Tax Analysts, which publishes The Insurance Tax Review, disputed the IRS's redaction in several categories of documents, including Legal Memorandums (LMs), Pending Issue Reports (PIRs), Field Service Advice Reports (FSAs), and Technical Assistances (TAs). The IRS argued that the redacted portions were part of the deliberative process.
A U.S. district court found that the LMs were part of the agency's deliberative process and that the redaction of taxpayers' names in undocketed cases and issue statements in docketed cases on the PIRs and the FSAs was proper. The court denied motions for TAs other than TAs to the field and those withheld under the Exemption 3 and Exemption 5 process privilege and the attorney-client and attorney work product privilege. The court considered the pre-1986 LM issue moot.
Next the court considered Tax Analysts' motion to reconsider the court's order that the foreseeable harm rule wasn't binding on the IRS, and it concluded that the March order was final. It granted the IRS's motion denying disclosure of TAs covered by treaty exemptions and by the attorney work product privilege. The court considered TAs prepared for law enforcement purposes and granted and denied in part the parties' motions. However, the court concluded that nine of the TAs weren't covered, and it granted Tax Analysts' motion for summary judgment on those. The IRS filed a motion for reconsideration, and Tax Analysts challenged the claims of error and sought reconsideration of the 2001 order.
The district court denied Tax Analysts' motion to reconsider, noting that it was untimely. The court dismissed Tax Analysts' arguments that the segregability requirement applies to documents protected under the attorney work product privilege. The court noted that under the segregability requirement, nonexempt document portions must be disclosed. It noted that agency working law was exempt under the Exemption 5 attorney work product privilege and the agency working law in a privileged attorney work product was exempt material and need not be segregated. The district court considered the IRS's motion for reconsideration, concluding that the threshold requirement in Rural Housing Alliance v. Dept of Agriculture, 498 F.2d 73 (D.C. Cir 1974), requiring inquiry into whether the documents were investigatory, was still applicable after the 1986 amendments to FOIA. The court held that the TAs submitted were a representative sample, and it ordered the IRS to apply the holdings in the 2000 and 2001 orders to the TAs at issue and to withhold and disclose the documents in accordance with the court's holdings. Tax Analysts appealed.
Circuit Judge Harry T. Edwards concluded that the IRS's LMs and the Office of Chief Counsel intradivisional TAs are exempt from disclosure under the deliberative process privilege in FOIA Exemption 5, 5 U.S.C. section 552(b)(5). The circuit court affirmed the district court's refusal to force the IRS to segregate and release agency working law from TAs withheld under Exemption 5's attorney work product privilege. Judge Edwards affirmed the district court's holding that the IRS properly withheld five TAs issued to program managers under Exemption 5's deliberative process privilege but held that the IRS must release five other TAs. The IRS appealed, and after reviewing the TAs in camera, the circuit court held that the district court correctly distinguished between TAs that are part of an internal give- and-take discussion and those that reflect the Office of Chief Counsel's legal conclusions.
Judge Edwards next concluded that the district court erred in ordering the IRS to release eight TAs because it found that the information wasn't exempt from disclosure. The court reversed and remanded so that the district court may reassess the material under the correct legal standard. Judge Edwards dismissed the district court's reliance on Rural Housing Alliance, concluding that that standard isn't relevant. The court concluded that the information doesn't relate to an ongoing investigation; rather, the IRS seeks to avoid disclosure of agency material relating to guidelines and techniques for law enforcement investigations and prosecutions outside an investigation. The court noted that the district court's holding failed to consider the amendment to Exemption 7 and its legislative history that makes it clear 
that Congress intended the amendment to protect noninvestigatory materials. The court concluded that, under the amended Exemption 7, an agency may seek to block the disclosure of internal materials even when they weren't compiled during an investigation. Thus, Judge Edwards reversed and remanded the district court on this point. The court concluded that the district court must apply the correct threshold and determine, as Exemption 7(E) requires, whether release of the agency materials would disclose guidelines, techniques, and procedures for law enforcement investigations or prosecutions if that disclosure could reasonably be expected to risk circumvention of the law. Tax Analysts v. IRS, No. 01-5231; No. 01-5232 United States Court of Appeals for the District of Columbia Circuit June 14, 2002.
Full Text Citations: Doc 2002-14346 (17 original pages) [PDF]; 2002 TNT 116-8 