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Appraiser Files Amended Counterclaim in Conservation Easement Suit

SEP. 14, 2020

United States v. Nancy Zak et al.

DATED SEP. 14, 2020
DOCUMENT ATTRIBUTES

United States v. Nancy Zak et al.

[Editor's Note:

The exhibits can be viewed in the PDF version of the document.

]

UNITED STATES,
Plaintiff,
v.
NANCY ZAK, et al.
Defendants,
And
CLAUD CLARK III,
Counterclaim-Plaintiff,
v.
UNITED STATES,
Counterclaim-Defendant.

IN THE UNITED STATES DISTRICT COURT FOR THE
NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION

AMENDED COUNTERCLAIM

On December 24, 2019, pursuant to Rule 13 of the Federal Rules of Civil Procedure, Claud Clark III (“Mr. Clark” or “Counterclaim-Plaintiff”) filed a counterclaim (the “Original Counterclaim”) seeking damages against the United States of America (“Counterclaim-Defendant”) under 26 U.S.C. § 7431 for wrongful disclosures of his return information. (ECF No. 123 at 115-27.) On February 24, 2020, Counterclaim-Defendant moved to dismiss the Original Counterclaim. (Motion to Dismiss Counterclaim, ECF No. 161.) On March 9, 2020, Mr. Clark filed his response in opposition to the Motion to Dismiss Counterclaim. (ECF No. 165.) On March 23, 2020, Counterclaim-Defendant filed its reply in support of its Motion to Dismiss Counterclaim. (ECF No. 168.)

On August 24, 2020, the Court granted the Motion to Dismiss Counterclaim, dismissed the Original Counterclaim without prejudice, and granted Mr. Clark leave to file an amended counterclaim within 21 days. (Order, ECF No. 202.) The Court provided that an amended counterclaim should directly address the issues raised in its Order, “specifically, how the statements made by the Government disclose [Mr.] Clark's tax return information or his identity and investigation of him personally linked to his tax return.” (ECF No. 202 at 15.)

Pursuant to this Order and the grant of leave therein to file an amended counterclaim, Mr. Clark, by his undersigned counsel, hereby amends his counterclaim against the Counterclaim-Defendant and alleges as follows:

JURISDICTION

1. This Amended Counterclaim arises under section 7431 of the Internal Revenue Code (26 U.S.C.) (the “Code”) and the laws of the United States for the recovery of statutory and/or actual and punitive damages for the willful, intentional, knowing, bad faith, grossly negligent, and/or negligent unauthorized disclosure of return information with respect to Counterclaim-Plaintiff by: Charles P. Rettig, Commissioner of Internal Revenue; Richard E. Zuckerman, Principal Deputy Assistant Attorney General of the Department of Justice Tax Division; Douglas O'Donnell, Commissioner of the Large Business and International Division of the Internal Revenue Service; Sunita Lough, Deputy Commissioner for Services and Enforcement of the Internal Revenue Service; and other unknown agents of the Internal Revenue Service (the “IRS”) and Department of Justice (“DOJ”) in violation of 26 U.S.C. § 6103.

2. This Court has jurisdiction over this Amended Counterclaim pursuant to 26 U.S.C. § 7431(a)(1) (unauthorized disclosure by employee of United States), 28 U.S.C. § 1331 (federal question), 28 U.S.C. § 1340 (claim arising under the internal revenue laws), and/or 28 U.S.C. § 1367 (supplemental jurisdiction).

3. This Court has personal jurisdiction over the Counterclaim-Defendant as a consequence of the Counterclaim-Defendant filing the Complaint (ECF No. 1, hereinafter the “Complaint”) in this Court and/or the statements at issue being published and made available in the State of Georgia.

4. Venue is proper in this District pursuant to 28 U.S.C. § 1391(e). By filing a Complaint against Counterclaim-Plaintiff, Counterclaim-Defendant has agreed that venue is proper in this District.

5. This is a compulsory counterclaim under Rule 13(a) of the Federal Rules of Civil Procedure because it arises out of transactions that are the subject of Counts I, II, III, IV, and V of the Complaint.

6. In the alternative, this is a permissive counterclaim under Rule 13(b) of the Federal Rules of Civil Procedure.

7. This Court granted Counterclaim-Plaintiff leave to file this Amended Counterclaim. (Order, ECF No. 202.)

STATEMENT OF FACTS

8. Mr. Clark, an individual and citizen of the United States of America, is a “person” and a “taxpayer” of the United States of America for purposes of the Code. See 26 U.S.C. § 7701(a)(1) (“an individual” is a person); 26 U.S.C. § 7701(a)(14) (“any person subject to any internal revenue tax” is a taxpayer); 26 U.S.C. § 6671(a) (unless otherwise provided, any reference in the Code to a “tax” includes the penalties under sections 6694, 6695A, and 6700 of the Code, to which Counterclaim-Defendant has alleged Mr. Clark is subject).

9. Mr. Clark files a federal income tax return annually with the IRS. The information provided by Mr. Clark on his federal income tax returns, such as his name, profession, and source of income, constitutes his “return information” for purposes of section 6103 of the Code.

10. Certain “material advisors” are required inter alia to file Form 8918, Material Advisor Disclosure Statement, which is described as a “return” under section 6111 of the Code. Information provided on Form 8918 constitutes “return information” within the meaning of section 6103 of the Code.

11. For certain years, Mr. Clark protectively filed Forms 8918 with the IRS. The information provided by Mr. Clark on the Forms 8918 he filed with the IRS constitutes his “return information” within the meaning of section 6103 of the Code.

12. Mr. Clark's clients have filed returns or portions of returns with the IRS containing information about Mr. Clark such as his identity, his profession, his opinions of value, and his potential liability for penalties based on his opinions of value (e.g., Form 8283, Noncash Charitable Contributions). The information provided about Mr. Clark on such returns filed by his clients with the IRS constitutes his “return information” within the meaning of section 6103 of the Code.

13. On knowledge and belief, the IRS has opened and conducted audits with respect to certain of Mr. Clark's clients and their tax liabilities under the Code. The information, documents, and analyses about Mr. Clark received by, recorded by, prepared by, furnished to, or collected by the IRS during any such audits constitute Mr. Clark's “return information” within the meaning of section 6103 of the Code.

14. On information and belief, certain of Mr. Clark's clients produced information and documents to the IRS relating to his appraisals and fees in response to IRS information requests. The information and documents about Mr. Clark provided by his clients to the IRS in response to IRS information requests constitute Mr. Clark's “return information” within the meaning of section 6103 of the Code.

15. The IRS has opened and conducted investigations with respect to Mr. Clark and his potential liabilities under the Code. The information, documents, and analyses received by, recorded by, prepared by, furnished to, or collected by the IRS during any investigation of Mr. Clark constitute his “return information” within the meaning of section 6103 of the Code.

16. Mr. Clark produced his appraisals, engagement letters, invoices, and other documents in response to IRS information requests. The information and documents provided by Mr. Clark to the IRS in response to IRS information requests constitute his “return information” within the meaning of section 6103 of the Code.

17. Since the Tax Court's decision in Kiva Dunes Conservation, LLC v. Comm'r, 97 T.C.M. (CCH) 1818 (2009), Mr. Clark has been well-known and respected as an expert in the appraisal of conservation easements amongst tax practitioners and members of the tax profession (e.g., attorneys and accountants), the tax press, the conservation community, and the appraisal industry.

18. Since the Tax Court's decision in Kiva Dunes, many articles have been written about Mr. Clark and his appraisal work relating to conservation easements.

19. Mr. Clark has been the subject of an ongoing civil suit brought against him and five co-defendants by Counterclaim-Defendant in this Court (“This Litigation”) since December 18, 2018.

20. This Litigation, as it pertains to Mr. Clark, is based on information specifically regarding Mr. Clark that was received by, recorded by, prepared by, furnished to, or collected by the IRS, i.e., Mr. Clark's return information.

21. The substantial or gross valuation misstatement penalties (26 U.S.C. §6695A), penalties for promoting abusive tax shelters (26 U.S.C. § 6700), and tax return preparer penalties (26 U.S.C. § 6694) that, in part, form the basis for This Litigation constitute “taxes” for purposes of the Code, except where otherwise noted. 26 U.S.C. § 6671.

22. The substantial or gross valuation misstatement penalties (26 U.S.C. § 6695A), penalties for promoting abusive tax shelters (26 U.S.C. § 6700), and tax return preparer penalties (26 U.S.C. § 6694) that, in part, form the basis for This Litigation and the equitable remedies (26 U.S.C. §§ 7402, 7407, 7408) sought by the Counterclaim-Defendant in This Litigation constitute “liabilit[ies] . . . under this title [26 U.S.C.] for any tax, penalty, interest, fine, forfeiture, or other imposition, or offense.” 26 U.S.C. § 6103(b)(2)(A).

23. On information and belief, from December 18, 2018 to the present, Mr. Clark has been the only licensed appraiser against whom the Counterclaim-Defendant has sought an injunction in any federal court litigation relating to the appraisal of conservation easements.

