Are Tennessee Ethics Commission lobbyist audit files always confidential, and when can the Commission release them in administrative hearings?

Subject

Opinion No. 13-88, Confidentiality of Audit Information Obtained by the Ethics Commission, November 6, 2013

Plain-English summary

Drew Rawlins, Executive Director of the Bureau of Ethics and Campaign Finance, asked five questions about the confidentiality of audit information obtained by the Tennessee Ethics Commission. The AG worked through them.

Q1: Is all audit information confidential, or only tax-related portions? All of it. Tenn. Code Ann. § 3-6-308(c) requires the Commission to maintain "random audit information and investigatory audit information" as confidential, in the same manner that tax information is maintained under Tenn. Code Ann. Title 67, Chapter 1, Part 17. The "in the manner and to the extent" language refers to how confidentiality is maintained, not to a limitation that confidentiality applies only to tax matters.

Q2: Can the Commission disclose this information in administrative proceedings? Yes, in defined circumstances. The Title 67 tax-confidentiality framework allows disclosure in administrative proceedings if (a) the audited lobbyist is a party and (b) the information is directly related to the resolution of an issue. The Commission can also disclose to assure compliance with lobbying disclosure and registration laws.

Q3: Does voluntarily-distributed information remain confidential? No. Information voluntarily provided to the Commission during an administrative proceeding (not obtained pursuant to an audit) is not "random audit information" within the meaning of the statute. The audit has been completed by that point. The same answer applies whether the lobbyist or the employer voluntarily provides it (including for contract documents).

Q4: Does public-domain information remain confidential? No. Information already publicly available has no confidentiality interest. Both Wright Medical Technology v. Grison (trade secrets context) and Eldridge v. Putnam County (public records context) support this.

Q5: Can the audited person waive confidentiality during the hearing? Yes, but consent must be in writing per Tenn. Code Ann. § 67-1-1703(a). The Commission can also disclose if the audited person is a party and the information directly relates to the proceeding's resolution.

Currency note

This opinion was issued in 2013. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

The Tennessee Ethics Commission Act and tax-information confidentiality statutes have been amended since 2013. Anyone administering an audit confidentiality decision should consult current law.

Background and statutory framework

The Tennessee Ethics Commission Act. Tenn. Code Ann. §§ 3-6-101 to -309. § 3-6-103 establishes the Commission to sustain public confidence by regulating lobbying, financial disclosures, and ethical conduct. § 3-6-106(a)(11) gives the Commission duty to investigate alleged violations. § 3-6-308(a)(7) requires annual audit of "no more than four percent (4%) of all lobbyists."

Confidentiality requirement. Tenn. Code Ann. § 3-6-308(c): random audit information and investigatory audit information shall be confidential "in the manner and to the extent that the confidentiality of tax information is maintained . . . under the provisions of title 67, chapter 1, part 17."

Definitions. Tenn. Code Ann. § 3-6-301(14): "Investigatory audit information" includes data obtained after probable cause finding, including source/amount of income, expenditures, receipts, assets, liabilities, net worth, or related financial or proprietary information. § 3-6-301(23): "Random audit information" is information from examining contracts, job descriptions, or compensation reviews to verify no prohibited contingency-fee arrangement and that employment dates match registration statements.

Tax confidentiality framework (incorporated by reference). Tenn. Code Ann. § 67-1-1702(a): general prohibition on disclosing tax information. § 67-1-1703 to -1707: exceptions. § 67-1-1704(b)(1): tax information may be disclosed in administrative proceedings if (A) taxpayer is a party, (B) the item is directly related to issue resolution, or (C) the information relates to a transactional relationship between the party and the taxpayer that affects the resolution. § 67-1-1705(b): disclosure permitted for tax-law compliance purposes. § 67-1-1703(a): disclosure with written taxpayer request or consent.

Administrative proceeding framework. Tenn. Code Ann. § 4-5-313: requires Tennessee agencies in contested case hearings to "give effect . . . to agency statutes protecting the confidentiality of certain records."

Statutory interpretation. Jackson v. General Motors Corp., 60 S.W.3d 800, 804 (Tenn. 2001): plain meaning controls. State v. Hawkins, 406 S.W.3d 121, 131 (Tenn. 2013): don't unduly expand a statute's coverage.

