New York State
Ethics Commission


Advisory Opinion No. 97-7: Application of the post-employment restrictions of §73(8)(a)(i) of the Public Officers Law to a former State employee appearing before a New York City agency in certain circumstances.

INTRODUCTION

The following advisory opinion is issued in response to an inquiry from [ ], a Tax Auditor with the New York State Department of Taxation and Finance ("Department"). He has asked whether, should he leave State service, the two year bar, found in Public Officers Law §73(8)(a)(i), would preclude him from representing taxpayers in certain situations.

Pursuant to the authority vested in the Commission by §94(15) of the Executive Law, the Commission hereby renders its opinion that §73(8)(a)(i) would: (1) prohibit [the requesting individual] from appearing or rendering services on behalf of taxpayers before the New York City Department of Finance ("Finance") when his services involve the audits of returns conducted by Finance pursuant to agreements with the Department; and (2) permit him to appear before the Division of Tax Appeals ("Division"), provided he does not request documents from or engage in settlement or other discussions with the Department.

BACKGROUND

[The requesting individual] is currently a Tax Auditor 1 assigned to the Sales Tax Bureau in the Department's [ ] District Office. Employees holding this title perform on-site audits of taxpayer books and records to verify accuracy and compliance with various New York State tax laws. In addition, they must be able to advocate cases at conferences held by the Department's Bureau of Conciliation and Mediation Services ("BCMS") and at Small Claims Hearings, and participate as a witness for the Department in proceedings to resolve cases where there is disagreement with a taxpayer.

[The requesting individual] has indicated to the Commission that he anticipates leaving State service in [date] to work as a Certified Public Accountant representing individual clients and companies in tax audits. He does not expect to prepare or file tax returns on behalf of his clients. He has asked the Commission for an interpretation of the post-employment two year bar restrictions as they pertain to the following circumstances:

(1) Could he appear before Finance at the audit level, including sales tax audits? If yes, would there be any restrictions?

(2) Could he represent taxpayers before the Division of Tax Appeals, and, if so, with what restrictions?

Finance is an agency within the City of New York. Its functions are to administer and collect all taxes, assessments and charges imposed by the City, collect arrears due to the City, including State and federal aid, and receive all moneys paid into and out of the City treasury.(1)

Through a series of memoranda of understanding with the Department, Finance is authorized to conduct examinations on behalf of the State for taxes that are administered by the State.(2) These include the New York State sales and use taxes, imposed under Articles 28 and 29 of the Tax Law; the personal income tax, imposed under Article 22 of the Tax Law; and the New York City non-resident earnings tax, imposed under Article 30 of the Tax Law, Article 2-E of the General City Law and Titles T and U of Chapter 46 of the Administrative Code. Such examinations are to be conducted in accordance with the direction, methods, rules, practices, procedures and regulations of the Department. Pursuant to the memoranda of understanding, the work of the audit group at Finance is subject to administration and review by the Commissioner of the Department. The Department periodically trains the Finance employees who conduct the examinations. By terms of the agreements, the Finance audit personnel are "employees of the City of New York, subject, however to . . . the Public Officers Law Code of Ethics (§74 of the Public Officers Law)."

Under the agreements, the Department provides Finance with a computerized listing of audit candidates. Finance selects candidates from this list, and, with the approval of the Department, including assignment of a case number, it proceeds to conduct the audits.(3) Each audit is conducted by a Finance employee using the Department's information, auditing standards and procedures, thereby ensuring continuity and proper internal controls. Audit findings are reported to the Department for review and ratification, and, as required, collection.

