Appellant's Brief

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

ARGUMENT NOT YET SCHEDULED

IN THE UNITED STATES COURT OF APPEALS
FOR THE DISTRICT OF COLUMBIA CIRCUIT

ON APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA

BRIEF FOR APPELLANT TAX ANALYSTS

WILLIAM A. DOBROVIR
P.O. Box 198
Sperryville, VA 22740-0198
(540) 987-9114

CORNISH F. HITCHCOCK
1100 17th Street, NW
10th Floor
Washington, DC 20036-4601
(202) 974-5111

Attorneys for Appellant

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STATEMENTS REQUIRED BY CIRCUIT RULE 28(a)(1)(A), (B), (C)

Certificate as to Parties, Rulings and Related Cases

(A) Parties and Amici

The following parties appeared before the United States District Court and are appearing in this court.

No Interveners or amici appeared.

(B) Rulings Under Review

The ruling under review is the Memorandum Opinion and Order of the United States District Court for the District of Columbia issued on August 27, 2002, by Hon. Ricardo J. Urbina, which appears on pp. 80-92 of the Joint Appendix. The ruling is not yet reported.

(C) Related Cases

There are no related cases within the meaning of Circuit Rule 28(a)(1)(C).

Statement with Respect to Procedural Motions

There are no procedural motions which would affect the calendaring of this case.

Corporate Disclosure Statement of Appellant Tax Analysts

Pursuant to F.R.A.P. 26.1 and Circuit Rule 26.1, appellant Tax Analysts declares:

1. Tax Analysts is a nonprofit corporation organized under the laws of the District of Columbia and is qualified as a charitable and educational organization described in Internal Revenue Code § 501(c)(3). Tax Analysts has no parent companies and no publicly held company owns any percentage of Tax Analysts.

2. Tax Analysts' general nature and purpose and its primary public education function is the publication and dissemination to the public in the United States and abroad of news and other information concerning the enactment and administration of the tax laws of the United States, the several states and other countries, the adjudication of tax cases by courts and other tribunals or the United States, the several states and other countries, and other subjects relating to taxation. Tax Analysts publishes, inter alia, a monthly magazine entitled The Exempt Organization Tax Review ("EOTR"), which concentrates on publication of news, opinions and [MISSING TEXT]

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BRIEF FOR APPELLANT TAX ANALYSTS

STATEMENT OF THE ISSUES PRESENTED FOR REVIEW

At issue here is whether the Internal Revenue Code ("IRC") allows the Internal Revenue Service ("IRS") to withhold documents by which the IRS revokes or refuses to grant tax exempt status. IRC § 6110(a) provides that "any written determination" — defined in the statute as including letter rulings and determination letters — shall be made public under § 6110 except, as provided in § 6110(l)(1), as to matters "to which § 6104 applies.” IRC § 6104 provides in pertinent part that letter rulings and determination Letters that grant exempt status must be disclosed under that section, but § 6104 says nothing about and thus does not apply to letter rulings and determination letters that deny ("EO denial letters") or revoke (EO revocation letters") tax exempt status.¹ However, IRS regulations categorize EO denial and revocation letters as "within the ambit" of § 6104. On the basis of this language IRS treats such letters as exempt from disclosure under § 6110 as well as under § 6104, which provides only for the disclosure of "grant" letters and does not mention EO denial or revocations letters. Relying on those regulations IRS has refused to disclose EO denial and revocation letters in this case.

The issues thus presented for review are:

1. Did the district court err in denying access to EO denial and revocation letters when § 6110 requires disclosure of "any" written determinations prepared by IRS except to the extent that § 6104" applies, "and the only relevant written determinations identified in § 6104, and hence to which it applies, are written determinations granting tax exempt status?

2. Did the district court misapply the holding in Chevron U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837 (1984), by failing to give effect to the plain language of the statutory text and instead deferring to IRS regulations that conflict with that text?

