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Brief for Appellee

Posted on Jan. 6, 2021

Citations: Taxation With Representation Fund v. IRS; No. 80-1688

SUMMARY BY TAX ANALYSTS

Brief for Appellee, Taxation With Representation Fund v. IRS, D.C. Cir., 80-1688

Taxation With Representation Fund v. IRS

TAXATION WITH REPRESENTATION FUND,
Plaintiff-Appellee,
v.
INTERNAL REVENUE SERVICE,
Defendant-Appellant.

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

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

BRIEF FOR APPELLEE

COUNTER STATEMENT OF QUESTION PRESENTED

Did the district court correctly hold that IRS General Counsel's Memoranda, Actions on Decision and Technical Memoranda, which are formal analyses and explanations of tax law, which custody [TEXT MISSING] which are approved by the highest officials of IRS acting within the scope of their authority and which are relied on by IRS personnel who negotiate and decide tax liability disputes with taxpayers, are required by 5 U.S.C. § 552(a)(2) to be disclosed us agency secret law?

COUNTER STATEMENT OF THE CASE

This Freedom of Information Act ease involves three kinds of IRS documents: General Counsel's Memoranda (GCM's), Actions on Decision (AOD's) and Technical Memoranda (TM's). These are formal, usually elaborate documents prepared by IRS' Office of Chief Counsel. They constitute IRS' detailed legal analysis underpinning published IRS action: IRS Revenue Rulings, private letter rulings, decisions to acquiesce or "non-acquiesce" in court decisions on tax law issues, and regulations interpreting and implementing the Internal Revenue Code.

The District Court held that these records are required by 5 U.S.C. § 552(a)(2) to be made currently available for public inspection and copying. (J.A. 191) Section (a)(2) records include agency final opinions; statements of policy and interpretations of law adopted by the agency, and instructions to agency staff that affect the public. IRS contends that GCM's, [TEXT MISSING]

The record in this case spells out in detail the way in which GCM's, AOD's and TM's are generated and used within the IRS. This record — which appellant largely ignores in its brief — establishes beyond question the character of GCM's, AOD's and TM's as constituting a body of IRS administrative law: final opinions, embodiments of policy and interpretations of law adopted and followed by the IRS, which the agency provides to its personnel for them to follow as instructions on what treatment to apply to taxpaying members of the public.

Statement of Facts

The facts in this case are uncontroverted. The following statement of facts is drawn exclusively from IRS' own Statement of Material Facts Not in Issue (J.A. 153-64); IRS' own sworn answers to interrogatories (J.A. 14-38), and the depositions and affidavits of three high IRS officials who IRS designated to testify to the facts. The officials are Jerome Sebastian, Director of the Interpretative Division of IRS' Office of Chief Counsel, the division which prepares GCM's (Sebastian was deposed together with Helen Pesta, Chief of Interpretive's Digest Section, which files and digests GCM's and otherwise makes them easily accessible) (J.A. 154, 43); Robert Bley, Director of the Legislation and Regulations Division of the Office of Chief Counsel, which prepares and files TM's (J.A. 17 [TEXT MISSING]), and Edward Everett Pigg, Executive Assistant to the Director of the Tax Litigation Division of IRS' Office.

GCM's

The preparation of GCM's consumes 65% of the time of the 58 lawyers who staff the Interpretative Division of IRS' Office of Chief Counsel. (J.A. 72) In the words of Jerome Sebastian, Director of the Interpretative Division, GCM's

are legal memorandums from the Office of Chief Counsel to the Internal Revenue Service prepared in response to a formal request for legal advice from the Assistant Commissioner (Technical). They are primarily prepared by attorneys in the Interpretative Division of the Office of Chief Counsel and usually addressed to the Office of the Assistant Commissioner (Technical) in connection with the review of proposed private letter rulings, proposed technical advice memorandums, and proposed revenue rulings (hereinafter proposed determinations) of the Service. The GCM sets forth the issues presented by whichever of these proposed determinations is under review, the conclusions reached and a brief factual summary. The body of the GCM contains a lengthy legal analysis of the substantive issues, and the recommendations and opinions of the Office of Chief Counsel.

* * *

GCMs are maintained by the Office of Chief Counsel and frequently cited in subsequent GCMs to insure consistency, avoid duplication of research, provide a reference source, and update earlier memorandums when a position on an issue is sustained, modified, or charged within the Office of Chief Counsel.

(J.A. 166, 167)

As Sebastian testified, the attorney who prepares a GCM is required to research "the pertinent Code sections, the regulation sections . . . published revenue rulings . . . court decisions," and then goes to the Interpretative Division's own "digest section . . . in which there are index cards which represent . . . GCM's" and other materials. (J.A. 45) The GCM digest cards are in "a large Diebold file . . . a rotary file," with electrical push button operation (J.A. 46-47), organized by Internal Revenue Code sections (e.g., § "501(c)(3)"). (J.A. 47, 73-80). After pushing the button to rotate the Diebold file to the area of his interest,

[t]he attorney will flip through the cards, and if he finds a card which represents a case that he believes is relevant to his research, he will write down the name of the document which it represents; that is, GCM number so and so, or OM number so and so or brief number so and so.

Then he can go to the stacked files in which all these documents are filed in chronological order. In other words, GCM's one through the last one we have, are filed' in chronological order. He would then pull out that GCM or OM, or brief, whatever it may be.

(J.A. 50) The GCM's are stored in open shelves, with tab dividers to aid in locating the desired GCM. There are 37,900 GCM's so stored, dating from 1926 to the present. (J.A. 51, 80-81)

After locating it the attorney could then "charge out the GCM" or

he can make a copy of it and take it back to his office, along with the decision that he found and reg rules, or anything else, to use that to formulate the position on that particular case.

(J.A. 52)

The lawyer also is supposed to check the CCM on a “citator showing “if there has been a citation from one GCM to another GCM." (J.A. 60). The Interpretative Division's Digest Section maintains the citator cards (also in an electrically powered rotary Diebold file). The five librarians in the Digest Section note "every time a GCM is cited in some later document"; they "keep bringing it up to date," "just like Shepard's," by "cull[ing] through every GCM searching for citations"; whenever a new GCM comes in [they] look to see if it is citing an old GCM." (J.A. 61-62)

The Shepardized GCM is used by the lawyer to "set a frame of reference . . . they represent a research tool, a very valuable research tool to him, plus he has what lawyers have said on similar subjects that have been general approved by the division, which gives him a pretty good idea of, you know, what we have held in the past on similar issues." (J.A. 52-53) The lawyer "will generally cite the GCM in his document . . . the same way he cites a tax court case or revenue ruling." (J.A. 53)

After the GCM is finished, reviewed and finalized, the lawyer prepares a summary that the Digest Section uses to make up a now index card for the Diebold file.1 The Digest Section also updates its "Shepard" citator cards for the older GCM's cited in the new GCM, and the new GCM is then available in the system for research, reference and citation. (J.A. 56-57, 60-62). To be certain that a lawyer will not miss a pertinent GCM in his research, the Digest Section prepares, on the average, three Revenue Code and regulations provisions. "Kind of like in West," “the same case will be under three or four key numbers," because “you want to make sure that whatever way he (the lawyer) starts, he will hit a card. . . ." (J.A. 63)

After completion and review up the line the GCM is transmitted to the Office of the Assistant Commissioner, Technical. This is the office charged with issuing revenue rulings, private letter rulings and technical advice memoranda,2 and "provides basic principles and rules for the uniform interpretation and application of the Federal tax laws. . . ." Internal Revenue Service Manual § 1113.9.3 As the IRS summarized below the testimony of Mr. Sebastian, "[t]he Office of Assistant Commissioner (Technical) will use the GCM as a guide as to what positions will be taken in the proposed revenue ruling, proposed private letter ruling, or proposed technical advice memorandum." (J.A. 156) The GCM always supports the ruling as issued by "Technical." In the event of disagreement, the GCM is "rewritten to conform to what the Assistant Commissioner, Technical, thinks it ought to be," and the Interpretative Division lawyer "would modify the GCM to represent the position taken in the revenue ruling if it were inconsistent." (J.A. 54)

