Cliff v. Internal Revenue Service

• Decision Date: 30 July 1980
• Docket Number: No. 80 Civ. 1574 RLC.,80 Civ. 1574 RLC.
• Citation: 496 F. Supp. 568
• Parties: Walter C. CLIFF, Plaintiff, v. INTERNAL REVENUE SERVICE, Defendant.
• Court: U.S. District Court — Southern District of New York

496 F. Supp. 568

Walter C. CLIFF, Plaintiff, v. INTERNAL REVENUE SERVICE, Defendant.

No. 80 Civ. 1574 RLC.

United States District Court, S. D. New York.

July 30, 1980.

Cahill, Gordon & Reindel, New York City, for plaintiff; George Wailand and Charles A. Gilman, New York City, of counsel.

John S. Martin, Jr., U. S. Atty., S.D.N.Y., New York City, for defendant; J. D. Pope, Asst. U. S. Atty., New York City, of counsel.

OPINION

ROBERT L. CARTER, District Judge.

Plaintiff Walter C. Cliff brought this action pursuant to the Freedom of Information Act ("Act" or "FOIA"), 5 U.S.C. § 552, to compel the Internal Revenue Service ("IRS") to disclose certain documents. On May 11, 1979, Cliff, a tax attorney, requested that the IRS release those documents for his use in advising a client. The IRS withheld various documents, claiming they were exempt from FOIA disclosure. 5 U.S.C. § 552(b). On March 11, 1980, after exhausting all administrative appeals, Cliff commenced this action under paragraph (a)(4)(B) of the Act, 5 U.S.C. § 552(a)(4)(B).

The parties have resolved their disputes over the disclosability of all but nine documents or portions thereof, each of which is responsive to Cliff's FOIA request for "all documents (including but not limited to all written communications as well as memoranda of meetings or telephone conversations) dated or prepared between 1960 and the present containing background material . . . relating to the application of Rev. Proc. 65-17 ...." Each party now moves for summary judgment as to these documents.¹ For the reasons given below, I find that these documents are exempt from FOIA disclosure, and grant the IRS's motion for summary judgment.

The documents in question have been identified and described in detail in an affidavit of Ewan D. Purkiss, an attorney in the Disclosure Litigation Division of the IRS Office of Chief Counsel ("Purkiss Affidavit"). They are referred to in the affidavit and by the parties as documents "b" through "j," and will be so denominated here. For the purposes of the instant motions, the nine documents may be divided into three groups: documents d and e relate to the tax situations of specific taxpayers; document j is an IRS General Counsel Memorandum ("GCM"); and the remaining documents (b-c, f-i) are memoranda written by various IRS and Treasury Department personnel pertaining to the subject of Cliff's request. Each group is discussed separately in Part II below.

I

The Act is "broadly conceived," EPA v. Mink, 410 U.S. 73, 80, 93 S.Ct. 827, 832, 35 L.Ed.2d 119 (1973), "to establish a general philosophy of full agency disclosure unless information is exempted under clearly delineated statutory language." S.Rep.No. 813, 89th Cong., 1st Sess., 3 (1965); N.L. R.B. v. Sears, Roebuck & Co., 421 U.S. 132, 136, 95 S.Ct. 1504, 1509, 44 L.Ed.2d 29 (1975); EPA v. Mink, supra, 410 U.S. at 80 n.6, 93 S.Ct. at 832. Specifically, all agency records not otherwise required to be published or available for public inspection must be made available on demand to any member of the public² who reasonably describes the records sought, 5 U.S.C. § 552(a)(3);³see NLRB v. Sears, Roebuck & Co., supra, 421 U.S. at 137, 95 S.Ct. at 1510, unless they fall into one or more of nine specific and exclusive categories of records exempted from disclosure. 5 U.S.C. § 552(b), (c); EPA v. Mink, supra, 410 U.S. at 79, 93 S.Ct. at 832.

There is no dispute that the documents Cliff seeks are covered by the comprehensive disclosure requirements of the Act. The issues in this case relate solely to the applicability to the disputed records of the exceptions to the general rule of disclosure. The IRS claims that documents d and e are covered by exemption 3, 5 U.S.C. § 552(b)(3),⁴ and that the remaining seven documents fall under exemption 5, 5 U.S.C. § 552(b)(5).⁵ Cliff argues that the exemptions do not apply to these documents; alternatively, as to the third group of documents (b-c, f-i), he claims that the IRS has not provided sufficient information to determine whether exemption 5 applies, and seeks additional discovery.

II

Documents d and e

Documents d and e are memoranda prepared by IRS staff discussing the effects of various IRS Revenue Procedures on the potential or actual tax liability of several specific taxpayers.⁶ The IRS contends that these documents constitute "return information" under the Internal Revenue Code ("I.R.C."), which forbids the disclosure of such information, and that FOIA exemption 3 therefore permits the IRS to withhold them.

