Taylor v. U.S., 96-1563

• Decision Date: 10 February 1997
• Docket Number: No. 96-1563,96-1563
• Citation: 106 F.3d 833
• Parties: -897, 97-1 USTC P 50,203 Frank J. TAYLOR, Appellant, v. UNITED STATES of America; Internal Revenue Service, Appellees.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 833

106 F.3d 833

79 A.F.T.R.2d 97-897, 97-1 USTC P 50,203

Frank J. TAYLOR, Appellant, v. UNITED STATES of America; Internal Revenue Service, Appellees.

No. 96-1563.

United States Court of Appeals,

Eighth Circuit.

Submitted Dec. 11, 1996.

Decided Feb. 10, 1997.

Marilyn S. Jensen, Osceola, IA, argued, for appellant.

Sally J. Schornstheimer, Dept. of Justice, Washington, D.C., argued, for appellees.

Before BOWMAN and HEANEY, Circuit Judges, and SMITH, ¹ District Judge.

BOWMAN, Circuit Judge.

Frank J. Taylor appeals from the decision of the District Court ² granting summary judgment to the United States on some of his claims against the Internal Revenue Service (IRS), and dismissing the rest for failure to state a claim. See Taylor v. United States IRS, 915 F.Supp. 1015 (N.D.Iowa 1996); Taylor v. United States IRS, 186 B.R. 441 (N.D.Iowa 1995). We affirm.

I.

For tax years 1981 through 1988, Taylor did not timely file federal income tax returns, nor did he file state income tax returns. In 1987, he filed a petition in bankruptcy under Chapter 7 of the Bankruptcy Code. In 1989, he was denied a discharge for various infractions, including failing to follow court orders and to keep records, and transferring assets in violation of the Bankruptcy Code. Five years later, the trustee had located only eighteen dollars in assets, so the bankruptcy court made no determinations as to creditors' claims. The case was dismissed on April 27, 1993.

In 1986, 1987, and 1991, the IRS made three disclosures of written tax information concerning Taylor to the Iowa Department of Revenue and Finance (IDORF), pursuant to specific written requests from the IDORF. The IRS had been investigating Taylor, but did not bring criminal charges against him. The state of Iowa, however, following an investigation by the IDORF that was based at least in part on the information it received from the IRS, filed criminal charges against Taylor for his failure to pay state taxes or file returns. Taylor was convicted.

On March 11, 1993, Taylor brought an adversary proceeding in the Bankruptcy Court, claiming violations of the Internal Revenue Code (IRC), the Privacy Act, and his alleged constitutional privacy rights. ³ He also asked the court to determine his federal tax liabilities for certain tax years. The court granted summary judgment for the United States on some of Taylor's claims and dismissed the rest of his claims. Taylor appeals.

II.

We address first Taylor's arguments that the IRS wrongfully disclosed his tax information to the IDORF in violation of federal statutes. The court granted summary judgment to the United States on those causes of action, and we review de novo. Initially we note that any fact issues Taylor asserts do not concern material facts, so we are faced only with the question whether the United States is entitled to judgment as a matter of law. See Fed.R.Civ.P. 56(c).

A.

Under the IRC, federal tax "[r]eturns and return information shall be confidential" and are not subject to disclosure under ordinary circumstances. 26 U.S.C. § 6103(a) (1994). Certain exceptions obtain, however, including one that permits disclosure to state tax officials "upon written request by the head of" the state taxing authority, "for the purpose of, and only to the extent necessary in, the administration of [state tax] laws." Id. § 6103(d)(1) (1994). Taylor asserts that federal officials disclosed his tax information without the requisite written request from the IDORF. ⁴

Taylor contends that the written correspondence from the IDORF to the IRS specifically requesting tax information on Taylor came too late, because the tenor of the correspondence proves that an oral discussion of protected tax information took place before the IRS received the written requests. The District Court granted summary judgment to the United States on the grounds that an Agreement on Coordination of Tax Administration (March 30, 1983) and three Federal-State Implementing Agreements (June 4, 1984; October 20, 1986; and May 7, 1990) between the IRS and the IDORF constitute the necessary written request. We agree.

