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HomeMy WebLinkAbout04 - Sales Tax RecordsCITY OF NEWPORT BEACH CITY COUNCIL STAFF REPORT Agenda Item No. 4 June 23, 2009 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: Administrative Services Department Dennis C. Danner, Administrative Services Director (949) 644 -3123 or ddannerOcity.newport- beach.ca.us Glen Everroad, Revenue Manager (949) 644 -3144 or everroad city.newport- beach.ca.us SUBJECT: SALES TAX RECORDS RESOLUTION RECOMMENDATION: Staff recommends the City Council: (1) adopt Resolution No._ authorizing the City Attorney to enter into the contract attached as Exhibit A; and (2) adopt Resolution No._ authorizing Holland & Knight access to confidential taxpayer records. DISCUSSION: Revenue and Taxation Code establishes that taxpayer sales and use tax records are confidential. Section 7056 authorizes the State Board of Equalization to provide access to confidential tax records under specific conditions, provided the City Council has entered into a contract meeting the requirements of Revenue and Taxation Code Section 7056(b) and adopts a resolution authorizing a person designated by the resolution to access such records. The City Council previously authorized contracting with the law firm of Holland & Knight LLP at the January 27, 2009 Council Meeting to represent the City in a lawsuit against the State of California related to errors in the allocation of the local portion of sales and use taxes. To access confidential records, a separate contract as provided for in Section 7056(b) as well as a resolution authorizing Holland & Knight access to confidential records is necessary for Holland & Knight to represent the City in this litigation. Environmental Review: The resolutions and agreement are not a project for purposes of the California Environmental Quality Act. Sales Tax Records Resolution June 23, 2009 Page 2 Public Notice: The agenda item has been noticed according to the Brown Act (72 hours in advance of the meeting at which the City Council considers the item). Funding Availability: Not applicable. Prepared by: erroad Revenue Manager Submitted by: ennis C. Danner Administrative Services Director Attachment: Resolution No._ & Exhibit A — Contract with Holland & Knight Resolution No. RESOLUTION NO. RESOLUTION OF CITY COUNCIL OF THE CITY OF NEWPORT BEACH AUTHORIZING THE CITY TO ENTER INTO A CONTRACT WITH HOLLAND & KNIGHT, LLP FOR ADVICE AND REPRESENTATION PERTAINING TO BRADLEY -BURNS LOCAL SALES AND USE TAX LAW WHEREAS, the City has retained the law firm of Holland & Knight LLP ( "H &K ") to represent it in a dispute with the California State Board of Equalization ( "SBOE ") regarding the allocation and payment of certain sales tax revenues owing to the City pursuant to the Bradley -Bums Uniform Local Sales and Use Tax Law (Cal. Rev. & Tax Code §§ 7200, et seq.) (the "Act "); and WHEREAS, pursuant to that representation, litigation has been commenced by the City against the SBOE for violation of the Act and is presently pending in the Superior Court of California for the City and County of San Francisco as Case No. CPF- 09- 509234 ( "the Lawsuit "); and WHEREAS, section 7056(b) of the California Revenue and Taxation Code ( "RTC ") provides that access to certain tax records and documents for purposes of pursuing the City's claims in the Lawsuit may be had provided that the City's legislative body pass a resolution requesting and authorizing such access; and WHEREAS, RTC section 7056(b)(1) further provides that the City shall, in connection with such a resolution, certify that it has an existing contract, binding on the persons to whom access to the tax records is to be provided, that contains certain undertakings described in section 7056(b)(1)(A) through 7056(b)(1)(D); and WHEREAS, the City wishes to enter into a contract meeting the lawful requirements of RTC section 7056(b) so that it can then entertain and adopt a resolution meeting the requirements of RTC section 7056(b) to facilitate access to tax records and documents for the purposes of pursuing the Lawsuit and any related proceedings: NOW, THEREFORE, the City Council of the City of Newport Beach resolves as follows: Section 1: That the City Attorney for the City of Newport Beach is hereby authorized to enter into the Contract attached to this Resolution as Exhibit "A ". Section 2: This Resolution shall take effect immediately upon its adoption by the City Council and the City Clerk shall certify the vote adopting the resolution. Adopted this day of the month of , 2009. Ed Selich, Mayor ATTEST: Leilani Brown, City Clerk EXHIBIT "A" CONTRACT GOVERNING ACCESS TO CONFIDENTIAL Pursuant to Council authorization, the City of Newport Beach ( "City") has retained the law firm of Holland & Knight, LLP ( "H &K") to provide it with advice and representation in connection