TAX ANALYSTS
Plaintiff
v.
INTERNAL REVENUE SERVICE,
Defendant.
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA
PLAINTIFF'S PRELIMINARY MEMORANDUM IN OPPOSITION TO IRS' CLAIMS OF EXEMPTION BASED ON SECRECY CLAUSE OF TAX TREATIES
Pursuant to the court's order of April 30, 1998, plaintiff Tax Analysts ("TA") is required to file its response to Defendant Internal Revenue Service's ("IRS") Memorandum Re: Redactions on Bases of Treaty Secrecy Clauses & International Agreements (served by mail June 1, 1998) ("IRS Mem.") by June 19, 1998. TA moved on June 9, 1998, for a continuance in order to carry out discovery on the issues raised by IRS' claims. IRS' time to file its opposition to that motion runs on June 23, 1998, and the court has not yet ruled on TA's motion for a continuance.
Without discovery TA is unable to address IRS' claims in full. Nonetheless, in obedience to the court's command we present herewith those arguments that we can make, in whole or in part, without discovery.
Statement
The D.C. Circuit's opinion, Tax Analysts v. IRS, 117 F.3d 607, 620 (D.C. Cir. 1997), remanded three issues to this court: IRS' claims of treaty secrecy under FOIA Exemption 3 for 32 FSAs, of FOIA Exemption 7(E) for 206 FSAs and of FOIA Exemption 6 for one FSA. The D.C. Circuit noted that TA had "raise[d] some doubt about whether the government properly presented" those claims. 117 F.3d at 620. It remanded the case to this court to "consider these issues."1 This court set a schedule for consideration of the treaty secrecy claims.
IRS made two transmittals of nontaxpayer-specific FSAs to TA, on April 28 and on May 14, 1998. Covering letters stated that IRS had reduced the total number of "treaty" FSAs from 32 to 29. Those two transmittals included 11 treaty FSAs, which were described in Defendant's Summary Index of Documents at Issue (No. 1) and (No. 2) (hereinafter "Vaughn Index") transmitted with them.2 One "treaty" FSA, no. 1087, was withheld entirely. On June 8, 1998, IRS transmitted 18 more FSAs, without a Vaughn index and without specifying whether they were or were not taxpayer-specific.3
An attachment to IRS Mem., a declaration of Michael Danilack, III, Associate Chief Counsel (International), has introduced confusion into the count and description of the "treaty" FSAs. IRS' transmittal letter of May 14, 1998, stated that all nontaxpayer-specific FSAs had been accounted for in the April 28 and May 14, 1998, transmittals (which included 11 "treaty" FSAs). However, the Danilack declaration, ¶ 8 at 3-4, identified three of the 18 "treaty" FSAs transmitted on June 8, 1998, nos. 1022, 1086 and 1184, as nontaxpayer-specific.4 This appears to be correct. Unlike the other 15 in that package, those three FSAs have no indication of deletions under § 6103. Moreover, in seven instances IRS' Vaughn Indexes and the Danilack declaration contain quite different descriptions of the material deleted.
I. IRS is Barred At the Threshold From Arguing Treaty Secrecy
A. IRS' Claim Comes Too Late
In defending FOIA lawsuits "'agencies [may] not make new exemption claims to a district court after the judge has ruled in the other party's favor,' nor may they 'wait until appeal to raise additional claims of exemption or additional rationales for the same claim.'" Senate of the Commonwealth of Puerto Rico v. United States Dep't of Justice, 823 F.2d 574, 580 (D.C. Cir. 1987) (quoting Holy Spirit Ass'n v. CIA, 636 F.2d 838, 846 (D.C. Cir. 1980) vacated in part as moot, 455 U.S. 997 (1982).
