Linsteadt v. I.R.S., 83-1462

• Decision Date: 16 April 1984
• Docket Number: No. 83-1462,83-1462
• Citation: 729 F.2d 998
• Parties: 84-1 USTC P 9392 L.A. LINSTEADT and Wannelle Linsteadt, Plaintiffs-Appellants, v. INTERNAL REVENUE SERVICE and Roscoe L. Egger, Commissioner, Defendants-Appellees. Summary Calendar.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 998

729 F.2d 998

84-1 USTC P 9392

L.A. LINSTEADT and Wannelle Linsteadt, Plaintiffs-Appellants, v. INTERNAL REVENUE SERVICE and Roscoe L. Egger, Commissioner,

Defendants-Appellees.

No. 83-1462

Summary Calendar.

United States Court of Appeals, Fifth Circuit.

April 16, 1984.

Tarlton, Douglas, Kressler & Wuester, William O. Wuester, Fort Worth, Tex., for plaintiffs-appellants.

Glenn L. Archer, Jr., Asst. Atty. Gen., Michael L. Paup, Chief, Appellate Section, Richard W. Perkins, Atty., Stephen Gray, Tax Div., U.S. Dept. of Justice, Washington, D.C., for defendants-appellees.

Appeal from the United States District Court for the Northern District of Texas.

Before BROWN, TATE and HIGGINBOTHAM, Circuit Judges.

TATE, Circuit Judge:

The plaintiffs, L.A. Linsteadt and his wife, sue under the Freedom of Information Act ("the Information Act"), 5 U.S.C Sec. 552, to require the Internal Revenue Service ("IRS") to permit them access to certain agency records. They appeal from summary judgment rejecting their demand insofar as an agency-prepared memorandum that reported only the facts stated by the Linsteadts themselves in an interview between them and an IRS special agent.

I. Overview

The principal legal issue, as will be stated below in more detail, is whether--as the defendant agency contends, and as the district court held--the agency's duty to disclose "return information" is entirely measured by a provision of the Internal Revenue Code, 26 U.S.C. Sec. 6103; or whether, as the plaintiffs contend, that provision is an exempting statute under the Information Act, 5 U.S.C. Sec. 553(b)(3), that furnishes the criteria for the duty to disclose, but which duty is nevertheless subject to the provisions of the Information Act. The difference is more than theoretical. If Sec. 6103 provides the sole measure of the duty, on judicial review the claimant has the burden of proving an abuse of the agency's discretion in nondisclosure. If, however, the Information Act applies and merely incorporates the criteria of Sec. 6103 as an exempting statute, on judicial review the district court determines the matter de novo, 5 U.S.C. Sec. 552(a)(4)(B), with the agency bearing the burden of showing that nondisclosure was warranted, id., by one of the nine specific exemptions listed in Sec. 552(b) of the Act. Following prior precedent of this court--and rejecting, as contrary to circuit panel practice, the suggestion of the IRS that we ignore this decision by a prior panel--we hold that, although Sec. 6103 may furnish the criteria for the agency's duty to disclose return information, judicial review of the agency's nondisclosure is governed by the Information Act.

This legal issue resolved, then the principal factual issue remaining is whether, in its alternative holding posited should this court find that the Information Act applies, the district court erred in determining that disclosure of a memorandum of the plaintiffs' own admissions to an IRS agent would "seriously impair Federal tax administration", 26 U.S.C. Sec. 6103(e)(7), or would "seriously interfere with enforcement proceedings," 5 U.S.C. Sec. 552(b)(7), two of the statutory criteria justifying agency nondisclosure. Applying the accepted principles that under the Information Act the agency has the burden to justify nondisclosure, we affirm the district court's factual determinations that the agency's refusal to disclose the memorandum was justified by these statutory exemptions from the disclosure requirements.

II.

On this appeal, the merit-issue concerns the denial of the Linsteadts' Information Act request for portions of an IRS memorandum that contained only their own factual statements as summarized by an IRS agent who interviewed them, as will be detailed more fully later. We will here discuss the interrelationship between the Information Act and 26 U.S.C. Sec. 6103, the factual context in which this issue arises, as well as the applicable jurisprudential principles.

A. The Freedom of Information Act, 5 U.S.C. Sec. 552

The Information Act provides that an "agency shall make available to the public," Sec. 552(a), its records upon request, Sec. 552(a)(3), except for nine specified exemptions, Sec. 552(b) (two of which are claimed by the IRS here to apply). On judicial review of an agency's failure to disclose its records, "the court shall determine the matter de novo ..., and the burden is upon the agency to sustain its action." Sec. 552(a)(4)(B). ¹

In resisting the Linsteadts' request for disclosure, the IRS relies upon Exemption 3 (the "exempting statute" exception) and upon Exemption 7(A) (the "investigatory records" exception) of Sec. 552(b). ² In this portion of the opinion, we will discuss the application of Exemption 3 to the present facts, reaching Exemption 7(A) in part IV below.

