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Tax Analysts v. Internal Revenue Service

February 27, 2006


The opinion of the court was delivered by: Ellen Segal Huvelle United States District Judge


Plaintiff Tax Analysts filed this action under Internal Revenue Code § 6110, 26 U.S.C. § 6110, and the Freedom of Information Act, 5 U.S.C. § 552 ("FOIA"), seeking disclosure of numerous documents withheld by the Internal Revenue Service ("IRS"). Before the Court are two issues: first, whether written advice rendered to regional employees by attorneys in the IRS Office of Chief Counsel's national office in less than two hours is "Chief Counsel advice" falling within the public inspection requirements of § 6110; and second, whether the Office of Chief Counsel properly withheld a number of requested documents under the deliberative process privilege of 5 U.S.C. § 552(b)(5). As the Court answers both of these questions in the affirmative, it will grant plaintiff's Cross Motion for Summary Judgment with respect to its § 6110 claim and grant defendant's Motion for Summary Judgment with respect to Exemption 5.


The genesis of this case lies in a FOIA request made by plaintiff more than a decade prior to the request at issue here. (See Def.'s Mem. in Supp. at 2.) In 1993, Tax Analysts asked that the IRS disclose numerous Field Service Advice Memoranda ("FSAs"), which are documents prepared by "[a]ttorneys in the national office of the Office of Chief Counsel . . . in response to requests from field personnel . . . for legal guidance, usually with reference to the situation of a specific taxpayer." Tax Analysts v. I.R.S., 117 F.3d 607, 609 (D.C. Cir. 1997).*fn1 After the agency's denial of the request and an unsuccessful series of administrative appeals, Tax Analysts filed suit under 5 U.S.C. § 552. Tax Analysts, 117 F.3d at 608-9. Addressing the IRS' appeal of a district court order requiring disclosure of the documents following the redaction of return information and attorney work product, the D.C. Circuit held that as "no blanket exemption applie[d] to all of the requested FSAs," they had to be released "except to the extent that they are protected by some specific FOIA exemption." Id. at 620. In reaching this conclusion, the Court rejected the agency's argument that the legal analyses contained in the contested documents constituted "return information" exempt from disclosure under 26 U.S.C. § 6103(b)(2), noting the absence of any relevant difference between FSAs and the Technical Advice Memoranda for which disclosure was already provided under 26 U.S.C. § 6110. Id. at 615-16. The Court also refused to hold the documents exempt from disclosure under the deliberative process privilege of § 552(b)(5), determining that the memoranda -- which "[r]epresent[ed] the considered view of the Chief Counsel's national office on significant tax law issues" -- were "themselves statements of an agency's legal position and, as such, [could not] be viewed as predecisional." Id. at 617.

The D.C. Circuit's opinion in Tax Analysts emphasized concerns regarding the privacy of those taxpayers addressed in field service advice. See H.R. Conf. Rep. No. 105-599, at 298 (1998). Unlike IRS rulings, determination letters, and technical advice memoranda -- all of which were included within the existing version of 26 U.S.C. § 6110 -- field service advice was not then subject to procedures by which taxpayers could seek redaction of their private information. Id. Congress remedied this in the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. No. 105-206, 112 Stat. 685 (1998), concluding in an accompanying Conference Report that while "written documents issued by the National Office of Chief Counsel to its field components and field agents of the IRS should be subject to public release in a manner similar to technical advice memoranda or other written determinations" in order to "increase the public's confidence that the tax system operates fairly and in an even-handed manner with respect to all taxpayers . . . , the privacy of the taxpayer who is the subject of the advice must be protected." H.R. Conf. Rep. No. 105-599, at 299. This protection was brought about by subjecting a new category of written determinations -- "Chief Counsel advice" -- to public inspection "in a manner generally consistent with the mechanism of section 6110." Id.

Section 6110(i) defines "Chief Counsel advice" as "written advice or instruction, under whatever name or designation, prepared by any national office component of the Office of Chief Counsel" that "is issued to field or service center employees of the Service or regional or district employees of the Office of Chief Counsel" and "conveys . . . any legal interpretation of a revenue provision[,] . . . any Internal Revenue Service or Office of Chief Counsel position or policy concerning a revenue provision[,] or . . . any legal interpretation of State law, foreign law, or other Federal law relating to the assessment or collection of any liability under a revenue provision." 26 U.S.C. § 6110(i)(1)(A).*fn2 Under the statute, all documents qualifying as Chief Counsel advice are subject to "public inspection" following the deletion of "the names, addresses, and other identifying details of the person to whom the written determination pertains" and other identified persons. Id. §§ 6110(a); 6110(c)(1); 6110(i)(3)(A). Section 6110 also grants the Secretary discretion to redact portions of otherwise public advice in accordance with the exemptions provided under the FOIA. Id. § 6110(i)(3)(B) (citing 5 U.S.C. §§ 552(b), 552(c)). The addition of Chief Counsel advice to § 6110 removed it from FOIA's reach, since § 6110 became the exclusive means for obtaining access to these materials. See id. § 6110(m) ("Except as otherwise provided in this title, or with respect to a discovery order made in connection with a judicial proceeding, the Secretary shall not be required by any Court to make any written determination or background file document open or available to public inspection, or to refrain from disclosure of any such documents.").