24. Prior to and during the pendency of This Litigation, employees and officers of the IRS and DOJ (“IRS and DOJ Officials”) have willfully, intentionally, knowingly, in bad faith, grossly negligently, and/or negligently made numerous statements that constitute unauthorized and unlawful disclosures of Mr. Clark's return information.

Mr. Clark's Return Information

25. For purposes of section 6103 of the Code, Mr. Clark's “return information” includes, but is not limited to the following types of information:

a. Mr. Clark's name and identity;

b. The nature, source, or amount of Mr. Clark's income;

c. The nature, source, or amount of Mr. Clark's potential liabilities under the Code;

d. Whether Mr. Clark or one of his returns was, is being, or will be examined or subject to other investigation or processing;

e. Any other data received by, recorded by, prepared by, furnished to, or collected by the IRS with respect to a return, portion of a return, or information return pertaining to or containing information about Mr. Clark; or

f. Any other data received by, recorded by, prepared by, furnished to, or collected by the IRS with respect to the determination of the existence, or possible existence, of liability (or the amount thereof) of Mr. Clark under this title for any tax, penalty, interest, fine, forfeiture, or other imposition, or offense.

See 26 U.S.C. § 6103(b)(2)(A) (emphasis added); Mallas v. United States, 993 F.2d 1111, 1118-20 (4th Cir. 1993); Ryan v. ATF, 715 F.2d 644 (D.C. Cir. 1983).

26. For purposes of section 6103 of the Code, the IRS has admitted that “[e]verything obtained, received, or generated by either CI or Exam [Criminal Investigation or Examination divisions of the IRS] with respect to determining Promoter's liability under title 26, including penalties under sections 6700 and 6701, is Promoter's return information.” IRS Office of Chief Counsel, Notice CC-2020-008, at 3 (Answer 5) (Sept. 8, 2020). The IRS has alleged that Mr. Clark is a promoter subject to liability under title 26, the Code, including penalties under section 6700 of the Code. Everything obtained, received, or generated by the IRS with respect to determining Mr. Clark's potential liabilities under title 26, the Code, constitutes Mr. Clark's “return information.”

27. For purposes of section 6103 of the Code, the fact that Mr. Clark was, is being, or will be subject to an investigation regarding any obligations under the Code constitutes return information. See In re Grand Jury Investigation, 688 F.2d 1068 (6th Cir. 1982); Marré v. United States, 117 F.3d 297 (5th Cir. 1997) (examining damages for unlawful disclosures that alleged promoter was under investigation).

28. For purposes of section 6103 of the Code, information may be both Mr. Clark's return information and another person's return information. Martin v. IRS, 857 F.2d 722, 724 (10th Cir. 1988) (“The parties[, one of which is the IRS,] agree that the same item of information may be the return information of more than one taxpayer. They also agree that the source of that information is not controlling. Therefore, data supplied to the IRS by A that may affect B's tax return may in theory be return information of A alone, of A and B, of B alone, or of no one.”); IRS Office of Chief Counsel, Notice CC-2020-008, at 2 (Answer 2) (Sept. 8, 2020).

29. For purposes of section 6103 of the Code, Mr. Clark's “return information” does not include data that has been properly reformulated into a statistical study or compilation and that does not, directly or indirectly, identify him. 26 U.S.C. § 6103(b)(2). However, if the reformulated data still tends to identify Mr. Clark, IRS guidance provides that the data still may not be disclosed. See IRS Publication 1075, Tax Information Security Guidelines for Federal, State and Local Agencies (rev. 2016), at 125; IRS CCA 201608013, 2016 WL 671176 (Feb. 19, 2016); see also Church of Scientology v. IRS, 484 U.S. 9 (1987); Long v. IRS, 395 F. App'x 472 (9th Cir. 2010); Judicial Watch Inc. v. Soc. Sec. Admin., 799 F. Supp. 2d 91 (D.D.C. 2011), aff'd, 701 F.3d 379 (D.C. Cir. 2012).

30. For purposes of section 6103 of the Code, Mr. Clark's “return information” encompasses information and data that specifically deals with him even if no identifying information is present. See Church of Scientology v. IRS, 484 U.S. at 15-18; First Heights Bank v. United States, 46 Fed. Cl. 312, 323 (Ct. Fed. Cl. 2000); Cencast Services, L.P. v. United States, 91 Fed. Cl. 496, 509-10 (Ct. Fed. Cl. 2010).

31. For purposes of section 6103 of the Code, a disclosure that does not name Mr. Clark still identifies him if it contains information that, combined with other information available at the time of the disclosure or that becomes available subsequently, permits persons generally knowledgeable with the relevant transactions and industry to identify Mr. Clark. See Cencast, 91 Fed. Cl. at 510; IRS PMTA 2019-07 (March 20, 2019); IRS CCA 201608013, 2016 WL 671176 (Feb. 19, 2016); 26 U.S.C. § 6110(c); 26 C.F.R. § 301.6110-3(a)(1).

Unauthorized Disclosures

32. To protect taxpayers and persons like Mr. Clark, the Code provides that return information shall be confidential except as otherwise authorized. 26 U.S.C. § 6103. This prohibition applies to Mr. Clark's return information regardless of whether it is contained in his income tax returns — Mr. Clark's return information is contained in other materials received by, recorded by, prepared by, furnished to, or collected by the IRS.

33. The Code and applicable law do not authorize IRS and DOJ Officials to disclose Mr. Clark's return information to the general public and members of the press solely on the basis that the information had/has become a matter of public record, e.g., in the course of a judicial proceeding, or on any other basis.

34. The Code and applicable law do not authorize IRS and DOJ Officials to disclose Mr. Clark's return information to IRS Officials whose official duties do not require such disclosure for tax administration purposes.

35. The Code and applicable law do not authorize IRS and DOJ Officials to disclose Mr. Clark's return information to DOJ Officials who are not personally and directly engaged in the investigation of Mr. Clark or preparation for any proceeding against him in Federal court.

36. The Code and applicable law do not authorize IRS and DOJ Officials to disclose Mr. Clark's return information to the U.S. Senate Committee on Finance outside closed executive session.

Intentional Disclosures

37. IRS and DOJ Officials made the public statements described in this Amended Counterclaim willfully, intentionally, knowingly, in bad faith, grossly negligently, and/or negligently in order to discourage participation in what the IRS calls “syndicated conservation easement transactions” and to impugn the reputation of one of the most experienced and well-respected conservation easement appraisers, Mr. Clark, without first having to prove the merits of their claims in an administrative proceeding, let alone in a court of law.

38. The disclosures described in this Amended Counterclaim were made by IRS and DOJ Officials with the deliberate intent of affecting Mr. Clark's reputation and business adversely.

39. The increased zeal for enforcement in the area and the strategic timing and inflammatory nature of the disclosures, among other facts, evidence the intent described in paragraphs 37 and 38 of this Amended Counterclaim.

40. That the statements described in this Amended Counterclaim were made without the IRS sustaining any Code section 6695A penalties against Mr. Clark or referring Mr. Clark to the IRS Office of Professional Responsibility and prior to any findings of fact by this Court with respect to the activities alleged in This Litigation, all further evidence the intent described in paragraphs 37 and 38 of this Amended Counterclaim.

41. The statements described in this Amended Counterclaim have had the actual effect of adversely affecting Mr. Clark, and Mr. Clark has been harmed by the disclosures described in this Amended Counterclaim.

IRS and DOJ Officials Intentionally Made Unauthorized
Disclosures of Mr. Clark's Return Information

42. IRS and DOJ Officials willfully, intentionally, knowingly, in bad faith, grossly negligently, and/or negligently made statements about Mr. Clark to other IRS and DOJ Officials that impermissibly disclosed Mr. Clark's “return information,” the types of which are described in paragraphs 25 through 31 of this Amended Counterclaim.

43. IRS and DOJ Officials willfully, intentionally, knowingly, in bad faith, grossly negligently, and/or negligently made public statements about Mr. Clark in formal press releases, to the press, and at speaking engagements that impermissibly disclosed Mr. Clark's “return information,” the types of which are described in paragraphs 25 through 31 of this Amended Counterclaim.

Examples of Counterclaim-Defendant's Unlawful and Intentional Disclosures of Mr. Clark's Return Information

Statement 1: IRS Gossip

44. On or about January 10, 2014, an IRS Official disclosed the following to at least one other IRS Official: a print-out of Mr. Clark's website, which prominently features a picture of him, with the remarks, “Your hero! Of Kiva Dunes,” handwritten on the printout in sharpie (produced by Counterclaim-Defendant in This Litigation). The quoted language and print-out described in this paragraph are hereinafter referred to as “Statement 1.” A copy of Statement 1 is attached hereto as Exhibit 1.

