UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
OPINION
[1] Plaintiff filed this Freedom of Information Act ("FOIA") lawsuit, pursuant to 5 U.S.C. section 552 et seq. on April 26, 1994, seeking to compel the Internal Revenue Service ("IRS") to release documents known as Field Service Advice memoranda ("FSAs"). On March 15, 1996, when this Court first ruled, IRS lost the critical issues at the first stage of the litigation. Tax Analysts v. Internal Revenue Service, 1996 WL 134587 (D.D.C.). On July 8, 1997, when the Court of Appeals for this Circuit ruled, IRS lost the critical issues at the second stage of the litigation. Tax Analysts v. Internal Revenue Service, 117 F.3d 607 (D.C. Cir. 1997). Now, some four years after filing of this suit, IRS is still fighting tooth and nail to keep FSAs out of the public domain. It is useful, even at this late stage in these proceedings, to keep in mind the general principles articulated on countless occasions by our Court of Appeals, and reiterated most recently in Summers v. Department of Justice, 1998 WL 176714 (D.C. Cir., Apr. 17, 1998) that "FOIA, enacted in 1966, reflects 'a general philosophy of full agency disclosure'" and that "disclosure, not secrecy, is the dominant objective of [the statute]," Id. at 3* (internal citations omitted).
[2] Because it was unable to reach any accommodation with IRS on the remaining issues remanded to this Court, as it had been able to do with IRS at other times after prevailing in other FOIA litigation, Plaintiff Tax Analysts has filed a Motion to Compel Defendant to Comply with the D.C. Circuit's Mandate In This Case. Upon consideration of the Motion, the various pleadings filed by Plaintiff and Defendant on the issues raised in the Motion, the opinion of the Court of Appeals, other relevant case law, and the entire record herein, the Court grants the Motion in part and denies it in part. The Court will address the numerous issues raised in the papers seriatim.
1. TIMING
[3] Tax Analysts first asks that the Court order IRS to redact and release, within 90 days from the date of this Order, all the approximately 1300 FSAs at issue in this litigation, and suggests a procedure for such redaction and release. IRS' first objection is to the timing and claims that it can not possibly complete the necessary tasks within 90 days, and requests a staged six-month period for processing the 1300 FSAs. In particular, it promises to make available within 60 days of the date of this Order the 108 non- taxpayer-specific FSAs, redacted of material exempt under exemption 3, exemption 5, and exemption 7(E) of FOIA. As to the remainder of the approximately 1300 FSAs, the IRS promises to release them in 3 approximately equal installments, at 60-day intervals, within the 180 day time frame. Since Plaintiff does not object to this proposed release timetable the Court will approve it.
2. REDACTIONS
[4] As to the redactions, Defendant proposes to file a so- called Vaughn index to establish the appropriateness of all redactions with regard to the applicable FOIA exemption. Plaintiff objects strenuously, arguing that preparation of a Vaughn index for 1300 FSAs before any are released is not necessary and that IRS is merely dragging its feet in order to avoid compliance with the Court of Appeals decision. Instead, Tax Analysts proposes release of the redacted FSAs with the reasons for the deletions inserted in the redacted FSAs, as demonstrated in Plaintiff's Exhibit A. Moreover, Plaintiff argues very persuasively that this proposal is modeled on one of IRS' own regulations, namely I.R.C. section 6110 for TAMs. See 26 C.F.R. section 310.6110-3(b), as well as the very procedure which IRS agreed to in a consent order which covered GCMs, AODs, and TAMs in Taxation With Representation Fund v. IRS, 646 F.2d 666 (D.C. Cir. 1981).
[5] The Court is totally sympathetic to Plaintiff's position on the merits. There is no question that withholding of the FSAs until a Vaughn index is prepared will not only significantly delay release but will also make it more difficult to enable the reader to understand the information made public.
[6] Unfortunately, the law does not appear to support Plaintiff's position. Obviously, a consent order can not provide authority for this Court, nor can an IRS Regulation affecting a different type of document. Most importantly, there is case law in this Circuit which directly supports Defendant's position that an agency need not add explanatory material to a document to make it more understandable, in light of the redactions. See Yeager v. DEA, 478 F.2d 315, 321 (D.C. Cir. 1982). For this reason, Plaintiff's request must be denied.
3. SECTION 6103 -- TAX RETURN INFORMATION
[7] Plaintiff has requested that in releasing the FSAs Defendant redact "any true return information", as the Court of Appeals directed. 117 F.2d at 620. The IRS, in effect, re-argues its construction of 26 U.S.C. section 6103 -- an argument it lost in the Court of Appeals.