Apparently believing its § 6103 claims to be airtight, IRS made a deliberate choice not to present its Exemption 3/treaty secrecy, Exemption 6 and Exemption 7(E) claims when the case was here before. See Motion of Plaintiff Tax Analysts for a Continuance for the Purpose of Discovery on IRS' claims of Exemption for "Treaty Secrecy" (June 9, 1998) ("TA Discovery Motion") at 4-5, 10-11. IRS, knowing action is not an excusable “pure mistake." Jordan v. United states Dep't of Justice, 591 F.2d 753, 780 (D.C. Cir. 1978) (en banc).
IRS has no excuse for presenting exemption claims piecemeal. The Department of Justice has warned agencies that what IRS did here "may result in a waiver." U.S. Department of Justice, Office of Information & Privacy, Freedom of Information Act Guide and Privacy Act Overview, 515-516 (Sept. 1997 ed.).5
This court should not permit IRS to string out these proceedings until its computers crash on January 1, 2000. This court should put an end to IRS' "fighting tooth and nail to keep FSAs out of the public domain." Opinion (April 30, 1998) at 1.
B. IRS Has Not Made the Required Showing of Harm
IRS' own rule, binding on it by Supreme Court holdings, requires IRS to justify any withholding by a determination that "public knowledge of the information contained in such record would significantly impede or nullify IRS actions in carrying out a responsibility or function." Internal Revenue Manual 1230, § 293(2). We incorporate here the discussion of that issue in Plaintiff Tax Analysts' Reply to Memorandum in Opposition to Plaintiff's Motion to Compel Defendant to Comply With the D.C. Circuit's Mandate in This Case (March 5, 1998) at 4-6.6
IRS has not even attempted to make the required showing in support of its deletions from and withholding of "treaty" FSAs. Its claims for exemption should be rejected on that ground.
C. While Treaties Of Course Are the Law of the Land, They Are Not "Statutes.” However, the Court Need Not Rule on This Issue of First Impression Because the Treaties Protect Only Exchanges of Taxpayer Information, Which Is Already Exempt.
1. As We show Below, The Treaties Can be Construed to Exempt Only Taxpayer Information
Congress amended and reenacted FOIA § 552(b)(3) in 1976. Pub. L. No. 94-409, 90 Stat. 1241, 1247 (1976). It did not change the reference to "statute" by adding "treaties" or "executive agreements." A court may not speculate about what Congress might or in the agency's view should have done. See TA Discovery Motion at 1-3. We concede that there may be good policy reasons for allowing exemptions based on treaties. Whether the word "statute" should be stretched so far out of recognition we leave to the court. Cf. Public Citizen v. Office of the United States Trade Representative, 504 F.Supp. 385, 388 (D.D.C. 1992) (even if "Senate-ratified treaties . . . have the status of statutory law," non-Senate ratified international agreements "do not").7 However, the court need not decide this difficult and sensitive issue, one of first impression.
Assuming that treaties are entitled to treatment as FOIA Exemption 3 statutes, and applying established principles of construction of such statutes, as we show below, IV., infra, the secrecy clauses of the treaties and executive agreements cover only "information . . . exchanged" or "information received" that is also taxpayer information. The D.C. Circuit and this court have spelled out the treatment of taxpayer information in FSAs. 117 F.3d at 615-16, 620; Opinion (April 30, 1998) at 4-5. Since such information already is protected under those standards, the treaty secrecy clauses are redundant.
