Fruehauf Corp. v. I.R.S.

• Decision Date: 30 November 1977
• Docket Number: No. 74-1474,74-1474
• Citation: 566 F.2d 574
• Parties: 78-1 USTC P 16,277, 78-1 USTC P 9101 FRUEHAUF CORPORATION, William E. Grace and Robert D. Rowan, Plaintiffs-Appellees, v. INTERNAL REVENUE SERVICE, Defendant-Appellant.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 574

566 F.2d 574

78-1 USTC P 16,277, 78-1 USTC P 9101

FRUEHAUF CORPORATION, William E. Grace and Robert D. Rowan, Plaintiffs-Appellees, v. INTERNAL REVENUE SERVICE, Defendant-Appellant.

No. 74-1474.

United States Court of Appeals, Sixth Circuit.

Argued June 16, 1977.

Decided Nov. 30, 1977.

Scott P. Crampton, Asst. Atty. Gen., Meyer Rothwacks, Richard F. Mitchell, Bennet N. Hollander, Civ. Tax Div., Dept. of Justice, Washington, D.C., Jane M. Edmisten, Myron C. Baum, Gilbert E. Andrews, Ernest J. Brown, Joseph L. Liegl, Philip M. Van Dam, U.S. Atty., Detroit, Mich., for defendant-appellant.

John L. King, Matthew C. McKinnon, Berry, Moorman, King, Lott & Cook, Detroit, Mich., William A. Barnett, Chicago, Ill., Milton J. Mehl, Fort Worth, Tex., Gerald C. Risner, Chicago, Ill., for plaintiffs-appellees.

Before CELEBREZZE, LIVELY and ENGEL, Circuit Judges.

ENGEL, Circuit Judge.

In Fruehauf Corporation v. Internal Revenue Service, 522 F.2d 284 (6th Cir. 1975), vacated, 429 U.S. 1085, 97 S.Ct. 1090, 51 L.Ed.2d 530 (1977), we affirmed an injunctive order of the United States District Court for the Eastern District of Michigan entered pursuant to the Freedom of Information Act (FOIA), 5 U.S.C. § 552 (1970). The order required the Internal Revenue Service to make available to plaintiffs for inspection and copying four basic categories of documents involving certain aspects of the federal manufacturers excise tax imposed upon sales of automobiles and trucks. Generally the categories were:

1) All private letter rulings and technical advice memoranda the Internal Revenue Service issued with respect to a number of questions concerning price, constructive price, and coverage under Sections 4216, 4061 and 6416 of the Internal Revenue Code;

2) communications between the Internal Revenue Service and persons outside the Executive Branch of the Government with respect to these private letter rulings and technical advice memoranda;

3) so much of the Internal Revenue Service's letter ruling indexing systems as would enable the appellees to determine whether additional similar letter rulings and technical advice memoranda have been issued by the Service; and

4) Internal Revenue Service files, including correspondence, analyses and submissions of fact, concerning 23 published revenue rulings.

We held that former § 6103 of the Internal Revenue Code, 26 U.S.C. § 6103 (1970), as amended, 26 U.S.C.A. § 6103 (Supp.1977), did not exempt from disclosure these categories of documents under exemption three of the FOIA, 5 U.S.C. § 552(b)(3) (1970), as amended, 5 U.S.C.A. § 552(b)(3) (1977). ¹ However, we noted that the district court reserved the right, after an in camera inspection, to deny disclosure of specific documents or portions thereof based on any of the FOIA exemptions. 522 F.2d at 287, 290.

The Supreme Court granted the government's petition for a writ of certiorari, vacated the judgment, and remanded the case to this court for further consideration in the light of the Tax Reform Act of 1976 (TRA), Pub.L. No. 94-455, 90 Stat. 1520. While we find some aspects of the Tax Reform Act to be applicable to these proceedings, we find nothing therein inconsistent with the order of the district court from which appeal is taken and accordingly reaffirm that order and remand for further proceedings.

Section 1201(a) of the TRA added a new § 6110 to the Internal Revenue Code of 1954, 26 U.S.C.A. § 6110 (Supp.1977), which authorizes public inspection of "written determinations" of the Internal Revenue Service and related "background file documents," in accordance with elaborate, specified procedures. ² "Written determinations" are defined to mean "a ruling, determination letter, or technical advice memorandum." With respect to these particular documents, Congress intended that § 6110 provide the exclusive means of public access, ruling out resort to the regular FOIA procedures. 26 U.S.C.A. § 6110(e) (1977); S.Rep.No.94-938, Part I, 94th Cong., 2d Sess. 314-15, reprinted in (1976) U.S.Code Cong. & Ad.News 3439, 3744.

