Tax Analysts v. I.R.S.

• Decision Date: 08 July 1997
• Docket Number: 96-5241,Nos. 96-5152,s. 96-5152
• Citation: 117 F.3d 607
• Parties: , 80 A.F.T.R.2d 97-5152, 97-2 USTC P 50,529, 38 Fed.R.Serv.3d 849 TAX ANALYSTS, Appellee. v. INTERNAL REVENUE SERVICE, Appellant.
• Court: U.S. Court of Appeals — District of Columbia Circuit

Page 607

117 F.3d 607

326 U.S.App.D.C. 53, 80 A.F.T.R.2d

97-5152, 97-2 USTC P 50,529,

38 Fed.R.Serv.3d 849

TAX ANALYSTS, Appellee. v. INTERNAL REVENUE SERVICE, Appellant.

Nos. 96-5152, 96-5241.

United States Court of Appeals District of Columbia Circuit.

Argued April 15, 1997.

Decided July 8, 1997.

Appeals from the United States District Court for the District of Columbia (94cv00923).

Jonathan S. Cohen, Attorney, U.S. Department of Justice, argued the cause, for appellant. With him on the briefs were Loretta C. Argrett, Assistant Attorney General, Murray S. Horwitz, Attorney, and Eric H. Holder, Jr., U.S. Attorney, Washington, DC.

William A. Dobrovir, Warrenton, VA, argued the cause and filed the brief, for appellee.

Before: RANDOLPH and ROGERS, Circuit Judges, and BUCKLEY, Senior Circuit Judge.

RANDOLPH, Circuit Judge:

Tax Analysts, a nonprofit District of Columbia corporation, brought an action under the Freedom of Information Act ("FOIA"), 5 U.S.C. § 552, to compel the Internal Revenue Service to disclose certain documents known as "Field Service Advice Memoranda." The district court issued an order requiring disclosure after redaction. The IRS appeals on the grounds that the court misconstrued FOIA § 552(a)(2)(B), and that the records were protected by FOIA exemptions 3 and 5.

I

Field Service Advice Memoranda, known by their initials "FSAs," are issued by the Office of Chief Counsel for the IRS. The Office of Chief Counsel employs more than 1600 attorneys and provides legal advice to the IRS, directs litigation in the Tax Court, and provides guidance and support for litigation in other courts. See INTERNAL REVENUE MANUAL 1171 (1993). Although the Chief Counsel is the chief legal officer for the IRS, id., the Office of Chief Counsel is not part of the IRS. The Chief Counsel is an Assistant General Counsel of the Treasury Department, appointed by the President with the advice and consent of the Senate. 31 U.S.C. § 301(f)(2). For most purposes, the Chief Counsel is subject to the supervision of the General Counsel of the Treasury Department, not the Commissioner of Internal Revenue (although during the time period relevant to this case, the Commissioner delegated certain IRS functions, including handling agency appeals, to the Office of Chief Counsel, and the Commissioner retained authority over the Office oF chiEF counsel with respect to those functions). INTERNAL REVENUE MANUAL 1112.62 (1990). According to the deposition testimony of senior officials in the Office of Chief Counsel, that office understands itself as independent from the IRS.

Attorneys in the national office of the Office of Chief Counsel prepare FSAs in response to requests from field personnel of either the Office of Chief Counsel or the IRS, such as field attorneys, revenue agents, and appeals officers. Field personnel request an FSA for legal guidance, usually with reference to the situation of a specific taxpayer. Each FSA includes a statement of issues, a conclusions section, a statement of facts, and a legal analysis section. CHIEF COUNSEL DIRECTIVES MANUAL (35)(19)44 (1992). ¹ The staff preparing an FSA are instructed that the conclusions section should recommend a position on each issue and state "any limitations or conditions to which a conclusion may be subject." Id. The style of the analysis section "should be exploratory and descriptive so that the strengths and weaknesses of a case are presented and developed candidly, directing attention to the authorities against the conclusions arrived at as well as those which support them." Id.

The government agrees that among the primary purposes of FSAs is ensuring that field personnel apply the law correctly and uniformly. The IRS tells us that FSAs are not formally binding on IRS field personnel who request them. It is not clear whether they bind requesters within the Office of Chief Counsel. In any case, the government concedes that FSAs are held in high regard and are generally followed.