45. On information and belief, IRS engineer, Roy A. Nixon, was one of the IRS Officials involved in Statement 1.

46. On information and belief, IRS appraiser, Gary McGurrin, was one of the IRS Officials involved in Statement 1.

Statement 1 Discloses Mr. Clark's Return Information

47. Statement 1 discloses Mr. Clark's return information.

48. Statement 1 directly discloses the identity of Mr. Clark, a person subject to internal revenue taxes (e.g., the income tax; appraiser penalties under section 6695A of the Code), by stating his name.

49. Statement 1 indirectly discloses Mr. Clark's profession as an appraiser, the nature and source of his income from his appraisal business, his potential liabilities under the Code for his appraisal work, and that he was, is being, or will be under IRS investigation by disclosing information relating to Mr. Clark's business website and history as an expert witness. Together with other available information and the IRS work setting in which the disclosure was made, the disclosed information permits the recipient to identify Mr. Clark's return information, e.g., his profession, his source and nature of income, his potential liabilities under the Code, and the IRS's investigation of him.

50. Statement 1, produced as part of an IRS engineer's file in This Litigation, discloses data and information about Mr. Clark received by, recorded by, prepared by, furnished to, or collected by the IRS during a review of one of Mr. Clark's conservation-easement appraisals, which relates to an income tax return and tax liability of one of Mr. Clark's clients, to returns or portions of returns filed by or about Mr. Clark (e.g., related Form 8283 and Form 8918), and to the determination of the existence or possible existence of Mr. Clark's potential liabilities for tax, substantial or gross valuation misstatement penalties (26 U.S.C. § 6695A), penalties for promoting abusive tax shelters (26 U.S.C. § 6700), tax return preparer penalties (26 U.S.C. § 6694), or equitable remedies (26 U.S.C. §§ 7402, 7407, 7408).

51. The IRS Official who made Statement 1 knew or should have known that the improper disclosures were specifically about Mr. Clark and related to his potential liabilities under the Code.

52. The IRS Official who made Statement 1 knew or should have known that the IRS Official who received Statement 1 would identify Mr. Clark's profession, nature and source of income, potential liabilities under the Code, and investigation by the IRS from the disclosures in Statement 1.

53. The IRS Official who received Statement 1 identified Mr. Clark's profession, nature and source of income, potential liabilities under the Code, and investigation by the IRS from the disclosures in Statement 1.

54. Statement 1 was not based on publicly available information or the public record.

The Disclosures in Statement 1 Were Unauthorized

55. No provision of the Code authorized the IRS Official to circumvent the statutorily mandated protections of 26 U.S.C. § 6103 and disclose Mr. Clark's return information to the IRS Official who received Statement 1.

56. Mr. Clark did not authorize the IRS Official who made Statement 1 to disclose Mr. Clark's return information to the IRS Official who received Statement 1.

57. The official duties of the IRS Official who received Statement 1 did not require the disclosures in Statement 1 for tax administration purposes within the meaning of Code section 6103(h)(1), as evidenced by the handwritten, off-handed nature of Statement 1.

The Disclosures in Statement 1 Were Intentional

58. The disclosures in Statement 1 were made by an IRS Official willfully; with knowledge and intent; in bad faith; with the deliberate intent of affecting Mr. Clark's reputation and business adversely; with reckless disregard; with gross negligence, or at the very least with negligence; or any combination of the above.

59. The disclosures in Statement 1 were made by an IRS Official without review of or regard to 26 U.S.C. § 6103, related authority, or related IRS policies and guidance, as evidenced by the handwritten, off-handed nature of Statement 1.

60. The disclosures in Statement 1 were made prior to standard supervisory approvals within the IRS.

61. The disclosures in Statement 1 have had the actual effect of adversely affecting Mr. Clark, and Mr. Clark has been harmed by the disclosures in Statement 1.

Statement 2: Public Trumpeting With Respect to Mr. Clark

62. On December 19, 2018, employees of the DOJ Office of Public Affairs disclosed the following to the general public in a press release: “The United States filed a complaint seeking an order stopping Nancy Zak, Claud Clark III, EcoVest Capital Inc., Alan N. Solon, Robert M. McCullough, and Ralph R. Teal, Jr., from organizing, promoting, or selling an allegedly abusive conservation easement syndication tax scheme, the Justice Department announced today. . . . Defendants also allegedly rely on grossly overvalued appraisals as part of their scheme. . . . [T]he defendants made or furnished gross valuation overstatements about the valuation of conservation easements and the corresponding tax deductions, or caused others to do so. . . . [The] defendants have organized, promoted, and sold at least 96 conservation easement syndicates resulting in the syndicates reporting over $2.0 billion of tax deductions from overvalued and improper 'qualified conservation contributions,' and have passed those tax deductions through to the thousands of customers of defendants' scheme, resulting in hundreds of millions of dollars of tax harm.” Dep't of Justice, Press Release 18-1672 (Dec. 19, 2018) (hereinafter, the “DOJ Press Release”). The quoted language in this paragraph is hereinafter referred to as “Statement 2.” A copy of the DOJ Press Release containing Statement 2 is attached hereto as Exhibit 2.

Statement 2 Discloses Mr. Clark's Return Information

63. Statement 2 discloses Mr. Clark's return information.

64. Statement 2 directly discloses the identity of Mr. Clark, a person potentially subject to internal revenue taxes or other liabilities under the Code (e.g., the income tax; appraiser penalties under section 6695A of the Code; and other remedies sought by the Counterclaim-Defendant in This Litigation), by stating his name.

65. Statement 2 indirectly discloses Mr. Clark's profession as an appraiser, the nature and source of his income from his appraisal business, his potential liabilities under the Code for his appraisal work, and that he was, is being, or will be under IRS investigation by disclosing information relating to the IRS's investigation of Mr. Clark, allegations against Mr. Clark in This Litigation, and allegations regarding Mr. Clark's appraisals. Together with other available information, the disclosure's context, the disclosure's explicit identification of Mr. Clark and no other licensed appraiser, and the accompanying link to the Complaint, this information permits members of appropriate communities, including the tax profession, the tax press, the conservation community, and the appraisal industry, to identify Mr. Clark's return information, e.g., his profession, his source and nature of income, his potential liabilities under the Code, and the IRS's investigation of him.

66. Statement 2 discloses data and information about Mr. Clark (e.g., number of appraisals, amounts of deductions based on his opinions of value) received by, recorded by, prepared by, furnished to, or collected by the IRS with respect to an income tax return and tax liability of Mr. Clark's clients, to returns or portions of returns filed by or about Mr. Clark (e.g., Form 8283 and Form 8918), and/or to the determination of the existence or possible existence of Mr. Clark's potential liabilities for tax, substantial or gross valuation misstatement penalties (26 U.S.C. § 6695A), penalties for promoting abusive tax shelters (26 U.S.C. § 6700), tax return preparer penalties (26 U.S.C. § 6694), or equitable remedies (26 U.S.C. §§ 7402, 7407, 7408).

67. Statement 2 was based on or derived from information specifically regarding Mr. Clark that was received by, recorded by, prepared by, furnished to, or collected by the IRS (e.g., during the audits and investigations that allegedly form the basis for This Litigation).

68. DOJ Officials knew or should have known that the improper disclosures in Statement 2 were specifically about Mr. Clark and related to his potential liabilities under the Code.

69. DOJ Officials knew or should have known that certain communities would identify Mr. Clark's profession, nature and source of income, potential liabilities under the Code, and investigation by the IRS from the disclosures in Statement 2.

70. Tax practitioners and members of the tax profession, members of the tax press, members of the conservation community, and persons knowledgeable with respect to the appraisal industry identified Mr. Clark's profession, nature and source of income, potential liabilities under the Code, and investigation by the IRS from the disclosures in Statement 2.

71. Statement 2 was not based on publicly available information or the public record.

72. The DOJ Press Release containing Statement 2 was drafted before the filing of the Complaint and was released immediately thereafter.

73. The DOJ Press Release containing Statement 2 was posted on DOJ's website and, on information and belief, provided to members of the press prior to DOJ Officials sending the Notice of a Lawsuit and Request to Waive Service of a Summons (the “Notice of a Lawsuit”) with respect to the Complaint to Mr. Clark, as evidenced by Mr. Clark learning of This Litigation on December 19, 2018 from a reporter, the Notice of a Lawsuit dated December 20, 2018, and Mr. Clark's receipt of the Notice of a Lawsuit on December 21, 2018.

74. Statement 2 contains information not based on the Complaint.

The Disclosures in Statement 2 Were Unauthorized

75. No provision of the Code authorized any DOJ Official to circumvent the statutorily mandated protections of 26 U.S.C. § 6103 and disclose Mr. Clark's return information, via Statement 2, to the general public and members of the press.

76. Mr. Clark did not authorize any DOJ Official to disclose Mr. Clark's return information, via Statement 2, to the general public and members of the press.

The Disclosures in Statement 2 Were Intentional

77. The disclosures in Statement 2 were made by one or more DOJ Officials willfully; with knowledge and intent; in bad faith; with the deliberate intent of affecting Mr. Clark's reputation and business adversely; with reckless disregard; with gross negligence, or at the very least with negligence; or any combination of the above.