JURISDICTIONAL STATEMENT

The district court had jurisdiction of this action under 26 U.S.C. (IRC) § 6110(f)(4) and the Freedom of Information Act ("FOIA"), 5 U.S.C. § 552(a)(4)(B). This court has jurisdiction of this appeal under 28 U.S.C. § 1291. On August 27, 2002, the  district court granted defendant-appellee IRS' motion for summary judgment and denied plaintiff-appellant Tax Analysts' motion for summary judgment. (JA 3, ¶ 19). Tax Analysts filed its notice of appeal on September 4, 2002. (JA 93).

STATUTES AND REGULATIONS

The controlling statutes, IRC § 6103(a), (b)(2),  § 6104(a)(1)(A), (B), § 6110(a), (b)(1), (c)(1), (f)(4), (l)(1), and regulations, 26 CFR § 301.6104(a)-1(a), (b), (b)(1), (i)(1), (2), 26 CFR § 301.6110-1(a), § 301.6110-2(a), (d), (e), and 26 CFR § 601.201(n)(5), (6), are reproduced in the Addendum.

STATEMENT OF THE CASE

In this case Tax Analysts seeks disclosure of IRS written determinations. The written determinations at issue are EO denial letters, by which IRS has denied an application for recognition as an organization exempt from tax under IRC § 501(c)(3), and EO revocation letters, by which IRS has revoked such § 501(c)(3) tax exempt status previously granted.² Tax Analysts seeks disclosure of EO denial and revocation letters under IRC § 6110.³

After exhausting administrative remedies (JA 7, 26), Tax Analysts filed a complaint in the United States District Court for the District of Columbia. (JA 5-12). IRS filed an answer. (JA 24-29). Tax Analysts sought discovery under Fed. R. Civ. P.  34 of, and IRS produced certain EO denial and revocation letters that had entered the public domain. (JA 71-77). The parties stipulated that these documents, which explain why IRS denied or revoked tax exempt status, were typical of all the documents sought in this action. (JA 95-100.

Three of the excerpts from these letters in the record are:

Revocation of our recognition of your exempt status is based upon our determination that interest-free cash advances made indirectly by you to your officers, directors, and taxable entities owned by your officers and directors resulting in inurement of your earnings to private individuals. Code section 501(c)(3) prohibits inurement of the earnings of an organization described therein to private individuals.

* * *

Net earnings inured to the benefit of a private individual.

Your operation of a charter school, a change in activities was not approved by the Internal Revenue Service.

* * *

MUSIC SQUARE CHURCH was formed and operated by TONY ALAMO for the principal purpose of willfully attempting to defeat or evade federal income tax.

Due to the inseparability of MUSIC SQUARE CHURCH and its creator, and its failure to operate for exclusively charitable purposes, MUSIC SQUARE CHURCH is not an organization described in IRC 501(c)(3), and is not exempt from income tax by reason of IRC 501(a).

(JA 72, 74-75).

The parties cross moved for summary judgment. The district court granted IRS' motion for summary judgment and denied Tax Analysts' motion. This appeal followed.

The Statutes and the Regulations at Issue

Section 6110 provides for general public disclosure, after redaction of identifying information and other material specified in § 6110(c), of "any" IRS "written determination," a term defined to include letter rulings and determination letters inter alia. § 6110(a), (b)(1). The only relevant exception is IRC § 6110(l)(1), which provides that "[t]his section shall not apply to (1) any matter to which [IRC] § 6104 applies. Section 6104, in turn, provides in pertinent part for general public disclosure of letter rulings and determination letters by which IRS grants an organization's application for § 501(c)(3) status. Section 6104 does not refer to EO denial or revocation letters. It neither requires, authorizes, permits or forbids their disclosure. In plain language, § 6104 does not "apply" to them.

