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Plaintiff's Response to Reply

Posted on Jan. 6, 2021

Citations: Tax Analysts v. IRS; No. 1:94-cv-923

SUMMARY BY TAX ANALYSTS

Plaintiff's Response to Reply, Tax Analysts v. IRS, D.D.C., 94-0923

Tax Analysts v. IRS

TAX ANALYSTS,
Plaintiff,
v.
INTERNAL REVENUE SERVICE,
Defendant.

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLUMBIA

PLAINTIFF TAX ANALYSTS' ("TA") RESPONSE TO THE INTERNAL REVENUE SERVICE'S REPLY TO PLAINTIFF'S MEMORANDUM ON NEW LEGISLATION, ETC. ("IRS' REPLY")

IRS asserts that TA is wrong "in three particulars." IRS is correct about one of the three particulars, but, as we show, the ultimate result is unchanged. IRS is incorrect about the other two.

I. Section 6110(i) Is Applicable to the 29 Field Service Advice Memoranda ("FSAs")

A. Congress Exempted Only "Tax Convention Information" from § 6110(i).

As IRS' Reply points out, § 6110 now does not apply "to any matter to which section . . . 6105 applies." IRS' Reply § 3a. Pertinent to this case, § 6105 "applies" to "tax convention information" in a document. The only information IRS claims should be deleted from 29 "treaty" FSAs is the name of a foreign country. We have argued that country names are not "tax convention information" as defined in § 6105(c)(1)(E), because, as IRS has conceded, no "tax convention" provides for secrecy of the country's name.1

We respond to IRS' contrary argument at III below. If, as we argue, country names are not "tax convention information," § 6105 does not "apply" to such information and § 6110(i) controls. TA's Mem., I. at 1-2.

B. This Court Has Not Ordered That The 29 "Treaty" FSAs "Be Disclosed."

IRS correctly quotes the Conference Committee report on § 3509 of IRSRRA.2 IRS' Reply at 3. As IRS quotes, § 6110(i) does not apply to documents that a "federal court has . . . ordered be disclosed." IRS is mistaken in asserting that this court has ordered the 29 "treaty" FSAs "disclosed".3 If the court had done so the 29 FSAs would have been released long ago (except for "true return information") and we would not be arguing about the meaning of § 6105.

II. IRS Is Wrong on "Impairment" (IRS' Reply ¶ 5 at 6-8).

Section 6105 says that the prohibition against disclosure of tax convention information in § 6105(e) "shall not apply" to nontaxpayer-specific tax convention information "if the Secretary mines, after consultation with each other party to the tax convention, that such disclosure would not impair tax administration. § 6105(b)(3) (emphasis added). The parallel Provision of § 6103(e)(7), on which § 6105(e) doubtless was modeled, is identical except for one word. A taxpayer's designee may inspect the taxpayer's return information ”if the Secretary determines that such disclosure would not seriously impair tax administration.” The only difference is inclusion in § 6103(e)(7) of the word "seriously” which, we pointed out, TA Mem. at 8 n. 6, the courts have not discussed in the § 6103(e)(7) impairment cases.4

Because of the virtual identity of the language in § 6103(e)(7) and § 6105, we argued that the FOIA Exemption 3/§ 6103 "impairment” cases were useful precedents here. TA Mem., IV.B. at 7-13. As in those cases, here too in this FOIA case IRS has the burden of proof on each element of the Exemption 3 statute. Contrary to IRS' rather bizarre argument, IRS' Reply at 7, IRS cannot avoid disclosure by declining to make an impairment determination at all.5 If IRS fails to make a good faith, factual determination that “impairment of tax administration" would "not" result from disclosure of the country's name, it would fail to meet its burden of proof and disclosure would be ordered. The draftsmanship of § 6105 confirms this. The section "shall not apply” if the Secretary determines that disclosure "would not impair tax administration." With the two "nots" cancelling each other, the statute means simply that § 6105 applies only if IRS, after consultation, makes the impairment determination and justifies it as the Exemption 3/§ 6103 cases require.6

III. The Name of a Country and Legislative History.

A. The Text of the Statute Is Clear.

IRS' Reply points to language in the Committee report suggesting that § 6105 covers "the association of a particular treaty partner with a specific issue or matter." IRS' Reply at 5 n. 4. To call the phrase "a rather clear expression" of Congress' intent, id., even though equivocal, is itself an overstatement. The committee's use of the vague term "association" is a far cry from stating, as the conference committee could have, "the name of a country or treaty partner always is tax convention information."

The conference committee's vague suggestion cannot, in this case, effect an amendment to the statute that both Houses passed and the President signed. Section 6105 defines tax convention information" as (1) "information exchanged pursuant to a tax convention," (2) "which is treated as confidential or secret under the tax convention." I.R.C. § 6105(c)(1)(E) (emphasis added). Unless the "association" of a country with a matter is treated as secret under a tax convention — which, we have shown, it is not, TA Mem. at 4-6, the Committee report not only would be amending the statute: it would be amending unilaterally the dozens of tax conventions presently in force between the U.S. and other countries.

B. When the Text Is Clear, Legislative History Is Irrelevant.

In any case, long accepted principles of statutory construction require the court to disregard such a committee "amendment." The Supreme Court holds that when "the statute's language is plain, the sole function of the court is to enforce it according to its terms." United States v, Ron Pair Enterprises, Inc., 489 U.S. 235, 241 (1989). Accord Rubin v. United States, 449 U.S. 424, 430 (1981) ("when we find the terms of a statute unambiguous, judicial inquiry is complete").