Public-domain principles. Wright Medical Technology v. Grison, 135 S.W.3d 561, 589 (Tenn. Ct. App. 2001), trade-secret analogy: info readily available through public sources is not confidential. Eldridge v. Putnam County, 86 S.W.3d 572, 574 (Tenn. Ct. App. 2001): containing confidential info doesn't limit access to otherwise public information.

Common questions

Why does the Ethics Commission audit lobbyists in the first place?

To verify lobbyists have correctly reported registration information, contingency-fee status, employment dates, and compensation ranges. The Commission audits up to 4% of lobbyists annually as a sampling. The random-audit information is the working data of the Commission's audit function.

What is the difference between random audit and investigatory audit information?

Random audit information is collected during routine compliance reviews. Investigatory audit information is collected after a probable-cause finding that an employer or lobbyist violated the Act. Investigatory audit info typically goes deeper into financial details (assets, liabilities, net worth).

Can a lobbyist's lawyer access audit files in litigation?

Through the lobbyist's written consent under § 67-1-1703(a), yes. As a party to a Commission proceeding, the lobbyist's counsel would also generally have access through the proceeding itself if the information directly relates to issue resolution.

What happens if Commission staff disclose audit info without authorization?

Tenn. Code Ann. Title 67, Chapter 1, Part 17 sets criminal and civil penalties for tax-info disclosure. By incorporation, those penalties apply to Ethics Commission audit information. Commission staff face the same exposure as Department of Revenue tax staff.

How does this affect a journalist seeking audit records?

A journalist without a connection to a specific Commission proceeding generally cannot obtain audit information. The confidentiality applies broadly. The journalist can request public-domain information (anything not "random audit" or "investigatory audit" in the statutory sense). The Commission's published enforcement decisions, for example, are typically public.

Citations

Tenn. Code Ann. §§ 3-6-101 to -309, 3-6-103, 3-6-105(a)(5), 3-6-106(a)(11), 3-6-201, 3-6-301(14), 3-6-301(23), 3-6-304(k), 3-6-308(a)(7), 3-6-308(c), 4-5-313, 67-1-1702(a), 67-1-1703(a), 67-1-1703 to -1707, 67-1-1704(b)(1), 67-1-1705(b). Cases: Jackson v. General Motors Corp., 60 S.W.3d 800 (Tenn. 2001); State v. Hawkins, 406 S.W.3d 121 (Tenn. 2013); Wright Medical Technology v. Grison, 135 S.W.3d 561 (Tenn. Ct. App. 2001); Eldridge v. Putnam County, 86 S.W.3d 572 (Tenn. Ct. App. 2001).

Source

• Landing page: https://www.tn.gov/attorneygeneral/opinions.html
• Original PDF: https://www.tn.gov/content/dam/tn/attorneygeneral/documents/ops/2013/op13-088.pdf

Original opinion text

November 6, 2013

Opinion No. 13-88

Confidentiality of Audit Information Obtained by the Ethics Commission

QUESTIONS

1. Does Tenn. Code Ann. § 3-6-308(c) restrict the confidentiality of all random audit information and investigatory audit information or just the confidentiality of such information as it relates to tax matters?

2. If the answer to question one is that all random audit information and investigatory audit information is confidential, would the Ethics Commission be prohibited from disclosing any such information in an administrative proceeding?

3. Does Tenn. Code Ann. § 3-6-308(c) require information to remain confidential that was obtained during an audit but is subsequently voluntarily distributed to the Tennessee Ethics Commission members by an audited lobbyist that is a party to an administrative proceeding conducted by the Commission?

a. Would the answer be the same for all administrative proceedings before the Ethics Commission?

b. Would the answer be the same if an employer of a lobbyist that was the subject of an audit voluntarily provided copies of the contract between the employer and audited lobbyist?

4. Does Tenn. Code Ann. § 3-6-308(c) require information that is considered public and which can be obtained in the public domain be kept confidential?