In addition, § 6103 of the Internal Revenue Code was extensively amended by § 1202(a) of the TRA, effective January 1, 1977, to establish the general rule that "returns and return information shall be confidential" and not subject to disclosure, with carefully delineated exceptions. 26 U.S.C.A. § 6103 (Supp.1977). ³

The first issue confronting us is to what degree, if any, the revised I.R.C. §§ 6103 and 6110 apply to this action. As to a case on direct review, the general rule is that "a court is to apply the law in effect at the time it renders its decision, unless doing so would result in manifest injustice or there is statutory direction or legislative history to the contrary." Bradley v. Richmond School Board, 416 U.S. 696, 711, 94 S.Ct. 2006, 2016, 40 L.Ed.2d 476 (1974). See NLRB v. Sears, Roebuck & Co., 421 U.S. 132, 162-65, 95 S.Ct. 1504, 44 L.Ed.2d 29 (1975).

Section 1201(b) of the TRA does in fact contain a statutory direction to the contrary:

(b) Effect Upon Pending Requests. Any written determination or background file document which is the subject of a judicial proceeding pursuant to section 552 of title 5, United States Code, commenced before January 1, 1976, shall not be treated as a written determination subject to subsection (h)(1), but shall be available to the complainant along with the background file document, if requested, as soon as practicable after July 1, 1976.

"Subsection (h)(1)" refers to I.R.C. § 6110(h)(1), which is simply that portion of the section dealing with the release procedures for written determinations issued pursuant to a request made before November 1, 1976. The records sought by Fruehauf fall within this category.

Congress was concerned about the effect on pending lawsuits of inherent delays in the new § 6110 procedures. These earlier written determinations are to be released only as funds for that purpose have been appropriated and only in a prescribed order. 26 U.S.C.A. § 6110(h)(3) (Supp.1977). In addition, persons who have received such determinations can file suit to block disclosure, and persons requesting determinations must pursue administrative remedies and file suit to obtain additional disclosure of determinations or portions thereof which the Secretary declines to make public. 26 U.S.C.A. § 6110(h)(4), (f)(2), (f)(4) (Supp.1977).

We conclude that § 1201(b) of the TRA exempts this pending lawsuit from the procedural requirements of § 6110, insofar as "any written determination or background file document" is concerned. However, the other portions of the TRA, including the revision of § 6103, do apply to pending cases, as we do not read § 1201(b) or any portion of the legislative history as clearly indicating the contrary. ⁴

While not mentioned by the Supreme Court's remand order, we include in our reconsideration not only the TRA but a recent amendment to exemption three of the FOIA, 5 U.S.C.A. § 552(b)(3) (1977), amending 5 U.S.C.A. § 552(b)(3) (1970), contained in § 5(b) of the Government in the Sunshine Act, Pub.L. No. 94-409, 90 Stat. 1241, 1247, which was effective March 13, 1977. ⁵ While this amendment narrowed the exemption, we conclude that revised § 6103 does qualify as an exemption three statute, entitling the Internal Revenue Service to refuse to disclose "returns and return information." ⁶

The government concedes that under § 1201(b) of the TRA it is required to disclose private letter rulings, technical advice memoranda, and related background file documents. These items comprise the first two categories of documents sought by the plaintiffs. The government informed the court that it had completed delivery of all items in these categories, after deleting certain kinds of information listed in 26 U.S.C.A. § 6110(c) (Supp.1977).

Remaining at issue are the two final categories of documents. The Internal Revenue Service urges that they fall within the definition of "return information" under revised § 6103 of the Internal Revenue Code and hence are exempted from disclosure under the FOIA. Fruehauf argues that the indexing systems and the background files of certain published revenue rulings are encompassed within the meaning of written determinations or background file documents under § 1201(b) of the TRA.

From samples of the indices submitted by the government to the plaintiffs, it is clear that they are in substance merely condensations of the rulings and technical advice memoranda already made disclosable by § 6110. Individual card entries are filed either alphabetically by taxpayers' names or by subject matter.

We tend to think that the indices are encompassed by the § 6110 definition of "written determinations," and thus disclosable under § 1201(b) of the TRA. While they are not in fact the precise documents transmitted to taxpayers, their essence is the same. Even if the indices are not technically within that definition, we conclude that they are not exempted "return information" under revised § 6103. While such documents fall within the literal language "any other data . . . prepared by the Secretary with respect to . . . the determination of . . . liability," nondisclosure would simply be at odds with the statutory scheme. Section 6103 is concerned foremost with protecting tax returns and information directly related thereto. The government does not argue that the indexing systems in question are summaries of returns. While return information does extend to "other data" concerning the existence of tax liabilities, we see no good reason for exempting indices when the more detailed documents themselves are not exempt and must be opened to public inspection.

To support its contention, the government relies upon one sentence of the Senate Finance Committee Report concerning the TRA, which stated that "it is not contemplated that existing IRS indices will be disclosed." S.Rep.No.94-938, Part I, 94th Cong., 2d Sess. 306, reprinted in ...