However, IRS long has refused to disclose EO denial and revocation letters, pursuant to regulations that declare that such rulings and written determinations, although not mentioned in, neither made disclosable nor barred from disclosure under IRC § 6104, are "within the ambit of § 6104." 26 CFR § 301.6110-1(a); 301.6104(a)-1(i). Specifically, as § 301.6104(a)-1(i) declares:

Under section 6110 certain written determinations issued by the Internal Revenue Service are made available for public inspection. Section 6110 does not apply, however, to matters on which the determination of availability for public inspection is made under section 6104. Accordingly, section 301.6110-1(a) describes matters which, for purposes of section 6110, are considered within the ambit of section 6104. Some determination letters and other documents relating to tax exempt organizations that are not open to public inspection under section 6104(a)(1)(A) and this section are nevertheless within the ambit of section 6104 for purposes of section 6110. These determination letters and other documents are therefore not available for public inspection under either section 6104 or section 6110. They include but are not limited to —

(1) Unfavorable rulings or determination letters (see section 601.201(n)) issued in response to applications for tax exemption,

(2) Rulings or determination letters revoking or modifying a favorable determination letter (see section 601.201(n)(6)). . . .

The Parties' Arguments in the District Court.

IRS argued below that EO denial and revocation letters were "return information" in their entirety, whose disclosure was prohibited by IRC § 6103. IRS conceded that § 6110 carved out an exception to § 6103, but argued that IRS' regulations cited and quoted above were valid and controlling and made § 6110 inapplicable to EO denial and revocation letters, even though they are not provided for at all in § 6104.

Tax Analysts argued below that these regulations are invalid under the principles long established in Chevron, 467 U.S. at 842-43, because they are contrary to "the unambiguously expressed intent of Congress" in the governing statute, § 6110, which requires disclosure of "any written determination," § 5110(a), unless, as provided in § 6110(l)(1), § 6104 "applies". Since § 6104 is silent about and hence does not "apply" to EO denial and revocation letters, the regulations, substituting "ambit" for application, are contrary to Congress'unambiguously expressed intent.

The District Court's Decision

The district court reached mightily to uphold IRS' "ambit" regulations. It ignored § 6110(l)(1) altogether. It purported to find an ambiguity in § 6110 that not even IRS had argued. Ignoring § 6110's coverage of "any written determination," the district court found the word "ruling" in § 6110 "ambiguous because Congress did not indicate what types of 'rulings . . . should be considered a (sic) written determination'" under § 6110. (JA 87). It then held IRS' regulations to be a reasonable interpretation of § 6110 entitled to Chevron deference. (JA88-89). Therefore, the district court concluded, EO denial and revocation letters are not written determinations disclosable under § 6110. (JA 91).

The district court recognized that  §6104 refers only to organizations "that are granted tax exempt status" (JA 89 (emphasis is the district court's)),  and "does not mention any disclosure requirements for organizations whose tax exempt status was revoked or denied." (Id.) Yet, inexplicably, the district court ignored altogether, not even mentioning, the dispositive provision of § 6110(l)(1), that the only rulings not covered by § 6110 are those "to which § 6104 applies."

STANDARD OF REVIEW

The district court granted summary judgment to IRS on a question of law. The standard of review is de novo.

SUMMARY OF ARGUMENT

1.

The district court erred in concluding that § 6110 was ambiguous and in deference to IRS regulations purporting to construe sections 6110 and 6104. The court instead should have granted summary judgment to Tax Analysts under "step one" of the supreme Court's Chevron test and not to the IRS under "step two" of the Chevron test.

Section 6110 unambiguously requires that, with exceptions not relevant here, there shall be disclosure of "any written determination, ” defined as "a ruling, determination letter, technical advice memorandum, or Chief Counsel Advice." The district court erred in its construction of § 6110 in two respects.

First, ignoring the statute's sweeping coverage of "any written determination," the district court held that § 6110 was ambiguous because it was not clear what "types" of "written determinations" fell within the scope of § 6110.

Second, it failed to consider at all the only relevant exception to the disclosure requirements of § 6110. That exception is § 6110(l)(1), which provides that § 6110 does not "apply" to any matter to which § 6104 "applies." Section 6104 applies to EO grant letters, not to EO denial or revocation letters. The decision below thus rests entirely upon an IRS regulation that is flatly inconsistent with unambiguous statutory language, a regulation that purports to place EO denial and revocation letters "within the ambit" of § 6104 and therefore outside of the disclosure regime of § 6110, even though § 6104 refers only to IRS letters that grant exempt status.

