Long v. U.S. I.R.S.

• Decision Date: 02 November 1984
• Docket Number: 83-3996,Nos. 83-3854,s. 83-3854
• Citation: 742 F.2d 1173
• Parties: 84-2 USTC P 9791 Susan B. LONG and Philip H. Long, Plaintiffs-Appellants, v. UNITED STATES INTERNAL REVENUE SERVICE, Defendant-Appellee. Susan B. LONG and Philip H. Long, Plaintiffs-Appellants, v. BUREAU OF ECONOMIC ANALYSIS, UNITED STATES DEPARTMENT OF COMMERCE, Defendant- Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 1173

742 F.2d 1173

84-2 USTC P 9791

Susan B. LONG and Philip H. Long, Plaintiffs-Appellants, v. UNITED STATES INTERNAL REVENUE SERVICE, Defendant-Appellee.

Susan B. LONG and Philip H. Long, Plaintiffs-Appellants, v. BUREAU OF ECONOMIC ANALYSIS, UNITED STATES DEPARTMENT OF

COMMERCE, Defendant- Appellee.

Nos. 83-3854, 83-3996.

United States Court of Appeals Ninth Circuit.

Argued and Submitted Feb. 7, 1984.

Decided Sept. 14, 1984.

As Amended on Denial of Rehearing Nov. 2, 1984.

Stephen K. Strong, Bendich, Stobaugh & Strong, Seattle, Wash., for plaintiffs-appellants.

Jonathan S. Cohen, Michael L. Paup, Dept. of Justice, Washington, D.C., for defendants-appellees.

Appeal from the United States District Court for the Western District of Washington.

Before TANG, SKOPIL and CANBY, Circuit Judges.

CANBY, Circuit Judge:

These consolidated cases present the issue of whether computer tapes and other records prepared in connection with the Internal Revenue Service's Taxpayer Compliance Measurement Program are exempted from disclosure under the Freedom of Information Act (FOIA), 5 U.S.C. Sec. 552 (1982), by section 701 of the Economic Recovery Tax Act of 1981 (ERTA), Pub.L. No. 97-34, 95 Stat. 172 (1981) (codified at 26 U.S.C. Sec. 6103(b)(2)). On motion for summary judgment, the district court, 566 F.Supp. 799, held that the tapes and records were exempt from disclosure. Because the district court applied an incorrect standard of review, we reverse and remand to the district court for further proceedings.

I

The Taxpayer Compliance Measurement Program (TCMP) is a continuing series of statistical studies measuring the level of taxpayer compliance with the tax laws. From the data compiled through the TCMP surveys, the IRS has developed a scoring technique, referred to as the discriminate function (DIF) system, by which individual and corporate tax returns having a high tax change potential are identified for the purpose of selecting returns for audit.

In Long v. IRS, the Longs seek data tapes from Phases II, III, and IV of the TCMP survey, which are in the possession of the IRS. On an earlier appeal in that case, we held that TCMP computer tapes were "records" subject to the disclosure provisions of FOIA, and that these tapes were not exempt from disclosure under the so-called Haskell amendment to 26 U.S.C. Sec. 6103(b)(2) to the extent that their disclosure would not pose a significant risk of indirect identification of taxpayers. Long v. IRS, 596 F.2d 362, 367 (9th Cir.1979), cert. denied, 446 U.S. 917, 100 S.Ct. 1851, 64 L.Ed.2d 271 (1980). We then remanded the case to the district court to determine whether such a risk existed. Id.

In the other case, Long v. BEA, the Longs seek copies of TCMP tapes for Phase III, Cycles 1-5, which had been edited to remove taxpayer identifying information and turned over to the Bureau of Economic Analysis to be used for estimating the total national income account. On an earlier appeal in that case, we affirmed a district court injunction ordering release of the tapes. Relying on our earlier opinion in Long v. IRS, we held that the BEA failed to establish that release of the tapes would pose a serious risk of indirect identification. Long v. BEA, 646 F.2d 1310, 1321 (9th Cir.1931). The Supreme Court, however, granted a stay pending certiorari.

Meanwhile, the Congress added an amendment to the Economic Recovery Tax Act providing that no federal law shall be construed to require the disclosure of standards used, or to be used, for the selection of returns for examination (or data used, or to be used, for determining such standards), "if the Secretary determines that such disclosure will seriously impair assessment, collection, or enforcement under the internal revenue laws." ¹ It is clear from the legislative history of the amendment that Congress was targeting these two cases. ² Upon passage of ERTA, the Supreme Court granted certiorari in Long v. BEA and remanded the case to us for reconsideration in light of the ERTA amendment. 454 U.S. 934, 102 S.Ct. 468, 70 L.Ed.2d 242 (1981). We in turn remanded to the district court. 671 F.2d 1229 (1982).

