transparency – Memphis Flyer

Tennessee Republicans maimed (and likely killed) bills this session that would have allowed state taxpayers to know which corporations pay no state corporate income taxes.

The bills were carried by Nashville Democrats Sen. Heidi Campbell and Rep. John Ray Clemmons. Each bill got brief hearings this month. Both passed committee votes and both got negative recommendations from a majority of lawmakers on those committees.

Campbell and Clemmons said the Tennessee Department of Revenue (TDOR) told them more than 60 percent of corporations here pay no state income tax, and “that is jarring to hear,” Campbell said. About 27 percent of Tennessee companies that report more than $1 billion in taxable income to the federal government paid zero Tennessee income taxes, she said.

“We don’t know which companies are paying nothing because the state law shields that information from public view.”
Sen. Heidi Campbell

“We don’t know which companies are paying nothing because the state law shields that information from public view,” Campbell said. “This bill will require publicly traded companies to report what they pay or don’t pay to the public. So, we can better understand how our current tax code is working.”

Clemmons said that, according to a report from the D.C.-based Institute on Taxation and Economic Policy, three Tennessee companies paid no federal taxes in 2020: FedEx Corporation, Franklin-based hospital operator Community Health Systems, and Chattanooga-based insurance company Unum Group. However, current state law does not allow the public to know if these companies paid any Tennessee taxes.

Clemmons said Tennessee has the second-highest sales tax in the country and is one of only a few states that taxes groceries. Sales and use taxes were the biggest chunk of the state’s 2022 budget, comprising more than 61 percent ($12.8 billion) of the budget, according to the TDOR. Clemmons called these “regressive taxes paid by working families.” Franchise and excise taxes (corporate income taxes) were second, making up more than 21 percent ($4.5 billion) of the budget.

“There are no loopholes for families buying groceries,” Clemmons said. “There are no loopholes for parents buying back-to-school clothes. There are no loopholes for property owners paying higher rates to make up for corporations [that are] not paying a dime.

“This bill does not raise taxes on anyone. It simply provides some transparency so the hardworking people of Tennessee, who pay their taxes, will know which big corporations are paying what they owe and which are not.”

Rep. Sabi Kumar (R-Springfield) said, “The implication that those who don’t pay taxes are not paying their fair share is a rather subjective matter.” He said a corporation’s responsibility is to “pay as little tax as they can following the law.” With this, Kumar said, “The problem is with the law, not with the fact that just because somebody does not pay taxes are doing something wrong.”

A corporation’s responsibility is to “pay as little tax as they can following the law.”
Rep. Sabi Kumar

“So, I would like to say that as a pro-business state, we need to realize it is okay to pay the legal share [of taxes], not the fair share as defined by somebody and that interpretation differs with everybody.”

The information sought by the bills is disclosed on the federal level, required by the U.S. Securities and Exchange Commission (SEC), according to a 2022 report from the D.C.-based Economic Policy Institute. But the SEC does not require the data on state taxes.

“The failure to require corporations to disclose their taxes allows them to unfairly avoid public scrutiny when they avoid paying billions in taxes,” reads the report. “Without information on how much corporations actually pay at the state and local levels, there is no way to determine whether or not they are paying their fair share.”

Reclaiming corporate tax revenues: Corporate income tax revenues are critical to the ability of state and local governments to provide basic services to their residents

State and local governments are missing out on a range of $43 billion-$57 billion in taxes from these companies, the report said.

A state lawmaker wanted to find out what the state paid for services to some insurance companies, but those companies filed lawsuits Friday to stop him, according to the Tennessee Coalition for Open Government (TCOG).

Rep. Martin Daniel (R-Knoxville) requested the information to better understand pricing of the state’s health-care plan for its employees. State officials were preparing to release the records after implementing exceptions to the Tennessee Public Records Act. The information would have been stripped of all patient identification information.

However, insurers BlueCross BlueShield of Tennessee and Cigna filed suit against the move in federal court Friday saying it would violate federal antitrust laws. Optum, an employee assistance program, filed suit in a state court claiming a violation of the state trade secret laws.

“The suits are known in public records circles as ‘reverse public records’ lawsuits because they are suits by third parties against a governmental entity to preemptively prevent the release of government information to public records requesters,” wrote TCOG director Deborah Fisher in a blog post Monday. “In some cases, the third party also files suit against the requester. [Optum did sue Daniel in its suit.] They can be particularly pernicious because oftentimes there is no one representing the public’s interest in protecting access to public records and open government in these actions.”
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The companies were given temporary restraining orders by judges on the same day the suits were filed. Officials with the state Attorney General’s office did not oppose the requests, according to TCOG.

Daniel, a member of the House Joint Fiscal Review Committee, requested the information after the state finance department sought to extend BlueCross and Cigna contracts for another year without going through a bidding process, according to a story in the Nashville Post.
State of Tennessee

Rep. Martin Daniel

The information Daniel sought would show the negotiated prices BlueCross, Cigna, and Optum would get for some services. Daniel told TCOG he was concerned “about potentially unreasonably high payments that could be costing taxpayers in the millions of dollars. He said he had initial information showing a wide variation of costs for the same procedure but needed more detail to analyze.”

In their suits, BCBST and Cigna said the information is a trade secret. Further, the companies said Daniel has an ulterior motive.

“Upon information and belief, Daniel has advanced these requests under the Open Record Laws at the behest of individuals and/or businesses who are attempting to interfere with and impede BCBST’s legitimately held position as a contractor,” reads the BCBST suit. A similar claim is made in the Cigna suit.

The company also believes Daniel is trying to promote anticompetitive coordination by the company competitors, facilitating that coordination, and “destroy efficiencies in the markets for health-care products and services.” Both companies said making the information public is not allowed under their contracts with the state.

These moves come after President Donald Trump revealed an executive order last month to “increase [health-care] price transparency to empower patients and increase competition among all hospitals, group health plans and health insurance issuers in the individual and group markets.” U.S. Health and Human Services Secretary Alex Azar said last month the health-care system “probably deserves an F on transparency.”

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“Today’s transparency announcement may be a more significant change to American health-care markets than any other single thing we’ve done, by shining light on the costs of our shadowy system and finally putting the American patient in control,” Azar said in a statement at the time.