D.C. Circuit decisions confirm that no resort to legislative history is appropriate when a statutory text is clear on its face. "At its best, statutory history is an undependable guide to the meaning of a statute," Gersman v. Group Health Association, Inc., 975 F.2d 886, 890 (D.C. Cir. 1992), for "[i]t is only the statute itself that is law," id. at 891. Hence "the Court need not consider the legislative history of a statute unless the plain meaning of the language is ambiguous." Assassination Archives and Research Center v. U.S. Department of Justice, 828 F.Supp. 100, 102 (D.D.C. 1993).

This general rule applies as much to a conference report as to any other source of legislative history. In National Small Shipments Traffic Conference v. CAB, 618 F.2d 819 (D.C. Cir. 1980), a shipper group challenged an order of the Civil Aeronautics Board ("CAB") exempting cargo airlines from their statutory obligation to file tariffs setting forth their rates. The CAB relied on a provision in the governing statute that gave it the power to issue an exemption from "any" requirement of that statute. The plaintiff argued that the conference report explaining that exemption provision stated that Congress did not expect the CAB to use that power to grant an exemption from the tariff filing obligation. 618 F.2d at 827.

The Court of Appeals upheld the CAB'S order granting the tariff filing exemption. The statute granted to the CAB the power to exempt carriers from "any" requirement of the law. Legislative history purporting to vary that statutory provision must be disregarded;

the plain language of the statute authorizes the Board's action. A court interpreting a statute is bound by the "literal or usual meaning of its words" unless this would lead to "'absurd results . . . or would thwart the obvious purpose of the statute' * * *." This case does not present an instance in which a literal interpretation of the language of the statute leads to an absurd result or conflicts with the obvious purpose of the Act.

618 F.2d at 827 (citations omitted). Congress limited the definition of ”tax convention information” in § 6105(c)(1)(E) to information covered by the secrecy clauses of tax conventions. To apply this provision in accord with its express terms, disregarding the gratuitous overlay of the conference report's "association” language, does not ”lead[ ] to an absurd result or conflict[ ] with the obvious purpose of the Act.”

The CAB court also noted the pitfalls of relying on legislative history to alter the plain meaning of a statute.

[I]nterest groups who fail to persuade a majority of the Congress to accept particular statutory language often are able to have inserted in the legislative history of the statute statements favorable to their position, in the hope that they can persuade a court to construe the statutory language in light of these statements. This development underscores the importance of following unambiguous statutory language absent clear contrary evidence of legislative intent.

618 F.2d at 828.

These holdings are echoed in Antolok v. United States, 873 F.2d 369, 377 (D.C. Cir. 1989). Plaintiffs argued that legislative history could be applied to vary the language of a statute. The court responded that

the short answer to plaintiffs' contention is a simple one. As the Supreme Court has repeatedly reminded us, "[w]hen . . . the terms of a statute [are] unambiguous, judicial inquiry is complete except in rare and exceptional circumstances."

Id. at 376 (citations and internal quotation marks omitted). It is

necessary for judges to exercise extreme caution before concluding that a statement made in floor debate, or at a hearing, or printed in a committee document may be taken as statutory gospel. Otherwise, they run the risk of reading authentic insight into remarks intended to serve quite different purposes.

873 F.2d at 377 (citation omitted).7

We were not in the room when the conference report was drafted and we do not know who was. However, the "association” phrase bears IRS' fingerprints and suggests a tug-of-war with committee staff's unwillingness to insert anything more specific.

Respectfully submitted

WILLIAM A. DOBROVIR
D.C. Bar No. 030148
Suite 102
65 Culpeper Street
Warrenton, VA 20186
(540) 341-2183

Attorney for Plaintiff

March 6, 2001

FOOTNOTES

1Plaintiff Tax Analysts' ("TA") Memorandum on New Legislation and Response to Defendant Internal Revenue Service's ("IRS") Notice of Recently Enacted Legislation Bearing on Its Claim of Treaty Secrecy for Certain FSAs ("Notice") (February 2, 2001) ("TA Mem."), III. at 5-6.

2Pub. L. 105-206, 105th Cong., 2nd Sess. (1998).

3IRS refers to the court's "April 30, 1998, Order." The court signed the Order on April 30, 1998, but it was filed by the Clerk on May 1, 1998, which is its effective date. For the court's ruling ordering briefing, not disclosure, see Tax Analysts v. IRS, No. 94-0923 (GK), Opinion (May 1, 1998) ¶ 6 at 7-8; Order, id., fifth "Further Order" paragraph at 2.

4Which IRS does not attempt to distinguish or refute.

5Agencies may not "prevent judicial review of their policy determinations by simply refusing to take the final action” Eloise Pepion Cobell, et al, v. Gale A. Norton, Secretary of the Interior, et al., No. 00-5081 (D.C. Cir., February 23, 2001), slip op at 20.

6The conference committee report confirms the meaning of the statute on this point:

The general rule does not apply to the disclosure of information not relating to a particular taxpayer if, after consultation with the parties to a tax convention, the Secretary determines that such disclosure would not impair tax administration. This is consistent with current practice.

Congressional Record (December 18, 2000) H12413.

7Quoting from International Bhd. of Electrical Workers, Local Union No. 474 v. NLRB, 814 F.2d 697, 717 (D.C. Cir. 1987)

END FOOTNOTES

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