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Bredesen: Politics Behind Report on Farr, Tax Variances

Former Gov. Phil Bredesen said Tuesday he believes the people who disagreed with former Revenue Commissioner Reagan Farr “got their final shot in” against Farr with a recent comptroller’s report that criticized the department on tax variances.

Bredesen said he has not read the report from Comptroller Justin Wilson but has talked briefly about it with Farr and that he has never had any questions about Farr’s integrity.

Bredesen made the comments after an appearance at the University of the South in Sewanee with former Vermont Gov. Jim Douglas, in which Bredesen said his style in dealing with the Legislature sometimes was to “go right around them.” He noted that former Gov. Don Sundquist did not use the “bully pulpit” of the office for the power of persuasion with the people when Sundquist proposed an income tax.

And Bredesen, a former mayor of Nashville, got his own shot in about term limits at the Metro Council in the capital city, calling the limits of two four-year terms a “disaster.”

Bredesen said his contact with Farr about the comptroller’s report lasted only about 30 seconds.

“He told me about it. I said, ‘That’s fine. You know the crew over there that was trying to do you in got their final shot in. There’s now a report. Fine,'” Bredesen said.

Bredesen said he never had any particular problems with what Farr did.

“He had a department which was very politically divided internally about the way it should operate,” Bredesen said. “This department has always had a group of people who thought, ‘Our job is tax collection, period. What we need to do is audit returns and collect taxes, and that’s the end of it.’

“But you’ve also got people that say, ‘No, no, no, tax policy and the way you do things is part of the process of the department. It’s part of economic development.’ Reagan was in that mode. I think the people that disagreed with him kind of got the final shot in there. I’ve never had any questions about his integrity or decision-making process.”

The report, dated Oct. 17 and addressed to leaders in the Legislature, noted a frequency in recent years where tax variance award letters involved references to economic development. Farr served as Revenue commissioner from 2007-2010. The report also said key department employees were sometimes left out of the decision-making process.

Gov. Bill Haslam said this week he has read the report and wants to concentrate on setting clearly defined procedures in the department.

Bredesen, a Democrat, and Douglas, a Republican, participated in a discussion formally called “American Politics: The View from the Center.” Both are seen as moderates in a time of polarized partisan politics. But that did not prevent Bredesen from being vocal in his views on matters of how to govern.

Bredesen said the direct power of the governor to do something is “demonstrably less” than the CEO of “a good-sized company,” saying the governor is limited in terms of what the Legislature will do and who can be hired and fired.

“What is unparalleled is you have the bully pulpit,” he said. “If you decide as governor to talk about K-12 education for six months of the year, that’s what will get talked about in the state. The chambers of commerce will talk about it. The newspapers will write about it. TV will do stories. You can make that happen. So I’ve always seen the power of the governor as the power to persuade.

“And the way to get things done in the Legislature is to go right around them.”

He noted his former legislative liaison, Anna Windrow, was in the audience and “probably crying” at the comment. His reference to going around the Legislature was to make his point about taking an issue directly to the people.

Bredesen told the audience he went into the governor’s office after Sundquist had attempted to get an income tax approved. Sundquist, a Republican, failed and was largely ostracized by his own party.

“You sort of watch it and say, you know, instead of making a case to the people of the state as to why something needed to change in the tax structure, he didn’t do any of that. He just tried to do it by twisting arms in the Legislature,” Bredesen said.

“What happens is you get your arm twisted, and then you go back home and find out people have got pitchforks about the subject you’re talking about.”

Bredesen won in 2002 on a platform that did not include a proposal for an income tax. He said the state didn’t need one, to the chagrin of some in his party. Bredesen won a second term handily and never proposed an income tax in his eight years in the office.

Bredesen said he had no problems with term limits in the executive branch of government because of the power of incumbency, but he said the term limits enacted by referendum for Nashville’s Metro Council have been disastrous.

“I just think it’s been awful for the city,” he said after the event, pointing to a couple of veteran lawmakers with institutional knowledge as examples of those whose experience can benefit the council.

“I’m not quite sure what problem you’re solving with term limits, and what I think it did is first of all you dramatically enhance the power of the mayor. There’s nobody left on the council with the kind of, you know, the history. There’s no Charlie Fentress on the council. There’s no Willis McAllister on the council.

“You get a bunch of people who are in there and really feel they have to move and shake and make things happen in their early sort of terms. I don’t think it’s worked well for the city.”

Bredesen and Douglas met with students at the university earlier in the day, and Bredesen said the young people asked about how the governors made difficult decisions.