78. The disclosures in Statement 2 were made by one or more DOJ Officials without review of or regard to 26 U.S.C. § 6103, related authority, or related policies and guidance.

79. The disclosures in Statement 2 were made prior to standard IRS and DOJ supervisory approvals for press releases.

80. The disclosures in Statement 2 have had the actual effect of adversely affecting Mr. Clark, and Mr. Clark has been harmed by the disclosures in Statement 2.

Statement 3: Public Attack on Mr. Clark and His Appraisals

81. On December 19, 2018, employees of the DOJ Office of Public Affairs disclosed the following statement by Richard E. Zuckerman, DOJ Tax Division's Principal Deputy Assistant Attorney General, to the general public in a press release: “The Department of Justice is working with our partners in the Internal Revenue Service to shut down fraudulent conservation easement shelters, which in this case were based on willfully false valuations.” DOJ Press Release. The quoted language in this paragraph is hereinafter referred to as “Statement 3.”

A copy of the DOJ Press Release containing Statement 3 is attached hereto as Exhibit 2.

Statement 3 Discloses Mr. Clark's Return Information

82. Statement 3 discloses Mr. Clark's return information.

83. Statement 3 indirectly discloses Mr. Clark's identity, profession as an appraiser, the nature and source of his income from his appraisal business, his potential liabilities under the Code for his appraisal work, and that he was, is being, or will be under IRS investigation by disclosing information relating to the IRS's investigation of Mr. Clark, the IRS's allegations against Mr. Clark in This Litigation, and allegations of “willfully false valuations.” Together with other available information, the disclosure's context, the disclosure's close proximity to an overt identification, by name, of Mr. Clark and no other licensed appraiser and an accompanying link to the Complaint in the same press release, this information permits members of appropriate communities, including the tax profession, the tax press, the conservation community, and the appraisal industry, to identify Mr. Clark's return information, e.g., his profession, his source and nature of income, his potential liabilities under the Code, and the IRS's investigation of him.

84. Statement 3 discloses other data and information about Mr. Clark received by, recorded by, prepared by, furnished to, or collected by the IRS with respect to an income tax return and tax liability of Mr. Clark's clients, to returns or portions of returns filed by or about Mr. Clark (e.g., Form 8283 and Form 8918), and/or to the determination of the existence or possible existence of Mr. Clark's potential liabilities for tax, substantial or gross valuation misstatement penalties (26 U.S.C. § 6695A), penalties for promoting abusive tax shelters (26 U.S.C. § 6700), tax return preparer penalties (26 U.S.C. § 6694), or equitable remedies (26 U.S.C. §§ 7402, 7407, 7408).

85. For example, Statement 3 discloses allegations that Mr. Clark willfully provided false valuations. These allegations directly relate to the determination or existence of Mr. Clark's potential liabilities under the Code. These allegations do not appear in the Complaint. Any reader of the DOJ Press Release would identify that the allegations refer to Mr. Clark for the reasons described in paragraph 83 of this Amended Counterclaim.

86. Statement 3 was based on or derived from information specifically regarding Mr. Clark that was received by, recorded by, prepared by, furnished to, or collected by the IRS (e.g., during the audits and investigations that form the basis for This Litigation).

87. DOJ Officials knew or should have known that the improper disclosures in Statement 3 were specifically about Mr. Clark and related to his potential liabilities under the Code.

88. DOJ Officials knew or should have known that certain communities would identify Mr. Clark's identity, profession, nature and source of income, potential liabilities under the Code, and investigation by the IRS from the disclosures in Statement 3.

89. Tax practitioners and members of the tax profession, members of the tax press, members of the conservation community, and persons knowledgeable with respect to the appraisal industry identified Mr. Clark's profession, nature and source of income, potential liabilities under the Code, and investigation by the IRS from the disclosures in Statement 3.

90. Statement 3 was not based on publicly available information or the public record.

91. The DOJ Press Release containing Statement 3 was drafted before the filing of the Complaint and was released immediately thereafter.

92. Mr. Zuckerman provided Statement 3 to the DOJ Office of Public Affairs before the filing of the Complaint.

93. The DOJ Press Release containing Statement 3 was posted on DOJ's website and, on information and belief, provided to members of the press prior to DOJ Officials sending the Notice of a Lawsuit with respect to the Complaint to Mr. Clark, as evidenced by Mr. Clark learning of This Litigation on December 19, 2018 from a reporter, the Notice of a Lawsuit dated December 20, 2018, and Mr. Clark's receipt of the Notice of a Lawsuit on December 21, 2018.

94. Statement 3 contains information not based on the Complaint.

The Disclosures in Statement 3 Were Unauthorized

95. No provision of the Code authorized Mr. Zuckerman or any DOJ Official to circumvent the statutorily mandated protections of 26 U.S.C. § 6103 and disclose Mr. Clark's return information, via Statement 3, to the general public and members of the press.

96. Mr. Clark did not authorize Mr. Zuckerman or any DOJ Official to disclose Mr. Clark's return information, via Statement 3, to the general public and members of the press.

The Disclosures in Statement 3 Were Intentional

97. The disclosures in Statement 3 were made by Mr. Zuckerman and one or more DOJ Officials willfully; with knowledge and intent; in bad faith; with the deliberate intent of affecting Mr. Clark's reputation and business adversely; with reckless disregard; with gross negligence, or at the very least with negligence; or any combination of the above.

98. The disclosures in Statement 3 were made by Mr. Zuckerman and one or more DOJ Officials without review of or regard to 26 U.S.C. § 6103, related authority, or related policies and guidance.

99. Mr. Zuckerman did not review the publicly available Complaint prior to providing Statement 3 to the DOJ Office of Public Affairs.

100. The disclosures in Statement 3 were made prior to standard DOJ supervisory approvals for press releases.

101. The disclosures in Statement 3 have had the actual effect of adversely affecting Mr. Clark, and Mr. Clark has been harmed by the disclosures in Statement 3.

Statement 4: IRS News Release, March 2019

102. On March 19, 2019, one or more unnamed employees of the IRS under the supervision of Terry Lemons, Chief, Communications and Liaison of the IRS, disclosed the following to the general public in a news release: “The promoters obtain an inflated appraisal of the conservation easement based on unreasonable factual assumptions and conclusions about the development potential of the real property. . . . In December 2018, the Department of Justice sued to shut down promoters of a conservation easement syndicate scheme. For more see DOJ Press Release 18-1672 [hyperlink].” IRS News Release IR-2019-47 (Mar. 19, 2019). The quoted language in this paragraph is hereinafter referred to as “Statement 4.” A copy of Statement 4 is attached hereto as Exhibit 3.

Statement 4 Discloses Mr. Clark's Return Information

103. Statement 4 discloses Mr. Clark's return information.

104. Statement 4 indirectly discloses Mr. Clark's identity, profession as an appraiser, the nature and source of his income from his appraisal business, his potential liabilities under the Code for his appraisal work, and that he was, is being, or will be under IRS investigation by disclosing information relating to conservation easement appraisals, allegations of overvaluation, and This Litigation. Together with other available information, the disclosure's close proximity to an overt reference to This Litigation, to which many press reports and the DOJ Press Release link Mr. Clark, and the disclosure's close proximity to an overt reference and hyperlink to the DOJ Press Release, which identifies by name Mr. Clark and no other licensed appraiser, this information permits members of appropriate communities, including the tax profession, the tax press, the conservation community, and the appraisal industry, to identify Mr. Clark's return information, e.g., his profession, his source and nature of income, his potential liabilities under the Code, and the IRS's investigation of him.

105. Statement 4 discloses other data and information about Mr. Clark received by, recorded by, prepared by, furnished to, or collected by the IRS with respect to an income tax return and tax liability of Mr. Clark's clients, to returns or portions of returns filed by or about Mr. Clark (e.g., Form 8283 and Form 8918), and/or to the determination of the existence or possible existence of Mr. Clark's potential liabilities for tax, substantial or gross valuation misstatement penalties (26 U.S.C. § 6695A), penalties for promoting abusive tax shelters (26 U.S.C. § 6700), tax return preparer penalties (26 U.S.C. § 6694), or equitable remedies (26 U.S.C. §§ 7402, 7407, 7408).

106. Statement 4 was based on or derived from information specifically regarding Mr. Clark that was received by, recorded by, prepared by, furnished to, or collected by the IRS (e.g., during the audits and investigations that form the basis for This Litigation).

107. IRS Officials knew or should have known that the improper disclosures in Statement 4 were specifically about Mr. Clark and related to his potential liabilities under the Code.

108. IRS Officials knew or should have known that certain communities would identify Mr. Clark's identity, profession, nature and source of income, potential liabilities under the Code, and investigation by the IRS from the disclosures in Statement 4.

109. Tax practitioners and members of the tax profession, members of the tax press, members of the conservation community, and persons knowledgeable with respect to the appraisal industry identified Mr. Clark's profession, nature and source of income, potential liabilities under the Code, and investigation by the IRS from the disclosures in Statement 4.