2. Exemption 3 Statutes Are Narrowly Construed to Favor Disclosure; If Treaties are Given Exemption 3 Status, They also Must Be Narrowly Construed
Congress amended FOIA § 552(b)(3) into its present form to narrow "the broad scope given the exemption by the Supreme Court." Reporters Committee for Freedom of the Press v. DOJ, 816 F.2d 730, 734 n. 4 (D.C. Cir.), modified on other grounds, 831 F.2d 1124 (D.C. Cir. 1987), rev'd on other grounds, 489 U.S. 749 (1989). In construing statutes (and by extension, treaties) that the agency claims permit withholding of records under 5 U.S.C. § 552(b)(3), agency interpretations are not entitled to Chevron deference. The statutes under which exemption is claimed are construed narrowly, any exemption must be stated "explicitly" in the statute. 816 F.2d at 734-35 (quoting Baldridge v. Shapiro, 455 U.S. 345, 355 (1982).8
For treaties as for statutes, the intent of the drafters, as expressed "explicitly" in the particular treaty, controls. There is no support whatsoever in the treaties for IRS' attempt to throw a cloak of secrecy over other countries' inquiries about U.S. law and over IRS' legal analyses, interpretations and conclusions in response to such inquiries. IV., infra. Neither IRS' view of the treaties, nor its desire to lump them all together, see Declaration of John T. Lyons, ¶¶ 7-17, nor "Model Conventions," see IRS Appendix II, have any bearing on what a particular treaty may exempt from disclosure. Reporters Committee, supra ; cf. IRS Mem. at 25-28. We reproduce in Appendix A, infra, the complete text of the Article of the treaty with each of the 10 countries that covers exchange of information and the treatment of such information.9 In IV, infra, we discuss how the provisions that IRS would omit bear on what information is covered.
II. IRS' Refusal to Identify the Treaties Invoked or the Countries Involved Cannot Be Sustained
IRS deletes from all the treaty FSAs the identity of the treaty that supposedly justifies deletions from each such FSA. IRS even withholds the name of the country that is the other party to the treaty in question. See e.g., Danilack declaration at 4, nos. 1176, 1184, 1206, 1214, 1222:
"doc, no. 1222: The identity of a foreign competent authority who made a request regarding information previously released by the Internal Revenue Service under the Freedom of Information Act."
See also Vaughn Index at 3, 4, FSA nos. 1111 and 1214: deletions of "[n]ame of a treaty partner and material that would permit the identification of the treaty partner"; id., FSA #1206, "[njame of the treaty partner and discussion of a treaty that would identify the treaty partner."
Even the broadest reading of terms like "information so exchanged" (Australia, Austria, Cyprus, Japan, Luxembourg and United Kingdom treaties), or "information received" (Barbados, Canada and Spain treaties and Mexico executive agreement) does not encompass the identity of the treaty or the name of the country. The information exchange Articles mention neither, not "explicitly" nor even by implication. That very information is a necessary predicate of IRS' claim that a treaty requires secrecy for information provided by another country. How can a court decide if information is exempt from disclosure by a treaty absent a reference to that treaty, identification of the country and a sufficient description of the information to prove that it is covered by the secrecy clause of that treaty? How else can IRS meet its burden of justifying its claims of exemption under 5 U.S.C. § 552(a)(4)(B)?
This brash attempt to "Glomarize" the very provision of law under which IRS claims exemption leaves us, for once, wordless.10
III. IRS Has Improperly Deleted Legal Analysis; the Legal Analysis in the Treaty FSAs, Including Interpretations of Treaty Provisions, Must Be Disclosed
IRS did not provide a Vaughn Index for the FSAs transmitted on June 8, 1998 (p. 2 n. 2 supra). Instead it marked on those FSAs handwritten references to the claims on which the deletions are based, e.g., "(b)(3)/TS" and "GIOS.” The Danilack declaration, id. at 4-6, includes descriptions of the material deleted that purport to justify them.
The deletions labeled "(b)(3)/TS" indicate that IRS is not complying with the D.C. Circuit's and this court's rulings that legal analyses and conclusions in FSAs must be disclosed.
For example, on pp. 1-2 of FSA no. 1022 (May 12, 1992), which the Danilack declaration lists as nontaxpayer-specific, a passage deleted on the basis of "TS" begins "Article [deleted] of the Treaty provides that [two paragraphs deleted]." Plainly, the deleted material is an interpretation of (if not a quotation from) the treaty. The Danilack declaration describes that FSA:
doc no. 1022: Discussion of request from a foreign competent authority for advice regarding the U.S. position on whether a company organized under the laws of a Treaty partner is treated as a resident under a Treaty.