Treasury Department regulations treat the Office of Chief Counsel as part of the IRS for purposes of FOIA requests. 31 C.F.R. § 1.1. Accordingly, Tax Analysts directed its requests for FSAs to the IRS, not the Office of Chief Counsel. Although Tax Analysts originally asked for both formal written FSAs and written records of advice provided informally to field personnel by telephone, Tax Analysts has since limited its claims to the approximately 1300 formal written FSAs issued by the Office of Chief Counsel between January 1, 1992, and December 14, 1993. The IRS failed to respond to Tax Analysts's initial requests within the statutory time period. Tax Analysts pursued unsuccessful administrative appeals and then filed suit in district court. The parties conducted extensive discovery, and both moved for summary judgment. The district court granted Tax Analysts's motion and later awarded it attorney's fees. ²

II

A remedial question needs to be addressed before we proceed any further. Throughout this litigation, Tax Analysts claimed that FSAs fall under the FOIA section requiring "[e]ach agency ... [to] make available for public inspection and copying ... those statements of policy and interpretations which have been adopted by the agency and are not published in the Federal Register." 5 U.S.C. § 552(a)(2)(B). ³ This is the so-called "reading room" provision.

The district court's memorandum opinion agreed that FSAs fell within § 552(a)(2)(B). But rather than explicitly requiring the IRS to make these documents available in a reading room, the court's order directed the IRS to "release all requested" FSAs, except to the extent that certain statutory exemptions apply. The IRS takes this to mean that it is obligated only to produce the FSAs to Tax Analysts. Any broader relief, the IRS claims, would be beyond the court's authority in light of our opinion inKennecott Utah Copper Corp. v. Department of the Interior, 88 F.3d 1191, 1202-03 (D.C.Cir.1996). FOIA's remedial provision, 5 U.S.C. § 552(a)(4)(B), provides that "[o]n complaint, the district court ... has jurisdiction to enjoin the agency from withholding agency records and to order the production of any agency records improperly withheld from the complainant." Kennecott holds that § 552(a)(4)(B) does not empower district courts to order agencies to publish certain statements in the Federal Register, although FOIA requires agencies to do so, see 5 U.S.C. § 552(a)(1). The only remedy § 552(a)(4)(B) mentions is an order directing the agency to produce the records to the complaining party. See Kennecott, 88 F.3d at 1203. ⁴

Tax Analysts has offered nothing in opposition to the IRS's argument regarding the limited scope of the remedy and it has not cross-appealed from the district court's order. We will, therefore, treat the argument as conceded for the purposes of this case only. This considerably simplifies matters. With the case in this posture there is no need for us to decide whether FSAs are "statements of policy and interpretations which have been adopted by the agency" under § 552(a)(2)(B). If § 552(a)(2)(B) did not require FSAs to be "made available for public inspection," another FOIA provision--s 552(a)(3)--required them to be made available to Tax Analysts, unless the documents were exempt from disclosure. Section 552(a)(3), which Tax Analysts invoked in its initial FOIA requests to the IRS, provides that: "Except with respect to records made available under paragraphs (1) and (2) of this subsection, each agency, upon any request for records which (A) reasonably describes such records and (B) is made in accordance with published rules ... shall make the records promptly available to any person." There is, we believe, no doubt that the requests here "reasonably describe[d]" the FSAs. "A request reasonably describes records if 'the agency is able to determine precisely what records are being requested.' " Kowalczyk v. Department of Justice, 73 F.3d 386, 388 (D.C.Cir.1996) (quoting Yeager v. Drug Enforcement Admin., 678 F.2d 315, 326 (D.C.Cir.1982)). The IRS has had no trouble identifying the FSAs Tax Analysts wanted. It told Tax Analysts precisely how many such documents existed, and it inspected the FSAs individually for privileged material and attorney work product.

III

FSAs constitute agency "records" within 5 U.S.C. § 552(a)(3): the Office of Chief Counsel created the documents and retained control over them. See Department of Justice v. Tax Analysts, 492 U.S. 136, 144-45, 109 S.Ct. 2841, 2847-48, 106 L.Ed.2d 112 (1989). And as we have just concluded, Tax Analysts "reasonably" described these records in its requests. With these conditions satisfied, the government could properly refuse to produce the FSAs only if one of FOIA's exemptions justified withholding them. In this suit to compel production, "the burden is on the agency to sustain its action." 5 U.S.C. § 552(a)(4)(B); see also Petroleum Info. Corp. v. Department of the Interior, 976 F.2d 1429, 1433 (D.C.Cir.1992).

The government invokes FOIA exemptions 3 and 5. FSAs fall under exemption 3, it says, because these are "matters" "specifically exempted from disclosure by statute," 5 U.S.C. § 552(b)(3). FSAs also are allegedly protected by exemption 5, which empowers an agency to withhold "inter-agency or intra-agency memorandums or letters which would not be available by law to a party other than an agency in litigation with the agency," 5 U.S.C. § 552(b)(5).

A. Exemption 3

The government rests its exemption 3 claim on 26 U.S.C. § 6103. Amended in 1976 in the wake of Watergate and White House efforts to harass those on its "enemies list," § 6103 now restricts government officers and employees from revealing "any return" or "return information." "Return information" is defined as:

a taxpayer's identity, the nature, source, or amount of his income, payments, receipts, deductions, exemptions, credits, assets, liabilities, net worth, tax liability, tax withheld,...