Smith v. US, 87-3067.

• Decision Date: 18 January 1989
• Docket Number: No. 87-3067.,87-3067.
• Citation: 703 F. Supp. 1344
• Parties: Thomas J. SMITH, Plaintiff, v. UNITED STATES of America, Defendant.
• Court: U.S. District Court — Central District of Illinois

703 F. Supp. 1344

Thomas J. SMITH, Plaintiff, v. UNITED STATES of America, Defendant.

No. 87-3067.

United States District Court, C.D. Illinois, Springfield Division.

January 18, 1989.

Wayne R. Golomb, Springfield, Ill., for plaintiff.

James Lewis, Asst. U.S. Atty., Springfield, Ill., David C. Hickman, Trial Atty., Tax Div., Washington, D.C., for defendant.

OPINION

RICHARD MILLS, District Judge:

This is a unique case — presenting a singular scenario.

The Court has found no case law dispositive of the issues posited. The uncommon facts here involve the disclosure of tax return information by a federal government tax official to a state tax official; and the matter is before the Court on cross-motions for summary judgment.

I — Facts

At the time of the disclosure, Ira Loeb was, and is still, the District Director for the Springfield District of the Internal Revenue Service. As such, he is the federal official chiefly responsible for the administration of the federal tax laws within the district. Plaintiff, Thomas Smith, was employed by the Illinois Department of Revenue and acted as the liaison official for the Federal-State Exchange Program (Program). The Program facilitates the exchange of confidential tax information between the IRS and the State of Illinois Department of Revenue (Revenue). As the liaison official, Smith was the contact point between the IRS and Revenue. During the relevant period, J. Thomas Johnson was the Director of the Illinois Department of Revenue.

In mid-October of 1984, information regarding Mr. Smith's tax delinquencies was brought to the attention of Mr. Loeb. Subsequently, Mr. Loeb received a memorandum from Eugene Winston, Chief of the Collection Division for the District, dated October 29, 1984. This memorandum stated that Mr. Smith had not filed a federal tax return for the years 1982 and 1983 and that he had outstanding liabilities for the tax years 1980 and 1981. After receiving this information, Mr. Loeb determined that it indicated a potential state tax violation by Mr. Smith and that this delinquency reflected poorly on Mr. Smith's ability to carry out his liaison responsibilities. Mr. Loeb then decided that the IRS should request that Mr. Smith be relieved of his position as the liaison official.

To accomplish his goal, Mr. Loeb determined that the Director of the Department of Revenue of Illinois should be contacted directly. Cognizant of disclosure laws, however, Mr. Loeb consulted IRS counsel for their opinion of whether the disclosures about Mr. Smith could be made. It was determined by counsel that the disclosure could be made lawfully under 26 U.S.C. § 6103(d) of the Internal Revenue Code.¹ Counsel further advised Mr. Loeb on the implications of disclosure in light of Rueckert v. Gore, 587 F.Supp. 1238 (N.D.Ill. 1984),² which involved disclosures of federal tax return information to the Illinois Department of Revenue. After receiving clearance from the IRS counsel, Mr. Loeb personally provided Mr. Johnson, the Director of Revenue, with the Winston memorandum and requested that Mr. Smith be relieved of his liaison responsibilities. The filing of Mr. Smith's complaint ensued.

II — Cross-Motions for Summary Judgment

Pursuant to Fed.R.Civ.P. 56(c), both parties have moved for summary judgment. Rule 56(c) mandates that summary judgment should be entered "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." The fact that cross-motions for summary judgment have been filed does not per se entitle the Court to dispense with the determination of whether questions of material fact exist. We must give no less careful scrutiny to the facts here than we would had only one litigant moved for summary judgment. See Lac Courte Oreilles Band of Lake Superior Chippewa Indians v. Voigt, 700 F.2d 341, 349 (7th Cir.), cert. denied, 464 U.S. 805, 104 S.Ct. 53, 78 L.Ed.2d 72 (1983). Having done so, however, we conclude that this cause is properly decided as a matter of law.