Each week the Digest Section gathers up the lawyers' summaries of GCM's prepared that week and publishes a three or four page bulletin called the "Library Digest Bulletin" in an edition of 161 copies. These are sent "to key officials of the Internal Revenue Service proper," such as the Commissioner and Assistant Commissioners; 53 copies "go out to the field," and every one of the 60-odd lawyers in the Interpretative Division gets a copy of the digest. (J.A 157, 69-70)

Finally, the "key officials" of IRS also get copies of the GCM's themselves. For them "it is very much like the advance sheet you get from the CCH, or Prentice-Hall," and gives those key official the opportunity to protest, if they wish, that "that position sounds crazy." (J.A. 59)

Despite IRS' efforts at formal disclaimer (see J.A. 169, ¶ (3)), GCM's are accorded the status of precedents within IRS. When the lawyers in Interpretative "come across a GCM, they would consider it of some precedent as a research item." When lawyers from "the Litigation Division [which litigates Tax Court cases] . . . research the digest room and come across a position which related to the issue in litigation, they would ordinarily follow the position in the GCM." (J.A. 74-75) The GCM retention and indexing system was created precisely "so there would be some uniformity of positions taken . . . to have a record of what positions we have taken in the past." (J.A. 75) Indeed, from 1926 until 1953, IRS published those GCM's "which, because they announce a ruling or decision upon a novel question or upon a question in regard to which there exists no previously published ruling or decision.

It therefore is not surprising that GCM's are looked to as reflecting the rules of decision in individual taxpayers' disputes with IRS: "IRS personnel who confer or negotiate on tax liability matters with taxpayers . . . may refer to GCM's for guidance as to the positions to take in such negotiations." (J.A. 30) But GCM's character as authority is hidden from the taxpayer. The negotiating IRS official does not tell the taxpayer about the GCM, or say that the “position is required or necessitated by a GCMs," or give the taxpayer a copy of the GCM. (Id.)

Such concealment is formal IRS policy. While the IRS Manual attempts in words to disclaim the use of GCM's as "precedent," (J.A. 169) the same sentence goes on to say that GCM's "may be used as a guide with other resource material in formulating a district office position on an issue."4 The next sentence compounds the deception by instructing the district office that, if the GCM is "the sole precedent," rather than cite it to the taxpayer the district office should obtain "technical advice," the equivalent of a private letter ruling, see p. 7 n.2 supra, and now public.5

TM's

The Legislation and Regulations Division ("L & R") of the IRS Office of Chief Counsel is responsible for developing the regulations that interpret and implement the Internal Revenue Code and which, when published as "Treasury Decisions," become binding on taxpayers and IRS alike. (See J.A. 83-84, 170).

In L & R Director Robert Bley's words, "a TM summarizes or explains the proposed rules, provides background information, states the issues involved, identifies any controversial legal or policy questions, discusses the approach taken by the drafts-person, and gives the reasons for that approach." (J.A. 173) Technical Memoranda (TM's) “are prepared in connection with notices of proposed" regulations, i.e., notices of proposed rulemaking. (J.A. 171) The TM, as part of a "signature package" that is formally approved by the Assistant Commissioner (Technical) of IRS, the Tax Legislative Counsel of the Treasury Department, the IRS Chief Counsel and the Commissioner' of Internal Revenue (J.A. 86-91), accompanies the proposed regulation throughout its journey within IRS, over to the Department of the Treasury and back again. (J.A. 171-72) But when the Regulation (Treasury Decision) is published, the TM is not. (J.A, 12)

Throughout the process of developing the new regulation the TM is referred to by "the people who have the ultimate decision as to whether to [TEXT MISSING]

extent the TM tells more about the regulation than does the regulation itself. (Id.)

The TM is a comprehensive explanation of the tax law basis for the regulation. The reason for this is "to show the consistency of a position in a notice of proposed rulemaking or Treasury decision with a position previously adopted by the Internal Revenue Service." (J.A. 26) TM's also apply and cite earlier TM's (J.A. 107-08), "where the two related Treasury decisions involved similar issues that were resolved in the same manner. In these cases, a TM related to the later Treasury decision would apply a TM related to the earlier Treasury decision for an explanation of the issues and its resolution." (J.A. 27)

The TM can be a full, elaborate and most useful explanation of the regulation. (J.A. 194-207)6 As such it analyzes, applies, refers to and cites not only the legislation that the regulation interprets and its legislative history, but also decided cases, GCM's and AOD's. (J.A. 91-92, 107)

IRS keeps TM's in a file in the L & R front office, where they are available for and are much used in research. The TM's are filed consecutively by Treasury Decision ("TD") number. As Mr. Bley explained, "[y]ou can find out which TD is under a particular reg simply by looking at one of the tax services — I work mostly with Commerce Clearing House." (J.A. 100) With the TD number, the researcher can quickly locate the pertinent TM. (J.A. 102-03) Like GCM's in the Interpretative Digest Section, TM's can be charged out from the L & R front office. (J.A. 105)

IRS employees ("tax law specialists") from "Technical," engaged in preparation of Revenue Rulings, letter rulings and the like, use the L & R files of TM's. So, "frequent[ly]," do lawyers from the Chief Counsel's office. (J.A. 100-01, 102, 104-05, 112) They look them up "to see why a position was taken in the regulation" (J.A. 101, 104) because TM's are "helpful in understanding what the regulation means." (J.A. 101) They look them up "in order to find out what the detailed explanation of the regulation is." (J.A. 105)

There is a close analogy between the relationship of Congress' Committee Reports to the statute, on the one hand, and the relationship of TM's to the published regulation, on the other hand. As Mr. Bley testified,

anybody probing in the nuts and bolts of either a statute or regulation would find, if someone were probing in the nuts and bolts of the statute, they would indeed find a committee report helpful, certainly; and I think they would find a technical memorandum helpful in probing of the nuts and bolts of the reg. . . .

(J.A. 115-16)

As with GCM's (and AOD's, J.A. 3[TEXT MISSING] and p. 13 infra) "IRS personnel who confer or negotiate on tax liability with taxpayers . . . may refer to TM's for a more detailed explanation of the applicable regulations." But again, they do not tell the taxpayer about the TM, "that a . . . position [taken] is required" by a TM or give the taxpayer a copy. (J.A. 31)

AOD's

The IRS' expert on AOD's, Edward Everett Pigg, testified that

AODs are prepared in general whenever the Government loses an issue in a tax case either in Tax Court or in a refund case in federal district court . . . The AOD sets forth the issue which was decided against the Government, a brief discussion of the facts and the reasoning of the attorney behind his or her recommendations that the Commissioner either "acquiesce" or "nonacquiesce". . .

(J.A. 175) Neither the AOD nor any other explanation of the IRS "non-acquiescence" is published. (J.A. 10, 11)

A "non-acquiescence" means that the IRS refuses to be bound by and refuses to give to other taxpayers the benefit of a court decision favorable to a taxpayer who litigated that case — even if the IRS does not appeal the court case. (J.A. 122-25, 134-35) "It really means that we [IRS] are . . . not following that opinion. . . ." (J.A. 123) Of course, "a member of the public who happens to have a similar case knows from the non-acquiescence that the IRS is not going to follow that court decision" (J.A. 123); but he does not know the IRS' reasoning, "the basis for the IRS making that decision, and taking that position". . . the "reasoning in the AOD." (J.A. 125)

Moreover, when the taxpayer tries to negotiate his tax liability, the IRS "conferee" has "the benefit of the reasoning in the AOD," but he does not "make that reasoning available to the taxpayer. . . . He only tells the taxpayer of the reasoning as set forth in rulings and other documents that are of public record." (J.A. 126) The conferee does not tell the taxpayer that the IRS "position" he is asserting "is required or necessitated by an AOD." (J.A. 31)

Before they become final and are sent out to the field for use with and against taxpayers, the AOD must be submitted to the Assistant Commissioner (Technical), the IRS official in charge of IRS internal and public administrative law ("the basic principles and rules for the uniform interpretation and application of the . . . tax laws," p. 7 supra). It only goes out if he docs not disapprove or disagree with it; if he does, the AOD is revised. (J.A. 162, 175, 121)