[8] After a careful and thorough analysis of Church of Scientology of California v. Internal Revenue Service, 484 U.S. 9 (1987), 26 U.S.C. section 6103, and 26 U.S.C. section 6110, the Court concluded that "[w]e see no difference, relevant to section 6103, between FSAs and Technical Advice Memoranda. Both are means by which the national office of the Office of Chief Counsel provides field offices with advice about the tax laws in response to questions regarding specific factual situations. FSAs and Technical Advice Memoranda serve similar purposes and the outline they follow is basically the same. This is not to suggest that FSAs and Technical Advice Memoranda are identical . . . None of these distinctions, however, has anything to do with the taxpayer privacy concerns underlying section 6103. With respect to the purposes of section 6103, Technical Advice Memoranda and FSAs amount to the same thing". 117 F.2d at 615-616.
[9] Consequently, the Court of Appeals concluded that "[l]egal analysis contained in FSAs are not 'return information' under section 6103, and the IRS's exemption 3 claim fails". 117 F.3d at 616. Finally, the Court noted that Congress would not order IRS to disclose the legal analysis portion of a Technical Advice Memorandum under section 6110 and then turn around and order IRS not to disclose the same portion of an FSA under section 6103. Id.
[10] From this analysis, it follows that the "true return information" the D.C. Circuit held should be redacted from FSAs before release is the return information to be redacted from Technical Advice Memoranda under section 6110(c)(1), i.e.,the names, addresses, and other identifying details of the person to whom the written determination pertains and of any other person, other than a person with respect to whom a notation is made under subsection (d)(1), identified in the written determination or any background file document subject to taxpayers' legitimate objections pursuant to section 6110(f).
[11] To emphasize what may be the obvious, this analysis applies to all portions of FSAs, i.e., the statement of issues, the conclusions section, statement of facts, and the legal analysis section.
4. ATTORNEY WORK PRODUCT
[12] Of the approximately 1300 FSAs, 309 related to docketed cases, Plaintiff has requested that they be released after IRS deletes any part that is "true . . . attorney work product." 117 F.3d at 619.
[13] In discussing the parameters of the work product doctrine the Court of Appeals ruled that "it also protects factual materials prepared in anticipation of litigation . . . [citations omitted]. Any part of an FSA prepared in anticipation of litigation, not just the portions concerning opinions, legal theories, and the like, is protected by the work product doctrine and fails under exemption 5". 117 F.3d at 619.
[14] Based on that ruling, the IRS takes the position that the great majority of the 309 docketed FSAs will be exempt because they were prepared, in their entireties, in anticipation of litigation or during the actual pendency of litigation. In short, under the IRS analysis, the basic thrust of the Court of Appeals opinion that agency working law is disclosable under FOIA would be eviscerated. This cannot be the result intended by the Court of Appeals. Given the entire tenor of the Court's opinion, it is clear that however "work product" is defined, and therefore redacted, the requester is entitled to the agency working law, legal analysis, and conclusions, so long as "the mental impressions, conclusions, opinions, or legal theories of an attorney" are protected. 117 F.3d at 619.
[15] Moreover, the IRS has promulgated an internal rule designed to address this very problem. In Internal Revenue Manual 1230, 293(2), it is provided that
The Internal Revenue Service will grant a request under the Freedom of Information Act (5 U.S.C. 552) for a record which [it] is not prohibited from disclosing by law or regulation unless the record is exempt from required disclosure under the FOIA and public knowledge of the information contained in such record would significantly impede or nullify IRS actions in carrying out a responsibility or function, or would constitute an unwarranted invasion of personal privacy.
[16] Thus, under its own internal operating rules, IRS would have the burden of establishing that disclosure of agency working law in docketed case FSAs "would significantly impeded or nullify IRS actions in carrying out a responsibility or function."
5. ATTORNEY CLIENT PRIVILEGE
[17] The Court of Appeals ruled with a fair degree of specificity and clarity that FSAs with communications regarding "the scope, direction, or emphasis of audit activity . . . are clearly covered by the attorney-client privilege". 117 F.3d at 619. When, in the next sentence, the Court of Appeals said that "the IRS may still assert the privilege with respect to particular portions of FSAs containing THIS SORT OF CONFIDENTIAL GOVERNMENT INFORMATION", id. (emphasis added), it was clearly referring back to the phrase "the scope, direction, or emphasis of audit activity" and was not creating, as IRS argues, some new open-ended category of government information to be withheld as attorney client privilege.
6. TAX TREATY SECRECY CLAUSES
[18] Defendant believes that portions of 32 of the FSAs fall under exemption 3 because of secrecy clauses contained in various tax treaties and information exchange agreements. The Court sees no reason to drag this issue out with attenuated briefing. Within 30 days from the date of this Order, IRS is to file a Memorandum of Law, with supporting affidavits if appropriate, spelling out why it believes that any of the FSAs should be withheld because of governing treaties or international agreements. Tax Analysts will have 15 days to respond, and IRS will have 5 days thereafter to file a reply.