2.

The congressional intent manifest in the language of § 6110(l)(1)is reinforced by the structure of the single public law that in 1976 enacted the three statutes involved in this case: IRC §§ 6103, 6110 and 6104. The overall statutory scheme is simple. Section 6103 makes taxpayer's "return information," broadly defined, confidential. Section 6110 provides an exception to § 6103 for disclosure of all IRS written determinations save those disclosable under § 66104. EO denial and revocation letters, not disclosable under § 6104, therefore are disclosable under § 6110.

Only this reading brings the three sections into a harmonious whole. Section 6104 does not apply to EO denial and revocation letters that are not mentioned at all.

3.

The Senate report on the 1976 public law confirms this reading. Congress did not wish to create two disclosure regimes for IRS written determinations that grant tax exempt status, which the public law separately made disclosable under § 6104. Congress therefore wrote an exception into § 6110, i.e., subsection (l)(1), for matters covered by § 6104. EO denial and revocation letters are not covered by § 6104; therefore they are not excepted from and must be disclosed under § 6110.

4.

The district court entirely ignored the unambiguous language of § 6110(l)(1). It upheld IRS' "ambit" regulations by purporting to find an ambiguity in § 6110 as to what "types" of rulings and determination letters are considered "written determinations" to be disclosed under § 6110. No such ambiguity exists. The statute covers "any written determination," i.e., "any" ruling or determination letter. In addition, "rulings"  and "determination letters" are defined precisely in IRS regulations that are valid interpretations of § 6110; regulations that the district court also ignored.

5.

In sum, Congress left no gap between § 6110 and § 6104 for IRS to fill. The regulations are invalid, EO denial and revocation letters must be disclosed under § 6110, and the district court's judgment should be reversed.

ARGUMENT

I. The Regulations on Which the District Court Relied Violate Congress' Unambiguously Expressed latent and Are Not Entitled to Deference.

In this case the district court upheld and applied Treasury regulations which purport to implement sections 6110 and 6104 of the Internal Revenue code. The regulations declare that certain written determinations, i.e., EO denial and revocation letters, are not open to public inspection under § 6110 because they are "within the ambit" of § 6104. Those regulations are contrary to the intent of Congress expressed in the statute. They are not entitled to deference. They are invalid, the district court erred and this court should reverse.

A. Under Chevron and Its Progeny the Court Must Find What Congress Intended in the Statute.

As in all statutory construction cases, we begin with the language of the statute. The first step "is to determine whether the language at issue has a plain and unambiguous meaning with regard to the particular dispute in the case." The inquiry ceases "if the statutory language is unambiguous and 'the statutory scheme is coherent and consistent.'"

Barnhart v. Sigmon Coal Co., 534 U.S. 438, ___, 122 S. Ct. 941, 950 (2002) (citations omitted).

This court most recently restated Chevron step one in Wells Fargo Bank, N.A. v. Federal Deposit Insurance Corporation, No. 01-5280 (D.C. Cir., November 15, 2002). To decide whether the regulations in issue are entitled to deference, "[w]e start our analysis, as always, by asking whether Congress has spoken to 'the precise question at issue.' If it has, both we and the agency must give effect to Congress' unambiguously expressed intent." Id., slip op. at 4. As we show, application of Chevron step one can lead to only one conclusion, viz., that the regulations in issue are contrary to the intent of Congress and invalid.

This court applies "traditional tools of statutory construction to determine whether Congress has spoken to the precise question at issue." Bell Atlantic Telephone Co. v. FCC, 131 F.3d 1044, 1047 (D.C. Cir. 1997) (internal quotation marks omitted). These tools, used to find 'the plain meaning of the statute," are "the statute's text, legislative history, and structure." Id. "If this search yields a clear result, then Congress has expressed its intention as to the question, and deference" to the agency's regulation "is not appropriate." Id.