The IRS Chief Counsel's legal analysis and legal conclusion about "the U.S. position" on a point of tax law is at the heart of agency working law that this court and the D.C. Circuit have ruled must be disclosed.
Similarly, on pp. 4-5 of FSA no. 1178 (August 4, 1993), the passage immediately after the heading "Discussion" reads
Article [deleted] of the [deleted] Convention is as follows:
[¶ deleted]
Similarly, Article [deleted] of the U.S.-[deleted] Income Tax Convention provides that
[¶ deleted]
The Danilack declaration says only:
doc. no. 1178: References to taxpayers' names; and discussion of taxpayer specific facts and question raised by a foreign competent authority regarding an exchange of information under a Treaty.
The Danilack declaration conceals what is plainly legal interpretation and analysis of treaty provisions. Other FSAs also betray similar deletions of legal analysis, interpretations or conclusions. See, e.g., FSA 1083, pp. 1, 2, 3;11 1134, p. 1;12 1153, p. 1.13 If treaties are the equivalent of statutes for purposes of FOIA Exemption 3, analysis of treaty provisions isagency working law for purposes of this case and must be disclosed.
IRS' legal interpretation, legal analysis, legal conclusion and statement of IRS "position" on U.S. tax law issues or on provisions of tax treaties, prepared by IRS' Office of Chief Counsel and included in the "treaty" FSAs, must be disclosed. Not a single information exchange Article mentions such matter, either "explicitly" or by implication.
This material deleted from the "treaty" FSAs is IRS' working law. It is not information received from the treaty partner. Similarly, the treaty partner's inquiry to IRS about the meaning of a U.S. tax law provision is not "information" that is "exchanged." It is a question that is asked, no more, and there is nothing secret about such questions.
IV. IRS' Deletion of Material That Is Not Taxpayer Information Cannot Be Justified Under Any of the Treaties
A. IRS Has Deleted from the "Treaty" FSAs Information That Is Not Taxpayer Information
The Vaughn Indexes covering 11 "treaty" FSAs and the parallel descriptions in the Danilack declaration demonstrate that IRS has made deletions that cannot be justified under any of the treaties or the executive agreement. For example:
(1)
"Discussion of inquiry by treaty partner regarding the taxation of certain corporations."
Vaughn Index (No. 1) at 8, FSA no. 1002. (Danilack substitutes "competent authority" for "treaty partner." Danilack Decl. at 3.)
(2)
"Inquiry from treaty partner regarding characterization of U.S. residency of U.S. citizen."
Id. at 9, FSA no. 1083 . The Danilack version is:
"doc. no. 1083: Discussion, based on information received from a foreign competent authority, regarding standard for determining whether a U.S. citizen is a resident of the U.S. for purposes of a Treaty."
Danilack Decl. at 3.
(3)
"Discussion of inquiry by treaty partner regarding the taxation of certain corporations."
Vaughn Index (No. 1) at 10, FSA no. 1127. The Danilack version is:
"doc. no. 1127: Discussion, based on information received from a foreign competent authority, on whether the Internal Revenue Service issued rulings concerning a specific type of entity formed in a Treaty country, and whether the U.S. has particular legislation in effect."
Danilack Decl. at 4.
(4)
"Discussion of inquiry by treaty partner regarding the taxation of capital gains under the treaty."
"doc. no. 1134: Discussion based on information received from a foreign competent authority, regarding the taxation of capital gains under a Treaty."
Danilack Decl. at 4.
(5)
"Discussion of the views of a treaty partner and the U.S. regarding reciprocal correlative adjustments between related parties within the meaning of the treaty."
Vaughn Index (No. 1) at 11, FSA no. 1142. The Danilack version is:
"doc. no. 1142: Discussion, based on information received from a foreign competent authority, regarding reciprocal correlative adjustments in the context of adjustments under section 482 of the Code."
