Tax Analysts v. I.R.S.

• Decision Date: 24 July 2007
• Docket Number: No. 06-5136.,06-5136.
• Citation: 495 F.3d 676
• Parties: TAX ANALYSTS, Appellee v. INTERNAL REVENUE SERVICE, Appellant.
• Court: U.S. Court of Appeals — District of Columbia Circuit

495 F.3d 676

TAX ANALYSTS, Appellee v. INTERNAL REVENUE SERVICE, Appellant.

No. 06-5136.

United States Court of Appeals, District of Columbia Circuit.

Argued April 19, 2007.

Decided July 24, 2007.

Appeal from the United States District Court for the District of Columbia (No. 05cv00934).

Francesca U. Tamami, Attorney, United States Department of Justice, argued the cause for the appellant. Jeffrey A. Taylor, United States Attorney, and Jonathan S. Cohen, Attorney, were on brief. Michael J. Martineau, Attorney, entered an appearance.

Cornish F. Hitchcock argued the cause for the appellee. William A. Dobrovir was on brief.

Before HENDERSON, ROGERS and KAVANAUGH, Circuit Judges.

Opinion for the court filed by Circuit Judge HENDERSON.

KAREN LeCRAFT HENDERSON, Circuit Judge:

Tax Analysts brought this action to compel the Internal Revenue Service (IRS) to disclose, inter alia, e-mails containing legal advice that lawyers in the IRS Office of the Chief Counsel (OCC) sent to IRS field personnel. The district court granted summary judgment to Tax Analysts on the ground that the documents sought constitute "Chief Counsel advice" (CCA) which the IRS is required to disclose under 26 U.S.C. § 6110. Tax Analysts v. IRS, 416 F.Supp.2d 119, 121 (D.D.C.2006). The IRS contends the statute's plain language makes clear that such advice is not CCA or, alternatively, if the language is ambiguous, that the IRS has reasonably construed it to exclude the e-mails from CCA. We conclude that the plain statutory language mandates that the IRS disclose the e-mails.

I.

Section 6110 of Title 26 of the United States Code provides generally with regard to IRS documents that "the text of any written determination and any background file document relating to such written determination shall be open to public inspection at such place as the Secretary may by regulations prescribe." 26 U.S.C. § 6110(a). Until 1998 the statute defined "written determination" as "a ruling, determination letter, or technical advice memorandum." 26 U.S.C. § 6110(b)(1) (1998). In Tax Analysts v. IRS, 117 F.3d 607 (D.C.Cir.1997), we held that this definition required the IRS to disclose as written determinations "Field Service Advice" memoranda (FSAs), which were prepared by lawyers in the IRS's Office of Chief Counsel (OCC) in response to requests for "legal guidance, usually with reference to the situation of a specific taxpayer," "from field personnel of either the [OCC] or the IRS, such as field attorneys, revenue agents, and appeals officers," Tax Analysts, 117 F.3d at 609.

In 1998, the Congress codified the court's holding in Tax Analysts by amending section 6110 in two important respects. First, it amended the definition of "written determination" to expressly include "Chief Counsel advice." Internal Revenue Service Restructuring and Reform Act, Pub.L. No. 105-206, § 3509(a) (1998). Second, it added subsection 6110(i) entitled "Special rules for disclosure of Chief Counsel advice," which defines "Chief Counsel advice" as

written advice or instruction, under whatever name or designation, prepared by any national office component of the Office of Chief Counsel which—

(i) is issued to field or service center employees of the Service or regional or district employees of the Office of Chief Counsel; and

(ii) conveys—

(I) any legal interpretation of a revenue provision;

(II) any Internal Revenue Service or Office of Chief Counsel position or policy concerning a revenue provision; or

(III) any legal interpretation of State law, foreign law, or other Federal law relating to the assessment or collection of any liability under a revenue provision.

Id. § 3509(b)(i)(1)(A) (codified at 26 U.S.C. § 6110(i)(1)(A)).

In September 1998, OCC issued a "Questions and Answers" document addressing issues raised by the new CCA disclosure provisions in section 6110. Regarding e-mail advice from OCC lawyers, the document stated that, although "e-mail is a writing," if an e-mail "consumed less than two hours of research and preparation, such that [a lawyer] need not open a case file, then, the e-mail is to be treated like informal telephone advice (which is memorialized in writing, also)," noting that "[t]he legislative history to section 3509 clarifies that informal advice is not considered to be CCA." JA 59; see also Chief Counsel Directives Manual (CCDM) Exh. 33.1.2-1 (JA 102).

