.L.R. 1373. (Emphasis supplied.)
Such investigations are plainly tyrannical, lending themselves to abuses for politically or maliciously inspired purposes. They are beyond the scope of the inquisitorial powers of a grand jury and are not to be allowed.
By statute, A.R.S. § 43--145, it is a misdemeanor for the Tax Commission or an employee thereof to disclose information contained in any report or return required by the Income Tax Act except (1) in accordance with a judicial order in cases instituted for the enforcement of the act, A.R.S. § 43--145(b)(1); or (2) under the circumstances set forth in § 43--145(b)(2):
'* * * The attorney general or any county attorney authorized in writing by the attorney general shall have the right to inspect the reports or returns of any taxpayer filing a report or return under this title, when required for the purpose of instituting action for the enforcement of this title or any other law relating to taxes or for the prosecution of violations of this title or any other law relating to taxes.' A.R.S. § 43--145(b)(2).
A comparison of the foregoing Arizona statutes with §§ 19282 and 19283 of the Revenue and Taxation Code of California reveals a close similarity in language so similar as to compel the conclusion that the Arizona statutes were derived from California. In California, the statutory prohibition of nondisclosure has been construed to 'render the returns privileged' 'to facilitate tax enforcement by encouraging a taxpayer to make full and truthful declarations in his return, without fear that his statements will be revealed or used against him for other purposes.' Webb v. Standard Oil Company of California, 49 Cal.2d 509, 319 P.2d 621, 624.
In Aday v. Superior Court of Alameda County, 55 Cal.2d 789, 13 Cal.Rptr. 415, 362 P.2d 47, the Supreme Court of California further held:
'The sole exception permitting disclosure for purposes of a criminal prosecution appears in sections 19283 and 26453, which are limited to...
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