Danilack Decl. at 4.
(6)
"Discussion of the views of the U.S. requested by a treaty partner regarding the consequences of a PLR on taxation of dividends under a treaty."
Vaughn Index (No. 1) at 11, FSA no. 1153. The Danilack version is:
"doc. no. 1153: Discussion, based on information received from a foreign competent authority, of whether Private Letter Ruling 9253034 affects a Treaty country's right under a Treaty to collect tax from a recipient of U.S. source dividends when the recipient is not entitled to Treaty benefits."
Danilack Decl. at 4.
(7)
"Discussion of request by treaty partner for exchange of information released under FOIA."
Vaughn Index (No. 1) at 12, FSA no. 1222. The Danilack version is:
"doc. no. 1222: The identity of a foreign competent authority who made a request regarding information previously released by the Internal Revenue Service under the Freedom of Information Act."
Danilack Decl. at 4.14
B. The Treaties Do Not Provide For Secrecy of Anything Except Taxpayer Information
IRS has so far denied to the court and TA the opportunity to determine if the particular treaty covers the material described as deleted — like, e.g., "information released under FOIA," FSA no. 1222, supra. We therefore discuss the treaties as a body. The question is what the "plain language" of the treaties, Amtrak, 503 U.S. at 418, "explicitly" provides. What do the treaties (not IRS) say is the kind of information to be kept confidential?
If a treaty is to be given the effect of a statute, it should be governed by the same rules of interpretation as statutes. Courts must "look for a sort of 'objectified intent' — the intent that a reasonable person would gather from the text." A. Scalia, A Matter of Interpretation; Federal Courts and the Law, 17 (1997). "The text is the law, and it is the text that must be observed." Id. 22. As we shall see, the texts make clear that what the treaties cover is factual information needed to carry out purposes of the treaties — and no more.
The purposes of the treaties are to regulate double taxation, to prevent fraud or evasion of tax, and to administer the tax laws to taxpayers. See, e.g., the Australia, Austria, Barbados, Canada, Cyprus, Japan, Luxembourg, Spain, Sweden and United Kingdom treaties and the Mexico executive agreement,15 quoted in Declaration of John T. Lyons, Assistant Commissioner (International), ¶ 3 at 1-7; Appendix A, infra. The texts of the treaties demonstrate that the information to be exchanged to serve those purposes is facts — evidence.
The treaties describe that factual information with specificity: taxpayer records ("copies of unedited original documents"), depositions, and information that tax authorities may obtain by compulsory process (each government is obligated to use its own compulsory process to obtain information requested by the other government). Australia, Art. 25(4), Barbados Art. 26(2), Canada, Art. 27(2), Cyprus, Art. 28(2), Mexico, Art. 4 (4), Sweden, Art. 26(3).16 Further proof that the exchange of information clauses are limited to factual information is found in safeguards against required disclosure of trade secrets (e.g., Austria, Barbados, Canada, Cyprus, Japan, Luxembourg, Spain, Sweden), of information whose disclosure would be “contrary to public policy” (e.g., Australia, Barbados, Canada, Cyprus, Japan, Luxembourg, Spain, Sweden), of privileged information (Mexico), and of information that would compromise national security (e.g., Luxembourg). Such terms certainly do not refer to questions and answers about U.S. tax law.
All 10 treaties expressly provide for use and disclosure of the information in court proceedings. Plainly this too refers to evidence and other factual material. It would be silly for a treaty to permit the requesting country to introduce its own legal arguments in its own courts.
IRS also is bound by the testimony of its designated witness, Cynthia J. Mattson, Assistant Chief Counsel (International), quoted in TA Discovery Motion at 6-7. Ms. Mattson testified,” . . . if the United States requests information from Canada, that information is generally in a very real sense probably taxpayer information of Canada. . . . protected by the disclosure laws of the United States,” and "becomes part of the taxpayer's return information here in the United States.” Id. at 6.
