King v. I. R. S., s. 81-2137

• Decision Date: 10 September 1982
• Docket Number: 81-3081,Nos. 81-2137,s. 81-2137
• Citation: 688 F.2d 488
• Parties: 82-2 USTC P 9578 Sharon L. KING, Plaintiff-Appellee, v. INTERNAL REVENUE SERVICE and Jerome Kurtz, Commissioner of Internal Revenue, Defendants-Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 488

688 F.2d 488

82-2 USTC P 9578

Sharon L. KING, Plaintiff-Appellee, v. INTERNAL REVENUE SERVICE and Jerome Kurtz, Commissioner of Internal Revenue, Defendants-Appellants.

Nos. 81-2137, 81-3081.

United States Court of Appeals Seventh Circuit.

Argued Jan. 20, 1982.

Decided Sept. 10, 1982. ^*

Stephen Gray, Atty., Glenn L. Archer, Jr., Asst. Atty. Gen., Michael J. Paup, Chief Appt. Sec., Tax Div., Dept. of Justice, Washington, D. C., for defendants-appellants.

James A. Fletcher, Isham, Lincoln & Beale, Chicago, Ill., for plaintiff-appellee.

Before PELL, Circuit Judge, FAIRCHILD, Senior Circuit Judge, and GORDON, District Judge. ^**

PELL, Circuit Judge.

This is an appeal from the District Court's grant of summary judgment ordering the Internal Revenue Service to disclose eight redacted documents to the plaintiff under the Freedom of Information Act, 5 U.S.C. § 552 (1976) (FOIA). The question presented is whether the District Court erred in holding that the documents must be released to the plaintiff after the deletion of taxpayer-identifying material. The I.R.S. contends that the court erred in its interpretation of the term "return information," as defined in I.R.C. § 6103(b)(2), when it ordered that the documents were disclosable after the deletion of such material; and further contends that the provisions of section 6103 embody the exclusive standard for releasing return information, without regard to the provisions of the FOIA.

I.

This litigation arises from three FOIA requests the plaintiff made upon the I.R.S. in 1978 and 1979. Those requests sought data, memoranda, and background information relating to or commenting on certain revenue rulings and regulations which had been issued by the Service on various subjects, including classification of utility trucks; treatment of expenditures for repair, maintenance, rehabilitation or improvement of property; and changes in methods of depreciation. The I.R.S. eventually released some, but not all, of the requested documents. The plaintiff thereafter filed suit seeking access to the remaining 102 documents.

The parties filed cross-motions for summary judgment. The I.R.S. claimed that most of the documents sought were exempt under FOIA § 552(b)(5), and that the eight documents at issue here were exempt under I.R.C. § 6103, or alternatively, FOIA § 552(b)(3). The District Court found sixty-eight of the documents exempt in their entirety under FOIA section (b)(5), but ordered that thirty-four of the documents, including the eight now at issue, be released either in whole or in part. The I.R.S. appealed only from that portion of the order relating to the eight documents for which exemption was claimed under I.R.C. § 6103, and has released all the others to the plaintiff. ¹ The eight documents at issue in this appeal consist of:

(a) two taxpayer protests of I.R.S. agents' audit reports;

(b) a transmittal letter and a portion of an audit;

(c) a form setting forth adjustments to a taxpayer's return and the reasons therefor;

(d) a form stating a specific taxpayer's liability by period, the amount of adjustments and the reasons therefor;

(e) two I.R.S. intra-office memoranda requesting information on a specific taxpayer; and

(f) a letter from the I.R.S. to a taxpayer asking the taxpayer to alter its method of accounting.

II.

We turn first to the determination of the proper definition of the term "return information," as used in I.R.C. § 6103(b)(2), and then to consideration of the extent to which the documents at issue here fall within that definition.

