NEW YORK - The Idaho Attorney General concluded that state tax commissioners broke no laws by settling tax protests with large, often out-of-state corporations.

Steven Olsen, chief of the attorney general's civil litigation division, reviewed a complaint lodged in late May by veteran Tax Commission auditor Stan Howland. Howland alleged that Idaho's four tax commissioners had violated state law by reaching compromises with companies over their annual tax bills, then using the state's disclosure laws to keep the agreements secret.

Howland immediately panned Olsen's 12-page opinion, released Wednesday, saying it was inaccurate and doesn't reflect standards required of an independent investigation.

Olsen wrote that the commission is entitled to weigh contested tax issues against a variety of factors when deciding to settle a protest, including legal ambiguities and the risk of costly litigation. He also said commissioners are bound by statute to withhold information about such settlements from the public to protect taxpayer confidentiality.

"Auditors play an important role in evaluating whether tax liability exists," Olsen wrote. "However, it is the tax commissioners who have ultimate responsibility, which is imposed by statute, for evaluating the facts, applying the law and making reasoned judgments concerning whether tax liabilities should be settled or should be tried in court."

Olsen said commissioners must carefully decide when to litigate.

"This discretion rests with the commissioners - not their staff," he said.

Royce Chigbrow, chairman of the Tax Commission, didn't immediately return a phone call seeking comment.

After reading the opinion, Howland said it contained several errors, including a passage indicating he recommended that commissioners pursue what turned out to be unsuccessful 2006 litigation of a tax protest filed by defense contractor Lockheed Martin Corp.

Olsen said that case illustrates that tax protests are complicated and are sometimes resolved contrary to auditors' conclusions, but Howland contends he supported settling that case, not going to court. Any contention otherwise "is absolutely untrue," Howland said.

Howland also questioned whether the attorney general's office was equipped to do an independent review, given lawyers from the office advise the Tax Commission on the settlements to which he objects.

"I was not contacted by anybody at the AG's office. To my knowledge, none of the other auditors were contacted," Howland said. "I don't know how they can make a decision without conducting an investigation."

The attorney general's opinion came after requests from Sens. Kate Kelly, D-Boise, and Brent Hill, R-Rexburg.

It is separate from a review ordered by Gov. C.L. "Butch" Otter that began this week under the direction of retired Deloitte & Touche accountant P. LaVern Gentry. There's also another push being undertaken by Legislative Services, aimed at scrutinizing Idaho policies governing such settlements and gathering information about other states' practices.

Those two efforts should still proceed as planned, Kelly and Hill said in separate interviews Wednesday, adding the reviews will help determine if existing Idaho policy strikes the right balance between confidentiality and accountability and if tax commissioners are being given the appropriate discretion in settling protests. They're hoping those reviews will be done by August, to give the Legislature time to draft bills before the 2009 session in January, should changes be in order.

Olsen's opinion "answered the narrow question that was at issue: 'Did the Tax Commission break the law?' " Kelly said. "It still raises the bigger question of whether or not the law we have is the best policy."

Hill, a certified public accountant and Senate Local Government and Taxation Committee chairman, said Olsen's opinion should provide assurances that tax commissioners haven't done anything nefarious in settling companies' protests.

It also helps underscore the different roles of auditors and commissioners, he said.

Commissioners "have a responsibility to take things into account that Mr. Howland said they should not take into account," Hill said. "The public would rather them be unbiased, look at the law and the consequences to the taxpayer, and the consequences to the public of pursuing litigation, and make a decision based on reason."