The texts of the treaties and IRS' own testimony can lead but to one conclusion: that the information exchange clauses are intended to provide only for exchange of factual information, i.e., taxpayer information. The provisions for secrecy likewise cover only that kind of information: taxpayer information about which this court and the D.C. Circuit have spoken at length in this case. Yet IRS has deleted from the 29 “treaty” FSAs at issue, interpretations of such sources of tax law as the "standard for determining whether a U.S. citizen is a resident of the U.S.,” U.S. legislation on taxation of corporations, IRS rulings on taxation of capital gains, "section 482 of the [Internal Revenue Code]”, the holding of PLR ”9253034” on taxation "of U.S. source dividends,” and even the FOIA. See IV.A. (2), (3), (4), (6), (7), supra. Such content is not protected by treaty secrecy clauses.
To sum up: inquiries from other countries about U.S. law, and IRS' responses in the FSAs interpreting U.S. tax law, are not the kind of information for which the treaties provide confidentiality.
V. IRS Is Not Following This Court's Mandate on Deletion of Taxpayer Information Under Treaties or § 6103
IRS' June 8, 1998, transmittal of 15 taxpayer-specific "treaty" FSAs, Danilack decl. at 4-6, presents a troubling question. IRS invokes I.R.C. § 6103 and treaty secrecy ("T/S”) to delete great gobs of the text of these FSAs. IRS does not tell the court what standard it has applied in deleting return information. The wholesale deletions indicate that IRS is not complying with this court's ruling, Opinion (April 30, 1998) at 4-5, that return Information deletions from FSAs are limited to those permitted by I.R.C. § 6110.
IRS has informed TA that it intends to file a motion to suspend the court's April 30, 1998, order, because IRS may want to appeal the order. In making deletions pending such appeal, has IRS followed an expansive standard of its own instead of the precise standard this court ordered? The discovery TA seeks, TA Discovery Motion (June 9, 1998), would seek an answer to this question. Intervening events may moot the § 6103 vs. § 6110 issue, however.
Officials of the U.S. Department of the Treasury, IRS, IRS' Office of Chief Counsel and TA's president, vice president and counsel met a number of times during the six months beginning in December 1997. Members and staff of the committees of the Congress with jurisdiction over tax matters and IRS knew of, approved and encouraged the meetings. The result of the meetings was that the Treasury Department was to propose to the Congress an amendment to I.R.C. § 6110 to be included in the pending bills to restructure IRS. The amendment, if enacted, would add a fourth category of document, called "Chief Counsel Advice," to the disclosure regime of § 6110. Chief Counsel Advice is defined expressly to include FSAs. If enacted, the amendment would codify the April 30, 1998, ruling of this court that deletion of taxpayer information from FSAs before release to the public shall be governed by I.R.C. § 6110(c).
CONCLUSION
Properly interpreted, the tax treaties that cover information exchanged between the U.S. and other nations permit exemption of
Respectfully submitted,
WILLIAM A. DOBROVIR
D.C. Bar No. 030148
Suite 102
65 Culpeper Street
Warrenton, VA 20186
(540) 341-2183
Attorney for Plaintiff
June 18, 1998
FOOTNOTES
1The issue whether IRS has waived the these claims by not "properly present[ing] them," id., is discussed at I.A., infra.
2Nos. 1002, 1083, 1127, 1134, 1142, 1153 and 1176 (April 28, 1998), and 1111, 1206, 1214 and 1222 (May 14, 1998).
3Nos. 988, 1022, 1038, 1045, 1064, 1065, 1074, 1079, 1086, 1087, 1109, 1117, 1148, 1178, 1184, 1189, 1209 and 1231.
4The Dainkack declaration also identified 14 taxpayer-specific FSAs. The declaration is dated June 1, 1998. IRS does not explain the seven day delay in transmitting the 18 redacted "treaty" FSAs to TA.