5. May a person or entity that is the subject of random or investigatory audit waive the confidentiality provisions of Tenn. Code Ann. § 3-6-308(c) in an administrative contested case proceeding before the Ethics Commission by discussing such random or investigatory audit information during the course of the proceeding?

OPINIONS

1. Tenn. Code Ann. § 3-6-308(c) requires the members and employees of the Ethics Commission to maintain as confidential all random audit information and investigatory audit information.

2. The Ethics Commission is not prohibited by Tenn. Code Ann. § 3-6-308(c) from disclosing random audit information and investigatory audit information concerning an audited lobbyist in an administrative proceeding, provided that the audited lobbyist is a party to the proceeding and the disclosed information is directly related to the resolution of an issue in the proceeding. The Ethics Commission is also not prohibited by Tenn. Code Ann. § 3-6-308(c) from disclosing random audit information and investigatory audit information if disclosure is necessary to assure compliance with Tennessee lobbying disclosure and registration laws.

3. No. Such information does not fall within the definition of random audit information and therefore is not required to be kept confidential pursuant to Tenn. Code Ann. § 3-6-308(c).

a. Yes.
b. Yes.

4. No, because information readily available in the public domain has no expectation of confidentiality.

5. In an administrative contested case hearing conducted by the Ethics Commission, the Commission is required by Tenn. Code Ann. § 4-5-313 to "give effect . . . to agency statutes protecting the confidentiality of certain records." Nonetheless, the Ethics Commission is allowed by Tennessee law to disclose random or investigatory audit information in such a proceeding if the person or entity that is the subject of that information is a party to the proceeding and the information is directly related to the resolution of an issue in that proceeding. A person or entity that is the subject of a random or investigatory audit may also request or consent to the disclosure of random audit information or investigatory audit information in an administrative proceeding before the Ethics Commission; however, such request or consent would need to be in writing.

ANALYSIS

1. The questions posed concern the confidentiality of documents obtained during a random or investigatory audit conducted pursuant to the Tennessee Ethics Commission Act of 2006, codified at Tenn. Code Ann. §§ 3-6-101 to -309 (hereinafter "the Act"). The Act creates the Tennessee Ethics Commission in order "to sustain the public's confidence in government by increasing the integrity and transparency of state and local government through regulation of lobbying activities, financial disclosure requirements, and ethical conduct." Tenn. Code Ann. § 3-6-103. The Commission's duties include to investigate any properly alleged violations of the Act as provided in Tenn. Code Ann. § 3-6-201, see Tenn. Code Ann. § 3-6-106(a)(11), and to annually audit "the registration statements, amendments to registration statements and reports of no more than four percent (4%) of all lobbyists" pursuant to Tenn. Code Ann. § 3-6-308(a)(7). The Act requires that "random audit information and investigatory audit information" be maintained as confidential, specifically stating:

Notwithstanding the provisions of any law to the contrary, random audit information and investigatory audit information shall be confidential and shall be maintained as such by the members and employees of the ethics commission and by the officers and employees of the state, in the manner and to the extent that the confidentiality of tax information is maintained by the officers and employees of the department of revenue and the state under the provisions of title 67, chapter 1, part 17.

Tenn. Code Ann. § 3-6-308(c). Investigatory audit information is defined as

data obtained pursuant to a finding of probable cause to believe that an employer or lobbyist has violated this part, including information pertaining to the source or amount of employer or lobbyist income, expenditures, receipts, assets, liabilities, net worth, or related financial or proprietary information that is received by, recorded by, prepared by, or collected by or on behalf of the ethics commission during the course of any audit, investigation or other examination undertaken for the purpose of ensuring compliance with, or imposing civil or criminal sanctions for violation of, this part.

Tenn. Code Ann. § 3-6-301(14). Random audit information is defined as

information obtained pursuant to an examination of a lobbyist's employment contract, job description or other documentation in order to determine that no contingency fee arrangement prohibited under § 3-6-304(k) is included and that the date of employment as a lobbyist is consistent with the registration statement filed by both the lobbyist and employer. "Random audit information" also means information obtained pursuant to a review of the total lobbying and lobbying-related compensation and expenses paid to the lobbyist by an employer that will be checked against the range of expenditures reported by the employer in a random audit. As provided in § 3-6-105(a)(5), information contained in statements filed with the commission for more than two (2) years shall not serve as the basis for a random audit.