The language of the statute is first and foremost. If "the language at issue has a plain and unambiguous meaning with regard to the particular dispute in the case," then "[o]ur inquiry must cease." Robinson v. Shell Oil Co., 519 U.S. 337, 340 (1997). Thus the court must "begin, as always in a case in which the meaning of a statute is in issue, by examining Congress' language." Watt v. Energy Action Educational Foundation, 454 U.S. 151, 162 (1981); see also United States v. Wilson, 290 F.3d 347, 352-53 (D.C. Cir. 2002); Cummings v. Dep't of the Navy, 279 F.3d 1051, 1053-54 (D.C. Cir. 2002).

B. The Language of the Statutes Is Clear and Unambiguous.

Section 6110 opens by providing for public disclosure of "any written determination." § 6110(a), a term that includes "a ruling" and a "determination letter," § 6110(b)(1)(A). Before disclosure, the "names, addresses and other identifying details of the person to whom the written determination pertains" and certain other information is deleted. § 6110(c). The one relevant exception to § 6110 disclosure is § 6110(l)(1):

(1) Section not to apply.

This section shall not apply to —

(1) Any matter to which Section 6104 or 6105 applies.

The question here is whether § 6104 "applies" to EO denial and revocation letters. It does not. In pertinent part, § 6104 refers only to, providing only for public inspection of, "any letter or other document issued by the Internal Revenue Service "to a § 501(c) organization in which IRS determines "that such organization was entitled to exemption;" that is, letter rulings and determination letters that grant § 501(c)tax exempt status. IRC § 6104(a)(1)(A). Section 6104 is altogether silent about letters or other documents in which IRS determines that an organization is not entitled to exemption under § 501(c). In plain language § 6104 does not "apply" to EO denial and revocation letters.

C. The Regulations IRS Relies on Cannot Be Squared With the Statutes They Purport to Interpret.

The IRS regulations in issue here, and to which the district court gave deference, declare that written determinations by which IRS denies or revokes exempt status under § 501(c)(3) are not open to public inspection under § 6110 because they are "within the ambit" of § 6104. Whatever "ambit" means here (and IRS does not tell us), it cannot be squared with § 6110(l)(1).

The statute provides that § 6110 is "not to apply," that is, it "shall not apply" to "any matter to which § 6104 applies." When congress used the same word three times in a provision containing only 19 words altogether it must have meant the same thing each time. Congress could only have meant that § 6110 would apply to, i.e., govern the public inspection of, "any written determination" except those to which one of two other statutes "applies," i.e., similarly governs public inspection of. Section 6104 governs public inspection only of IRS rulings and determination letters (and background  documents) that grant tax exemption. Hence it "applies"only to such documents, leaving § 6110 still to "apply to," i.e.,  govern the public inspection of, EO denial and revocation letters and determination letters.

IRS' reasoning in the regulation in support of its conclusion that EO denial and revocation letters are not disclosable under § 6110 is the essence of bootstrap. The § 6104 regulation, quoted at p. 6 supra, asserts that "§ 6110 does not apply to matters for which the determination of availability for public inspection is made under § 6104." Section 6104 provides for "determination of availability for public inspection" only of rulings and determination letters that grant tax exemption, not of those that deny or revoke tax exemption. Yet IRS' regulation asserts that EO denial and revocation letters, which are neither open nor closed to public inspection under § 6104 — which does not mention them — "are nevertheless within the ambit of § 6104." How, is not explained, but they are "therefore not available for public inspection under either § 6104 or § 6110." 26 CFR § 301.6104(a)-1(i), id. (i)(1), (i)(2).

Quite simply, "the determination of availability for public inspection" of rulings and determination letters that deny or revoke, rather than grant § 501(c) tax exemption, is not "made under § 6104." Under the plain, unambiguous language of IRC § 6110(l)(1), § 6104 does not "apply" to such rulings. The regulation is invalid.

D. The Structure of the Statutes and Relevant Legislative History Ara Further Evidence of Congress' Intent That EO Denial and Revocation Letters Be Open to Public Inspection Under Section 6110.