Then the AOD is distributed to IRS offices around the nation — 1,708 copies are sent out. (J.A. 213-14) They are kept on file in the field at District Counsel Offices, most Appeals Division Offices and larger Examination (formerly Audit) Division Offices, especially those in cities with District Director's Offices. (J.A. 15, 137-38) One field office, in Manhattan, New York City, gets 100 copies. (J.A. 137) AOD's are also filed in two different locations at IRS National office headquarters. (J.A. 15) AOD's are microfilmed and indexed by the court case name (the taxpayer's name). (J.A. 132, 138-39) The index is computerized. (J.A. 21, 215)

Both lawyers in the Chief Counsel's office and tax law specialists from "Technical" 1 [TEXT MISSING] AOD's after finding the court decision and "non-acquiescence." They "look up the AOD's . . . precisely to see why we [IRS] did not appeal" (J.A. 133), and in preparing new AOD's; AOD's "are sometimes cited in subsequent AOD's." (J.A. 25; id. 141-42) (AOD's are also, but "rarely," cited in TM's; J.A. 25.) Moreover, AOD's may be "revised as the position changes." (J.A. 142)

Mr. Pigg concluded his testimony by admitting that publication of AOD's "would not cause any harm to the operations of the (Internal Revenue) Service"; that "in some cases" publication "would provide . . . useful information . . . to the public." As he added, in cases where there is "non-acquiescence" and "no appeal, it would be of great interest." (J.A. 141)

Proceedings Below

Appellee first requested access to GCM's, AOD's and TM's, after the favorable conclusion of the private rulings litigation described at pp. 19-21 infra, in July 1977. IRS never responded to the request, and this action was filed in December 1978. (J.A. 4)

Plaintiffs conducted discovery by interrogatory and deposition, and a full factual record of the manner of preparation, approval and use of the documents was compiled. (J.A. [TEXT MISSING]-143) Based on this record, the district court ruled that the documents were not exempt from disclosure under FOIA Exemption 5 (J.A. 179-187) and were required to be currently made publicly available and indexed pursuant to 5 U.S.C. § 552(a)(2). (J.A. 191) The IRS appeals from those rulings. (J.A. 192)

SUMMARY OF ARGUMENT

I

GCM's, AOD's and TM's record the detailed legal reasoning behind published IRS decisions. They are approved at the highest levels of the agency, are looked to by agency employees as precedents that set forth and explain the agency's law and are cited and relied on as authoritative statements of agency law. As such they are the kind of "secret law" or agency "working law" that is required to be made public under 5 U.S.C. § 552(a)(2), as declared by the Supreme Court, this court, other federal courts of appeals and the district courts. (Pp. 18-28, 32-38 infra)

II

GCM's, AOD's and TM's, approved by the highest delegated officials of the agency and interpreting the tax law as set forth in statute, regulations, rulings, court decisions and other GCM's, AOD's and TM's, are "interpretations adopted by the agency" under 5 U.S.C. § 552(a)(2)(B). Used, referred to and relied on by agency personnel who negotiate and decide, at the agency level, tax liability disputes with the taxpaying public, they are "instructions to staff that affect members of the public" under 5 U.S.C. § 552(a)(2)(C). As the detailed legal reasoning, nowhere made public, behind and in support of agency decisions in particular cases, GCM's (for IRS rulings) and AOD's (for litigated cases) are "final opinions . . . made in the adjudication of cases" under 5 U.S.C. § 552(a)(2)(A). (Pp. 28-31, infra)

III

GCM's, AOD's and TM's constitute and reflect agency "positions." For the IRS a "position" is its rule of decision on an issue of tax law or policy, its administrative law doctrine or rule that it will apply to taxpayers in deciding tax disputes. Thus by IRS' own admitted internal practice GCM's, AOD's and TM's embody IRS administrative law, required to be disclosed as agency "working law." (Pp. 38-42, infra)

IV

Because GCM's, AOD's and TM's are secret agency law as interpretations adopted by the IRS and applied to the public, the "deliberative" or government privilege of Exemption 5 is inapplicable. Because of their finality their disclosure will in no way affect the IRS' internal deliberative process. (Pp. 43-45, infra)

V

Section 6110 of the Internal Revenue Code provides for disclosure of private letter rulings, technical advice memoranda and their background file documents. Congress excluded GCM's from the reach of § 6110, expressly providing for them to be governed by the provisions of the FOIA. (Pp. 46-47, infra)

ARGUMENT

I. FOIA REQUIRES IRS' "SECRET LAW" TO BE DISCLOSED

A. The Decisions in This Circuit In Tax Analysts and Advocates Are Controlling Precedent Here

IRS administers both a public and a secret body of law. This Freedom of Information Act (FOIA) case seeks public disclosure under section (a)(2) of the FOIA, 5 U.S.C. § 552(a)(2),7 of the still-secret portion of the body of administrative law which IRS has created and which it applies to taxpayers, embodied in GCM's, AOD's and TM's.

Prior to the enactment of the FOIA the public body of IRS law included statutes, chiefly the Internal Revenue Code; IRS regulations, published as "Treasury Decisions" in the Federal Register and the Internal Revenue Bulletin (IRB); Revenue Rulings, which announce the tax treatment of fairly specific, but common, sets of facts and which are published in the IRB, and decisions of the Supreme Court, Court of Appeals, District Courts and the Tax Court. Prior to 1954, the public body also included some GCM's also published in the IRB. The secret body of law included private letter rulings and technical advice memoranda, which are IRS determinations of the tax treatment of specific fact situations submitted by particular taxpayers, p. 7 n. 2, supra; before 1955 many and after 1954 all GCM's, and all AOD's and TM's.

The first breach into the IRS trove of secret law came in a FOIA suit brought by plaintiff-appellee here under its earlier name, Tax Analysts and Advocates8 v. IRS, 362 F. Supp. 1298 (D.D.C. 1973), aff'd in part and rev'd in part, 505 F.2d 350 (D.C. Cir. 1974), on remand, 405 F. Supp. 1065 (1975). In that case the district court held that private letter rulings and technical advice memoranda were "interpretations adopted by the agency" under § (a)(2)(B), and ordered them disclosed because "secret law is an abomination." 362 F. Supp. at 1310. On appeal IRS did not contest this holding, but argued other FOIA exemptions which this court rejected for private letter rulings but accepted for technical advice memoranda.9 On remand from this court the district court in TAA ruled expressly that all private letter rulings were subject to public inspection and copying under § (a)(2)(B).10

TAA applies squarely to the documents at issue here. In holding that private letter rulings and technical advice memoranda were subject to 5 U.S.C. § (a)(2), the district court relied on facts remarkably similar to the facts here. It found that many of the rulings and memos were "deemed to have a continuing 'reference' value or internal IRS purposes," like "Court decisions land] published Revenue rulings." Also, as in this case, in TAA "[t]he reference file is organized by code section and an 'index-digest' card file is maintained, giving citations to the main 'reference' file and usually summarizing the contents of the reference file." 362 F. Supp. at 1302 (footnotes omitted), quoted in this court's opinion on appeal, 505 F.2d at 353.

The court was not impressed with IRS' argument that its private letter rulings were not cited as "precedents" in subsequent determinations — the same argument IRS makes again and again here. (Br. 39, 42; J.A. 26, 30, 31) It held that "the plain meaning" of the words "adopted by the agency . . . reaches any interpretation issued by the agency or its delegates acting within the scope of their authority." 362 F. Supp. at 1303. The court rejected, as having no authoritative weight, a House report that appeared to support IRS' "cited or relied upon as precedent" argument, following this court's earlier rejection of the House report in Getman v. NLRB, 450 F.2d 670, 673 n. 8 (D.C. Cir. 1971). 362 F. Supp. at 1304.

Moreover, the court found "that many of the rulings are in fact often 'relied upon' by the agency as precedent." Indeed, the "reference" file had been called the “precedent" file before 1967, 362 F. Supp. at 1305 — that is, before enactment of FOIA and the curious insertion of the reference to "precedent" in the House report. At that time "files occupying over two thousand linear feet of shelf space were laboriously restamped 'reference' in place of 'precedent.'" 362 F. Supp. at 1305 n. 35. Compare IRS' practice of masking its reliance on a controlling GCM, when it is the only precedent, by requesting "technical advice" (J.A. 169), p. 9 supra.