During the audit process, the auditor may meet with the taxpayer and/or his or her representative. Informal conferences may also occur at the end of an audit to allow the taxpayer to discuss or challenge the auditor's determination. If the parties cannot reach a resolution at the informal conference, the taxpayer may appeal the audit determination to the BCMS, which is within the Department.(4) At that stage, a conciliation conferee, who is an employee of the Department, conducts an informal proceeding, taking testimony and receiving evidence from the parties. The taxpayer may be represented by a relative, attorney, certified public accountant or other qualified agent.(5) When an audit is conducted by Finance, the Department is represented by one of its auditors, but the Finance auditor and/or his or her supervisor attends the hearing. A conciliation order is issued by the conferee, who may waive or modify any penalties.

A taxpayer may appeal a BCMS order to the Division.(6) This is an independent entity within the Department, created to provide for independent reviews and resolutions of controversies resulting from determinations issued by the Department.(7) The Division, which includes a tax appeals tribunal, consists of three commissioners who are appointed by the Governor with the advice and consent of the Senate and who serve for terms of nine years. The tax appeals tribunal has the power to appoint and remove its employees and to prepare and submit a budget to the Commissioner of the Department which cannot be revised in any manner by the Commissioner.(8)

A hearing in the Division is conducted by an administrative law judge, who is authorized to take testimony, require, by subpoena, the attendance of witnesses and the production of books and records, and render determinations.(9) As when before the BCMS, a taxpayer may be represented by a relative, attorney, certified public accountant or other qualified agent. The Department is represented by the agency's Chief Counsel or his or her representative.

APPLICABLE STATUTE

Public Officers Law §73(8)(a)(i) provides:

(i) No person who has served as a state officer or employee shall within a period of two years after the termination of such service or employment appear or practice before such state agency or receive compensation for any services rendered by such former officer or employee on behalf of any person, firm, corporation or association in relation to any case, proceeding or application or other matter before such agency.

Part of what is generally referred to as the "revolving door" provision, §73(8)(a)(i) sets the ground rules for what individuals may do with the knowledge, experience and contacts gained from public service after they terminate their employment with the State. In short, it bars former State officers and employees for two years after termination of their State service from appearing or practicing before their former agency or receiving compensation for services rendered in relation to any case, proceeding, application or other matter before such agency.

DISCUSSION

1. [The requesting individual's] appearing or rendering services before the New York City Department of Finance.

In the usual circumstances, there would be no bar to a former Department employee appearing or rendering services before an agency of the City of New York such as Finance. However, in the situation presented by [the requesting individual], the Department has delegated its auditing authority with respect to the sales and use taxes, the personal income tax and the New York City non-resident earnings tax to Finance. For purposes of auditing -- the examination of returns and books and records bearing upon them -- Finance acts as the agent of the Department.

While the Department has delegated its audit authority, it closely monitors the audit process, establishes the criteria and standards for conducting audits, provides tax information and other resources to Finance, and requires prior approval of all candidates selected for audit. The Commission has been advised by the Department that upon completion of an audit by Finance, the results must be confirmed by the Department. Any written notice of a determination of tax due, a tax deficiency, or a denial of a refund or a credit application is issued by the Department. If a matter is pursued beyond the audit stage, it is appealed to the BCMS, which the Commission has held is part of the Department (Advisory Opinion No. 91-6).(10)

Given this arrangement, the Commission concludes that an audit conducted by Finance pursuant to its agreements with the Department constitutes a matter before the Department. It follows that [the requesting individual] could not appear or render services with respect to such an audit because he would be so acting with respect to a matter before his former agency.

Furthermore, should [the requesting individual] submit any documents to Finance related to an audit where Finance is acting pursuant to its agreements with the State, he would have reason to know that the documents are likely to be reviewed by his former agency. The Commission has previously held that the submission of documents in such a situation is prohibited by §73(8) (Advisory Opinion Nos. 89-9 and 97-5). While the previous opinions have concerned documents initially submitted to a State agency and then forwarded to an individual's former agency, there is no reason not to apply the same standards when documents are initially submitted to a City agency acting as the agent of an individual's former State agency.

