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TAX REFORM RESEARCH GROUP v. IRS

July 19, 1976

TAX REFORM RESEARCH GROUP, ET AL., Plaintiffs,
v.
INTERNAL REVENUE SERVICE, Defendant



The opinion of the court was delivered by: BRYANT

 WILLIAM B. BRYANT, UNITED STATES DISTRICT JUDGE

 This matter is now before the Court on cross motions for summary judgment. For the reasons discussed below, both motions are granted in part and denied in part. Plaintiffs in this case include a public interest group concerned with reform of the tax laws in the United States. In August of 1973, shortly after the testimony of John W. Dean, III before the Senate Select Committee On Presidential Campaign Activities (the Ervin Watergate Committee), plaintiffs made a freedom of information request of the Internal Revenue Service for certain documents whose existence or probable existence had been revealed by that testimony. Mr. Dean's testimony indicated that the Nixon Administration had been pressuring the Internal Revenue Service to take various actions with respect to persons perceived by the White House as either "friends" or "enemies" of the Administration. The records sought in plaintiffs' FOIA request were generally those which would disclose specific contacts between the White House and the I.R.S. in connection with this endeavor. Following the refusal of the I.R.S. to honor a narrowed request, plaintiffs commenced this action on February 1, 1974. Since that time the issues in the case have been considerably narrowed by negotiation between the parties, and the remaining documents as to which disagreements still exist have been submitted to the Court for in camera inspection. Having inspected the more than 330 documents at issue, the Court now directs that a large number of them be released, and sustains the I.R.S.'s claims of exemption with respect to a relatively few of them.

 As Mr. Chief Justice Burger observed in another FOIA case, "if 'hard cases make bad law, ' unusual cases surely have the potential to make even worse law." Department of the Air Force v. Rose, 425 U.S. 352, 382 96 S. Ct. 1592, 48 L. Ed. 2d 11, 44 U.S.L.W. 4503, 4512 (1976). This is such a case; the Court is faced here with many conflicting and overlapping values to serve, in the context of a unique factual setting. The conflicts are serious: on the one hand, the basic purpose of the Act is to open to public scrutiny the actions of the various government agencies without unnecessarily invading individuals' personal privacy; on the other hand, by opening to public scrutiny certain details of abuses which themselves were invasions of personal privacy, the personal privacy of individuals involved in the original abuses may be further invaded. Moreover, the agency involved, the I.R.S., has traditionally guaranteed the privacy of its transactions with taxpayers. While in normal circumstances that privacy is protected by statute, difficulties arise where, as here, the activities involved are not part of the normal and proper operations of the agency, in relation to which taxpayer privacy is normally protected, but are rather connected with serious abuses of an essentially political nature, which -- not being contemplated by the privacy statute -- may therefore not be protected from disclosure. Also to be weighed in the balance is the obvious public interest in a full and thorough airing of the serious abuses that did in fact occur, in the hope that such abuses will not occur in the future and that confidence in the neutrality of the I.R.S. and in the privacy of taxpayer relations with the I.R.S. may be restored. In weighing these various interests in light of the mandate of the Act that the balance be tipped towards disclosure, the Court has attempted to be sensitive to these values and to reconcile them to the extent possible; the Court does wish to note however that the resolution of the issues herein must be viewed in light of the unusual context in which the case arises.

 The records plaintiffs claim have been wrongfully withheld fall into three categories: correspondence between the I.R.S. and a Special Assistant to the President, Clark Mollenhoff, during the time Mr. Mollenhoff was at the White House (referred to as the "Mollenhoff documents"); records that are responsive to paragraph 16b of the amended complaint (referred to as the "16b documents"); and four documents written by White House personnel, responsive to paragraph 16e of the complaint (referred to as "16e documents").

 I. THE MOLLENHOFF DOCUMENTS

 By agreement of the parties, the Mollenhoff documents consist of those documents compiled by the I.R.S. in connection with its investigation of charges of undue influence by the White House on the Service. The correspondence between Mr. Mollenhoff and the I.R.S. falls into three subcategories:

 
(A) Requests by Mr. Mollenhoff, as Special Counsel to President Nixon, to inspect income tax returns of named taxpayers.

 The twenty-three pages in this category are "form" requests and summaries of the form requests and were furnished to the plaintiff with the taxpayers' names deleted. The I.R.S. has claimed that these deletions are proper under 5 U.S.C. § 552(b)(3), which exempts documents which are "specifically exempted from disclosure by statute." Defendant relies on 26 U.S.C. § 6103, 26 U.S.C. § 7213 and 18 U.S.C. § 1905 to support that claim. Section 1905 of Title 18 does not exempt the I.R.S. from disclosure of records, rather, it prescribes the penalties for disclosure of confidential information; it is therefore irrelevant to the defendant's claim. In Tax Analysts & Advocates v. I.R.S., 164 U.S. App. D.C. 243, 505 F.2d 350 (1974), the Court held that sections 6103 and 7213 provide "for protection of the privacy of taxpayers filing tax returns and are designed to prevent disclosure of information contained either in the returns or in documents filed in conjunction therewith which enable the secretary or his delegate to determine tax due the United States." Accord, Fruehauf Corp. v. I.R.S., 522 F.2d 284 (C.A. 6, 1975), cert. granted 423 U.S. 919, 96 S. Ct. 259, 46 L. Ed. 2d 246, 44 U.S.L.W. 3389 (1976). The Court in Tax Analysts further held that certain documents known as "technical advice memoranda" were protected by the statutes since the memoranda dealt directly with information contained in "returns made with respect to taxes" and are part of "the process by which tax determinations are made" and, thus, "specifically exempt from disclosure by statute." Id. at 355. The documents now before the Court are simply form requests from Mr. Mollenhoff to the I.R.S. requesting tax information on the named individuals. They do not contain any information supplied to the I.R.S. by the taxpayer that is entitled to the protection of sections 6103 and 7213.