1. The Structure of the Statutes.

The Supreme Court teaches that "the words of a statute must be read in their context and with a view toward their place in the overall statutory scheme." Davis v. Michigan Dep't of Treasury, 489 U.S. 803, 809 (1989). The reviewing court must fit "all parts into an harmonious whole." FTC v. Mandel Brothers, Inc., 359 U.S. 385, 389 (1959) (both cases quoted in Food and Drug Administration v. Brown & Williamson Tobacco Co., 529 U.S. 120, 133 (2000)).

Three provisions of the Internal Revenue Code, §§ 6103, 6104 and 6110, frame the issues and constitute the "overall statutory scheme" against which IRS' regulations must be measured. The pertinent provisions of all three were enacted together, in the same Title, Title XII, of the same public law, Pub. L. 94-455 (October 4, 1976), the Tax Reform Act of 1976.⁴ This "overall statutory scheme" first sets up broad prohibitions against public disclosure of taxpayer "return information." § 6103(a), (b)(2). It then carves out two exceptions to those prohibitions.

Section 6103 establishes a broad category of information relating to taxpayers, called "return information," § 6103(b)(2), which may not be disclosed absent a specific exception in § 6103 or elsewhere in the Code. § 6103(a). Sections 6110 and 6104 are two of those exceptions. Section 6110 provides for disclosure of "any," i.e., all, IRS written determinations. These are pronouncements by IRS that respond to a taxpayer's request for a statement of IRS' position on how the tax law applies to particular facts. While thus requiring disclosure of IRS tax law opinions, § 6110 protects taxpayer privacy by requiring deletion of information that would identify the taxpayer. § 6110(c)(1).

Section 6104 in pertinent part requires disclosure of IRS "letters and other" documents by which IRS grants tax exempt status under § 501(c) (i.e., as charities) to applicant organizations. § 6104(a)(1)(A). Unlike § 6110, § 6104 does not provide for deletion of identifying information. It would make no sense to have two disclosure regimes, one with deletion of identifying information and one without, for rulings and  determination letters that grant tax exemption. Congress therefore included in § 6110 the exemption in § 6110(l)(1), for "any matter to which § 6104 applies."

Reading the three disclosure provisions of the Tax Reform Act as a "harmonious whole," FTC v. Mandel Brothers, Inc., 359 U.S. at 389, leads to a single conclusion about Congress' intent. Return information is confidential except to the extent that such information is part of an IRS pronouncement on the tax law that could be of interest to other taxpayers. Such pronouncements are made public under § 6110 except for the subclass of such pronouncements granting tax exemption to charities, which are made public under § 6104. But EO denial and revocation letters, of which § 6104 makes no mention, are not in this latter subclass and remain disclosable under § 6110.

That § 6104 does not "apply" to EO denial and revocation letters and therefore that IRS' regulations are not a "reasonable" interpretation of § 6110(l)(1)is further demonstrated by another provision of § 6104, that all rulings respecting exemption of pension plans from tax are to be disclosed, whether favorable or unfavorable, except rulings for plans with fewer than 25 participants. § 6104(a)(1)(B). Section 6104 thus "applies" to unfavorable large plan pension plan rulings, which are to be disclosed, as well as to favorable and unfavorable small plan rulings that are not to be disclosed because of the 25 participant threshold. Therefore, under § 6110(l)(1), no pension plan rulings, neither those of 25-plus member plans that are disclosed under § 6104, nor the small plan rulings that are not disclosed under § 6104, are disclosable under § 6110; § 6104 "applies" to them by its terms. In contrast, EO denial and revocation letters, not dealt with in § 6104, are not natters to which § 6104 "applies".

2. Legislative History, Pre and Post.

Congress' intent, to exclude from § 6110 only the documents granting tax exempt status covered by § 6104, is reinforced by the only relevant legislative history. "The committee amendment" that enacted § 6110, i.e., § 1201(a) of the Tax Reform Act of 1976, "does not apply to IRS determinations . . . whether an organization is tax exempt, because these determinations are generally open to public inspection under present law." S. Rep. No. 94-938, 94th Cong., 2nd Sess. (1976) at 307.