“They wanted to know, ‘How is it done? Tell me about some challenge you had’ — in my case TennCare or something — really a nice set of questions for somebody who is a senior ready to go out in life, not saying, ‘Let me debate,'” Bredesen said.

He said it was different from encounters with people who want to express a view about a specific issue.

“These were young people who weren’t so much concerned about that as they were just, ‘OK, I want to be effective in the years ahead. I’ve got a couple of former governors in front of me. How did you do this?'”

They also wanted to talk about jobs, he said.

“If you’re a senior in college in this economy today, you’re scared,” Bredesen said. “You’re scared about what the workplace holds right now. This is the time in which they want to get out, they want to get a job, they want to build a life, and it’s a pretty scary world out there right now.”

In Wake of Comptroller’s Report on Farr, Haslam says Consistency Needed in Tax-Variance Decisions

Gov. Bill Haslam said Monday the best reaction to a comptroller’s report widely seen as critical of former Department of Revenue Commissioner Reagan Farr is to establish clearly defined procedures for tax variances granted by the commissioner.

“I just got a copy and read it over the weekend,” Haslam said of the report (pdf).

“For us, I think the important thing is to say: What are we going to do going forward? I think the clear message to us was: We want to have well-documented, clearly organized procedures for how you handle any variances.”

Haslam said he and current Revenue Commissioner Richard Roberts have talked about the issue and that Roberts agrees with him on the proper approach.

Haslam said he does not know if he will advocate any legislation to address procedures for tax variances, however. He said all of his department chiefs are reporting to him with any proposals for legislation they may have for next year and that he will address the Department of Revenue later this week.

A key element of the issue, however, has been the private nature of Revenue decisions, which affect individual taxpayers.

Comptroller Justin Wilson’s report, dated Oct. 17, is accompanied by a letter to Lt. Gov. Ron Ramsey, Speaker of the House Beth Harwell, Sen. Randy McNally of Oak Ridge and Rep. Charles Sargent of Franklin, saying the report is in response to their request. All four of the legislators are Republicans. McNally and Sargent are chairmen of their chambers’ respective finance committees.

Wilson is a Republican. Farr served in the administration of former Gov. Phil Bredesen, a Democrat.

The comptroller’s report looked at tax variances from 2000-2011 and involved a review of 59 variances — 40 requested by the taxpayer, 19 by the commissioner. The report said approvals of taxpayer-requested variances increased during the tenure of Loren Chumley, who served in 2002-2007, and Farr, who served in 2007-2010. It noted a frequency in recent years where variance award letters involved references to economic development.

“Specifically, taxpayers would use job creation and economic impact as part of their argument for why they should be awarded a variance,” the report said, adding that requests used tax treatment as a “negotiation tool.”

The report said key department employees were sometimes excluded from the decision-making process. The report recommends that the Legislature consider legislation requiring additional approvals to variances, that the department should proceed with a new tracking system for variances and that the department develop a process for reviewing awarded variances.

Haslam acknowledged Monday the difficulty of dealing with privacy issues of agreements with taxpayers balanced with transparency in government.

“That is one of the difficulties, because obviously it deals with private taxpayers’ information,” Haslam said. “But I think the important thing for us to do is make certain, again, that there is a process that is clear and predictable and we’re letting people know everything we can — absent private taxpayers’ information.

“We really are trying to do that.”

Haslam Promises Openness On Amazon

Gov. Bill Haslam insisted Friday he has not changed his position on negotiations with Amazon.com on the collection of sales taxes and said whatever agreement might be struck with the retail giant the people of Tennessee would be informed about it.

Meanwhile, former Commissioner of Revenue Charles Trost, on whose watch the original Amazon deal was made in Tennessee, declined to comment Friday on details of the state’s current arrangement with the company. Current commissioner Richard Roberts, whom Haslam said is leading the talks for his administration, declined to comment on any talks as well.

Haslam says he wants Amazon to collect sales taxes on its transactions in Tennessee in the future, and his administration is involved in talks with Amazon on how to settle the issue of whether the company should have to collect the tax.

But Haslam’s predecessor, Phil Bredesen, struck a deal last year before leaving office where Amazon would not have to collect sales taxes as the company established large distribution centers in Hamilton and Bradley counties, bringing more than 1,000 jobs to the state. Amazon has since announced the addition of a distribution center in Lebanon

Haslam has said he planned to honor the Bredesen agreement, which was handled with little transparency and has stirred interest among some legislators concerned about the erosion of the state’s sales tax base. Legislators from the Chattanooga area, home of the first two distribution centers, have generally supported the Bredesen deal because of the jobs it creates.