There is no indication in the text of the IRC's confidentiality and disclosure statute that Congress intended to require an individualized request in order to satisfy the strictures of § 6103 relevant to disclosure to state tax officials. What is required of the written statement is: (1) that the request be made "by the head of" the state agency charged under state law "with responsibility for the administration of State tax laws"; (2) that the request designate the individuals who are the representatives of the state taxing authority to receive the tax information; and (3) that the representatives named not be the chief executive officer of the state or any person who is not an employee of the taxing authority (nor certain other state employees described in the statute). Taylor does not claim that the Agreement on Coordination and the Implementing Agreements between the IRS and the IDORF do not meet the requirements of the statute. Moreover, we have examined the portions of the agreements that the parties submitted in the record on appeal and we see nothing to suggest that these documents fail to satisfy the statutory requirements of § 6103(d). Our conclusion accords with those reached by two of our sister circuits. (The IRS has coordinating and implementing agreements with the taxing authorities of all fifty states.) See Long v. United States, 972 F.2d 1174, 1179 (10th Cir.1992); Smith v. United States, 964 F.2d 630, 633 (7th Cir.1992), cert. denied, 506 U.S. 1067, 113 S.Ct. 1015, 122 L.Ed.2d 162 (1993).

Taylor argues that, if we allow the agreements at issue to operate as standing requests for disclosure of taxpayer information, we will "totally eviscerate[ ] Section 6103 as a statutory implementation of a right of privacy." Appellant's Brief at 12. We disagree. The confidentiality of taxpayer information is by no means absolute. The bulk of § 6103 constitutes exceptions to the general rule of non-disclosure. See Church of Scientology v. IRS, 484 U.S. 9, 15, 108 S.Ct. 271, 275, 98 L.Ed.2d 228 (1987) ("Subsections (c) through (o) of § 6103 set forth various exceptions to the general rule that returns and return information are confidential and not to be disclosed. These subsections provide that in some circumstances, and with special safeguards, returns and return information can be made available to ... state tax officials...."). Notwithstanding the need to prevent abusive disclosure of federal taxpayer information by the IRS and others, Congress clearly recognized the need for disclosure of such information in certain carefully delineated circumstances. Disclosure of individual taxpayer information by the IRS to a state taxing authority via a standing written agreement that is carefully crafted to satisfy concerns for confidentiality implements rather than "eviscerates" the will of Congress.

B.

Taylor also argues that the District Court erred in granting summary judgment to the United States on his claim that the disclosures to the IDORF violated the Privacy Act, 5 U.S.C. § 552a (1994). Section 552a prohibits federal agency disclosure of "any record" kept by that agency "unless disclosure of the record would be ... for a routine use as defined in subsection (a)(7) of this section and described under subsection (e)(4)(D) of this section." Id. § 552a(b)(3). A "routine use" is defined as "the use of such record for a purpose which is compatible with the purpose for which it was collected." Id. § 552a(a)(7). Subsection (e)(4)(D) requires the agency to publish in a timely manner in the Federal Register a notice of "each routine use of the records contained in the system, including the categories of users and the purpose of such use."

It is undisputed that the IRS published the necessary notices in the Federal Register for its "Individual Returns Files, Adjustments and Miscellaneous Documents Files" records system and its "Examination Administrative File" records system. See 50 Fed.Reg. 29,821, 29,857 (1985) ("Disclosure of returns and return information may be made only as provided by 26 U.S.C. 6103."). Further, it is clear that the disclosure of federal taxpayer information collected for the purpose of federal tax administration to state tax officials for the purpose of state tax administration is "use of [the] record for a purpose ... compatible with the purpose for which it was collected." 5 U.S.C. § 552a(a)(7). Taylor's argument that the IRS may disclose federal tax information only for the purpose of federal tax administration is unavailing. Under § 6103, which (as the Federal Register notice states) governs the "routine use" of taxpayer information, "tax administration" includes "the administration, management, conduct, direction, and supervision of the execution and application of the internal revenue laws or related statutes (or equivalent laws and statutes of a State)." 26 U.S.C. § 6103(b)(4)(A)(i) (1994) (emphasis added). As we have already discussed, the IRS's disclosures were in compliance with the restrictions set forth in § 6103(d).

We conclude that the District Court did not err in granting summary judgment for the government on Taylor's Privacy Act claim.

III.

The claims remaining in Taylor's lawsuit after the summary judgment motion was granted were dismissed on motion of the United States for failure to state a claim. We review de novo. See Labickas v. Arkansas State Univ., 78 F.3d 333, 334 (8th Cir.) (per curiam), cert. denied, --- U.S. ----, 117 S.Ct. 395, 136 L.Ed.2d 310 (1996).

Taylor argues that "Congress lacks the power to legislate Section 6103," because the statute violates his "fundamental right to financial privacy." Appellant's Brief at 8. He cites two cases for the proposition that "[t]he right to financial privacy is in fact deeply rooted in this Nation's history and tradition." Id. It is apparent that...