Exemption 3, 5 U.S.C. § 552(b)(3), provides that the Act's disclosure requirements do not apply to material specifically exempted from disclosure by another statute, provided the statute meets certain criteria.⁷ The statute relied upon by the IRS here, I.R.C. § 6103, 26 U.S.C. § 6103, is such a statute. Breuhaus v. IRS, 609 F.2d 80, 82 (2d Cir. 1979); Chamberlain v. Kurtz, 589 F.2d 827, 838-39 n.33 (5th Cir.), cert. denied, 444 U.S. 842, 100 S.Ct. 82, 62 L.Ed.2d 54 (1979); Moody v. IRS, 80-1 U.S.T.C. ¶ 9254 at 83,494 (D.D.C.1980). Therefore, if section 6103 exempts documents d and e from disclosure under the Internal Revenue Code as the IRS contends, then FOIA exemption 3 does the same under the Act.

Section 6103 prohibits disclosure of "returns" and "return information" to third parties such as Cliff. 26 U.S.C. § 6103(a); Fruehauf Corp. v. IRS, 566 F.2d 574, 578 n.6 (6th Cir. 1977); Moody v. IRS, supra, 80-1 U.S.T.C. at 83,495; see also Chamberlain v. Kurtz, supra, 589 F.2d at 838-39 n.33. "Return information" is defined as

(A) 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, deficiencies, overassessments, or tax payments, whether the taxpayer's return was, is being, or will be examined or subject to other investigation or processing, or any other data, received by, recorded by, prepared by, furnished to, or collected by the Secretary with respect to a return or with respect to the determination of the existence, or possible existence, of liability (or the amount thereof) of any person under this title for any tax, penalty, interest, fine, forfeiture, or other imposition, or offense . . ..

* * * * * *

but such term does not include data in a form which cannot be associated with, or otherwise identify, directly or indirectly, a particular taxpayer.

26 U.S.C. § 6103(b)(2). It is clear from the descriptions of documents d and e in the Purkiss Affidavit⁸ that both are documents "prepared by, furnished to, or collected by the Secretary with respect to . . . the existence, or possible existence, of liability (or the amount thereof) of any person under this title for any tax," and thus are covered by the statute.⁹ See Breuhaus v. IRS, supra, 609 F.2d at 83.

Cliff contends, however, that even if documents d and e are return information, the IRS should be required to delete any material from them that identifies the taxpayers involved and release them in this sanitized form. He relies for this argument upon the Act's requirement that "any reasonably segregable portion of a record shall be released . . . after deletion of the portions which are exempt," 5 U.S.C. § 552(b), and the proviso in the definition of return information, the so-called Haskell amendment, Long v. IRS, 596 F.2d 362, 365 (9th Cir. 1979), cert. denied, 446 U.S. 917, 100 S.Ct. 1851, 64 L.Ed.2d 271 (1980), that excludes "data in a form which cannot be associated with, or otherwise identify . . a particular taxpayer." 26 U.S.C. § 6103(b)(2), supra. The IRS contends that documents d and e consist solely of return information, so that there are no non-exempt portions to segregate, and that the Haskell amendment does not apply.

As indicated above, these two documents fit squarely within the statutory definition of return information, and thus are exempt in their entirety; the IRS is correct in its assertion that they contain no segregable portions under the Act. See Zale Corp. v. IRS, 481 F.Supp. 486, 489 (D.D.C.1979). The Haskell amendment argument presents greater difficulty, as research reveals no case that has decided the precise question presented here of whether the IRS must delete material that may identify taxpayers from records otherwise exempt as return information.

Cliff cites three cases involving material exempt from disclosure under FOIA exemption 3 and I.R.C. § 6103 in which the IRS was required to delete certain exempt material from documents and release the remainder. Those decisions, however, are not dispositive of the issue raised here. In Long v. IRS, supra, 596 F.2d 362, the court held that the Haskell amendment applied to a series of IRS statistical studies¹⁰ based on return information and that the IRS was required to disclose the studies and underlying source material with identifying data deleted, provided the district court determined on remand that such release did not "entail a significant risk of indirect identification." Id. at 367. See also Common Cause v. IRS, 80-1 U.S.T.C. ¶ 9208 at 83,325 (D.D.C.1979). The question of whether the same obligation would arise in a case involving return information related to an individual taxpayer's situation, rather than that generated in the production of statistical data, was not raised in Long.

Conway v. IRS, 447 F.Supp. 1128 (D.D.C. 1978), considered the question of whether the IRS could withhold documents in their entirety because they contained some material exempt under I.R.C. § 6103. Without explicitly ruling on the applicability of the Haskell amendment,¹¹ the court held that section 6103 "prohibits disclosure of return information, not all documents that may contain some such information," id. at 1133, and required the IRS to release the portions of the records in question that were not return information. Nothing in Conway supports the position that return information...