110. Statement 4 was not based on publicly available information or the public record.

111. Statement 4 contains information not based on the Complaint.

The Disclosures in Statement 4 were Unauthorized

112. No provision of the Code authorized any IRS Official to circumvent the statutorily mandated protections of 26 U.S.C. § 6103 and disclose Mr. Clark's return information, via Statement 4, to the general public and members of the press.

113. Mr. Clark did not authorize any IRS Official to disclose Mr. Clark's return information, via Statement 4, to the general public and members of the press.

The Disclosures in Statement 4 Were Intentional

114. The disclosures in Statement 4 were made by one or more IRS Officials under the supervision of Terry Lemons, Chief, Communications and Liaison of the IRS, willfully; with knowledge and intent; in bad faith; with the deliberate intent of affecting Mr. Clark's reputation and business adversely; with reckless disregard; with gross negligence, or at the very least with negligence; or any combination of the above.

115. The disclosures in Statement 4 were made by one or more IRS Officials under the supervision of Terry Lemons, Chief, Communications and Liaison of the IRS, without review of or regard to 26 U.S.C. § 6103, related authority, or related IRS policies and guidance.

116. The disclosures in Statement 4 were made prior to standard IRS supervisory approvals for press releases.

117. The disclosures in Statement 4 have had the actual effect of adversely affecting Mr. Clark, and Mr. Clark has been harmed by the disclosures in Statement 4.

Statement 5: IRS News Release, November 2019

118. On November 12, 2019, one or more employees of the IRS under the supervision of Terry Lemons, Chief, Communications and Liaison of the IRS, disclosed the following in a press release: “These audits and investigations cover billions of dollars of potentially inflated deductions as well as hundreds of partnerships and thousands of investors. . . . In December 2018, the Department of Justice filed a complaint seeking to stop several individuals and an entity from organizing, promoting or selling allegedly abusive syndicated conservation easement transactions.” IRS News Release IR-2019-182 (Nov. 12, 2019). The quoted language in this paragraph is hereinafter referred to as “Statement 5.” A copy of IRS News Release IR-2019-182 containing Statement 5 is attached hereto as Exhibit 4.

Statement 5 Discloses Mr. Clark's Return Information

119. Statement 5 discloses Mr. Clark's return information.

120. Statement 5 indirectly discloses Mr. Clark's identity and potential liabilities under the Code and that he was, is being, or will be under IRS investigation by disclosing information relating to audits and investigations of potentially inflated conservation easement deductions and the amount of such deductions. Together with the DOJ Press Release, which identifies by name Mr. Clark and no other licensed appraiser, other available information and news articles, and the disclosure's close proximity to an overt reference to This Litigation, to which many press reports and the DOJ Press Release link Mr. Clark, this information permits members of appropriate communities, including the tax profession, the tax press, the conservation community, and the appraisal industry, to identify Mr. Clark's return information, e.g., his identity, his potential liabilities under the Code, and the IRS's investigation of him.

121. Statement 5 discloses other data and information about Mr. Clark received by, recorded by, prepared by, furnished to, or collected by the IRS with respect to an income tax return and tax liability of Mr. Clark's clients, to returns or portions of returns filed by or about Mr. Clark (e.g., Form 8283 and Form 8918), and/or to the determination of the existence or possible existence of Mr. Clark's potential liabilities for tax, substantial or gross valuation misstatement penalties (26 U.S.C. § 6695A), penalties for promoting abusive tax shelters (26 U.S.C. § 6700), tax return preparer penalties (26 U.S.C. § 6694), or equitable remedies (26 U.S.C. §§ 7402, 7407, 7408).

122. Statement 5 was based on or derived from information specifically regarding Mr. Clark that was received by, recorded by, prepared by, furnished to, or collected by the IRS (e.g., during the audits and investigations that form the basis for This Litigation).

123. IRS Officials knew or should have known that the improper disclosures in Statement 5 were specifically about Mr. Clark and related to his potential liabilities under the Code.

124. IRS Officials knew or should have known that certain communities would identify Mr. Clark's identity, potential liabilities under the Code, and investigation by the IRS from the disclosures in Statement 5.

125. Tax practitioners and members of the tax profession, members of the tax press, members of the conservation community, and persons knowledgeable with respect to the appraisal industry identified Mr. Clark's identity, potential liabilities under the Code, and investigation by the IRS from the disclosures in Statement 5.

126. Statement 5 was not based on publicly available information or the public record.

127. Statement 5 contains information not based on the Complaint.

The Disclosures in Statement 5 Were Unauthorized

128. No provision of the Code authorized any IRS Official to circumvent the statutorily mandated protections of 26 U.S.C. § 6103 and disclose Mr. Clark's return information, via Statement 5, to the general public and members of the press.

129. Mr. Clark did not authorize any IRS Official to disclose Mr. Clark's return information, via Statement 5, to the general public and members of the press.

The Disclosures in Statement 5 Were Intentional

130. The disclosures in Statement 5 were made by one or more IRS employees under the supervision of Terry Lemons, Chief, Communications and Liaison of the IRS, willfully; with knowledge and intent; in bad faith; with the deliberate intent of affecting Mr. Clark's reputation and business adversely; with reckless disregard; with gross negligence, or at the very least with negligence; or any combination of the above.

131. The disclosures in Statement 5 were made by one or more IRS employees under the supervision of Terry Lemons, Chief, Communications and Liaison of the IRS, without review of or regard to 26 U.S.C. § 6103, related authority, or related IRS policies and guidance.

132. The disclosures in Statement 5 were made prior to standard IRS supervisory approvals for press releases.

133. The disclosures in Statement 5 have had the actual effect of adversely affecting Mr. Clark, and Mr. Clark has been harmed by the disclosures in Statement 5.

Statement 6: IRS News Release, Commissioner Rettig's Comments

134. On November 12, 2019, one or more employees of the IRS under the supervision of Terry Lemons, Chief, Communications and Liaison of the IRS, disclosed the following statement by Charles P. Rettig, Commissioner of Internal Revenue, in a news release: “We will not stop in our pursuit of everyone involved in the creation, marketing, promotion and wrongful acquisition of artificial, highly inflated deductions based on these aggressive transactions.” IRS News Release IR-2019-182 (Nov. 12, 2019). The quoted language in this paragraph is hereinafter referred to as “Statement 6.” A copy of IRS News Release IR-2019-182 containing Statement 6 is attached hereto as Exhibit 4.

Statement 6 Discloses Mr. Clark's Return Information

135. Statement 6 discloses Mr. Clark's return information.

136. Statement 6 indirectly discloses Mr. Clark's identity and that he was, is being, or will be under IRS investigation by disclosing information about “highly inflated” deductions and enforcement efforts relating to conservation easements. Together with the DOJ Press Release, which identifies by name Mr. Clark and no other licensed appraiser, other available information and news articles, and the disclosure's close proximity to an overt reference to This Litigation, to which many press reports and the DOJ Press Release link Mr. Clark, this information permits members of appropriate communities, including the tax profession, the tax press, the conservation community, and the appraisal industry, to identify Mr. Clark's return information, e.g., his identity and the IRS's investigation of him.

137. Statement 6 discloses other data and information about Mr. Clark received by, recorded by, prepared by, furnished to, or collected by the IRS with respect to an income tax return and tax liability of Mr. Clark's clients, to returns or portions of returns filed by or about Mr. Clark (e.g., Form 8283 and Form 8918), and/or to the determination of the existence or possible existence of Mr. Clark's potential liabilities for tax, substantial or gross valuation misstatement penalties (26 U.S.C. § 6695A), penalties for promoting abusive tax shelters (26 U.S.C. § 6700), tax return preparer penalties (26 U.S.C. § 6694), or equitable remedies (26 U.S.C. §§ 7402, 7407, 7408).

138. Statement 6 was based on or derived from information specifically regarding Mr. Clark that was received by, recorded by, prepared by, furnished to, or collected by the IRS (e.g., during the audits and investigations that form the basis for This Litigation).

139. IRS Officials knew or should have known that the improper disclosures in Statement 6 were specifically about Mr. Clark and related to his potential liabilities under the Code.

140. IRS Officials knew or should have known that certain communities would identify Mr. Clark's identity, potential liabilities under the Code, and investigation by the IRS from the disclosures in Statement 6.

141. Tax practitioners and members of the tax profession, members of the tax press, members of the conservation community, and persons knowledgeable with respect to the appraisal industry identified Mr. Clark's identity, potential liabilities under the Code, and investigation by the IRS from the disclosures in Statement 6.

142. Statement 6 was not based on publicly available information or the public record.

143. Statement 6 contains information not based on the Complaint.

The Disclosures in Statement 6 Were Unauthorized

144. No provision of the Code authorized Mr. Rettig or any IRS Official to circumvent the statutorily mandated protections of 26 U.S.C. § 6103 and disclose Mr. Clark's return information, via Statement 6, to the general public and members of the press.