Negotiations between the Haslam administration and Amazon have raised questions on exactly what the arrangement might become and whether it represents a shift in the state’s policy.

“Nothing has changed from the state’s commitment at all,” Haslam said Friday. “We are in ongoing discussions with Amazon. Everybody knows that. We’d love to see them grow more. Number two, there is quite a bit of discussion in the Legislature about exactly how that should work out.

“I wouldn’t be being honest if I didn’t say I’d love for them (Amazon) to collect sales tax.”

The governor has said all along he would like to get the definition of the state’s long-term relationship with Amazon nailed down. He has also said there needs to be a national solution to the issue of online retailers collecting sales taxes, and Amazon officials have said they believe a national approach is best.

But given the continuation of talks with Amazon, the future of the state’s arrangement continues to be scrutinized.

Trost, a Nashville attorney who replaced Reagan Farr as commissioner of Revenue last Sept. 10, would not comment on details of the Bredesen deal.

“I really am not in a position where I can,” Trost said. “The taxpayer confidentiality rules have put me in a position where I just don’t even want to start down the road talking about it.”

Trost said he is not even in a position to confirm that the deal was struck while he was commissioner.

“What’s in the public record out there, if you looked at the timing on it, when I was in office, you can draw your own conclusions,” Trost said.

“It’s just not a topic I feel comfortable talking about to the press or anybody else. It’s just … I’ve thought about this … I’m no longer the commissioner. There is a new administration. There is a new commissioner. The issue is still in the public domain for discussion. I think my best policy is not to add myself to the discussion.”

The Amazon arrangement was made late in Bredesen’s time in office. Bredesen informed the incoming governor, Haslam, of the deal with the explanation that if Amazon were not given the break on tax collections, the company might have put its facility in Georgia.

“I have the utmost regard for Governor Haslam, Governor Bredesen, my successor as commissioner and my predecessor as commissioner,” Trost said. “There’s a new group dealing with these issues, and I’m just not going to get into it. That’s the only position I can take.”

Roberts had a similar response.

“I can tell you that the state statutes prohibit me from discussing any taxpayer, whether it be you or Billy Bob’s Bait Shop or an unnamed major Internet retailer,” Roberts said. “Just as a matter of policy we simply can’t comment on individual taxpayers.”

Roberts said he cannot confirm that the administration is talking to Amazon.

“Our policy here requires that we maintain confidentiality. The reason is we have to give any taxpayer the confidence that what they file with us and their dealings with us will not wind up in the public domain. Until the legislature changes that — and I also believe it’s the right policy — I just simply can’t confirm or deny,” Roberts said.

Sen. Andy Berke, D-Chattanooga, speaking to reporters Friday, picked up on the issue of discussing the talks.

“I can’t quite tell what the governor’s position on this is, but we are making a mistake by talking about our discussions with Amazon without having some kind of firm agreement with them,” Berke said.

“One of the rules of economic development over the last several years is that we don’t talk about ongoing discussion. Now, if there’s going to be an agreement, we should have an agreement with them before we start talking about it.”

Two lawmakers have filed legislation that would require Amazon to collect the sales tax. When one of the sponsors, Sen. Randy McNally, R-Oak Ridge, suggested a two-year grace period on collecting the tax might be an answer, Haslam said that would leave the arrangement uncertain.

Haslam said Friday he has not personally had any direct conversation with Amazon, with Roberts taking the lead.

“We’re going to honor our commitment to them, but we would love to figure out a way long-term for them to pay (collect) sales tax and to build an employee base here,” Haslam said.

The issue has become ticklish for the state since it is highly interested in increasing the number of jobs in Tennessee, but there is a concern that it creates a double standard that hurts other retailers who collect the sales tax.

An opinion from state Attorney General Robert Cooper said distribution centers, like the ones Amazon is constructing, would present enough physical presence to require the tax collection and that the legislation sponsored by McNally and Rep. Charles Sargent, R-Franklin, would be constitutionally defensible.

Lt. Gov. Ron Ramsey has expressed frustration that he cannot learn the specifics of the Amazon deal, and at one time Ramsey attempted to meet with Matt Kisber, commissioner of Economic and Community Development under Bredesen, about the arrangement. But Ramsey has said he never got his answers from Kisber.

Haslam was asked Friday if, when an arrangement with Amazon is reached, the public would be informed what it is.

“Sure,” Haslam said. “You bet. You bet.”