GCM's, AOD's and TM's are similar to private letter rulings in dispositive respects. They are adopted and approved by the highest officials of IRS, the Chief Counsel, the Assistant Commissioner (Technical) and the Commissioner, acting within the scope of their authority. They are in fact, if not in name, relied on in administrative disposition of taxpayer cases. They are in fact and in name cited and relied on inter se, filed and used as legal authority. Like private letter rulings, therefore, they fall squarely under 5 U.S.C. § 552(a)(2).

B. The Holding of the Court Below That The Documents at Issue Must be Disclosed as the Agency's Working Law Squarely Follows and Correctly Applies Decisions of the Supreme Court, This Court and Other Courts of Appeals

1. The District Court's Findings Carefully Reflect The Evidence in the Record

The findings of the court below are accepted on appeal "unless they are clearly erroneous," Coastal States Gas Corp. v. Department of Energy, 617 F.2d 854 (D.C. Cir. 1980). It is obvious, comparing the findings below to the record, that they are a careful, accurate reflection of the evidence, not "clearly erroneous" and therefore binding here.

The district court found that "GCM's are maintained by the Office of Chief Counsel and frequently cited in subsequent GCM's to insure consistency, avoid duplication of research, provide a reference source, and update earlier memoranda when a position on an issue is sustained, modified, or changed within the Office of Chief Counsel"; that "IRS personnel who confer or negotiate on tax liability matters with taxpayers or taxpayer representatives may refer to GCM's for guidance as to the positions to take in such negotiations"; "that differences between the GCM and (Revenue] ruling are resolved before the GCM is considered complete and before it becomes available for future reference"; and that "GCM's contain the reasons behind the adoption of revenue rulings, private letter rulings, and technical advice memoranda. . . . are indexed and have important precedential value in determining future tax questions." 183-84)

The district court found that AOD's are "reviewed within the Tax Litigation Division and after approval . . . sent to the Office of the Assistant Commissioner (Technical). . . . if the Assistant Commissioner (Technical) is not in disagreement with the recommendation to acquiesce or nonacquiesce, the AOD is printed and distributed"; that "AOD's are made available to IRS personnel and are cited and applied by IRS personnel in later AOD's, and TM's to promote the consistent application of the tax laws"; and that "AOD's contain the reasons behind the acquiescence or nonacquiescence of the IRS in court decisions. These reasons are of vital concern to the public and their release will not harm the decision-making process of the agency." (J.A. 185)

The district court found that a TM "summarizes or explains the proposed (regulation), provides background information, states the issues involved, identifies any controversial legal or policy questions, discusses the approach. . . . are indexed, digested, and made available to IRS personnel in order to assure consistent treatment of taxpayers"; that they "explain the reasons behind the adoption of the Treasury Decision," and "are used by IRS personnel in determining the tax status of taxpayers." (J.A. 186)

2. GCM's, AOD's and TM's Must Be Disclosed Because They Are "Secret Law" of the Agency

These findings establish that GCM's, AOD's and TM's, while presently secret, are part of IRS' body of administrative tax law. As such they must be disclosed. NLRB v. Sears, Roebuck & Co., 421 U.S. 132, 151-55 (1975); Renegotiation Board v. Grumman Aircraft Engineering Corp., 421 U.S. 168, 186 (1975); Coastal States Gas Corp. v. Department of Energy, 617 F.2d 854 (D.C. Cir. 1980); Bristol-Myers Co. v. FTC, 598 F.2d 18, 25 (D.C. Cir. 1978); Caplan v. Bureau of Alcohol, Tobacco & Firearms, 587 F.2d 544 (2nd Cir. 1978), citing Cuneo v. Schlesinger, 484 F.2d 1086, 1090-91 (D.C. Cir. 1973), cert. denied, 415 U.S. 977 (1974); Cox v. Department of Justice, 576 F.2d 1302, 1309 (8th Cir. 1978); cf. Anderson v. Butz, 550 F.2d 459, 463 (9th Cir. 1977).

As found by the district court and as the record demonstrates, GCM's, AOD's and TM's contain "the reasons which did supply the basis for an agency policy actually adopted . . .," Sears, 421 U.S. at 152. The IRS' published decision — i.e., ruling, "acquiescence or "non-acquiescence" and Treasury Decision (Regulation), is supported by and conforms to the reasoning in the GCM, AOD and TM. "These reasons . . . expressed within the agency, constitute the 'working law' of the agency" and must be disclosed to the public. Sears, 421 U.S. at 152-53. GCM's, AOD's and TM's are indexed, digested, researched, referred to, widely distributed and available within IRS and applied as legal authority in the decision of subsequent cases and the preparation of subsequent GCM's, AOD's and TM's.11 Materials so prepared, so available and so used are required to be disclosed. 5 U.S.C. § 552(a)(2); Sears, 421 U.S. at 151-55; Tax Analysts and Advocates, 362 F. Supp. at 1302-06, text at nn. 22-23, 40-46.

IRS creates, indexes and uses GCM's, AOD's and TM's to assure uniform, consistent, reasoned application of the tax law to taxpayers, pp. 9, 12, 13-14 supra. This is "precisely the kind of agency law in which the public is so vitally interested and which Congress sought to prevent the agency from keeping secret." Sears, 421 U.S. at 156. They "explain the decision" published in the revenue ruling, private letter ruling, technical advice memoranda, non-acquicscence or TD (regulation). "[T]he public is vitally concerned with the reasons which did supply the basis for an agency policy actually adopted," Sears, 421 U.S. at 152. "These reasons, if expressed within the agency, constitute the 'working law of the agency. . . .;" id. at 152-53. There is "a strong congressional aversion to 'secret law'" and "an affirmative congressional purpose to require disclosure of documents which have 'the force and effect of law.'" Id. at 153.

The IRS body of law contained in GCM's, AOD's and TM's make up a living, reasoned body of law. They are not slavishly followed as precedent; a reasoned, not a rigid consistency is the desideratum. (See J.A. 74-75, 109, 167; Addendum, infra, p. 1, box 12) This makes them no less secret law. If GCM's, for example, did not have the force of law there would be no need to "consider revoking or modifying" an earlier GCM in a later one (J.A. 75); as there would have been no need to rescind, amend or refer to a higher authority the legal memoranda held disclosable as secret law in Coastal States, pp. 27-28, infra. As the TAA court noted,

That a ruling is relied upon does not necessarily mean that it will be slavishly followed, for precedent is often persuasive rather than controlling. Nor does reliance mean that the official decision maker is not free to reverse itself or overrule prior decisions if necessary. Just as within the Court system, the highest responsible authority within the agency is not bound to follow a "precedent" which on thorough examination he concludes is ill-founded or no longer appropriate.

362 F. Supp. at 1306 (footnote omitted).

In sum, GCM's, AOD's and TM's are at the least "information clarifying substantive or procedural law [and] must be disclosed. Cox v. Department of Justice, 576 F.2d at 1309, quoting the view of Professor Davis' treatise that

instructions in the nature of substantive or procedural law should be available. For instance, "guidelines for the staff in auditing" of tax returns ought to be open to the taxpayer to the extent that they tell the auditor the position of the Internal Revenue Service on any question of tax law. * * * [S]ecret law is an abomination. (K. Davis, Administrative Law Treatise 187 (Supp. 1970) (emphasis in original).)

See also Hawkes v. IRS 467 F.2d 787, 795 (6th Cir. 1972), quoted in Cox at id.: "the disclosure of information clarifying an agency's substantive or procedural law serves the very goals of enforcement by encouraging knowledgeable and voluntary compliance with the law."

If any doubt were left regarding the status of these documents as disclosable agency law, it would be laid to rest by this court's decision in Coastal States. Coastal States involved memoranda from agency lawyers (regional counsel) to auditors, responding to auditors' requests for interpretations of the agency's regulations. The agency claimed that the interpretations were not "formal" — that there were procedures for issuing published interpretations. (The parallel to IRS' argument comparing GCM's and published Revenue Rulings is plain.) The agency also argued that the interpretations were not "binding;" but the facts showed that they were indeed regularly and consistently followed by agency staff in particular audit cases (as GCM's, AOD's and TM's are applied by IRS conferees in tax liability disputes). The interpretations were indexed, used as precedent in subsequent cases and circulated around the country. They were even sometimes "amended" or "rescinded" (as GCM's arc sometimes distinguished or overruled by subsequent GCM's). 617 F.2d at 858-60.

