the application of exemption (b) (3) as an exception to the Act. That is because exemption (b) (3) was added to the Freedom of Information Act with non-disclosure statutes such as section 6103 in mind and was intended to allow them continued effect. Illustrative of this fact is the decision in Neufeld v. Internal Revenue Service, 646 F.2d at 665, where the scope of exemption (b) (3)'s protection was determined specifically by looking to the definition of confidential return information provided in section 6103. In other words, exemption (b) (3) provided a vehicle through which section 6103's provisions relating to the confidentiality of records were given effect.
As such, there is no real significant conflict between the two statutory provisions and it is apparent that section 6103's objective of confidentiality will not be negated or diminished by applying it to exemption (b) (3) of the Freedom of Information Act. Instead, the principal effect of such action will be procedural, going to the process of review and the scope of the Court's role in that review. And in this regard, even though the Court will proceed de novo, if a determination of the IRS to withhold information pursuant to section 6103 is found to be sound, it will be given full effect by the Court in the same manner as if review had proceeded under the narrower standard of the Administrative Procedure Act suggested by the defendant.
Finally, the Court notes that section 6103 has been applied to exemption (b) (3) in a number of decisions and those decisions, along with the accompanying extensive body of law which has been developed to implement the Freedom of Information Act provide an effective, identifiable practical framework which the courts can use in dealing with questions involving the withholding of tax return information. To depart from the example of those decisions and that body of law does not seem advisable or warranted in the absence of a specific directive from Congress. As noted previously, the real issue here is the scope and manner of the Court's review, not whether section 6103 will remain viable. While it may be less time consuming for the Court to review the action of the IRS without regard to the Freedom of Information Act, such a decision should be governed by legal considerations, rather than convenience.
Accordingly, in view of: (1) the recent decisions in this circuit dealing with the issue of tax return information; (2) the recognition of section 6103 as an exempting statute within the meaning of exemption (b) (3) of the Freedom of Information Act; (3) the failure of Congress to specifically exclude section 6103 from the coverage of the Freedom of Information Act; (4) the lack of significant conflict between the objectives of section 6103 and exemption (b) (3) of the Freedom of Information Act; (5) the applicability of exemption (b) (3) to a number of similar non-disclosure statutes; and (6) the existing body of law facilitating review under the Freedom of Information Act, the Court finds that section 6103 does not operate independently of the Freedom of Information Act as the sole standard governing disclosure of tax returns and return information, but instead should function as applied to exemption (b) (3) of the Freedom of Information Act. The appropriate standard of review in this action is thus provided by the Act.
The Court having determined that its review is governed by the provisions of exemption (b) (3) of the Freedom of Information Act in conjunction with section 6103 of the Internal Revenue Code, must now address that review.
The plaintiff is a taxpayer who seeks disclosure of a 509-page document entitled "Action Memorandums -- Supporting Statement." This document was prepared by the Internal Revenue Service in connection with certain Tax Court cases involving the plaintiff, her husband, two other individuals and a substantial number of corporations and partnerships for the calendar years 1941 - 1948. After these cases were settled the document was subsequently utilized in certain related Tax Court cases covering the taxable years 1949-1961 involving the same parties and entities. These cases were decided in the Tax Court in 1979.
The defendant has released 142 pages of the document in question, but has withheld all or parts of the remaining pages on the grounds that the information contained therein is return information which is protected from disclosure by the provisions of section 6103 in accordance with exemption (b) (3). In this regard, section 6103 does provide as a general rule that return information is confidential and should not be disclosed, with such return information being described as:
a taxpayer's identity, the nature, source, or amount of his income, payments, receipts, deductions, exemptions, credits, assets, liabilities, net worth, tax liability, tax withheld, deficiencies, overassessments, or tax payments, whether the taxpayer's return was, is being, or will be examined or subject to other investigation or processing, or any other data, received by, recorded by, prepared by, furnished to, or collected by the Secretary with respect to a return or with respect to the determination of the existence, or possible existence, of liability (or the amount thereof) of any person under this title for any tax, penalty, interest, fine, forfeiture, or other imposition, or offense.
26 U.S.C. § 6103(b) (2) (A).
Section 6103 also specifically provides that return information "does not include data in a form which cannot be associated with, or otherwise identify, directly or indirectly, a particular taxpayer." Id.
Because the IRS has the burden of demonstrating that non-disclosure pursuant to section 6103 as applied to exemption (b) (3) is proper, see 5 U.S.C. § 552(a) (4) (B), it must prove two things to justify its decision to withhold. First, it must show that the material contained in each of the pages or portions thereof which were withheld satisfies one of the definitions provided in the description of return information set forth in section 6103(b) (2) (A). Second, it must also show that the information contained in each of the withheld pages or portions thereof includes only information that directly or indirectly identifies a particular taxpayer. See Neufeld v. Internal Revenue Service, 646 F.2d at 665.
Furthermore, even if the IRS demonstrates that the information found on a particular page of the document satisfies these two requirements so as to constitute return information, that information will nevertheless be subject to disclosure if the party seeking such disclosure is found to have a "material interest" in the information. See section 6103(e) (6) and (e) (1). The circumstances under which a party will be considered to have a material interest are set forth in section 6103(e) (1). The situations which could possibly apply in the present instance appear to be those which permit disclosure to:
(A) in the case of the return of an individual --