with the City's claims against the California State Board of Equalization ( "SBOE "), which are presently pending before the Superior Court of the State of California for the City and County of San Francisco in its Case No. CPF -09- 509234 (the "Lawsuit "). In order to provide effective advice and representation to the City in the Lawsuit, it is necessary for H &K, acting through certain of H &K's lawyers, staff and consultants, to have access to all confidential information and data gathered by the City's sales tax consultant, MuniServices, on the City's behalf, as well as all information in the possession, custody or control of the SBOE or others pertaining to the ascertainment of the sales and use taxes that are the subject of the Lawsuit. These data relate to the City's claims in the Lawsuit, which derive from retail sales transactions conducted by various retailers in the City. Section 7056(b) of the California Revenue and Taxation Code ( "RTC ") provides that access to such confidential data by any person other than an employee or officer of a city is conditioned upon there being an existing Resolution by the city designating the person to examine the records, data and other information and certifying that the individual meets the conditions specified in RTC Section 7056(b)(1), including the requirement of RTC Section 7056(b)(1)(A),that there be an existing contract with the city to examine the sales and use tax records that meets all requirements of RTC Section 7056(b)(1), subdivisions (A) through (D). The City and H &K wish to enter into a Contract complying with the legal requirements described in RTC section 7056. Therefore, H &K and the City do hereby further agree as follows:. 1. In connection with its representation of the City, the law firm of Holland & Knight LLP ( "H &K") (acting through certain of its partners, associates, employees and consultants whose identities shall be set out in a list maintained by the City Attorney) is hereby authorized to examine all confidential records and data of the State Board of Equalization, including but not limited to records and data available through Muni Services, pertaining to the ascertainment of the sales taxes and use taxes collected or to be collected by the State Board of Equalization that relate to the claims that are the subject of the Lawsuit. W 2. H &K and its- partners, associates, employees and consultants will disclose any information contained in, or derived from, those sales and use tax records only to: (i) officers, employees or other duly authorized representatives of the City; or (ii) parties in the Lawsuit and the Court in the Lawsuit, but only to the extent reasonably necessary in order to pursue the Lawsuit on behalf of the City and only to the extent authorized by the Court in the Lawsuit. 3. H &K will ensure that each of its partners, associates, employees and consultants who will have access to confidential sales and use tax records has done each of the following prior to, and as a condition of, access to such records: (a) Read this Contract; (b) Signed the list of H &K personnel who will be provided with access to confidential sales and use tax records and information pursuant to this contract; (c) Acknowledged through such signature on the City Attorney's list that he or she is bound by this Contract and by the legal requirements of RTC section 7056 with respect to the confidentiality of sales and use tax records; and (d) Agreed though such signature, to the extent that such agreement is not prohibited by Rule 1 -500 of the California Rules of Professional Conduct, not to provide California state sales and use tax consulting services to any retailer during the term of this Contract. 4. H &K will return or (at the City's request) ensure the destruction of all sales and use tax documents disclosed pursuant to this Contract, as well as all other documents containing information derived from those sales and use tax documents, prior to the termination of this Contract. 5. This Contract shall terminate ninety (90) days after H &K ceases to advise or represent the City in connection with the Lawsuit or any subsequent appellate or administrative proceedings concerning the City's claims that are the subject of the Lawsuit, unless the parties otherwise agree in writing. H &K and its personnel who have been provided with confidential sales and use tax records and information pursuant to this contract shall not retain in their files or in any other document the confidential state sales and use tax information to which they have received access after this contract has terminated. 