The agency asserted Exemption 5. This court first disposed of the agency's claims of attorney client privilege and attorney work product privilege (which IRS has abandoned here). 617 F.2d at 862-66. It then turned to the claim of government or "deliberative process" privilege. After discussing Sears and Renegotiation Board v. Grumman the court went on;

A strong theme of our opinions has been that an agency will not be permitted to develop a body of "secret law," used by it in the discharge of its regulatory duties and in its dealings with the public, but hidden behind a veil of privilege because it is not designated as "formal," "binding," or "final." The theme was sounded as early as 1971 when the court emphatically stated that agencies would be required to disclose "orders and interpretations which it actually applies to cases before it," in order to prevent the development of "secret law."

617 F.2d at 867. This court found, 617 F.2d at 869, in language directly applicable to GCM's, AOD's and TM's, that the documents are "routinely used by agency staff as guidance," and "were retained and referred to as precedent." It then held

If this occurs, the agency has promulgated a body of secret law which it is actually applying in its dealings with the public but which it is attempting to protect behind a label. This we will not permit the agency to do. . . . Suggestions which could be freely disregarded would not need to be rescinded, amended, or referred to a higher authority. These documents, . . . in practice represent interpretations of established policy on which the agency relies in discharging its regulatory responsibilities; withholding them would serve no legitimate policy interest of the government.

Id. This declaration of the law squarely applies to the documents at issue in this case.

3. GCM's, AOD's and TM's Fit Precisely Within The Definitions of the SubSections of 5 U.S.C. § 552(a)(2)
a. GCM's, AOD's and TM's Are "Interpretations Adopted by the Agency" Which Must Be Disclosed Under FOIA Section (a)(2)(E)

There is no dispute that GCM's, TM's and AOD's are analyses of pertinent tax law: statutory provisions, cases, rulings, and other GCM's, AOD's and TD's. GCM's, TM's and AOD's thus interpret the tax law. There is no dispute that each is approved, when finalized, by the agency, either IRS, the Treasury Department, or both, and then is filed and used as authoritative. Thus each is "adopted" as the agency's interpretation of the tax law issues they deal with, within the TAA court's definition of "interpretation adopted by the agency" as "any interpretation issued by the agency or its delegates acting within the scope of their authority." TAA, 362 F. Supp. at 1303.

GCM's, AOD's and TM's form a body of interpretive law used, relied on and cited, sometimes followed, sometimes distinguished and sometimes "overruled" — much like court decisions. An "interpretation" need not be "binding" to fall within § (a)(2)(B). "[I]t is entitled only to such future weight or authority as its rationale will bear. . . ." The agency is “free to revoke or disown the interpretation." But if "the interpretation was once adopted by the agency" it "came within the express terms" of FOIA § (a)(2)(B)12 TAA, id. GCM's, AOD's and TM's are "compiled and studied in order to develop coherent policy guidelines . . . to provide the foundation from which the individual decisions derive their consistency." Sigler, n. 12 infra at 794. They contain "interpretations of rules and statutes," and so must be disclosed. Cuneo v. Schlesinger, 484 F.2d 1086, 1090-91 (D.C. Cir. 1973), cert. denied, 415 U.S. 977 (1974).

b. GCM's, AOD's and TM's Are "Instructions to Staff that Affect Members of the Public" and Must Be Disclosed Under FOIA Section (a)(2)(C)

IRS Revenue Agents and Appeals Officers, who deal face to face with taxpayers and negotiate and decide tax liability questions administratively, have available, follow, and apply to taxpayers the legal positions and interpretations embodied in GCM's, AOD's and TM's; pp. 9, 12, 13-14, supra. They thus contain substantive law which IRS applies to the public. Such documents, which

set forth (or clarify] an agency's substantive or procedural law should be made available since there is a legitimate public interest in having those affected guide their conduct in conformance with the agency's understanding.

Caplan v. Bureau of Alcohol, Tobacco & Firearms, 587 F.2d 544 548 (2d Cir. 1978), citing Cuneo v. Schlesinger, 484 F.2d at 1090-91.

The information in GCM's, AOD's and TM's, if made public, would enable taxpayers to conform their action to IRS' understanding of the law applied by IRS, see, e.g., p. 15 supra, and thus encourage compliance with the law, cf. Cox v. Department of Justice, 576 F.2d at 1309, p. 26 supra. In no way would disclosure impede law enforcement, Stokes v. Brennan, 476 F.2d 699, 702 (5th Cir. 1973); Hawkes v. IRS, 467 F.2d at 795. The information must therefore be disclosed. Hawkes, id.

c. GCM's and AOD's Are "Final Opinions . . . Made In the Adjudication of Cases" Which Must Be Disclosed Under FOIA Section (a)(2)(A)

AOD's are the reasoned support for the decision of "nonacquiescence" or "acquiescence" in a particular court decision. Acquiescence or non-acquiescence is the final IRS administrative disposition of that case. GCM's embody the detailed legal reasoning behind Revenue Rulings and IRS' administrative determinations of rulings requests and audit issues. Since the GCM or the AOD "explains the reasons for the (IRS'] 'final disposition' it plainly qualifies as an 'opinion'; and falls within 5 U.S.C. § 552(a)(2)(A)." NLRB v. Sears, Roebuck & Co., 421 U.S. at 159.

AOD's and GCM's thus fall squarely within the category of "final," disclosable opinions this court described in Bristol-Myers Co. v. FTC, 598 F.2d at 25. The agency actions they underpin (rulings and non-acquiescence) have “the practical effect of disposing of a matter before the agency." As the court held in Bristol-Myers, "[i]f such action is accompanied by a written explanation of the decisionmaker's reasoning, that explanation constitutes a 'final opinion' and must be disclosed." Id. See also United States v. J. B. Williams Co., Inc., 402 F. Supp. 796, 799 (S.D.N.Y. 1975): ". . . where it is clear that an agency has adopted material in an otherwise exempt document as the basis of a non-exempt decision . . . the adopted material loses its immune status."

Here each GCM and AOD is "a final agency decision which is utilized as a touchstone for future administrative action.” Ash Grove Cement Co. v. FTC, 519 F.2d 934, 935 (D.C. Cir. 1975). As such § (a)(2)(A) requires their disclosure and disclosure of their indexes.

C. Recent District Court Decisions Hold GCM's and TM's Disclosable Under FOIA as Interpretations Adopted by the IRS

1. GCM's

Three district court decisions besides the decision below have considered the disclosure of GCM's under the FOIA. Appellant's brief ignores two of them and misleadingly cites the third. The cases arc Falcone v. IRS, 479 F. Supp. 985 (F.D. Mich. 1979), appeal pending, No. 80-1105 (6th Cir.); Caspe v. United States, 80-1 U.S.T.C. § 9201 (S.D. Iowa 1980), and Cliff v. IRS, No. 80 Civ. 1574 (RLC) (S.D.N.Y., July 31, 1980).

Falcone involved a request for a particular GCM, one which recommended changes in a proposal revenue ruling. Many of the same facts spelled out in the record here were before the Falcone court, see 479 F. Supp. at 986-87. There, as here, IRS claimed the Exemption 5 government privilege. Id. at 987.13

The court held that the GCM had to be disclosed under 5 U.S.C. § 552(a)(2)(B) as a "statement of policy and interpretation adopted by the agency." 479 F. Supp. at 988. The court found that GCM's "state current agency interpretations," which "make them useful for legal advice in cases other than the one for which they are prepared." Id. The GCM in issue, inspected in camera, cited Internal Revenue Code sections, regulations and other GCM's. "Obviously," the court concluded, "GCM's are widely recognized within the IRS as statements of agency interpretation for the tax questions for which they are prepared," yet were not published. GCM's were therefore "precisely [the] 'secret law' which FOIA was designed to eliminate." Id. The court distinguished Renegotiation Board v. Grumman Aircraft as involving only recommendations, not "policies or reasoning adopted by the agency in making its decision." Id. at 989.14

Caspe was a civil discovery case. The court followed Falcone and applied FOIA principles to hold two GCM's subject to discovery. After in camera inspection of the GCM's the court rejected IRS' argument that the GCM's were "deliberative" and protected, as "merely commentaries on proposed revenue rulings" that "do not contain any statements or interpretations of policy." 80-1 U.S.T.C. at 83, 313. The court found that the GCM's "summarize current legal interpretations relating to the subject matter of the proposed revenue rulings" and "do indicate the policies of the IRS with regard to certain issues." The court noted that the citation of published authorities in the GCM's "bolsters the conclusion that the memoranda arc summaries of law and policy rather than commentaries on a specific revenue ruling." Id.