III — Section 6103(d) Violation

The parties agree, and the Court concurs, that the operative section of the Code is section 6103. The pertinent subsections of that section state:

(a) General Rule. — Returns and return information shall be confidential, and except as authorized by this title —

(1) no officer or employee of the United States

* * * * * *

shall disclose any return or return information obtained by him in any manner in connection with his service as such an officer or an employee or otherwise or under the provisions of this section. For purposes of this subsection, the term "officer or employee" includes a former officer or employee.

* * * * * *

(d) Disclosure to State tax officials. — Returns and return information with respect to taxes imposed by chapters 1, 2, 6, 11, 12, 21, 23, 24, 31, 44, 51, and 52 and subchapter D of chapter 36, shall be open to inspection by or disclosure to any State agency, body, or commission, or its legal representative, which is charged under the laws of such State with responsibility for the administration of State tax laws for the purpose of, and only to the extent necessary in, the administration of such laws, including any procedures with respect to locating any person who may be entitled to a refund.

Such inspection shall be permitted, or such disclosure made, only upon written request by the head of such agency, body, or commission, and only to the representatives of such agency, body, or commission designated in such written request as the individuals who are to inspect or to receive the return or return information on behalf of such agency, body, or commission. Such representatives shall not include any individual who is the chief executive officer of such State or who is neither an employee or legal representative of such agency, body, or commission nor a person described in subsection (n).

Section 7431 of the Code³ authorizes suit against the United States where "any officer or employee of the United States knowingly, or by reason of negligence, discloses any return or return information with respect to a taxpayer in violation of any provision of section 6103...." Id. § 7431(a)(1). However, the section provides that no liability will arise if the disclosure results from "a good faith, but erroneous, interpretation of section 6103." Id. § 7431(b).

Thus, section 6103 has three requirements: (1) disclosures are made only to the extent necessary for the administration of state tax laws; (2) disclosures are made only upon written request by the head of the agency charged with the administration of the state tax laws; and (3) disclosures are to be made only to the designated representative of the requesting agency.⁴

There is no dispute as to the first and third requirements. The disclosure here was made in furtherance of the administration of the state tax laws. Plaintiff does not argue otherwise. The third requirement provides a peculiar situation in this cause but is resolvable. The third requirement necessitates that disclosures be made to the designated representative of the requesting agency. Here, that designated agent was Plaintiff. Mr. Loeb provided the information directly to Mr. Johnson, thus bypassing Plaintiff. This is a situation which simply was not anticipated by section 6103. As Plaintiff is the designated agent of Mr. Johnson and because Plaintiff was the target of the disclosure, the Court finds no violation of section 6103 on the part of Mr. Loeb in making the disclosure directly to Mr. Johnson (subject to compliance with the second requirement). We must emphasize, however, that this deviation from the requirements of section 6103(d) is condoned only in consideration of the peculiar facts of this case.⁵

The contentions of the parties mainly focus on the second requirement of section 6103(d) — that disclosures be made only upon written request by the head of the agency charged with the administration of the state tax laws. The Government contends that this requirement is met by the Agreement on Coordination of Tax Administration (Coordination Agreement) and the Implementation Agreement Between the Illinois Department of Revenue and the Internal Revenue Service (Implementation Agreement). The IRS Disclosure of Official Information Handbook (1987) defines the Coordination Agreement as "the `basic' agreement which provides for the mutual exchange of tax data between a specific State tax agency and the Service. Its provisions encompass the required procedures and safeguards. Arrangements for continuing disclosures are made by means of an `implementing agreement'...." Id. at 1272-382, ¶ (33)-41(1). The Handbook further provides that an "implementing agreement will be developed and negotiated with each State tax agency which wishes to receive Federal returns and return information on a continuing basis pursuant to a basic agreement. It will supplement the basic agreement by specifying the detailed working arrangements and items to be exchanged...." Id. at 1272-383, ¶ (33)-42.1(1).

The Government contends that section 6103's written request requirement is met by the Coordination Agreement and the Implementing Agreement which "constitute standing written requests for certain types of information." This is correct, in that these agreements were promulgated in response to Congress' mandate in section 6103(d) that disclosures be made to state tax officials only under certain conditions. However, having invoked the agreements as satisfying one of section 6103(d)'s requirements, the Government must show that the agreements' requirements were followed in the same way section 6103(d)'s requirements must be followed. In essence, the agreements have become part and parcel of section 6103(d); thus, failure to follow the requirements of the agreements is a...