This history is referred to in a report prepared by the staff of the Joint Committee on Taxation. Joint Committee on Taxation, Study of Present-Law Taxpayer Confidentiality and Disclosure Provisions as Required by Section 3802 of the Internal Revenue Service Restructuring and Reform Act of 1998, vol. II: Study of Disclosure Provisions Relating to Tax-Exempt Organizations (JCS-1-00) (January 28, 2000) ("JCT Staff Report"). The district court cited the report as indicating "that Congress is considering, but has not yet enacted, an amendment to § 6104's disclosure requirements" to include EO denial and revocation letters. The district court viewed this as confirming its holding that IRS' regulations excluding their disclosure under § 6110 reasonably interpret Congress'intent in 1976. (JA 90).

The district court misconstrued the JCT Staff Report. Citing Senate Report 94-938 quoted above, the report recited:

When section 6110 was enacted in 1976, Congress believed that section 6104 already permitted disclosure of guidance relating to tax exempt organizations. Thus, section 6110(k)(1) [now (l)(1)] provides, "this section shall not apply to any matter to which section 6104 applies." The regulations under section 6110 clarify which matters are within the ambit of section 6104 and, therefore, are not subject to disclosure under section 6110. 

JCT Staff Report, Part III.B.3, at 39. The JCT Staff Report went on to quote the portions of both the §  6110 and the § 6104 regulations that include EO denial and revocation letters "within the ambit" of § 6104. Id. at 40, quoting 26 CFR § 301.6110-1(a) and id. § 6104(a)-1(i), (1), (2).

The staff did not accept the propriety of IRS' "clarification." Citing back to the discussion just quoted, the staff concluded that "present law," as embodied in IRS' "ambit" regulations, "creates an unintended and inappropriate result," i.e., "the anomaly that, in some cases, there is greater disclosure of written determinations regarding taxable persons under section 6110 than there is of written determinations relating to tax exempt organizations." The staff recommended "that this anomaly be corrected and that all written determinations . . . involving tax exempt organizations be made available to the public." JCT Staff Report at 83.

The JCT Staff Report tells us two things. First, Congress did not intend EO denial and revocation letters to be exempt from § 6110 disclosure. Second, as an arm of the Legislative Branch, the JCT staff's only tool to correct the anomaly created by the IRS regulations was to recommend legislation. That the JCT staff did so does not mean, as the district court felt, that Congress in 1976 intended that anomalous result.

The district court erred in construing the JCT Staff Report as evidence that "Congress's exclusion of EO denial and revocation letters from Section 6104 displays Congress's intent to make such records  confidential." (JA 90). All the evidence, looking at "the overall statutory scheme" and fitting all its parts into a "harmonious whole" shows that Congress' intent was that EO denial and revocation letters be disclosed under § 6110.

II. The District court Erred in Ignoring the Dispositive Language of Section 6110(l)(1)and Skipping Chevron Step One.

The district court's opinion makes not a single reference to the dispositive provision of the statute, § 6110(l)(1). Had the district court considered § 6110(l)(1), it would have had to make a determination "whether Congress has directly spoken to the precise question at issue," for "if the intent of Congress is clear, that is the end of the matter." Chevron, 467 U.S. at 842. This is Chevron step one.

But the district court never came to grips with the crucial language, i.e. § 6110(l)(1), in which Congress has "directly spoken to the precise question at issue." That precise guestion is whether the disclosure of EO revocation and denial letters is governed and mandated by § 6110, or rather is governed and barred by § 6104. The district court never even looked to see if there was an ambiguity in Congress' words in § 6110(l)(1), "matters to which § 6104 applies." Instead, the district court found an ambiguity "because Congress did not indicate what types of 'rulings' or 'determination letters' should be considered a 'written determination.'" (JA 87).

There is no ambiguity in § 6110 on this score. The statute provides that "except as otherwise provided in this section, the text of any written determination . . . shall be open to public inspection." § 6110(a)(emphasis added). "'Written determination' means a ruling, determination letter. . . ." § 6110(b)(1).