Cliff15 was an FOIA case where the plaintiff sought, in pertinent part, a GCM that was unlike the great bulk of GCM's involved in this case. The GCM at issue was an evaluation of a proposed new revenue procedure, which recommended against promulgation of the revenue procedure. Mem. Op. at 9.

The IRS distinguished the GCM in issue from most GCM's on the grounds that it "merely gives advice about whether or not to proceed with the proposed revenue procedure at all" and “neither interprets nor relies on prior law or IRS policy." It was "purely advisory, not interpretive." Id. at 10.16 On the basis of these representations the court found the document "deliberative." It distinguished Falcone and Caspe:

The documents at issue in those cases were generated during the process leading to the promulgation of revenue rulings, and were explicitly characterized as "statement[s] of policy and interpretation adopted by the agency," "not deliberative,' and as the agency's "secret law." [citations omitted) In contrast, document j deals with whether or not a proposed revenue procedure should be pursued at all, rather than with its substantive characteristics. Because it takes no position on the underlying tax policy issues, it cannot be characterized as stating policy or interpretation or as "secret law," and is much more clearly deliberative than the GCM's in Falcone and Caspe.

Mem. Op. at 12.

The Cliff court discussed at length, with approval, the decision on appeal here. Mem. Op. at 12-13. It noted that our district court had ruled on the generality of GCM's based on the IRS' own testimony and was not presented with the occasional, anomalous GCM like the one at issue in Cliff. The IRS had "failed, in good faith, to put the issues now disputed before [that] court," which "therefore did not pass" on them. Id. at 14-15. The Cliff court concluded that its GCM "is not an explanation or interpretation of agency policy, as were the GCM's described in Taxation With Representation Fund that are specifically revised to reflect accurately the final agency action." Id. at 15.17

2. TM's

Appellant's brief also ignores the only case involving a TM, Pies v. IRS, 79-2 U.S.T.C. § 9571 (D.D.C. 1979), appeal pending, No. 79-2303 (D.C. Cir.), which is to be argued together with this case. In Pies the district court went even further than did the district court in this case. Pies involved not a published regulation's TM, but a draft regulation that was never adopted and its draft TM. Nevertheless Judge Parker found that the drafts "though never enacted into IRS regulations, have been used by the agency in issuing other regulations and rendering opinions, and therefore cannot fairly be categorized as predecisional materials under exemption (b)(5)." 79-2 U.S.T.C. at p. 88,080. The district court rejected IRS' argument that the drafts were "predecisional material because they were never enacted," finding that "the draft regulations and accompanying draft, technical memorandum have been treated as final work product by the IRS." Id. at p. 88,081. Some of the drafts had been incorporated into other regulations that were enacted, and IRS could not show that the drafts "have not been or will not be used and relied on in connection with issuance of private letter rulings and other determinations." Id. The district court concluded that the drafts constituted "secret agency law," id. at p. 88,082, citing Sears, 421 U.S. at 153.

On appeal here in Pies IRS makes the argument that the Pies drafts "have not been expressly incorporated by reference in any final decision; no one has been invited to read them in order to fathom the basis for any agency decision"; there was only "casual undirected use" of these materials by agency personnel, who "could read the contested documents during the course of their duties." Pies v. IRS, No. 79-2303 (D.C. Cir.), Brief for Appellant (IRS) at 8, 24, 25 (emphasis added). IRS also argues in Pies that no one in authority approved the drafts, id. at 13-14, that the drafts were merely "recommendations as to the form some final . . . [r]egulations might alternately take. . . .," id. at 15.

In contrast, the final GCM's, AOD's and TM's in issue here are constantly cited and followed, "used and relied upon" by IRS in later regulations, decisions and other determinations, cf. Pies, 79-2 U.S.T.C. at p. 88,081. IRS personnel are not only "invited" but are encouraged, indeed instructed, to research, use and rely on GCM's, AOD's and TM's; sec pp. 5, 11-12, 14-15, supra. All GCM's, AOD's and TM's are formally approved by the Assistant Commissioner (Technical), the highest authority within IRS for the formulation of policy; TM's are part of a package formally signed by the Commissioner of Internal Revenue himself; see p. 10, supra. In sum, the decisions of three other district courts on GCM's and our district court on TM's apply the principles laid down by the Supreme Court, this court and other federal courts of appeals in the same way the court below did in this case. All are correct.18

D. IRS Itself Considers GCM's, AOD's and TM's as Declaring IRS "Positions," Which Are IRS Rules of Decision Applied to the Taxpaying Public

The word "position" runs as a theme throughout the IRS testimony and other IRS materials in the record.

GCM's are kept and referred to in order to ensure consistency and uniformity of "positions," pp. 4, 8 supra; are used to help "formulate the position" on an issue, p. 5 supra; are used by Technical as a guide to the "position to be taken" in a revenue ruling, p. 7 supra; are revised to conform to the "position" Technical decided to take in the revenue ruling, p. 7 supra; and IRS litigators follow "the position" taken in a pertinent GCM when they argue tax cases, p. 8 supra.

TM's point out the "positions" taken in a regulation, p. 10 supra; themselves apply earlier GCM's and AOD's to ensure consistency of the "position" in the regulation with "a position previously adopted," p. 11 supra, and are looked up in order to find out "why a position was taken in the regulation," p. 10 supra.

IRS agents who handle, negotiate and decide at the agency level tax liability disputes between the IRS and taxpayers refer to GCM's and AOD's "as to the positions to take in such negotiations"; and they do not tell the taxpayer "that a particular position is required" by a GCM, AOD or TM. (J.A. 30-31)

That GCM's, AOD's and TM's thus constitute, embody, record or explain an IRS "position" is a conclusive demonstration that these documents constitute, embody, record and explain IRS' administrative law and are IRS' interpretations of the tax law as IRS applies the tax law to the public. "Position" is a term of art in IRS parlance. The word means the holding of IRS on a question of tax law, the rule of decision that IRS will apply in determining taxpayer liability. IRS commonly employs "position" in that sense. See, e.g., Treas. Reg. § 1.1311(a)-1(b) (1956), declaring that an error in a closed tax year can be corrected in a taxpayer's favor only if the Service had taken an inconsistent "position" for another year; Treas. Reg. § 1.1311(b)-1 (1962), entitled "Maintenance of an Inconsistent Position"; Treas. Reg. § 1.404(a)-14(k)(1) (as proposed 5/19/78), CCH Standard Federal Tax Reports ¶ 2657B at p. 32,558; and see, for recent examples, Rev. Rul. 80-205, 1980-31 I.R.B. at 10,11 ("It is the position of the [IRS] that organizations restricting benefits in this way do not qualify for exemption. . . ."); Rev. Proc. 80-20, 1980-26 I.R.B. at 7 ("A determination letter is issued only . . . on the basis of . . . a position . . . that specifically answers the question presented."); Rev. Rul. 80-99, 1980-15 I.R.B. at 6 ("[i]t is also a well-established position of the [IRS] that reimbursements for expenses . . . are not includible in the taxpayer's gross income."); Rev. Rul. 79-80, 1979-1 Cum. Bull. 86 (". . . the IRS stated its position that. . . ."); Rev. Rul. 79 102, 1979-1 Cum. Bull. 184 ("Rev. Rul. 76-242 revoked the position of the (IRS) sent forth in (1921). . . ."); Rev. Proc. 79-16, 1979-1 Cum. Bull. 516 (". . . revoked the position of the (IRS) set forth in. . . ."); IRS information releases, IR-80-84, IR-80-2, IR 2164, 2105, and numerous private letter rulings on a myriad of subjects.19

The word "position" is used as a synonym for rule of decision throughout the Internal Revenue Manual.20 It appears frequently in that same sense in court opinions. See, e.g., National Muffler Dealers Ass'n, Inc. v. United States, 440 U.S. 472, 486 (1979) (Congress did not try "to change the Commissioner's position as to the class of organization included in § 501(c)(6)"); Centra1 Illinois Public Service Co. v. United States, 435 U.S. 21, (1978) ("upon audit in 1971, the [IRS] took the position that . . . lunch reimbursements . . . qualified as wages subject to withholding"); Commissioner v. Standard Life & Accident Ins. Co., 433 U.S. 148, 161 (1977) (rejecting "the Commissioner's position" of "greater tax liability on unpaid premiums than . . . premiums. actually . . . paid"); Simon v. Eastern Kentucky Welfare Rights Organization, 426 U.S. 26, 29 (1975); Commissioner v. Idaho Power Co., 418 U.S. 1, 13 n. 9 (1974) ("the position of the Commissioner that construction-related depreciation is to be capitalized"); Donaldson v. United States, 400 U.S. 517, 538 (1970) (concurring opinion) ("the (IRS) has taken the position that the taxpayer who is being investigated is not entitled to be present at" examination of documents in the hands of a third party).