Haslam was also asked about the time frame for a deal.

“It’s too early to say that,” he said. “We’re in discussions with them. I’d love to have some sort of agreement with them where we all do that by the time the Legislature comes back (in January). Remember, in the context of all this, there’s quite a bit of controversy in the Legislature about how this should go forward. So it’s not solely an administration decision what happens here.

“We’d love to come to an agreement that works where the Legislature says, ‘OK, that’s the right approach for the state of Tennessee long-term,’ and Amazon says, ‘Great, we can live with that, and we will grow and expand in Tennessee.'”

A call Friday to the media office at Amazon’s corporate headquarters was not returned.

Haslam said he does not believe the attorney general’s opinion has changed the administration’s approach to the issue.

“Obviously, the Legislature is a major factor in what gets worked out with anything in the state of Tennessee. It’s not different with Amazon than any other item, and so I think Amazon is aware of that,” Haslam said.

“We’re continuing to have conversations. I’m not going back at all in what the state has told Amazon. I’d like to work out something where we took this issue off the table, and Amazon says, ‘Great, we can live with that,’ the state of Tennessee says, ‘Great, we can live with that, too,’ and we have a great relationship.”

Haslam said he did not believe the recent announcement of the distribution center in Lebanon changed the dynamics of the negotiations with Amazon, and he noted that the company has talked of even more distribution centers in the state. Haslam also pointed out that individuals who buy an item online are supposed to pay the tax regardless of the business’s status.

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Farr Cleared in TBI Probe

Press Release from District Attorney General Victor S. (Torry) Johnson III; July 26, 2011:

Davidson County District Attorney General Torry Johnson and 15th Judicial District Attorney General Tommy Thompson have announced that a TBI investigation into former State Revenue Commissioner Reagan Farr has concluded. The investigation yielded no evidence of criminal wrong-doing on the part of the former cabinet member.

The review of that office was launched in August 2010, amid questions about how the investigations of sales tax revenues of some businesses were handled. One of the duties of the Revenue Commissioner is to oversee tax collections and investigations for the state. Johnson says the TBI’s investigation was closed when there was no evidence found to justify criminal charges against Farr.

“Allegations of possible public corruption are always taken seriously; however, in this situation, it appears the claims were the result of policy differences within the department and not any criminal conduct on the part of the former commissioner,” stated Johnson.

Farr left the position of Revenue Commissioner on September 1 last year to return to the private sector.

Bredesen: Nothing Improper About New Solar Venture

Gov. Phil Bredesen sees nothing wrong with investing in a solar energy start-up business spearheaded by two high-ranking officials in his administration.

“Much ado about nothing,” Bredesen said of press interest in his business relationships with Matt Kisber, head of the Department of Economic and Community Development, and former Revenue Commissioner Reagan Farr.

Curiosity of late in the business dealings between Bredesen, Kisber and Farr is likely driven more by the recent initiation of a probe into the state Revenue Department’s handling of tax disputes under former Commissioner Farr than anything related to the new company itself, said Bredesen.

“You come to an end of a term and there’s a transition. There’s people moving out and during that time you have to go talk to somebody who might be your future employer and make those things. I think we all have to walk carefully through that,” the governor said after a building dedication ceremony on the Belmont University campus in Nashville.

Bredesen, who has been aggressive in recruiting clean-energy industries to the state with favorable tax treatment and other incentives, is investing in Silicon Ranch Corp., a solar power company launched by Kisber and Farr.

The Tennessean reported this week that Bredesen “has invested an amount ‘in the very low six figures'” in the company, which was incorporated in Delaware on Aug. 5.  Farr is listed as the company’s vice president, secretary and sole employee, Kisber the president.

The start-up venture is aimed at becoming “a new model for deploying solar across the U.S,” Farr told The Tennessean.

“Bredesen said his money was meant to help Farr test the feasibility of his idea, which would draw on his knowledge of the solar industry and tax law,” according to The Tennessean article. “Bredesen said he had personally reserved the company’s domain name while registering other websites but had not been keeping tabs on the company’s progress.”

Farr, who stepped down from his job as the state’s chief tax collector on Sept. 1, reserved the company name with the Tennessee Department of State’s business services division on July 22.

Since Farr resigned from his government job, the Tennessee Bureau of Investigation and the FBI have launched investigations into tax collection decisions made by that department under his leadership.

“The whole thing has gotten kind of messy right now,” said Bredesen. “Were it not for the fact that the TBI came in and was looking at some things, I think it would have passed unnoticed.”