As set out in the margin, with regard to Exemption 3, the Information Act provides that it "does not apply to matters that are ... specifically exempted from disclosure by statute," provided that the statute meets certain requirements. The crux of the present disputed legal issue is whether agency records subject to an "exempting statute", such as the one upon which the IRS now relies, are completely exempted from any application whatsoever of the Information Act, or whether, instead, the Information Act's requirements of de novo judicial review and agency burden of proof for nondisclosure apply with regard to matters that the agency has statutory discretion not to disclose under the exempting statute. ³

B. 26 U.S.C. Sec. 6103

In refusing disclosure of the memorandum at issue to the Linsteadts, the IRS relies upon 26 U.S.C. Sec. 6103. This statute, in general, provides that a taxpayer's tax returns or tax "return information" (defined, as is conceded, to include the memorandum of information furnished by the taxpayer to the IRS with respect to his tax liability) is confidential and may not be disclosed to the public (nor to governmental agencies, except as authorized by the statute). These nondisclosure provisions of Sec. 6103 meet the requirement of proviso A to Exemption 3--requiring "that the matters be withheld from the public in such a manner as to leave no discretion on the issue," 5 U.S.C. Sec. 552(b)(3)(A) quoted note 2 supra (emphasis added)--so that a person (a "member of the public," insofar as another person's tax information is concerned) is not entitled to access to the tax return or return information of other taxpayers. Fruehauf Corporation v. Internal Revenue Service, 566 F.2d 574, 578, 580 (6th Cir.1980) (but specifically noting that the issue of discretionary release to a taxpayer himself, infra, was not at issue, 566 F.2d at 578 n. 6).

However, Sec. 6103 also provides that the taxpayer himself or his designee may have access to his own return and return information unless the Secretary determines that disclosure "would seriously impair Federal tax administration." 26 U.S.C. Sec. 6103(c), (e)(7). ⁴

The IRS contends that, by virtue of these provisions of Sec. 6103, the Information Act is not applicable to a taxpayer's request for access to his own tax return or tax return information. The tax return or return information of a taxpayer is protected therefore (it argues) from access even by the taxpayer himself, when the Secretary determines that federal tax administration would thereby be impaired.

C. Interrelationship of Sec. 6103 and the Information Act

In so contending, the IRS relies upon the construction of Secs. 6103(c) and (e)(7), and the interrelationship between these statutory provisions and the Information Act, declared by Zale Corporation v. United States Internal Revenue Service, 481 F.Supp. 486 (D.C.D.C.1979). Zale held that Sec. 6103(e)(7) (then (e)(6)) was intended to provide the sole standard governing disclosure or nondisclosure of tax return information, rather than being merely support for a claim of exemption under the Information Act's Sec. 552(b)(3) exemption. Construing Sec. 6103's particularized regulation of release of return information as a self-contained statutory scheme, Zale concluded that the generalized disclosure requirements of the Information Act were not applicable at all to regulation of the disclosure/nondisclosure of tax return information. Zale held, therefore, that judicial review of the agency's nondisclosure of tax return information was limited by the Administrative Procedure Act, 5 U.S.C. Sec. 701 et seq., to determining whether the Secretary's action was arbitrary or an abuse of his discretion in his impairment determination upon which nondisclosure was based. 481 F.Supp. at 490. The Zale court found no such abuse and upheld nondisclosure. 481 F.Supp. at 491.

Whatever the merits of the Zale interpretation, this circuit has held to the contrary. Chamberlain v. Kurtz, 589 F.2d 827 (5th Cir.), cert. denied, 444 U.S. 842, 100 S.Ct. 82, 62 L.Ed.2d 54 (1979). In Chamberlain, we held that 26 U.S.C. Secs. 6103(c) and (e)(7) (then, (e)(6)), indeed met the requirement of an exempting statute under Exemption 3(B), 5 U.S.C. Secs. 552(b)(3)(B) (quoted in note 2 supra )--as establishing sufficiently "particular criteria" on "particular types" of records to be withheld--so as "to avoid the evils of unfettered agency discretion with which Congress was trying to deal when [in 1977] it [more restrictively] amended Exemption 3." 589 F.2d at 839. Therefore, Sec. 6103(c), (e)(7) "permits the Secretary to withhold return information if he determines that such disclosure would 'seriously impair Federal tax administration.' " 589 F.2d at 843.

However, we also held that, under the Information Act, the IRS has "the burden of sustaining a decision to withhold information" from the taxpayer. 589 F.2d at 841. ⁵ Thus, contrary to the subsequent construction of Zale, supra, we held in Chamberlain that Sec. 6103(c), (e)(7) provide criteria for nondisclosure under Exemption 3, but that on judicial review the agency bears the...