 The defendant argues that the Court of Appeals' construction of sections 6103 and 7213 has been altered by the Supreme Court's decision in F.A.A. Administrator v. Robertson, 422 U.S. 255, 95 S. Ct. 2140, 45 L. Ed. 2d 164 (1975). Plaintiff in that FOIA suit sought certain reports concerning the operation and maintenance performance of commercial airlines. The administrator of the F.A.A. withheld the documents under exemption 3 of the Act, claiming that 49 U.S.C. § 1504 *fn1" gave him the discretion to disclose or to withhold the documents sought by the plaintiff. The Supreme Court was faced with the question of whether the FOIA impliedly repealed all such discretionary disclosure statutes. The Court found no congressional intent to do so and held that a statute which confers discretion on an administrator to disclose is no less a "statute" within the meaning of § 552(b)(3), and thus can serve as a basis for an agency's refusal to disclose records sought under the FOIA. Because the statutes relied on by the defendant here contain no grant of discretion comparable to section 1504 the defendant's reliance on Robertson, supra, is misplaced. Since no other exemptions are applicable, these documents must be released in their entirety.

 (B) Requests by Mr. Mollenhoff, as Special Counsel to President Nixon, for information regarding Service treatment of specific taxpayers.

 These documents are requests by the White House, as well as the I.R.S. responses to those requests, for status reports on then-pending I.R.S. investigations of several taxpayers. From the Court's inspection it is clear that the documents are summaries of investigations the I.R.S. had undertaken by virtue of its authority to enforce the tax laws. The documents detail what the taxpayers were being investigated for and what the results of those investigation show, and the contemplated future action of the I.R.S. The documents in question were released to the plaintiff with the names of the taxpayers and certain other identifying data deleted. The I.R.S. has asserted exemption (b)(3) for the three documents (6 pages) in this category. For the same reasons that apply to Category I(A), the Court holds that exemption (b)(3) does not apply. However section (b)(7)(C) of the Act allows an agency to withhold identifiable records when those records constitute "investigatory files compiled for law enforcement purposes, but only to the extent that the production of such records would . . . constitute an unwarranted invasion of personal privacy." Summary reports of investigations are certainly "investigatory files" within the meaning of exemption (b)(7). Upon reading the documents it becomes clear that the data on which the reports were based was compiled by the I.R.S. for the purpose of enforcing the tax laws. In Retail Credit Co. v. Federal Trade Commission, CA75-0895 (D.C.D.C., February 2, 1976), Judge Jones said: "Exemption (b)(7) (C) is closely patterned on Exemption (b)(6), which precludes disclosure of information which would constitute a clearly unwarranted invasion of personal privacy." The Court of Appeals, in Getman v. NLRB, 146 U.S. App. D.C. 209, 450 F.2d 670 (1971), outlined the considerations relevant to determining whether disclosure would constitute a clearly unwarranted invasion of privacy. One of those considerations is the use to which the requesters wish to put the materials. Plaintiff here is an organization generally seeking a more equitable and efficient tax system. In pursuit of this goal it needs all the information it can obtain concerning the present condition of the internal revenue system. The documents here at issue disclose the existence of and request the details of settlement arrangements and tax liabilities of the taxpayers involved. The Court perceives no way in which the plaintiffs could use this information, and believes it would reveal nothing further about the attempts by the Administration to use the I.R.S. for political purposes than is already well known. See, e.g. Joint Committee On Internal Revenue, "Investigation Into Certain Charges Of The Use Of The Internal Revenue Service For Political Purposes", December 20, 1973, 93d Cong., 1st Sess. (Committee Print). Because the disclosure of the withheld names would constitute a serious invasion of the personal privacy of the taxpayers involved, the Court believes that the disclosure would therefore be unwarranted. Getman v. N.L.R.B., supra. Their privacy has already been invaded by the requests themselves, and the Court finds no public interest in exacerbating that invasion. For these reasons the Court holds that the edited portions of the documents in this category (as specified in the attached order) are properly withheld from disclosure under § 552(b)(7)(C).

 (C) Memoranda from Mr. Mollenhoff, as Special Counsel to President Nixon, to the I.R.S. indicating individuals suspected to be violating the tax laws.

 There are two documents (consisting of four pages) in this category. Both documents were released to the plaintiffs with the names of the taxpayers deleted. The first document states that Mr. Mollenhoff had been informed that an attached list of thirteen individuals had been reporting their income improperly and requests a study of their returns. *fn2" The second document alleges financial irregularities in connection with bankruptcy and courts and asks that the tax returns of the nine people listed be given close examination "with particular reference to payoff money for political bribes." The I.R.S. claims that the taxpayers' names are protected from disclosure by exemption (b)(3) or (b)(6). For the reasons discussed earlier the Court rejects the I.R.S. claims that these documents are protected from disclosure by (b) (3). Exemption 6 allows an agency to withhold "personnel and medical and similar files the disclosure of which would constitute a clearly unwarranted invasion of personal privacy." The defendant contends ...


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