“I certainly have not done anything wrong or unethical,” he continued.

Bredesen added that the Tennessee Comptroller is investigating Farr as well, but a spokesman for that office would neither confirm nor deny that Farr’s work in the Department of Revenue or his business activities are under formal examination.

TN Department of Revenue Restructured

State of Tennessee Press Release, Oct. 25, 2010:

Department Veterans Elevated to New Positions

NASHVILLE Commissioner Charles Trost has restructured the Tennessee Department of Revenue to ensure that tax enforcement policies are uniformly and consistently implemented. As part of the reorganization, department veterans Arnold Clapp and David Gerregano have been named Assistant Commissioners, responsible for maintaining compliance and uniform tax policies, and upholding the standards and credibility of the department.

“It is imperative that the department provide a reliable structure for compliance,” said Commissioner Trost. “We will continue to provide consistent enforcement to sustain the high degree of integrity in this office. I am pleased to make these appointments to such distinguished attorneys who combine more than 56 years of working in the Department of Revenue, and who will bring the benefit of their experience and judgment to these important new positions.

In his new role as Assistant Commissioner for Compliance and Integrity, Clapp will directly advise the commissioner and the department, and handle legal matters involving tax enforcement. Clapp, a Nashville School of Law graduate, has filled many roles since joining the department in 1967, including Audit Supervisor, Senior Tax Counsel and Special Counsel to the Commissioner.

David Gerregano, a Vanderbilt Law graduate, has been with the department for over 13 years. As Assistant Commissioner for Legal Affairs, Gerregano will provide guidance to the department in its tax policy efforts while continuing to serve in the role of General Counsel.

“The Department of Revenue will now have senior officers responsible for compliance in a manner now standard within major corporations and public agencies,” Added Commissioner Trost. “These positions will have complete authority to oversee all matters within the department and advocate for the taxpayers of the State of Tennessee so that it can provide, to the fullest extent, the myriad of necessary services on which our citizens depend.”

The Department of Revenue is responsible for the administration of state tax laws and motor vehicle title and registration laws established by the legislature and the collection of taxes and fees associated with those laws. The Department of Revenue collects approximately 92 percent of total state tax revenue. During the 2009-2010 fiscal year, the department collected $10.1 billion in state taxes and fees. In addition to collecting state taxes, $1.9 billion of local sales tax was collected by the department for local governments during the 2009-2010 fiscal year. Besides collecting taxes, the department enforces the revenue laws fairly and impartially in an effort to encourage voluntary taxpayer compliance. The department also apportions revenue collections for distribution to the various state funds and local units of government. To learn more about the department, log on to www.TN.gov/revenue.

Bredesen Backs Farr; Partisanship Driving Investigations Into Revenue Department Tax Collections, GOP Says

Former Tennessee Revenue Commissioner Reagan Farr may be under scrutiny by state and federal law enforcement agencies, but Gov. Phil Bredesen expressed unequivocal confidence that the man he appointed in 2007 to be the state’s chief tax collector has done nothing improper.

Bredesen, a Democrat, said he believes neither Farr nor his department underlings acted inappropriately when they decided to confidentially settle a sales-tax collections dispute with a Carthage-based furniture store chain, D.T. McCall & Sons.

The McCalls are politically active Republicans whom Democratic Party Chairman Chip Forrester said Thursday may have “breached the public’s trust by failing to report revenues they collected on behalf of the state.”

After speaking at a Nashville business breakfast at Lipscomb University in Nashville, Bredesen said he is confident any of the agreements and settlements the agency reached with Tennessee businesses in tax disputes were appropriate, responsible and well within Farr’s discretion as director of the Department of Revenue.

“Commissioners of revenue — it’s their job to make calls just like this all the time. And I’m sure if you went back over 100 of them, anybody could find one…(in which) somebody could have made the call the other way,” Bredesen said.

“I don’t have any hesitation in saying I am absolutely positive (Farr) has done absolutely nothing wrong,” Bredesen continued.

Republicans on Thursday suggested the push for an investigation by Davidson County District Attorney General Torry Johnson and 15th Judicial District Attorney General Tommy Thompson is politically motivated.

“What is telling is that this controversy seems to have been drummed up by the Democrats just days before an election they know isn’t going to end in their favor,” TNGOP director Chris Devaney told the Chattanooga Times Free Press. “It also needs to be pointed out that a central figure in this controversy is Attorney General Tommy Thompson — a significant Democrat donor.”

Thompson, wrote Free Press statehouse reporter Andy Sher, denied that partisan considerations had anything to do with his request.