The Commission recognizes that in Advisory Opinion No. 96-8, it held that the two year bar did not preclude a former Department of Social Services ("DSS") employee from submitting claims for processing to an entity under contract with DSS. However, there, DSS randomly reviewed fewer than one percent of all claims filed with the contractor. In contrast, the Department maintains close oversight and control of Finance's auditing activities, and approves the results in each case.

Finally, the Commission notes that Finance also administers a number of taxes which are exclusive to the City of New York (e.g., commercial rent tax, vault tax, unincorporated business tax). Notices of taxes due, tax deficiencies, etc. regarding City taxes are issued by the New York City Commissioner of Finance. Taxpayers may appeal such determinations to the New York City Tax Appeals Tribunal, an agency of the City which is independent of Finance.(11) [The requesting individual] would not be precluded from appearing before Finance on audits with regard to these taxes, as there would be no matter before the Department with respect to such audits.

2. [The requesting individual's] appearing and rendering services on matters before the Division of Tax Appeals.

[The requesting individual] has also asked whether he could represent taxpayers before the Division in cases emanating from tax audits conducted by Finance. The Commission has previously held that the Division is a State agency separate from the Department (Advisory Opinion Nos. 90-18 and 91-13). The Commission has also held that a former Tax Department employee may, within his two year bar, appear in a proceeding pending before the Division in which the Department is a party, but may not request documents from or engage in settlement or other discussions with his former agency. A former employee may, however, when so appearing, subpoena documents from the Department (Advisory Opinion Nos. 90-18 and 95-28). In accord with these opinions, [the requesting individual] could appear before the Division subject to the restrictions set forth therein.(12)

CONCLUSION

The Commission concludes that Public Officers Law §73(8)(a)(i) would prohibit [the requesting individual] from appearing or rendering services on behalf of a taxpayer before the New York City Department of Finance when Finance acts as auditor pursuant to agreements with the Department, as he would be appearing in relation to matters before the Department, his former agency; he would not be prohibited, however, from representing taxpayers on matters related to taxes which are exclusive to New York City. He would be permitted to appear before the Division and subpoena documents from the Department, but he could not request documents or engage in settlement or other discussions with the Department.

This opinion, until and unless amended or revoked, is binding on the Commission in any subsequent proceeding concerning the person who requested it and who acted in good faith, unless material facts were omitted or misstated by the person in the request for opinion or related supporting documentation.

All concur:

Evans V. Brewster
Angelo A. Costanza
Robert E. Eggenschiller
Donald A. Odell, Members

Dated: March 17, 1997


Endnotes

1. New York City Charter Chapter 58, §1504.

2. Under §697(b) of Article 22 of the Tax Law, the Department has power to delegate to any agent the function of examination of returns and any books and records bearing on the matters required to be included in those returns for the purpose of ascertaining their correctness or making an estimate of taxable income.

3. Finance may independently identify candidates for sales and personal income tax audits which are not included on the Department listing. Finance must receive prior approval from the Department before it can proceed with such audits.

4. Tax Law §170(3-a).

5. Tax Law §170(3-a)(d).

6. The taxpayer may, in accordance with Department rules and regulations, bypass the BCMS process and appeal the audit determination directly to the Division.

7. Tax Law, §2000.

8. Tax Law, §2006.

9. Tax Law §§2006 and 2010.

10. [The requesting individual], in his letter of request, recognizes that the two year bar would preclude his appearing before the BCMS.

11. New York City Charter Chapter 7, §168.

12. Although this opinion concerns the application of the two year bar, it should be noted that the "lifetime bar," contained in Public Officers Law §73(8)(a)(ii), prohibits activity in relation to any case, proceeding, application or transaction in which a former employee was directly concerned and personally participated or which was under his or her active consideration. Accordingly, [the requesting individual] could not appear before the Division or receive compensation in relation to those cases, reviews, applications, etc., in which he had been involved while at the Department.



URL: http://www.nysl.nysed.gov/edocs/ethics/97-07.htm