A. Return Information

Section 6103(b)(2) of the Internal Revenue Code provides:

(2) Return information.-The term "return information" means-

(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, and

(B) any part of any written determination or any background file document relating to such written determination (as such terms are defined in section 6110(b)) which is not open to public inspection under section 6110,

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

The primary area of dispute here is over the language of the so-called Haskell Amendment, a portion of the Tax Reform Act of 1976, which added the proviso "but such term (return information) does not include data in a form which cannot be associated with, or otherwise identify, either directly or indirectly, a particular taxpayer." The district court construed this provision as meaning that "return information ... includes only information that directly or indirectly identifies a particular taxpayer." The court further held that after deletion of "identifying matter," documents which would otherwise constitute return information are disclosable under the FOIA. The I.R.S. contends that the district court erred in its interpretation, and that for a document containing data listed in subsection (b)(2)(A) to be disclosable, the Haskell Amendment requires (1) that the information be in a different form, i.e., amalgamated with other data to form statistical compilations or tabulations; and, (2) not be associated with or otherwise directly or indirectly identify a specific taxpayer. We turn to an evaluation of the statutory language and context as well as the relevant legislative history to find which interpretation is more in keeping with Congress' intent in enacting section 6103(b)(2).

1. The Statute

The relevant portion of section 6103(b)(2) begins by stating, in subsection (A), that return information means not only a taxpayer's identity, but also an extensive catalog of specific items of information as well as "any other data, received by, recorded by, prepared by, furnished to, or collected by the Secretary with respect to a return ...." There is no doubt that this highly inclusive definition guarantees privacy to a very broad spectrum of taxpayer information, and would include all the items of information sought by the plaintiff, but for the language of the Haskell Amendment.

The language of the amendment first provides that return information does not include "data in a form" which cannot be associated with or identify a particular taxpayer. It is from this language that the I.R.S. derives its argument that the statute provides for the release of such data only if it is changed in form, by amalgamation with data from other taxpayers to form statistical tabulations or studies. The plaintiff contends that this reads the language of the amendment too narrowly, and that only identifying information is exempt from disclosure.

We note initially that the construction urged by the plaintiff and adopted by the district court essentially reads the words "in a form" out of the statute. It is a basic principle of statutory construction that "(c)ourts have no right, in the guise of construction of an act, to either add words to or eliminate words from the language used by congress." DeSoto Securities Co. v. Commissioner, 235 F.2d 409, 411 (7th Cir. 1956), and that a statute should not be construed in a way that renders portions or phrases superfluous. We further note that adoption of the simple "identity test" urged by the plaintiff would render superfluous the detailed catalog of protected data listed in subsection (b)(2)(A). If Congress had intended only taxpayer-identifying information to be exempt, it could have achieved that result with a much simpler statute specifying merely that all non-identifying information is disclosable. Congress chose not to go that route. See Cliff v. I. R. S., 496 F.Supp. 568, 574 (S.D.N.Y.1980).

The statute continues with the words "which cannot be associated with, or otherwise identify, directly or indirectly, a particular taxpayer." Despite the apparent breadth of this formulation, the plaintiff's construction equates "associated with," and "identify, directly or indirectly." Again, we are renitent to construe the statute so as to render its language redundant or superfluous. Indeed, it might be persuasively argued that information which pertains only to a particular taxpayer, and is not changed in form by amalgamation, is always "associated with ... a particular taxpayer." But we need not adopt that extreme position to be persuaded that information which might not on its face identify a taxpayer might well be associated with a taxpayer by an FOIA requester who knows sufficient extrinsic facts (about a competitor, for instance) to draft a request in a manner sufficiently narrow to produce information which could only pertain to that taxpayer. In this case, for example, one of the documents sought contains photographs of utility trucks. Even if the taxpayer's name is deleted from the photographs, the industry discussed in the documents here is sufficiently specialized that the plaintiff might well be able to deduce from the photos which taxpayer's return has been disclosed. Allowing the determination by the district court on an ad hoc basis of whether an FOIA requester has sufficient data to make such an association would substantially undercut the protective purpose of section 6103(b)(2). The district court, like the I.R.S., cannot be aware of how much information the requester already possesses to facilitate the association.

The broader statutory context also provides...