Tax Analysts v. I.R.S.
| Decision Date | 14 June 2002 |
| Docket Number | No. 01-5232.,No. 01-5231.,01-5231.,01-5232. |
| Citation | 294 F.3d 71 |
| Parties | TAX ANALYSTS, Appellant, v. INTERNAL REVENUE SERVICE, Appellee. |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Appeals from the United States District Court for the District of Columbia (No. 96cv02285).
William A. Dobrovir argued the cause for appellant/cross-appellee. With him on the briefs was Cornish F. Hitchcock.
Jonathan S. Cohen, Attorney, United States Department of Justice, argued the cause for appellee/cross-appellant. With him on the briefs were Roscoe C. Howard, Jr., United States Attorney, and Karen D. Utiger, Attorney, United States Department of Justice.
Before: EDWARDS, HENDERSON, and GARLAND, Circuit Judges.
Opinion for the Court filed by Circuit Judge HARRY T. EDWARDS.
Several cases over the last two decades have required this court to consider whether records and documents of the Internal Revenue Service ("IRS" or "the Service") are exempt from public disclosure under the Freedom of Information Act ("FOIA"), 5 U.S.C. § 552 (2000). In this case, the District Court determined that the IRS' Legal Memoranda ("LMs") and the Office of Chief Counsel's ("OCC") intradivisional Technical Assistance memoranda ("TAs") are exempt from disclosure pursuant to the deliberative process privilege encompassed in FOIA Exemption 5, 5 U.S.C. § 552(b)(5). The District Court further held that IRS need not segregate and release agency working law from TAs withheld pursuant to Exemption 5's attorney work product privilege. We affirm the District Court's judgment and adopt its reasoning and conclusions on these points.
The District Court also ordered IRS to release eight TAs, finding the information not exempt from disclosure under FOIA Exemption 7(E), because the information did not concern "investigations which focus directly on specifically alleged illegal acts, illegal acts of particular identified officials, acts which could, if proved, result in civil or criminal sanctions." Tax Analysts v. IRS, 152 F.Supp.2d 1, 14 (D.D.C.2001) [hereinafter "Mem. Op. II"]. This was error. We therefore reverse and remand on this point so that the District Court may reassess this material pursuant to the correct legal standard.
Finally, the District Court ruled that IRS properly withheld five TAs issued to program managers pursuant to Exemption 5's deliberative process privilege, but held that IRS must release five other such TAs. IRS appeals the latter determination as to three of the five documents that were ordered released. After reviewing the TAs in camera, we hold that the District Court correctly distinguished between TAs that are part of an internal give-and-take discussion and TAs that reflect OCC's considered legal conclusions. We therefore affirm the judgment of the District Court on these issues.
Tax Analysts is a non-profit organization that publishes news and other material on taxation. In 1995, Tax Analysts made a FOIA request for several categories of unpublished IRS internal memoranda. In response, the Service released certain documents but withheld others. Tax Analysts brought an action in the District Court for the District of Columbia. Pursuant to intervening legislation and a partial settlement by the parties, most of the categories of memoranda were eventually released. The two categories still at issue are LMs and certain sub-categories of TAs.
On the basis of a largely undisputed factual record, the District Court described LMs as follows:
LMs are prepared by so-called "docket attorneys" in the Office of Chief Counsel to assist in the preparation and review of proposed revenue rulings. Revenue rulings are official interpretations of the Internal Revenue Code and other tax materials. Before a proposed revenue ruling is published and achieves the status of precedent, it must pass through a multi-faceted review process that is not complete until the Office of the Assistant Secretary (Tax Policy) at the Department of Treasury grants its final approval. As a proposed revenue ruling works its way through this process, it is accompanied by a "publication package." Sometimes, but not always, the publication package includes a LM. According to the Chief Counsel Publications handbook, LMs may include a restatement of the proposed revenue ruling's issue and holding; justification, arguments, and lines of research that are not reflected fully in the proposed revenue ruling; and the principal arguments for reaching a contrary position. The LM serves as briefing material for the reviewers, providing a comprehensive summary of the drafter's legal research as well as the drafter's evaluation of the proposed ruling's strengths and weaknesses. At various points in the approval process the publication package may be returned to the drafter for revisions. Once approved by Treasury, revenue rulings are published in the Internal Revenue Bulletin for the information and guidance of taxpayers. There is no formal process, however, whereby the LM is conformed to reflect the final published revenue ruling.