145. Mr. Clark did not authorize Mr. Rettig or any IRS Official to disclose Mr. Clark's return information, via Statement 6, to the general public and members of the press.

The Disclosures in Statement 6 Were Intentional

146. The disclosures in Statement 6 were made by Mr. Rettig and one or more IRS employees under the supervision of Terry Lemons, Chief, Communications and Liaison of the IRS, willfully; with knowledge and intent; in bad faith; with the deliberate intent of affecting Mr. Clark's reputation and business adversely; with reckless disregard; with gross negligence, or at the very least with negligence; or any combination of the above.

147. The disclosures in Statement 6 were made by Mr. Rettig and one or more IRS employees under the supervision of Terry Lemons, Chief, Communications and Liaison of the IRS, without review of or regard to 26 U.S.C. § 6103, related authority, or related IRS policies and guidance.

148. The disclosures in Statement 6 were made prior to standard IRS supervisory approvals for press releases.

149. The disclosures in Statement 6 have had the actual effect of adversely affecting Mr. Clark, and Mr. Clark has been harmed by the disclosures in Statement 6.

Statement 7: IRS Disclosures to the Press

150. On or about November 12, 2019, unnamed employees and/or officers of the IRS disclosed the following to Richard Rubin of the Wall Street Journal: “The IRS . . . said its combined civil and criminal efforts include billions of dollars in deductions and thousands of investors in the deals.”; and, “In some deals, high-income people can invest $1 and claim $4 or more in deductions within months, enough to turn a quick profit on the tax break. Those deals have been particularly popular in the southeastern U.S. . . . Also last year, the IRS filed suit against easement promoters in Georgia.” Richard Rubin, IRS Pursues Criminal Cases on Land-Tax Donation Deals, WALL STREET JOURNAL, Nov. 12, 2019. The quoted language in this paragraph is hereinafter referred to as “Statement 7.” A copy of Statement 7 is attached hereto as Exhibit 5.

Statement 7 Discloses Mr. Clark's Return Information

151. Statement 7 discloses Mr. Clark's return information.

152. Statement 7 indirectly discloses Mr. Clark's identity, Mr. Clark's potential liabilities under the Code, and that he was, is being, or will be under IRS investigation by disclosing information about the amount of deductions (which directly relate to Mr. Clark's opinions of value and potential liability), conservation easements in the southeastern U.S., and injunction suit litigation in Georgia. Together with the DOJ Press Release, which identifies by name Mr. Clark and no other licensed appraiser, IRS press releases, other available information and news articles, and the disclosure's close proximity to a reference to This Litigation, to which many press reports and the DOJ Press Release link Mr. Clark, this information permits members of appropriate communities, including the tax profession, the tax press, the conservation community, and the appraisal industry, to identify Mr. Clark's return information, e.g., his identity, his potential liabilities under the Code, and the IRS's investigation of him.

153. Statement 7 discloses other data and information about Mr. Clark received by, recorded by, prepared by, furnished to, or collected by the IRS with respect to an income tax return and tax liability of Mr. Clark's clients, to returns or portions of returns filed by or about Mr. Clark (e.g., Form 8283 and Form 8918), and/or to the determination of the existence or possible existence of Mr. Clark's potential liabilities for tax, substantial or gross valuation misstatement penalties (26 U.S.C. § 6695A), penalties for promoting abusive tax shelters (26 U.S.C. § 6700), tax return preparer penalties (26 U.S.C. § 6694), or equitable remedies (26 U.S.C. §§ 7402, 7407, 7408).

154. Statement 7 was based on or derived from information specifically regarding Mr. Clark that was received by, recorded by, prepared by, furnished to, or collected by the IRS (e.g., during the audits and investigations that form the basis for This Litigation).

155. IRS Officials knew or should have known that the improper disclosures in Statement 7 were specifically about Mr. Clark and related to his potential liabilities under the Code.

156. IRS Officials knew or should have known that certain communities would identify Mr. Clark's identity, potential liabilities under the Code, and investigation by the IRS from the disclosures in Statement 7.

157. Tax practitioners and members of the tax profession, members of the tax press, members of the conservation community, and persons knowledgeable with respect to the appraisal industry identified Mr. Clark's identity, potential liabilities under the Code, and investigation by the IRS from the disclosures in Statement 7.

158. Statement 7 was not based on publicly available information or the public record.

159. Statement 7 contains information not based on the Complaint.

The Disclosures in Statement 7 Were Unauthorized

160. No provision of the Code authorized any IRS Official to circumvent the statutorily mandated protections of 26 U.S.C. § 6103 and disclose Mr. Clark's return information, via Statement 7, to a member of the press.

161. Mr. Clark did not authorize any IRS Official to disclose Mr. Clark's return information, via Statement 7, to a member of the press.

The Disclosures in Statement 7 Were Intentional

162. The disclosures in Statement 7 were made by one or more IRS Officials willfully; with knowledge and intent; in bad faith; with the deliberate intent of affecting Mr. Clark's reputation and business adversely; with reckless disregard; with gross negligence, or at the very least with negligence; or any combination of the above.

163. The disclosures in Statement 7 were made by one or more IRS Officials without review of or regard to 26 U.S.C. § 6103, related authority, or related IRS policies and guidance.

164. The disclosures in Statement 7 have had the actual effect of adversely affecting Mr. Clark, and Mr. Clark has been harmed by the disclosures in Statement 7.

Statement 8: Commissioner Rettig's Public Comments to Tax Practitioners

165. On November 14, 2019, Charles P. Rettig, Commissioner of Internal Revenue, disclosed the following to the attendees of his presentation at the American Institute of CPAs National Tax Conference in Washington, D.C.: “We don't appreciate the activities that have gone on with respect to the syndicated conservation easements; there are some artificial appraisals there, some fatal flaws.” Paul Bonner, IRS Commissioner Seeks to Enhance Taxpayer Contacts, Target Enforcement, JOURNAL OF ACCOUNTANCY: NEWS, Nov. 14, 2019. The quoted language in this paragraph is hereinafter referred to as “Statement 8.” A copy of Statement 8 is attached hereto as Exhibit 6.

Statement 8 Discloses Mr. Clark's Return Information

166. Statement 8 discloses Mr. Clark's return information.

167. Statement 8 indirectly discloses Mr. Clark's identity, his potential liabilities under the Code, and that he was, is being, or will be under IRS investigation by disclosing information about “artificial appraisals” received with respect to syndicated conservation easements and the IRS's disdain for syndicated conservation easements. Together with the DOJ Press Release, which identifies by name Mr. Clark and no other licensed appraiser, IRS press releases, other available information and news articles, and the relatively small number of publicly known conservation easement appraisers, this information permits members of appropriate communities, including the tax profession, the tax press, the conservation community, and the appraisal industry, to identify Mr. Clark's return information, e.g., his identity, his potential liabilities, and the IRS's investigation of him.

168. Statement 8 discloses other data and information about Mr. Clark received by, recorded by, prepared by, furnished to, or collected by the IRS with respect to an income tax return and tax liability of Mr. Clark's clients, to returns or portions of returns filed by or about Mr. Clark (e.g., Form 8283 and Form 8918), and/or to the determination of the existence or possible existence of Mr. Clark's potential liabilities for tax, substantial or gross valuation misstatement penalties (26 U.S.C. § 6695A), penalties for promoting abusive tax shelters (26 U.S.C. § 6700), tax return preparer penalties (26 U.S.C. § 6694), or equitable remedies (26 U.S.C. §§ 7402, 7407, 7408).

169. Statement 8 was based on or derived from information specifically regarding Mr. Clark that was received by, recorded by, prepared by, furnished to, or collected by the IRS (e.g., during the audits and investigations that form the basis for This Litigation).

170. Mr. Rettig knew or should have known that the improper disclosures in Statement 8 were specifically about Mr. Clark and related to his potential liabilities under the Code.

171. Mr. Rettig knew or should have known that certain communities would identify Mr. Clark's identity, potential liabilities under the Code, and investigation by the IRS from the disclosures in Statement 8.

172. Tax practitioners and members of the tax profession, members of the tax press, members of the conservation community, and persons knowledgeable with respect to the appraisal industry identified Mr. Clark's identity, potential liabilities under the Code, and investigation by the IRS from the disclosures in Statement 8.

173. Statement 8 was not based on publicly available information or the public record.

174. Statement 8 contains information not based on the Complaint.

The Disclosures in Statement 8 Were Unauthorized

175. No provision of the Code authorized Mr. Rettig to circumvent the statutorily mandated protections of 26 U.S.C. § 6103 and disclose Mr. Clark's return information, via Statement 8, to the general public and members of the press.

176. Mr. Clark did not authorize Mr. Rettig to disclose Mr. Clark's return information, via Statement 8, to the general public and members of the press.

The Disclosures in Statement 8 Were Intentional

177. The disclosures in Statement 8 were made by Mr. Rettig willfully; with knowledge and intent; in bad faith; with the deliberate intent of affecting Mr. Clark's reputation and business adversely; with reckless disregard; with gross negligence, or at the very least with negligence; or any combination of the above.

