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Home My WebLink About00-581 ConfidentialSTATE ETHICS COMMISSION 309 FINANCE BUILDING P.O. BOX 11470 HARRISBURG, PA 17108 -1470 (717) 783 -1610 1- 800 - 932 -0936 ADVICE OF COUNSEL June 1, 2000 Re: Public Official /Employee; Attorney; Department A; Bureau B; FIS; Creditor; IRS; Rollover of IRA to Roth iRA. This responds to your letter of April 28, 2000, by which you requested a confidential advisory from the State Ethics Commission. Issue: Whether the Public Official and Employee Ethics Act ( "Ethics Act"), 65 Pa.C.S. §1101 et seq., would require disclosure on the Statement of Financial Interests form of taxes owed to the IRS over a four -year period as a result of rolling over an IRA into a Roth IRA_ Facts: As an Attorney for Department A, Bureau B, you seek a confidential advisory from the State Ethics Commission regarding the disclosure requirements for Statements of Financial Interests filed pursuant to the Ethics Act. You state that you began working for the Commonwealth in 1998. Also in 1998, you rolled over your IRA into a Roth IRA. You further state that for people who rolled over in the first year of the Roth, the IRS allowed four years for payment of the taxes on the amount rolled over. You have paid the taxes for two years and have never been delinquent. You have two more years to make these payments. Finally, you state that no interest is required to be paid. Based upon the above, you request a confidential advice as to whether the taxes owed under the above payment arrangement would constitute a debt to the IRS, which you would be required to report on your Statements of Financial Interests. Discussion: It is initially noted that pursuant to Sections 1107(10) and 1107(11) of the Ethics Act, 65 Pa.C.S. §1107(10), (11), advisories are issued to the requestor based upon the facts which the requestor has submitted. In issuing the advisory based upon the facts which the requestor has submitted, the Commission does not engage in an independent investigation of the facts, nor does it speculate as to facts which have not been submitted. It is the burden of the requestor to truthfully disclose all of the material facts s relevant he extent the requestor has truthfully ( di s sclo disclosed all of of the material advisory only affords a acts defense As an Attorney for Department A, Bureau B, you are a "public employee" as that term is defined in the Ethics Act, and hence you are subject to the provisions of that Act. Section 1104 of the Ethics Act provides in pertinent part: FAX: (717) 787 -0806 • Web Site: www.ethics.state.pa.us • e -mail: ethics @state.pa.us 00 -581 Confidential Advice, 00 -581 June 1, 2000 Page 2 § 1104. Statement of financial interests required to be filed (a) Public official or public employee. —Each public official of the Commonwealth shall file a statement of financial interests for the preceding calendar year with the commission no later than May 1 of each year that he holds such a position and of the year after he leaves such a position. Each public employee and public official of the Commonwealth shall file a statement of financial interests for the preceding calendar year with the department, agency, body or bureau in which he is employed or to which he is appointed or elected no later than May 1 of each year that he holds such a position and of the year after he leaves such a position. Any other public employee or public official shall file a statement of financial interests with the governing authority of the political subdivision by which he is employed or within which he is appointed or elected no later than May 1 of each year that he holds such a position and of the year after he leaves such a position. Persons who are full -time or part -time solicitors for political subdivisions are required to file under this section. 65 Pa.C.S. §1104(a). The substantive requirements for disclosure on the Statement of Financial Interests form are set forth in Section 1105 of the Ethics Act. Section 1105(a) provides: § 1105. Statement of financial interests (a) Form. —The statement of financial interests filed pursuant to this chapter shall be on a form prescribed by the commission. All information requested on the statement shall be provided to the best of the knowledge, information and belief of the person required to file and shall be signed under oath or equivalent affirmation. 