On June 7, 2004, Tax Analysts sent a letter to OCC requesting disclosure under section 6110 of, inter alia, "all written legal advice documents, whether or not styled CCA, prepared by National Office components of OCC for the field, and which have been withheld from public disclosure on the ground that such written advice `can be rendered in less than two hours,' or that such documents `can be prepared in less than two hours.'" Decl. of Assoc. Chief Counsel Deborah A. Butler ¶ 22 (JA 32).¹ The letter also included a request under the Freedom of Information Act (FOIA), 5 U.S.C. § 552, for records regarding the two-hour disclosure rule.

On July 12, 2004, the IRS responded to the section 6110 request with a letter stating that the request "`raises several issues that we are investigating' and that `[a]t this time we are not in a position to advise as to a timetable for response.'" Compl. ¶ 16(a) (alteration in original). In a follow-up e-mail dated February 4, 2005, the IRS advised Tax Analysts it would not respond to the request until after it completed processing another request from Tax Analysts, which it did not expect to occur until September 30, 2005. In response to the FOIA request, the IRS sent a series of letters requesting additional time to respond. In a letter dated April 21, 2005, the IRS stated it would "`try to respond to the FOIA portion of the [amended] request by May 23, 2005.'" Id. ¶ 17 (alteration in original).

On May 10, 2005, Tax Analysts, having received no documents from the IRS, filed this action in the district court. On February 27, 2006, the district court granted summary judgment in Tax Analysts' favor on the section 6110 request, concluding that "written advice rendered to regional employees by attorneys in the IRS Office of Chief Counsel's national office in less than two hours is `Chief Counsel advice' falling within the public inspection requirements of § 6110." Tax Analysts, 416 F.Supp.2d at 121.²

The IRS filed a notice of appeal on April 27, 2006.

II.

The court reviews the district court's grant of summary judgment de novo. Holly Sugar Corp. v. Johanns, 437 F.3d 1210, 1212-13 (D.C.Cir.2006); Milk Train, Inc. v. Veneman, 310 F.3d 747, 753 (D.C.Cir.2002). "The burden of proof with respect to the issue of disclosure of any information shall be on the Secretary and any other person seeking to restrain disclosure." 26 U.S.C. § 6110(f)(4)(A). Applying these standards, we conclude that the IRS has not met its burden and that Tax Analysts is, as the district court held, entitled under section 6110 to disclosure of the e-mails the IRS withheld from disclosure under its two-hour rule.

The district court correctly concluded that the plain language of section 6110 requires disclosure of the e-mails. Section 6110(a) unequivocally requires that the IRS make available for public inspection "the text of any written determination and any background file document relating to such written determination." Id. § 6110(a) (emphasis added). As amended in 1998, section 6110 defines "written determination" to include "Chief Counsel advice," id. § 6110(b)(1)(A), and defines "Chief Counsel advice," in turn, to include "written advice or instruction . . . prepared by any national office component of the Office of Chief Counsel which . . . is issued to field or service center employees of the Service or regional or district employees of the Office of Chief Counsel" and "conveys . . . any legal interpretation of a revenue provision," id. § 6110(i)(1)(A). The documents Tax Analysts seeks readily fit this description. They are written interpretations of revenue provisions prepared by lawyers in OCC and sent to field personnel. Nonetheless, the IRS has raised two interpretational arguments to support withholding the documents—each hinging on the formality of the advice provided.

Before the district court, the IRS argued primarily that "issued," as used in section 6110(i)(1)(A)(i), is ambiguous and should be interpreted to require that the advice be formally issued by OCC as its official position and therefore cannot apply to the "informal" written advice Tax Analysts seeks. On appeal, the IRS largely passes over the "issued" argument urged below and relies instead on its interpretation of the statutory term "component." According to the IRS, the informal advice of individual lawyers employed by a national office component "without supervisory review," Appellant's Br. at 22, cannot be considered to be advice of a "component" of OCC because a "`component' is an institutional entity, such as a Division, or perhaps a Branch within a Division," id. at 21. Thus, the IRS maintains, the informal, unreviewed advice of an individual lawyer is not "prepared by any national office component," 26 U.S.C. § 6110(i)(1)(A), and therefore not subject to the disclosure requirement in section 6110. We find neither of the IRS's arguments persuasive.

As a preliminary matter, Tax Analysts contends that the "component" argument, which the IRS acknowledges "was not emphasized below," Appellant's Br. at 20 n. 5, has been waived because it was not adequately presented to the district court. See United States ex rel. Hampton v. Columbia/HCA Healthcare Corp., 318 F.3d 214, 219 (D.C.Cir.2003) ("Arguments not presented to the district court will not be heard on appeal absent exceptional circumstances, and there are none in this case." (citing District of Columbia v. Air Fla., Inc., 750 F.2d 1077, 1084-85 (D.C.Cir. 1984))). Nonetheless, we assume, without deciding, that the argument has not been waived and we...