178. The disclosures in Statement 8 were made by Mr. Rettig without review of or regard to 26 U.S.C. § 6103, related authority, or related IRS policies and guidance.

179. The disclosures in Statement 8 have had the actual effect of adversely affecting Mr. Clark, and Mr. Clark has been harmed by the disclosures in Statement 8.

Statement 9: More IRS Public Comments to Tax Practitioners

180. On November 14, 2019, Douglas O'Donnell, Commissioner of the Large Business and International Division of the IRS, disclosed the following to the attendees of his presentation at the American Institute of CPAs National Tax Conference in Washington, D.C.: “According to O'Donnell, the IRS looked for reporting gaps in the disclosures filed by investors and material advisers to determine if reporting obligations were being met. 'To the extent they aren't, we have appropriate penalties to use to bring people into compliance,' O'Donnell said November 14 at the American Institute of CPAs National Tax Conference in Washington. 'And we began doing that work.' . . . 'We found out that we didn't necessarily have enough appraisers or valuation specialists, so we've gotten approval to contract for a significant number of outside experts to help us with this work.'” Kristen A. Parillo, IRS is Building Up its Easement Toolbox, TAX NOTES, Nov. 15, 2019. The quoted language in this paragraph is hereinafter referred to as “Statement 9.” A copy of the article reporting Statement 9 is attached hereto as Exhibit 7.

Statement 9 Discloses Mr. Clark's Return Information

181. Statement 9 discloses Mr. Clark's return information.

182. Statement 9 indirectly discloses Mr. Clark's identity, his potential liabilities under the Code, and that he was, is being, or will be under IRS investigation by disclosing information about material adviser forms, appraiser penalties, and IRS work related to such penalties. Together with the DOJ Press Release, which identifies by name Mr. Clark and no other licensed appraiser, IRS press releases, other available information and news articles, and the relatively small number of publicly known conservation easement appraisers, this information permits members of appropriate communities, including the tax profession, the tax press, the conservation community, and the appraisal industry, to identify Mr. Clark's return information, e.g., his identity, his potential liabilities, and the IRS's investigation of him.

183. Statement 9 discloses other data and information about Mr. Clark received by, recorded by, prepared by, furnished to, or collected by the IRS with respect to an income tax return and tax liability of Mr. Clark's clients, to returns or portions of returns filed by or about Mr. Clark (e.g., Form 8283 and Form 8918), and/or to the determination of the existence or possible existence of Mr. Clark's potential liabilities for tax, substantial or gross valuation misstatement penalties (26 U.S.C. § 6695A), penalties for promoting abusive tax shelters (26 U.S.C. § 6700), tax return preparer penalties (26 U.S.C. § 6694), or equitable remedies (26 U.S.C. §§ 7402, 7407, 7408).

184. Statement 9 was based on or derived from information specifically regarding Mr. Clark that was received by, recorded by, prepared by, furnished to, or collected by the IRS (e.g., during the audits and investigations that form the basis for This Litigation).

185. Mr. O'Donnell knew or should have known that the improper disclosures in Statement 9 were specifically about Mr. Clark and related to his potential liabilities under the Code.

186. Mr. O'Donnell knew or should have known that certain communities would identify Mr. Clark's identity, potential liabilities under the Code, and investigation by the IRS from the disclosures in Statement 9.

187. Tax practitioners and members of the tax profession, members of the tax press, members of the conservation community, and persons knowledgeable with respect to the appraisal industry identified Mr. Clark's identity, potential liabilities under the Code, and investigation by the IRS from the disclosures in Statement 9.

188. Statement 9 was not based on publicly available information or the public record.

189. Statement 9 contains information not based on the Complaint.

The Disclosures in Statement 9 Were Unauthorized

190. No provision of the Code authorized Mr. O'Donnell to circumvent the statutorily mandated protections of 26 U.S.C. § 6103 and disclose Mr. Clark's return information, via Statement 9, to the general public and members of the press.

191. Mr. Clark did not authorize Mr. O'Donnell to disclose Mr. Clark's return information, via Statement 9, to the general public and members of the press.

The Disclosures in Statement 9 Were Intentional

192. The disclosures in Statement 9 were made by Mr. O'Donnell willfully; with knowledge and intent; in bad faith; with the deliberate intent of affecting Mr. Clark's reputation and business adversely; with reckless disregard; with gross negligence, or at the very least with negligence; or any combination of the above.

193. The disclosures in Statement 9 were made by Mr. O'Donnell without review of or regard to 26 U.S.C. § 6103, related authority, or related IRS policies and guidance.

194. The disclosures in Statement 9 have had the actual effect of adversely affecting Mr. Clark, and Mr. Clark has been harmed by the disclosures in Statement 9.

Statement 10: Yet More IRS Public Comments to Tax Practitioners

195. On November 14, 2019, Sunita Lough, Deputy Commissioner for Services and Enforcement of the IRS, disclosed the following to the attendees of her presentation at the American Institute of CPAs National Tax Conference in Washington, D.C. or to a member of the press: “Lough said that when litigating syndicated easement cases, the IRS will follow the successful strategy used against microcaptive insurance transactions. 'I'm very comfortable we will have wins in conservation easement cases because some of the appraisals are really bad and can't stand on their own,' Lough said.” Kristen A. Parillo, IRS is Building Up its Easement Toolbox, TAX NOTES, Nov. 15, 2019. The quoted language in this paragraph is hereinafter referred to as “Statement 10.” A copy of the article reporting Statement 10 is attached hereto as Exhibit 7.

Statement 10 Discloses Mr. Clark's Return Information

196. Statement 10 discloses Mr. Clark's return information.

197. Statement 10 indirectly discloses Mr. Clark's identity, his potential liabilities under the Code, and that he was, is being, or will be under IRS investigation by disclosing information about syndicated conservation easement litigation and “really bad” appraisals. Together with the DOJ Press Release, which identifies by name Mr. Clark and no other licensed appraiser, IRS press releases, other available information and news articles, and the relatively small number of publicly known conservation easement appraisers, this information permits members of appropriate communities, including the tax profession, the tax press, the conservation community, and the appraisal industry, to identify Mr. Clark's return information, e.g., his identity, his potential liabilities, and the IRS's investigation of him.

198. Statement 10 discloses other data and information about Mr. Clark received by, recorded by, prepared by, furnished to, or collected by the IRS with respect to an income tax return and tax liability of Mr. Clark's clients, to returns or portions of returns filed by or about Mr. Clark (e.g., Form 8283 and Form 8918), and/or to the determination of the existence or possible existence of Mr. Clark's potential liabilities for tax, substantial or gross valuation misstatement penalties (26 U.S.C. § 6695A), penalties for promoting abusive tax shelters (26 U.S.C. § 6700), tax return preparer penalties (26 U.S.C. § 6694), or equitable remedies (26 U.S.C. §§ 7402, 7407, 7408).

199. Statement 10 was based on or derived from information specifically regarding Mr. Clark that was received by, recorded by, prepared by, furnished to, or collected by the IRS (e.g., during the audits and investigations that form the basis for This Litigation).

200. Ms. Lough knew or should have known that the improper disclosures in Statement 10 were specifically about Mr. Clark and related to his potential liabilities under the Code.

201. Ms. Lough knew or should have known that certain communities would identify Mr. Clark's identity, potential liabilities under the Code, and investigation by the IRS from the disclosures in Statement 10.

202. Tax practitioners and members of the tax profession, members of the tax press, members of the conservation community, and persons knowledgeable with respect to the appraisal industry identified Mr. Clark's identity, potential liabilities under the Code, and investigation by the IRS from the disclosures in Statement 10.

203. Statement 10 was not based on publicly available information or the public record.

204. Statement 10 contains information not based on the Complaint.

The Disclosures in Statement 10 Were Unauthorized

205. No provision of the Code authorized Ms. Lough to circumvent the statutorily mandated protections of 26 U.S.C. § 6103 and disclose Mr. Clark's return information, via Statement 10, to the general public and members of the press.

206. Mr. Clark did not authorize Ms. Lough to disclose Mr. Clark's return information, via Statement 10, to the general public and members of the press.

The Disclosures in Statement 10 Were Intentional

207. The disclosures in Statement 10 were made by Ms. Lough willfully; with knowledge and intent; in bad faith; with the deliberate intent of affecting Mr. Clark's reputation and business adversely; with reckless disregard; with gross negligence, or at the very least with negligence; or any combination of the above.

208. The disclosures in Statement 10 were made by Ms. Lough without review of or regard to 26 U.S.C. § 6103, related authority, or related IRS policies and guidance.

209. The disclosures in Statement 10 have had the actual effect of adversely affecting Mr. Clark, and Mr. Clark has been harmed by the disclosures in Statement 10.