To be sure, IRS tries by form of words to keep "the term 'position,' when used in connection with interpretations of the IRC (Internal Revenue Code] . . . restricted to those interpretations" published in the Internal Revenue Bulletin. Int. Rev. Manual (11) 151. Here again, as with "precedent” and "reference" private letter rulings, p. 21 supra, and the Internal Revenue Manual's admonition to district offices to conceal their use of GCM's as precedents.(J.A. 169) p. 9 supra, the words cannot replace the reality. GCM's, AOD's and TM's are integrated components of the body of IRS "positions." They are IRS administrative law applied to taxpayers.

II. EXEMPTION 5 IS INAPPLICABLE TO AGENCY "SECRET LAW" DISCLOSABLE UNDER 5 U.S.C. § 552(a)(2)

Appellant suggests, without quite articulating, that even if GCM's, AOD's and TM's are interpretations adopted by the agency and hence part of the agency's working, albeit secret, law, they may nevertheless be exempt as "deliberative" under FOIA Exemption 5. (Br. 16-17, 29) The suggestion is untenable.

The Supreme Court held in Sears that "Exemption 5, properly construed, calls for 'disclosure of all 'opinions and interpretations' which embody the agency's effective law and policy . . . 421 U.S. at 153, quoting Davis, The Information Act: A Preliminary Analysis, 34 U. Chi. L. Rev. 761, 797 (1967). The Court would be "reluctant, therefore to construe Exemption 5 to apply to documents described in 5 U.S.C. § 552(a)(2). . . ." Id.

As this court consistently holds, "FOIA exemptions are to be interpreted narrowly," and Exemption 5 is to be kept "as narrow as was 'consistent with efficient Government operation.'" Ryan v. Department of Justice, 617 F.2d 761, 790 (D.C. Cir. 1980), quoting S. Rep. No. 813, 89th Cong., 1st Sess. 9 (1965). Citing Sears, 617 F.2d at 791 n. 36, this court declared in Ryan that "Exemption 5 does not apply to . . . statements of policy and final opinions which have the force of law or which explain actions an agency has already taken," id. at 790-91. Nor can Exemption 5 apply to "communications that promulgate or implement an established policy," id. at 791. Here, as the record makes manifestly clear, the documents embody the agency's effective law, explain, promulgate and implement agency actions and policy, are covered by § (a)(2) and Exemption 5 does not apply.

The reason why Exemption 5 cannot apply to documents that fall within FOIA section (a)(2) is obvious. The purpose of Exemption 5 is to protect agencies' internal decision-making process from the inhibitions of disclosure, to encourage candid, predecisiona1 advice. See Bristol-Myers Co. v. FTC, 598 F.2d 18, 23 (D.C. Cir. 1978). Absent such protection, the quality of internal agency debate might suffer. Cf. Sears, 421 U.S. at 150-51; Aviation Consumer Action Project v. CAB, 412 F. Supp. 1028, 1032-33 (D.D.C. 1973).

There is no possibility here that the quality of GCM's, AOD's or TM's, or of the rulings, non-acquiescence decisions and regulations to which they relate, would be adversely affected by disclosure. They are not "predecisional memoranda prepared in order to assist an agency decision-maker in arriving at his decision. . . ." Renegotiation Board v. Grumman Aircraft Engineering Corp., 421 U.S. 168, 184 (1975). They are the decisions themselves. They are not internal agency debate, but the final product of that debate. They are not mere "staff recommendations;" they are interpretations which the agency has adopted "as its own, and at that point (their) disclosure can be required." Washington Research Project, Inc. v. Department of Health, Education and Welfare, 504 P.2d 238, 248 (D.C. Cir. 1974); American Mail Line, Ltd. v. Gulick, 411 F.2d 696 (D.C. Cir. 1969); accord, Niemeier v. Watergate Special Prosecution Force, 565 F.2d 967 (7th Cir. 1977). As the Supreme Court and this court teach, in such a case Exemption 5 is inapplicable:

The probability that an agency employee will be inhibited from freely advising a decision-maker for fear that his advice, if adopted, will become public is slight. First, when adopted, the reasoning becomes that of agency and becomes its responsibility to defend. Second, agency employees will generally be encouraged rather than discouraged by public knowledge that their policy suggestions have been adopted by the agency. Moreover, the public interest in knowing the reasons for a policy actually adopted by an agency supports . . . (disclosure].

Sears, 421 U.S. at 161, quoted in Bristol-Myers Co. v. FTC, 598 F.2d at 24-25 (emphasis is the Supreme Court's).

III. SECTION 6110 OF THE INTERNAL REVENUE CODE DOES NOT APPLY TO GCM'S

Appellant makes a rather convoluted suggestion that Int. Rev. Code § 6110 (1976), ought to be construed to exempt GCM's from FOIA disclosure because it was not intended to include GCM's in the particular § 6110 disclosure system. (Br. 24-27) It is important to note that appellant does not argue that § 6110 is an Exemption 3 statute requiring withholding of GCM's. This should be enough to dismiss appellant's suggestion out of hand. Indeed, as appellant recognizes, § 6110 was intended to provide for disclosure of private letter rulings, technical advice memoranda and "background file documents," not withholding.

Appellant's suggestion is simply a non sequitur: that the § 6110-disclosable background file documents do not include GCM's has nothing to do with disclosure of GCM's under the FOIA.

Appellant bases its suggestion on a quotation from the Senate Report (Br. 26) that leaves out a crucial sentence. The Senate Report concluded its discussion of § 6110, referring to the various documents (including "internal memoranda") not specifically to be disclosed as § 6110 background file documents, by stating:

(The question of the availability of these documents is to be governed by other provisions of law, including the Freedom of Information Act.)

S. Rep. No. 94-938, Pt. II, 94th Cong., 2d Sess. 475 (1976).

In short. Congress did no more in § 6110 than to leave the status of GCM's to be determined under FOIA, as this action will do.21 Section 6110 is plainly irrelevant here.

CONCLUSION

Appellant's position in this action is entirely without foundation. It flies in the face of the record, of applicable law and of IRS' own practices. The judgment of the district court should be affirmed.

Respectfully submitted,

WILLIAM A. DOBROVIR
Dobrovir, Oakes & Gebhardt
2005 L Street, N.W.
Washington, D.C. 20036
(202) 785-8919

THOMAS F. FIELD
Taxation With Representation Fund
6830 N. Fairfax Drive
Arlington, VA 22213

Attorneys for Appellee

November 12, 1980

FOOTNOTES

1[Editor’s Note: The text for footnote 1 does not appear in the original full text.]

2There is a procedural but no substantive difference between private letter rulings and technical advice memoranda [MISSING TEXT]

3[Editor’s Note: The text for footnote 3 does not appear in the original full text.]

4This language dates from April 27, 1979 (J-A. 169), five months after this action was filed (J.A. 4). Previously the manual section, 4245.3 (August 2, 1976), had declared that GCM's "may be maintained and used in support of a district office position on an issue." (emphasis added) The softening of the language in 1979, presumably anticipating an argument in this case (see Br. 42), obviously makes no substantive difference in the practice at District offices. It is another example of IRS' habit of changing words to avoid the FOIA while retaining a practice unchanged, described at [MISSING TEXT]

5[Editor’s Note: The text for footnote 5 does not appear in the original full text.]