These terms are further defined by regulation. The § 6110 regulation provides that "[a] 'ruling' is a written statement issued by the National Office [of IRS] to a taxpayer . . . that interprets and applies tax laws to a specific set of facts." A "'determination letter' is a written statement issued by a district director in response to a written inquiry that applies principles and precedents previously announced . . . to the particular facts involved." 26 C.F.R. § 301.6110-2(a), (d), (e). Had the district court referred  to the extensive excerpts from EO revocation and denial letters in the record (JA 71-77), which are typical of all such rulings and determination letters (JA 97-100), it could only have concluded that EO revocation and denial letters fit these definitions.

The § 6104 regulation refers specifically to "[u]nfavorable rulings or determination letters" and "[r]ulings or determination letters revoking or modifying a favorable determination letter or ruling." 26 CFR § 301.6104(a)-1(i)(1), (2). Indeed, all letters that IRS issues granting, denying or revoking tax exemption are either "rulings" or "determination letters" depending on whether they are issued by the National office (rulings) or key district directors (determination letters). 26 CFR § 601.201(n)(1), (2), (favorable rulings or determination letters), (5) (unfavorable rulings or determination letters), (6) (revocation rulings or determination letters).

Each EO denial and revocation letter is either a ruling or a determination letter. Each is thus undeniably within the documents included in the § 6110 umbrella of "any written determination." But if the statute had left any "gap for [the] agency to fill," Chevron, 467 U.S. at 843, the agency has filled the gap by making crystal clear that all EO rulings and determination letters are "written determinations" and specifying that EO denial and revocation letters are such written determinations.

Nonetheless, based on a purported but nonexistent ambiguity, the district court held "reasonable" IRS' "interpretation" of § 6110, i.e., that EO denial and revocation letters are not open to public inspection under § 6110 because they are “within the ambit" of § 6104. (JA 89). The district court did so by avoiding the difficult, if not impossible task of reconciling "any matter to which § 6104 applies" with "within the ambit of § 6104." Without saying so, the district court's error resulted in turning the silence of § 6104 on EO denial and revocation letters into the reverse its "application" to them.

The district court adverted to principles of special deference to Treasury notice and comment regulations interpreting the Code, founded in the special expertise of IRS and Treasury on this subject. (JA 88). IRS also argued below that deference is owed because of the length of time, now 25 years, since the § 6110 regulation was issued. Neither principle is applicable here. That deference is limited to regulations "that implement the congressional mandate in some reasonable manner." United States v. Cleveland Indians Baseball Co., 532 U.S. 200, 219 (2001). A regulation that does violence to the governing statutory provision, § 6110(l)(1), is not "reasonable". Unlike the statute involved in United States v. Mead Corp., 533 U.S. 218 (2001), here Congress did not "explicitly leave a gap for" IRS to fill, 533 U.S. at 227, quoting Chevron (internal quotation marks omitted). That regulations here were issued after notice and comment does not save them when they are, as here, "manifestly contrary to the statute," cf. Mead, id.

Nor is it relevant here that some regulations that interpret other provisions of § 6104 are given Chevron deference. For example, in Lehrfeld v. Richardson, 132 F. 3d 1463, 1465 (D.C. Cir. 1998), this court had before it a regulation interpreting the § 6104(a)(1)(A) term, "papers submitted in support of such application." The regulation provided that this language was limited to papers submitted by the applicant and excluding papers submitted by third parties. The court held the regulation entitled to Chevron deference. The reason, this court held, is that Congress did not prescribe the source of such disclosable papers, i.e., did not say submitted by whom; and this left a gap to fill. Lehrfeld does not support Chevron deference to regulations that plainly contradict Congress' language where there is no gap to fill.

CONCLUSION

The district court's judgment in favor of IRS should be reversed and the cause remanded to the district court with Instructions to enter judgment for Tax Analysts.

Respectfully submitted,

WILLIAM A. DOBROVIR
D.C. Bar No. 030148
P.O. Box 198
Sperryville, VA 22740-0198
(540) 987-9114

CORNISH F. HITCHCOCK
D.C. Bar No. 238824
10th Floor
1100 17th Street, NW
Washington, DC 20036-4601
(202) 974-5111

Attorneys for Appellant

December 30, 2002