Tenn. Code Ann. § 3-6-301(23).

The initial question posed is whether these statutory provisions render all random and investigatory audit information confidential or just such information relating to tax matters. "The cardinal rule of statutory construction is to follow the plain meaning of the statute where the language is clear and unambiguous on its face." Jackson v. General Motors Corp., 60 S.W.3d 800, 804 (Tenn. 2001). The provisions of Tenn. Code Ann. § 3-6-308(c) require that random audit information and investigatory audit information be confidential and maintained "in the manner and to the extent that the confidentiality of tax information is maintained . . . under the provisions of title 67, chapter 1, part 17." This language is clear and unambiguous and requires the members and employees of the Ethics Commission to maintain as confidential all random and investigatory audit information, and not just such information related to tax matters.

2. The Ethics Commission is not prohibited from disclosing any random or investigatory audit information with respect to an audited lobbyist in an administrative proceeding, provided that the audited lobbyist is a party to the proceeding and the disclosed information is directly related to the resolution of an issue in the proceeding. The Ethics Commission is required to maintain random and investigatory audit information in the same manner that tax information is maintained by the Department of Revenue "under title 67, chapter 1, part 17." Tenn. Code Ann. § 3-6-308(c). The Title 67 provisions referenced by Tenn. Code Ann. § 3-6-308(c) include Tenn. Code Ann. § 67-1-1702(a), which contains a general prohibition on the disclosure of tax information and provides as follows:

Notwithstanding any law to the contrary, returns, tax information and tax administration information shall be confidential and, except as authorized by this part, no officer or employee of the department or of any office of a district attorney general or any state or local law enforcement agency, and no other person, or officer or employee of the state, who has or had access to such information shall disclose any such information obtained by such officer or employee in any manner in connection with such officer's or employee's service as an officer or employee, or obtained pursuant to this part, or obtained otherwise.

Title 67 nonetheless lists a number of exceptions to this general prohibition and provides for the disclosure of tax information in certain specified circumstances. See Tenn. Code Ann. §§ 67-1-1703 to -1707. Specifically, Tenn. Code Ann. § 67-1-1704(b)(1) provides that tax information may be disclosed in a federal or state judicial or administrative proceeding pertaining to tax administration, but only if:

(A) The taxpayer is a party to such proceeding;

(B) The treatment of an item reflected on such return is directly related to the resolution of an issue in the proceedings; or

(C) Such return or tax information directly relates to a transactional relationship between a person who is a party to the proceeding and the taxpayer that directly affects the resolution of an issue in the proceeding.

Furthermore, Tenn. Code Ann. § 67-1-1705(b) authorizes disclosure for purposes of administration and compliance with the tax laws and specifically authorizes disclosure of information relating to an audit, stating:

An officer or employee of the department may, in connection with the officer's or employee's official duties relating to an audit, collection activity, or civil or criminal tax investigation or the investigation of any offense or matter under the tax laws of this state, disclose tax information to the extent that such disclosure is necessary in obtaining information, that is not otherwise reasonably available, with respect to the correct determination of tax, liability for tax, or the amount to be collected. Such officer or employee may also disclose tax information when disclosure is required to assure compliance with the tax laws of this state through:

(1) The release of specific tax information; or

(2) Publishing of a bulletin or list identifying persons recognized by the department as qualified sellers, limited users, dealers, and distributors qualified to receive taxable substances, indicating the extent to which they are bonded, or listing similar categories of persons and kinds of data.

As previously noted, Tenn. Code Ann. § 3-6-308(c) requires the Ethics Commission to maintain random and investigatory audit information in the same manner that tax information is maintained by the Department of Revenue under title 67, chapter 1, part 17. The Title 67 Department of Revenue statutory provisions cited above specifically authorize the disclosure of confidential tax information in an administrative proceeding if the taxpayer is a party to the proceeding and the information is directly related to the resolution of an issue in the proceedings, and they further authorize disclosure in order to assure compliance with the tax laws. In light of these Title 67 provisions, which are incorporated by reference in Tenn. Code Ann. § 3-6-308(c), the Ethics Commission is not prohibited from disclosing random and investigatory audit information concerning an audited lobbyist in an administrative proceeding, provided that the audited lobbyist is a party to the proceeding and the disclosed information is directly related to the resolution of an issue in the proceeding. The Ethics Commission would also not be prohibited from disclosing random and investigatory audit information if it is necessary to assure compliance with the state lobbying disclosure and registration laws.