6. This contract may be amended only in writing signed by the parties hereto. (SIGNATURES ON FOLLOWING PAGE] H In witness whereof, Holland & Knight LLP and the City have executed this Agreement as of this day of , 2009. APPROVED AS TO FORM: OFFICE OF THE CITY ATTORNEY By: Aaron C. Harp, Assistant City Attorney ATTEST: By: Leilani Brown, City Clerk CITY OF NEWPORT BEACH A Municipal Corporation David Hunt, City Attorney HOLLAND & KNIGHT, LLP 92 Print Name: Print Name: [END SIGNATURES] E RESOLUTION No. TAXATION CODE SECTION 7056(b) WHEREAS, the City has retained the law firm of Holland & Knight LLP to represent it in a dispute with the California State Board of Equalization ( "SBOE ") regarding the allocation and payment of certain sales tax revenues owing to the City pursuant to the Bradley -Bums Uniform Local Sales and Use Tax Law (Cal. Rev. & Tax Code §§ 7200, et seq.) (the "Act "); and WHEREAS, pursuant to that representation, litigation has been commenced by the City against the SBOE for violation of the Act and is presently pending in the Superior Court of California for the City and County of San Francisco as Case No. CPF -09- 509234 ( "the Lawsuit "); and WHEREAS, section 7056(b) of the Revenue and Taxation Code ( "RTC ") provides, in pertinent part, that: "When requested by resolution of the legislative body of any ... city.... the board [SBOE) shall permit any duly authorized ... person designated by that resolution, to examine all of the sales or transactions and use tax records of the board pertaining to the ascertainment of those sales or transactions and use taxes to be collected for the ... city ... '; and WHEREAS, in order for Holland & Knight LLP and its consultants (including Albin C. Koch, Esq.) to assist and represent the City in the Lawsuit, the City has agreed to authorize certain lawyers, staff and consultants working with Holland & Knight LLP to have access to, and examine and use all sales or transactions and use tax records whether held by the SBOE or the City pertaining to the ascertainment of the sales and use taxes at issue in the Lawsuit that are properly due the City; and WHEREAS, City wishes to provide access to all such tax records otherwise confidential under RTC Section 7056 to certain lawyers, staff and consultants at Holland & Knight LLP: NOW, THEREFORE, BE IT RESOLVED AS FOLLOWS: 1. Pursuant to RTC Section 7056(b), the City hereby provides, and requests the SBOE to provide, access to the lawyers, staff and consultants working with Holland & Knight LLP on the Lawsuit to examine and use all confidential records and data of the SBOE pertaining to the ascertainment of the sales and use taxes collected or to be collected by the SBOE that are the subject of the Lawsuit. 2. To identify each person to whom access to records is to be provided pursuant to RTC section 7056(b), the City Attorney shall maintain a list of all lawyers, staff members and consultants of Holland & Knight LLP who will be given such access pursuant to this Resolution; -t- 3. Pursuant to RTC section 7056(b)(1), the City hereby certifies that: (A) The City has an existing contract with Holland & Knight LLP to examine the aforementioned sales and use tax records to effectively advise and represent the City in the Lawsuit; (B) The City's contract with Holland & Knight LLP requires that Holland & Knight LLP shall disclose confidential taxpayer information contained in, or derived from, the aforementioned sales or transaction and use tax records only to: (i) officers, employees or other duly authorized representatives of the City; or (ii) parties in the Lawsuit and the Court in the Lawsuit, but only to the extent reasonably necessary to pursue the Lawsuit on behalf of the City and only to the extent authorized by the Court in the Lawsuit. (C) Under the City's contract with Holland & Knight LLP, all lawyers, staff members and consultants of Holland & Knight LLP working on the Lawsuit are prohibited from providing California state sales and use tax consulting services to any retailer during the term of the City's contract with Holland & Knight LLP, to the extent that such agreement is not prohibited by Rule 1 -500 of the California Rules of Professional Conduct. (D) Under the City's contract with Holland & Knight LLP, Holland & Knight LLP is prohibited from retaining the confidential taxpayer information contained in or derived from the aforementioned sales and use tax records after that contract has terminated. 4. The records and information to be provided to Holland & Knight LLP shall be used solely for the purpose of pursuing the City's claims against the SBOE that are the subject of the Lawsuit and for no other purpose, and shall be returned to the City after the contract has terminated. NOW, THEREFORE, the City Council of the City of Newport Beach resolves as follows: Section 1: This Resolution shall take effect immediately upon its adoption by the City Council and the City Clerk shall certify the vote adopting the resolution. Adopted this day of the month of , 2009. ATTEST: Leilani Brown, City Clerk Ed Selich, Mayor -2-