7. PUBLICATION OF REDACTED FSAs AS "READING ROOM" MATERIAL
[19] Tax Analysts requests that IRS be ordered to publish the redacted 1300 FSAs which are the subject of this lawsuit as "reading room" material, under 5 U.S.C. section 552(a)(2); it also requests that IRS be ordered to redact and publish as "reading room" material "all its other FSAs" under the same terms and conditions as the 1300 being processed. In addition, Tax Analysts requests that within six months of the date of this Order IRS publish a subject matter index to all FSAs released by that date, and update the index every six months thereafter.
[20] Section 552(a)(2)(B) of FOIA, the so-called "reading room" provision, requires "[e]ach agency . . . [to] make available for public inspection and copying . . . those statements of policy and interpretations which have been adopted by the agency and are not published in the Federal Register." This Court's earlier memorandum opinion ruled that FSAs fell within section 552(a)(2)(B), and directed IRS to release all the requested FSAs to Plaintiff. There was no discussion or consideration in the opinion about explicitly ordering IRS to make all the documents available in a reading room, and no such order was entered.
[21] Tax Analysts did not cross-appeal from the limited remedial order entered by this Court, and IRS argued before the Court of Appeals that any relief broader than release of the FSAs to Plaintiff would be beyond the District Court's authority. The Court of Appeals noted that "Tax Analysts has offered nothing in opposition to the IRS's argument regarding the limited scope of the remedy and it has not cross-appealed from the district court's order. We will, therefore, treat the argument as conceded for the purposes of this case only. . . . With the case in this posture there is no need for us to decide whether FSAs are 'statements of policy and interpretation which have been adopted by the agency' under section 552(a)(2)(B)." 117 F.3d at 609-610.
[22] However, not only has this issue already been decided by this Court, 1996 WL 134578, at *3 (D.D.C.), but the Court of Appeals characterization of FSAs as "agency law", "statements of an agency's legal position", "the considered view of the Chief Counsel's National Office on significant tax law issues", and part of "a body of coherent, consistent interpretations of the federal tax laws nationwide", 117 F.3d at 616, 617, strongly supports the conclusion already reached. Consequently, the fact that in its original opinion this Court chose to order only release of properly redacted FSAs to Plaintiff does not deprive it, at this juncture on remand, of the authority to order the full scope of the statutory remedy, namely treatment of the 1300 FSAs as "reading room" material.
[23] In light of the importance of these materials to taxpayers all over the United States, and the difficulties taxpayers often face trying to fully inform themselves about what constitutes IRS "agency law", and despite the objections of IRS, the Court deems this remedy entirely appropriate.
[24] Tax Analysts has also requested that IRS publish a subject matter index to these FSAs. While this suggestion makes good sense, and the Court hopes that IRS will adopt this user-friendly mechanism (especially in these days when the agency is, according to the media, attempting to improve its services to the public), the Court reluctantly concludes that there is no statutory authority for actually ordering such a remedy and therefore will not do it. Hopefully, the agency will respond to the request without being under court order.
[25] Tax Analysts also requests that IRS redact and publish as "reading room" material "all its other FSAs", index them, and update the index every six months. This request is far more problematic. IRS is correct that the Court has no subject matter jurisdiction to order any relief as to FSAs for which a request for release has not even been made and for which administrative remedies have not been exhausted. See Ogelsby v. Dept. Of the Army, 920 F.2d 57, 61-62 (D.C. Cir. 1990); American Federation of Gov't Employees v. Dept. Of Commerce, 907 F.2d 203, 209 (D.C. Cir. 1990).
[26] Again, the Court totally sympathizes with Plaintiff's practical argument that since the parties negotiated a similar consent order procedure for reading room publication of future GCMs, AODs, and TAMs, after a remand in Taxation with Representation Fund v. IRS, 646 F.2d 666 (D.C. Cir. 1981), and IRS offers no sound policy reason for not agreeing to a similar procedure in this case, that it simply makes no sense to have Tax Analysts file repetitive FOIA requests each week or each month for all newly issued FSAs now that the Court of Appeals has ruled on the legal issues.
8. MISCELLANEOUS MATTERS
[27] Plaintiff has made two other requests for which there is no statutory authority or jurisdiction. First, Plaintiff requests that IRS release to any taxpayer requesting an FSA in the future a copy of that FSA, within 10 working days of receipt of the request, with the deletions provided in this Court's order, with the exception of return information. As already discussed, the Court has no subject matter jurisdiction to grant such a request.
[28] Plaintiff also requests that IRS be ordered to mail notice to each concerned taxpayer of its intention to disclose each of the approximately 1300 FSAs at issue in this suit as well as any FSAs issued in the future, so that any dispute over redactions can be litigated in the Tax Court. There is obviously no authority for this fanciful suggestion which Plaintiff must have dreamed up after evaluating the four years it has taken to prevail in a lawsuit in which it has not yet obtained release of the FSAs to which two courts have no ruled it is entitled.
April 30, 1998
Gladys Kessler
U.S. District Judge