3. Nor is the Ethics Commission required to keep confidential information about an audited lobbyist that meets the definition of random audit information but that is voluntarily distributed by the audited lobbyist or the employer of the audited lobbyist to the Ethics Commission members during an administrative proceeding, assuming no agreement exists between the parties to the proceeding to maintain such information as confidential. Under the definition of random audit information at Tenn. Code Ann. § 3-6-301(23), information received pursuant to an examination or random audit required by Tenn. Code Ann. § 3-6-308(a)(7) is considered to be "random audit information" and, therefore, required to be kept confidential pursuant to Tenn. Code Ann. § 3-6-308(c) except for certain authorized disclosures. However, if the information is not received pursuant to an examination or random audit but instead is voluntarily provided by an audited lobbyist or the employer of an audited lobbyist during the course of an administrative proceeding before the Ethics Commission, the information would not be protected as confidential by the specific terms of Tenn. Code Ann. § 3-6-301(23). See, e.g. State v. Hawkins, 406 S.W.3d 121, 131 (Tenn. 2013) (recognizing the general rule of statutory construction that a court must "ascertain and give effect to the legislature's intent without unduly . . . expanding a statute's coverage beyond its intended scope"). Under these circumstances, the audit has been completed and, therefore, the information was not obtained pursuant to an audit or examination but was presented during the course of the administrative proceeding. Accordingly, such information does not fall within the definition of random audit information and is not required to be kept confidential pursuant to Tenn. Code Ann. § 3-6-308(c), absent an agreement by the parties that such information should be maintained as confidential. This conclusion would be the same for any administrative hearing conducted by the Commission.

4. The Ethics Commission is not required by Tenn. Code Ann. § 3-6-308(c) to keep confidential information that is readily accessible in the public domain. See Wright Medical Technology, Inc. v. Grison, 135 S.W.3d 561, 589 (Tenn. Ct. App. 2001) (observing, in determining whether certain information should be considered a trade secret, that "[i]nformation which has become readily available through public sources or is generally well known in the industry cannot be considered confidential"); Eldridge v. Putnam County, 86 S.W.3d 572, 574 (Tenn. Ct. App. 2001) (noting, in discussing provisions of Tennessee's Public Records Act, that "the fact that a file or document contains confidential information shall not be used to limit or deny access to otherwise public information").

5. Finally, in contested case administrative hearings conducted by an agency of Tennessee government the agency must "give effect . . . to agency statutes protecting the confidentiality of certain records." Tenn. Code Ann. § 4-5-313(1). However, as previously discussed, the Ethics Commission itself is authorized to disclose random or investigatory audit information in an administrative proceeding if the person or entity that is the subject of that information is a party to the proceeding and the information is directly related to the resolution of an issue in that proceeding.

Additionally, the confidentiality provisions in title 67, chapter 1, part 17 for tax information, which again are applicable to confidential random and investigatory audit information obtained by the Ethics Commission, provide for the disclosure of tax information at the request or with the consent of the taxpayer. Specifically, Tenn. Code Ann. § 67-1-1703(a) provides for the disclosure of tax information with respect to a taxpayer "to such person or persons as the taxpayer may designate in a written request for or consent to such disclosure," subject to limited exceptions. Accordingly, a person or entity that is the subject of a random or investigatory audit may either request or consent to the disclosure of random or investigatory audit information; however, such request or consent would need to be in writing.

ROBERT E. COOPER, JR.
Attorney General and Reporter

WILLIAM E. YOUNG
Solicitor General

JANET M. KLEINFELTER
Deputy Attorney General

Requested by:

The Honorable Drew Rawlins
Executive Director
Bureau of Ethics and Campaign Finance
Registry of Election Finance
404 James Robertson Parkway, Suite 104
Nashville, TN 37243-1360