6These pages reproduce an actual TM furnished to appellee pursuant to the FOIA. It is unclear when IRS changed its position on disclosure of TM's.

7"(2) Each agency, in accordance with published rules, shall make available for public inspection and copying —

(A) final opinions, including concurring and dissenting opinions, as well as orders, made in the adjudication of cases;

(B) those statements of policy and interpretations which have been adopted by the agency and are not published in the Federal Register;. . . .

(C) . . . instructions to staff that affect member of the public. . . . (and)

. . . current indexes [to such documents]."

8Tax Analysts and Advocates changed its name to Taxation With Representation Fund on August 25, 1978. It was and is a publicly supported, non-profit, tax exempt charity.

9In a similar case the Sixth Circuit went one step further and held technical advice memoranda disclosable as well. Fruehauf, p. 9 n. 5 supra.

10The court stayed implementation of the judgment because IRS had petitioned for certiorari in Fruehauf. IRS withdrew the petition because of enactment of amendments to § 6103 and new provisions of the Internal Revenue Code, see § 6110, expressly adopting and implementing the disclosure of private letter rulings and technical advice memoranda ordered in TAA and Fruehauf. The TAA litigation ended with a stipulation providing a timetable and procedure for release of private letter rulings and technical advice memoranda after redaction to protect taxpayer privacy, and payment of plaintiff's attorney's fees.

Examination of the TM in the record (J.A. 194-207) makes one wonder what earthly reason IRS has for wanting to keep such materials secret — unless it wishes simply to conceal its own administrative law from the taxpaying public because of some fancied advantage. The TM is a comprehensive analysis of a regulation, citing many decided cases of the Tax Court, Courts of Appeals and Court of Claims, and reflecting how the regulation was changed in the process of drafting to meet certain needs. See, e.g., J.A. 194. It is to a Regulation as a Committee report is" to a statute — an essential element of the "legislative history." See J.A. 113-1.7.

Indeed, the practice of express internal agency reliance on and citation of such interpretations as "precedent," which the record affirmatively shows here, also brings GCM's, AOD's and TM's squarely within § (a)(2)(B), TAA, id. 1304-06, p. 21 supra; National Prison Project of American Civil Liberties Union Foundation, Inc. v. Sigler, 390 F. Supp. 799, 794 (D.D.C. 1975).

IRS also claimed attorney-client privilege in Falcone, as it did in the district court here. The court rejected that argument, and IRS has argued attorney-client privilege on appeal there, Falcone v. IRS, No. 80-1105 (6th Cir.), Brief for Appellant (IRS) at 18 (apparently because the plaintiff, Mr. Falcone, was himself a former IRS attorney seeking to get access to his own IRS work product for use in his private practice). Here, in contrast, plaintiff is a public interest organization seeking to free all GCM's, AOD's and TM's for use by the general public. In any event, appellant has abandoned the attorney-client claim here, Br. 24 n.7, resting exclusively on the governmental privilege.

The Falcone court relied on an affidavit of Jerome Sebastian that is word-for-word with his affidavit here; compare 479 F. Supp. at 988 with J.A. 167, quoted at p. 4 supra. In the passage quoted Mr. Sebastian says that GCM's are cited 'to insure consistency." The Falcone court concluded that "obviously, GCM's would not be valuable in insuring consistency unless they stated positions adopted by the agency to which subsequent rulings must be conformed." 479 F. Supp. at 988.

See Br. 24 n.8, where appellant suggests that Cliff supports its position.

IRS' Vaughn v. Rosen affidavit emphasized, significantly:

This memorandum contains no citations to any Internal Revenue Service regulations, Treasury regulations or any other GCM. I have reviewed the citator card (index card) in the Digest Section, Administrative Service Division, Office of Chief Counsel, which would note the citing of this GCM in subsequent CCMs or Office of Chief Counsel internal memoranda. The citator card reveals that this GCM has not been cited in a subsequent GCM and has been cited in one subsequent internal memorandum of the Office of Chief Counsel.

Cliff, Mem. Op., n. 14, pp. 4-5 of footnotes.

The Cliff court was referring to the process of revision of GCM's to conform them to the policy decisions of the Assistant Commissioner (Technical); see Mem. Op. at 13, quoting from the decision below in this case, 485 F. Supp. at 266. (J.A. 182-84) The Cliff court noted that because the GCM before it "did not make affirmative suggestions as to the content of the proposal, there could be no 'reconciliation' of differences to reflect the revenue procedure eventually adopted.” Mem. Op. at 14.

Appellant has cited other decisions in support of its appeals in Falcone and Pies which it has not cited here; in any event, none are in point. Shermco Industries, Inc. v. Secretary of The Air Force, 613 F.2d 1314 (5th Cir. 1980), involved legal memoranda relating to the choice of one contract bidder over another who, disappointed, sought disclosure of the documents. The legal opinions were the kind of ad hoc documentation routinely prepared to aid a decisionmaker, not the integrated components of a systematic body of law involved in this case. Virginia Independent Schools Ass'n, 76-1 U.S.T.C. ¶ 9322 (D.D.C. 1976), aff'd, 564 F.2d 601 (D.C. Cir. 1977), involved items such as a "Conference Report" and "rough or preliminary drafts"; all the documents contained "recommendations and exchanges of ideas made in the course of pre-decisional deliberations" on a "proposed change in IRS policy." 76-1 U.S.T.C. at pp. 83,760, 81,761. Bast v. IRS, 78-1 U.S.T.C. ¶ 9418 (D.D.C. 1978), applied exemption 5 to protect legal memoranda prepared by IRS' Disclosure (FOIA) Division on the plaintiff's FOIA appeal. Like the memoranda in Shermco (and those in Murphy v. Dep't of the Army, 613 F.2d 1151 (D.C. Cir. 1979), see Coastal States, 617 F.2d at 868) the Bast and Virginia Independent Schools IRS memoranda, as well as those described in detail by the court in Rosenthal and Schanfield v. IRS, 80-2 U.S.T.C. ¶ 9500 (N.D. Ill. 1980), as reflecting policy disputes, briefing material, tentative drafts and the like, were not part of a systematic body of substantive law like the documents at issue here.

E.g., Nos. 8026022 (charitable deductions); 8026012 ("The position espoused by the Government in the Wham case is equally applicable to this case and represents the position of this office. Accordingly, it is our conclusion that the $3,000,000 note from Controlled to Distributing constituted 'other property' received by Distributing in the reorganization pursuant to sections 368(a)(1)(D) and 361(b)."); 8024082 (travel expenses); 8020024, 8018005 (change in accounting methods); 8015003 (deduction vs. credit); 8011013 ("About 1974, the Service began to re-examine its position for distinguishing these favorable private rulings from Rev. Rul. 69-50 and accordingly began a review of the favorable private rulings. . . . the retroactive application of the Commissioner's change in position as to the shareholders in the other five corporations was an unlawful discrimination between similarly situated taxpayers and an abuse of the Commissioner's discretion. . . . Despite a showing of reliance on the ruling issued to another taxpayer, it was held in each case that the issuance of a private ruling to a particular taxpayer provided a sufficient basis for the Commissioner to apply a change in position retroactively as to taxpayers who had not received rulings."); 8001017 (royalties; "It is the position of the Service that the restriction on the Commissioner's authority to allocate under section 482 set forth by the Supreme Court in First Security Bank of Utah is limited to that situation where the taxpayer is prevented from receiving income under United States law.”).

E.g., 152 (Regional Counsel's offices prepare legal memoranda on "pertinent legal issues and the (IRS') position thereon"); 356.6 ("it is the position of the (IRS) that a notice of levy served upon the main bank reaches an account in a branch bank"); 563, 584, 587, [TEXT MISSING], 953, 954.

Appellant claims, ex-record, that appellee somehow is sneaking this lawsuit past a statute that appellee itself was instrumental in enacting. (Br. 26) Since appellant has gone outside the record to characterise appellee's role in the legislative process, appellee is constrained to set the record straight. As high officials of IRS are well aware, the drafting of § 6110 and of the Senate Report were the result of an express compromise between appellee and the IRS to leave GCM's unaffected, to be litigated under FOIA another day.

END FOOTNOTES

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