5We also refer the court to the discussion and cases cited, TA Discovery Motion at 10-11.
6This, like the waiver rule, is government-wide:
Another significant Freedom of InformationAct development was the issuance in October1993 of statements of new FOIA policy by bothPresident Clinton and Attorney General Janet Reno, which together established a strong new spirit of openness in government under the FOIA. In conjunction with President Clinton's call upon all agencies to follow "the spirit" as well as the letter of the Act, Attorney General Reno's FOIA Memorandum articulated the FOIA's "primary objective" — that of achieving "maximum responsible disclosure of government information."
U.S. Department of Justice, Office of Information & Privacy, Freedom of Information Act Guide and Privacy Act Overview, 11-12 (Sept. 1997 ed.) (footnotes omitted).
7IRS cites Barquero v. United States, 18 F.3d 1311 (5th Cir 1994), in support of the argument that an executive agreement is also a foia Exemption 3 statutes. The case has nothing to do with FOIA. There a Mexican national sought to bar enforcement of an IRS summons to a U.S. bank for his records. Mexico had requested the records under the executive agreement. The court held that the executive agreement was constitutional, that it was authorized by I.R.C. § 274(h)(6)(C), and that the summons was enforceable.
8Even in granting Chevron deference the Court looks to whether the agency interpretation accords with the "plain language," the "structure and language of the statute as a whole." National R.R. Passenger Corp. v. Boston & Marine Corp. ("Amtrak"), U.S. 407, 417-18 (1992).
9IRS' Appendix I extracts the one or two sentences that refer to secrecy of information and omits the sometimes lengthy provisions, crucial to proper construction, see IV.B., infra, about the kind of information to be exchanged and the purpose of exchanging information. Our Appendix A reproduces all of the omitted language. See p. 16 n. 16 infra.
10The term "Glomarize" refers to an agency statement that even to confirm or deny the existence of documents about a secret project (there an attempt by a CIA-chartered vessel called the Glomar Explorer to raise a sunken Soviet submarine from the deep ocean floor) would compromise national security protected by FOIA § 552 (b)(1). Phillippi v. CIA, 546 F.2d 1009, 1013 (D.C. Cir. 1976).
11”[T]he proper standard to apply in determining whether a U.S. citizen is a resident of the United States for purposes of the United States [rest deleted]"; ”[a]lthough the section 871 regulations were intended primarily to determine the 'residence' of alien individuals, [continuation deleted]"; "[t]herefore, to the extent the section 7701(b) definition of residence conflicts with the definition [large deletion]."
12"Under section 1221 of the Internal Revenue Code, stock is generally a capital asset, and both dividends and gain from the sale of stock are considered [continuation deleted]."
13"If a person not entitled to a reduced withholding rate under the [deleted] onetheless [sic] claims that benefit, too little tax will be withheld. To ensure that the proper amount of tax is ultimately paid (rest of page deleted]."
14"Treaty" FSA no. 1222 is 14 pages long. The Vaughn Index and the Danilack declaration are both correct and both, of course, are incomplete descriptions of the material deleted; cf. the seven blind men asked to describe an elephant based on the part of the elephant that each touched.
15IRS argues that the Mexico executive agreement is authorized by I.R.C. § 274(h)(6)(C). That section authorizes "exchange of information agreement[s]" that provide for the exchange of information
necessary or appropriate to carry out and enforce the tax laws of the United States and the beneficiary country (whether criminal or civil proceedings), including information which may otherwise be subject to nondisclosure provisions of the local law of the beneficiary country such as provisions requesting bank secrecy and bearer shares.
This hardly can be construed to cover IRS' legal analysis of a tax law issue in response to Mexico's query.
16Neither IRS' Appendix I nor the Lyons declaration reproduced these provisions. Appendix A, infra. reproduces the entire text of each article that refers to exchange of information. We have used the version of the treaty presently in force (like, e.g., the 1995 treaty with Sweden).
END FOOTNOTES