Statement 11: Disclosures to Senator Grassley

210. On February 12, 2020, Charles P. Rettig, Commissioner of Internal Revenue, disclosed the following to Senator Charles Grassley, which was then disclosed to the public and press by an employee of the United States: “Since January 1, 2010, what is the total number of appraisers and/or appraisal firms involved in the transaction described in Notice 2017-10? The IRS completed additional analysis to determine how many appraisers prepared the appraisal reports for the TY 2015, 2016, and 2017 top-tier entities. There were approximately 13 appraisers in 2015, 23 appraisers in 2016, and 29 appraisers in 2017. If there were two people from one firm, they were only counted once to help prevent duplication. . . . The IRS created a cross-divisional team to develop and implement a comprehensive strategy, which not only includes enforcement activities for those who participated in the transactions, but also for those who facilitated the transactions, including promoters, return preparers, donee organizations and appraisers. . . . The IRS is developing and asserting all appropriate penalties, including penalties for . . . appraisers (penalty for substantial and gross valuation misstatements attributable to incorrect appraisals), promoters, material advisors, and accommodating entities (penalty for promoting abusive tax shelters and penalty for aiding and abetting understatement of tax liability), as well as return preparers (penalty for understatement of taxpayer's liability by a tax return preparer) . . . In December of 2018, the Department of Justice filed an injunction complaint seeking to stop several individuals and an entity from organizing, promoting, or selling allegedly abusive syndicated conservation easement transactions. The IRS continues to work closely with the Department of Justice in this area.” Letter from Charles P. Rettig, Commissioner of the IRS, to Senator Charles Grassley, Chairman of the U.S. Senate Committee on Finance (Feb. 12, 2020) (available on file and at finance.senate.gov). The quoted language in this paragraph is hereinafter referred to as “Statement 11.” A copy of Statement 11 is attached hereto as Exhibit 8.

Statement 11 Discloses Mr. Clark's Return Information

211. Statement 11 discloses Mr. Clark's return information.

212. Statement 11 indirectly discloses Mr. Clark's identity, his potential liabilities under the Code, and that he was, is being, or will be under IRS investigation by disclosing information about appraisers of syndicated conservation easements, appraiser penalties, and This Litigation. Together with the DOJ Press Release, which identifies by name Mr. Clark and no other licensed appraiser, IRS press releases and other available information and news articles, the disclosure's overt reference to This Litigation, to which many press reports and the DOJ Press Release link Mr. Clark, the disclosure's reliance on a small sample size (13 appraisers in 2015, 23 appraisers in 2016, and 29 appraisers in 2017), and the relatively small number of publicly known conservation easement appraisers, this information permits members of appropriate communities, including the tax profession, the tax press, the conservation community, and the appraisal industry, to identify Mr. Clark's return information, e.g., his identity, his potential liabilities, and the IRS's investigation of him.

213. Statement 11 discloses other data and information about Mr. Clark received by, recorded by, prepared by, furnished to, or collected by the IRS with respect to an income tax return and tax liability of Mr. Clark's clients, to returns or portions of returns filed by or about Mr. Clark (e.g., Form 8283 and Form 8918), and/or to the determination of the existence or possible existence of Mr. Clark's potential liabilities for tax, substantial or gross valuation misstatement penalties (26 U.S.C. § 6695A), penalties for promoting abusive tax shelters (26 U.S.C. § 6700), tax return preparer penalties (26 U.S.C. § 6694), or equitable remedies (26 U.S.C. §§ 7402, 7407, 7408).

214. Statement 11 was based on or derived from information specifically regarding Mr. Clark that was received by, recorded by, prepared by, furnished to, or collected by the IRS (e.g., during the audits and investigations that form the basis for This Litigation).

215. Mr. Rettig knew or should have known that the improper disclosures in Statement 11 were specifically about Mr. Clark and related to his potential liabilities under the Code.

216. Mr. Rettig knew or should have known that certain communities would identify Mr. Clark's identity, potential liabilities under the Code, and investigation by the IRS from the disclosures in Statement 11.

217. Tax practitioners and members of the tax profession, members of the tax press, members of the conservation community, and persons knowledgeable with respect to the appraisal industry identified Mr. Clark's identity, potential liabilities under the Code, and investigation by the IRS from the disclosures in Statement 11.

218. Statement 11 was not based on publicly available information or the public record.

219. Statement 11 contains information not based on the Complaint.

The Disclosures in Statement 11 Were Unauthorized

220. No provision of the Code authorized Mr. Rettig to circumvent the statutorily mandated protections of 26 U.S.C. § 6103 and disclose Mr. Clark's return information, via Statement 11, to the general public and members of the press.

221. Mr. Clark did not authorize Mr. Rettig to disclose Mr. Clark's return information, via Statement 11, to the general public and members of the press. 

The Disclosures in Statement 11 Were Intentional

222. The disclosures in Statement 11 were made by Mr. Rettig willfully; with knowledge and intent; in bad faith; with the deliberate intent of affecting Mr. Clark's reputation and business adversely; with reckless disregard; with gross negligence, or at the very least with negligence; or any combination of the above.

223. The disclosures in Statement 11 were made by Mr. Rettig without review of or regard to 26 U.S.C. § 6103, related authority, or related IRS policies and guidance.

224. The disclosures in Statement 11 have had the actual effect of adversely affecting Mr. Clark, and Mr. Clark has been harmed by the disclosures in Statement 11.

Other Unlawful and Intentional Disclosures of Mr. Clark's Return Information by Counterclaim-Defendant

225. On information and belief, since 2014 when Statement 1 was made, and likely as early as 2009 when Kiva Dunes was decided, IRS and DOJ Officials have made other statements constituting impermissible disclosure of Mr. Clark's return information.

226. For example, on information and belief IRS and DOJ Officials improperly identified Mr. Clark and disclosed his return information to the DOJ Office of Public Affairs to prepare the DOJ Press Release.

227. The Code and applicable law do not authorize IRS and DOJ Officials to disclose Mr. Clark's return information to DOJ Officials who are not personally and directly engaged in the investigation of Mr. Clark or preparation for any proceeding against him in Federal court.

228. On information and belief, such statements continue to be made as of the date of this Amended Counterclaim.

COUNTERCLAIM COUNT I

229. Counterclaim-Plaintiff incorporates the allegations of paragraphs 1 through 228, above, as if fully re-alleged here.

230. Counterclaim-Plaintiff is entitled to statutory and/or actual and punitive damages under 26 U.S.C. § 7431 for the willful, intentional, negligent, bad faith, and/or grossly overzealous negligent disclosures of “return information” made by employees and officers of the United States in violation 26 U.S.C. § 6103. 

RELIEF REQUESTED

WHEREFORE, Counterclaim-Plaintiff hereby respectfully requests that this Court grant the following relief:

A. At least $1,000 in statutory minimum damages for each unauthorized disclosure of return information, as authorized by 26 U.S.C. § 7431(c)(1)(A);

B. If greater, the sum of: (1) actual damages sustained by the Counterclaim-Plaintiff as a result of the unauthorized disclosures, the extent of which at this time cannot be completely nor accurately ascertained but which will be more fully known after the completion of discovery and which include, but are not limited to, substantial professional and personal embarrassment and loss of business income; and (2) punitive damages for each willful or grossly negligent disclosure of return information, as authorized by 26 U.S.C. § 7431(c)(1)(B);

C. Cessation of public statements relating to Counterclaim-Plaintiff and his appraisals until the completion of This Litigation, as authorized by 26 U.S.C. § 7402;

D. Attorney's fees and costs, as authorized by 26 U.S.C. § 7431(c)(2); and

E. Such other and further relief as the Court may deem just and proper.

Dated: September 14, 2020

Respectfully submitted,

CAPLIN & DRYSDALE, CHARTERED

CHRISTOPHER S. RIZEK
DC Bar No. 370796
One Thomas Circle NW, Suite 1100
Washington, DC 20005
Telephone: (202) 862-8852
Facsimile: (202) 429-3301
Email: crizek@capdale.com
Admitted Pro Hac Vice

NILES A. ELBER
DC Bar No. 488099
One Thomas Circle NW, Suite 1100
Washington, DC 20005
Telephone: (202) 862-7827
Email: nelber@capdale.com
Admitted Pro Hac Vice

ROSS R. SHARKEY
DC Bar No. 1033405
One Thomas Circle NW, Suite 1100
Washington, DC 20005
Telephone: (202) 862-7845
Email: rsharkey@capdale.com
Admitted Pro Hac Vice

AMANDA M. LEON
D.C. Bar No. 888273633
One Thomas Circle NW, Suite 1100
Washington, DC 20005
Telephone: (202) 862-7861
Email: aleon@capdale.com
Admitted Pro Hac Vice

KHAYAT LAW FIRM
ROBERT C. KHAYAT, JR
Georgia Bar No. 416981
75 Fourteenth Street, N.E.,
Suite 2750
Atlanta, Georgia 30309
Telephone: (404) 978-2750
Facsimile: (404) 978-2901
Email: rkhayat@khayatlawfirm.com

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