On remand the BEA case was consolidated with the IRS case. The district court held that the ERTA amendment to 26 U.S.C. Sec. 6103(b)(2) qualified as an exemption statute under FOIA exemption 3, 5 U.S.C. Sec. 552(b)(3). ³ Specifically, the district court found that the amendment qualified under Part B of exemption 3, in that the amendment both established particular criteria for withholding and referred to particular matters to be withheld. Turning to the question whether TCMP data tapes fall within the category of documents described in the amendment, the district court limited its "de novo inquiry" under FOIA to "(1) whether the records at issue are 'standards used or to be used for the selection of returns for examination, or data used or to be used for determining such standards,' and (2) whether the Secretary or his delegate has in fact determined that disclosure of the records would 'seriously impair assessment, collection, or enforcement under the internal revenue laws.' " Finding that there was no issue of material fact under the first prong and that the Commissioner had in fact made the requisite determination of impairment, the district court concluded that the government had met its burden under the de novo standard of establishing the applicability of the amendment to the TCMP tapes sought by the Longs.

II

The Longs' primary contention on appeal is that the district court's "de novo" review is not limited, as the district court thought, to determining the factual existence of the Secretary's determination of harm, but rather includes an independent determination of the question of harm. The government takes the position that 26 U.S.C. Sec. 6103 operates independently of FOIA, rendering FOIA's procedural requirements, including the requirement of de novo review, inapplicable. Alternatively, the government argues that section 6103 qualifies as an exemption statute under Part A of 5 U.S.C. Sec. 552(b)(3) and that de novo review of Part A statutes is limited merely to establishing the factual existence of the Commissioner's finding that disclosure would seriously impair tax collection. Thus, the government contends that the district court properly refused to look behind the Commissioner's impairment determination and substitute its judgment for the Commissioner's.

A. Is Section 6103 Subject to FOIA?

In support of its position, the government urges us to adopt the interpretation given section 6103 by Zale Corporation v. IRS, 481 F.Supp. 486 (D.D.C.1979). In Zale, the court held that section 6103 provided the sole standard governing disclosure of returns and return information, because in its view any other interpretation would render the subsequently enacted tax disclosure scheme "an exercise in legislative futility." Id. at 489. The Zale interpretation has been followed by numerous district courts, ⁴ and has been adopted explicitly by at least one circuit. See, e.g., King v. IRS, 688 F.2d 488, 495-96 (7th Cir.1982). See also White v. IRS, 707 F.2d 897, 900 (6th Cir.1983) (indicating that it was disposed to accept the Zale rationale). ⁵

Assuming that we would be free to adopt Zale, ⁶ we decline to do so. First, we disagree that section 6103 is irreconcilable with FOIA. Prior decisions of this court have held that section 6103 qualifies as an exemption statute under 5 U.S.C. Sec. 552(b)(3). See, e.g., Willamette Inds. v. IRS, 689 F.2d 865, 867-68 (9th Cir.1982), cert. denied, 460 U.S. 1052, 103 S.Ct. 1500, 75 L.Ed.2d 931 (1983); Long v. BEA, 646 F.2d at 1321; Long v. IRS, 596 F.2d at 365-70. ⁷ Second, neither section 6103 nor its legislative history contains any language indicating that section 6103 should operate independently of FOIA. This omission is significant in view of the fact that the legislative history of the Tax Reform Act of 1976 amply demonstrates Congress' awareness of FOIA at the time it was writing the nondisclosure provisions of the Internal Revenue Code. In the tax reform legislation, Congress not only made extensive amendments to section 6103, but it also added section 6110 to deal with the disclosure of IRS letter rulings. In doing so, it noted those cases that had held that private letter rulings were not tax returns or return information as defined in section 6103 and thus were not exempt from disclosure under section 552(b)(3) of FOIA. ⁸ Congress, wishing to exclude section 6110 from FOIA, specifically made known its intention by providing that section 6110 was to be the exclusive remedy where disclosure of written determinations were sought and that the rules and procedures of FOIA would not apply. 26 U.S.C. Sec. 6110(1) (1982). ⁹ To replace the procedures of FOIA, Congress created a new set of procedures to be applicable to requests under section 6110. Its failure to do likewise in amending section 6103 is highly persuasive of an intent not to preempt the procedural provisions of FOIA as to requests under section 6103.

Moreover, we find wholly unconvincing the government's argument that section 6103 and FOIA are irreconcilable merely because one is a specific nondisclosure statute and the other a specific disclosure statute. Exemption 3 of FOIA was designed to give effect to just such explicit nondisclosure statutes as section 6103. ¹⁰ As with all nondisclosure statutes given effect by section 552(b)(3), section 6103's purpose of confidentiality is not the same as FOIA's purpose of making information available to the public. If an exemption statute's purpose were determinative, then we would have to treat all exemptions statutes as independent of FOIA, a result clearly not consonant with FOIA. We therefore refuse to hold that section 6103 preempts FOIA. ¹¹

The government, however, argues that, although section 6103 may not preempt FOIA, the ERTA amendment does. The government bases this...