After a proposed revenue ruling is definitively approved or rejected, the publication package is archived and can be retrieved by reference to the number of the proposed revenue ruling. The accompanying LM, if any, is archived with the rest of the publication package, but there is no indexing or retrieval system by which one can identify those files that contain an LM. IRS attorneys sometimes keep copies of LMs for their own reference, and may retrieve the revenue ruling file if they wish to probe the history behind a certain revenue ruling. Attorneys may exchange LMs informally, but they are not distributed through official channels.
Tax Analysts v. IRS, 97 F.Supp.2d 13, 16 (D.D.C.2000) [hereinafter "Mem. Op. I"] (internal citations omitted).
As for TAs, the District Court offered the following description:
TAs are prepared by the four technical divisions within the Office of Associate Chief Counsel (Domestic): the Office of Assistant Chief Counsel (Passthroughs & Special Industries), the Office of Assistant Chief Counsel (Income Tax & Accounting), the Office of Assistant Chief Counsel (Corporate), and the Office of Assistant Chief Counsel (Financial Institutions & Products). These technical divisions prepare TAs in response to requests from many different offices for many different purposes. The IRS has attempted to categorize the TAs by requester. One such category, TAs to the district or regional offices of the IRS or Office of Chief Counsel, or Service Centers ("the field") were dismissed from the case in the context of the IRS's motion to dismiss. Four categories remain: TAs to program managers in the national office, TAs to component offices of the national Office of Chief Counsel (intra-national office TAs), TAs to specific taxpayers, and TAs to federal and state government agencies. Within each of these four categories, the TAs can be further categorized by their purpose. For example, TAs to program managers fall into eight different categories, and intra-national office TAs fall into four different categories.
Id. at 20 (internal citations omitted).
The District Court reviewed sample documents in camera, along with a Vaughn index prepared by IRS. Both parties moved for summary judgment. The court granted IRS' motion as to LMs, which IRS had claimed were exempt under FOIA Exemption 5's deliberative process privilege. Id. at 16-18. The District Court held that the withheld portions of LMs did not constitute IRS working law and were therefore exempt under the privilege. Id. The District Court reasoned that, like the Background Information Notes in Arthur Andersen & Co. v. IRS, 679 F.2d 254 (D.C.Cir.1982), LMs were written by lower-level attorneys for use by senior decisionmakers. Id. at 16-17. The District Court found that LMs are not officially approved by the senior decisionmakers and do not "emanate from [OCC] with any appearance of authority." Id. at 17.
The District Court distinguished LMs from the General Counsel's Memoranda at issue in Taxation With Representation Fund v. IRS, 646 F.2d 666, 670 (D.C.Cir. 1981) [hereinafter "TWRF"], which were used to promote uniformity in IRS policy. Mem. Op. I at 17. The court found that, unlike General Counsel's Memoranda, LMs are not updated to reflect the national office's current position, widely distributed within IRS, or officially reconciled to reflect uniform policy. Id. The District Court also distinguished LMs from the Field Service Advice memoranda ("FSAs") at issue in Tax Analysts v. IRS, 117 F.3d 607 (D.C.Cir.1997), because LMs flow "upward" from staffers to reviewers, while FSAs flow "outward" from OCC to field personnel. Id. (citing Tax Analysts, 117 F.3d at 617). Thus, the District Court upheld IRS' policy of redacting the portions of LMs reflecting the authors' opinions and analysis. Id. at 17-18.
With regard to TAs, the District Court ordered further briefing. Id. at 21-23. The court then rejected Tax Analysts' argument that IRS was required to demonstrate that it had complied with the so-called "harm rule," a policy set forth in the Internal Revenue Manual ("Manual"). Id. at 15 n. 3. The "harm rule" stated that IRS would grant FOIA requests unless the record is exempt and disclosure would significantly impede IRS actions in carrying out a responsibility or function. Id. The District Court found that the rule is non-binding. Id. Tax Analysts moved for reconsideration of this ruling. In Mem. Op. II, the District Court denied Tax Analysts' motion as untimely. The District Court also revisited the merits and found that the Manual's harm rule, which had been revised, was still not binding because it lacked mandatory language and did not demonstrate that IRS intended to be bound by the policy. Id. at 7-8.
The District Court then turned to...
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