65 Pa.C.S. §1105(a). Section 1105(b)(4) of the Ethics Act sets forth the requirements for disclosure of creditors: § 1105. Statement of financial interests (b) Required information. —The statement shall include the with regard to I the person required to file the statement. l year (4) The name and address of each creditor to whom is owed in excess of $6,500 and the interest rate thereon. However, loans or credit extended between members of the immediate family and mortgages securing real property which is the principal or secondary residence of the person filing shall not be included. Confidential Advice, 00 -581 June 1, 2000 Page 3 65 Pa.C.S. §1105(b)(4). Having set forth the pertinent provisions of the Ethics Act, your specific inquiry shall now be addressed. Section 1105(b)(4) of the Ethics Act requires disclosure of the name and address of each creditor to whom is owed in excess of $6,500 and the interest rate thereon. Taxes owed the I osure for those calendar your ear(s) in which the t IRA l to a balanc owed would to the IRS subject ould disclosure exceed $6,500. Thus, for example, if the total taxes owed were in the amount of $10,000, and the IRS allowed payments to be made in the amount of $2,500 for each of four years, the obligation would be required on the Statements of Financial Interests filed as to the first and second calendar years. For the first calendar year, the total balance owed would be $10,000 (even though only $2,500 would be paid during the course of that year). For the second calendar year, the total remaining balance would be as much as $7,500, and so disclosure would be required for the Statement of Financial Interests filed as to that year. But at the beginning of the third calendar year, the total balance owed would be only $5,000, which would be below disclosure owed to the IRS RS wo Id the Therefore, sclosure requ requirement. calendar years, the balance In applying the above analysis to your circumstances, you commenced employment with the Commonwealth in 1998, the very year that the rollover occurred. You would have 1, ben 1 required _ For that Statement to le a Statement of o f Financial n and for the Statements year f FinanFinancialInterests 199 filed as to calendar years 1999, 2000, and — assuming your employment with the Commonwealth continues -2001, you would be required to disclose your obligation to the IRS if the total balance in owed the IRS would exceed $6,500 at any time during the particular calendar year question. Section 1107(9) of the Ethics Act requires that Statements of Financial Interests be kept on file for five years. Your Statements of Financial Interests for calendar years 1998 and 1999 should still be on file, and should be amended to disclose the obligation to the IRS be mad the disclosure if the total balance owed to the IRS at any time � for dung the applicable g i calendar year be made o exceeds $6,500. In disclosing the obligation, you would not list any interest rate, since there is none, but rather, you would complete the block labeled "Interest Rate" with a designation such as "N /A." The propriety of the proposed conduct has only been addressed under the Ethics con the applicability the E thics Act has t not'been e considered in that they do not other nvolv an conduct than e interpretation of the Ethics Act. Specifically not addressed herein is the applicability of the Governor's Code of Conduct. Conclusion: As an Attorney for Department A, Bureau B, you are a public employee P a.C subject 1 01 provisions t se q. Taxes Public Official and the IRS as he o your A rolling t o over Act "), 65 a.C_S. § q your IRA to a Roth IRA would be subject to disclosure for those calendar year(s) in which the total balance owed to the IRS would exceed $6,500. To the extent disclosure was required but not made on forms already filed, amended Statements of Financial Interests Confidential Advice, 00 -581 June 1, 2000 Page 4 should be filed. Lastly, the propriety of the proposed conduct has only been addressed under the Ethics Act. Pursuant to Section 1107(11), an Advice is a complete defense in any enforcement proceeding initiated by the Commission, and evidence of good faith conduct in any other civil or criminal proceeding, provided the requestor has disclosed truthfully all the material facts and committed the acts complained of in reliance on the Advice given. This letter is a public record and will be made available as such. Finally, if you disagree with this Advice or if you have any reason Commission. A to challenge same, you may e Phe Commission to will be and a personal appearance before Opinion will be issued by the Commission. Any such appeal must be in writing and must be actually received at the Commission within thirty (30) days of the date of this Advice pursuant to 51 Pa. Code §13.2(). The appeal may be received at the C ommission by hand delivery, United States mail, delivery service, or by FAX transmission (717-787-0806). Failure to file such an appeal at the Commission within thirty (30) days may result in the dismissal of the appeal. cerely, N.r Vincent J. opko Chief Counsel