Following the enactment of § 6110(i), the Office of Chief Counsel began to instruct its attorneys on the contours of this provision. In a September 1998 memorandum, the Office addressed the circumstances under which an emailed response to an inquiry from the field would amount to Chief Counsel advice. (See Butler Decl. ¶¶ 10-11 and Ex. 8 at 3.) Calling upon an existing business rule that classified as "informal" all advice rendered in less than two hours, the memorandum indicated that emails requiring less than two hours' preparation were not Chief Counsel advice. (Butler Decl. Ex. 8 at 3.) If, however, "the time expended in researching and preparing an e-mail response consume[d] two or more hours, or . . . local office practice [was] to open a case file because of the significance of the matter, then the e-mail [was] not informal advice and [was] CCA." (Id.) Though the Office acknowledged that such a standard might appear an "artificial" means of identifying those email messages subject to public inspection under § 6110(i), the memorandum stated that "[t]he legislative history to section [6110] clarifies that informal advice is not considered to be CCA" and noted that the two-hour rule had "historically been the touchstone for determining, for numerous business reasons, whether advice is considered 'informal' or 'formal.'" (Id.) As further explained by Associate Chief Counsel Deborah Butler's declaration in this case, matters "simple enough to be handled in less than two hours" could be "informally" resolved without "going through the process of 'issuance'" -- that is, "proposing draft advice in memorandum form and obtaining approval from [a] manager[]." (Butler Decl. ¶ 11.)

On February 19, 2004, the Office further specified its procedures under § 6110(i) with the publication of Notice CC-2004-012. (Id. ¶ 17 and Ex. 12.) The Notice reiterated the two-hour standard, stating that "legal advice that can be rendered in less than two hours by a National Office component . . . [is] informal in nature and need not be released to the public . . . even if it is reduced to writing." (Id. Ex. 12 at 5 ("A12").) The Notice went on to clarify the reach of this rule, specifying that a "background memorandum" prepared in another case and provided to the field after less than two hours' work on a request was not Chief Counsel advice and could therefore be withheld from public inspection. (Id. at 6 ("A16").)

Two months after the publication of Notice CC-2004-012, Tax Analysts wrote Associate Chief Counsel Butler with questions regarding the legal basis and administration of the two-hour standard, including the treatment of background memoranda under the rule. (Compl. ¶ 13; Def.'s Statement of Material Facts as to which There Is No Material Dispute ¶ 5 ("Def.'s Stmt.").) When the letter went unanswered, plaintiff submitted a June 7, 2004 request asking that all written advice that had "taken the place of FSAs . . . and . . . not been made publicly available under § 6110(i) or under its transition rules," all written advice withheld on the ground that it had been prepared in less than two hours, and all written advice withheld as "pre-existing legal memorand[a]" be disclosed in accordance with the public inspection requirements of § 6110. (Def.'s Stmt. ¶ 6.) The same letter included a FOIA request for all IRS records, created before February 19, 2004, describing, referencing, or containing precursors to certain sections of Notice CC-2004-012, as well as all records providing "guidance or instruction . . . on how to carry out th[ose] provisions." (Id.)Plaintiff later submitted an April 8, 2005 letter expanding its request to include any such records prepared or issued by the date of the letter's receipt. (Compl. ¶ 16-17; Def.'s Stmt. ¶ 44.)

The Office of Assistant Chief Counsel ultimately provided plaintiff with six documents pertaining to its FOIA request for precursors to Notice CC-2004-012: the agency's September 21, 1998 memorandum discussing the treatment of emails under § 6110(i); a later memorandum reiterating the relevant contents of the September memorandum; an October 8, 2000 Chief Counsel Desk Guide; a July 18, 2001 Business Rules Handbook; a November 21, 2001 case management appendix; and Notice CC-2002-026, a prior document addressing Chief Counsel advice. (Def.'s Stmt. ¶ 45.) All other materials responsive to plaintiff's FOIA request were withheld under the deliberative process privilege of 5 U.S.C. § 552(b)(5). (See Drain Decl. ¶¶ 12-15.)

Following the agency's limited disclosure, representatives of both parties held an August 19, 2005 meeting in an attempt to negotiate a settlement of the dispute. (Pl.'s Stmt. ¶ 57.) There, IRS officials provided plaintiff's counsel with representative samples of the kinds of "informal" documents that had been withheld from disclosure under § 6110. (Id.) While counsel were not given copies of the materials, they were provided with a "table of contents" outlining the eight kinds of documents at issue -- handwritten and typewritten recordations of telephonic advice; informal advice sheets that accompanied emailed advice; emailed answers to emailed questions in "question and answer" format; exchanges involving multiple emails and providing advice; informal advice provided in an email offering a link to existing public material; emailed requests and advice relating to open cases; and formal requests resulting in the opening of a case but nonetheless answered "informally." (Hitchcock Decl. ¶ 4.)

Plaintiff filed this action on May 10, 2005, seeking the release under § 6110 of "all two-hour CCA withheld from disclosure and . . . all CCA withheld from disclosure on the ground that the document transmitted was a pre-existing legal memorandum," as well as the release under FOIA of all documents underlying Notice CC-2004-012 or offering Office of Chief Counsel attorneys guidance on its proper application. (Compl. ¶¶ 15, 21.) On November 22, 2005, defendant filed a motion for summary judgment, contending that its nondisclosure of the contested materials was appropriate as the "informal advice" covered by the two-hour standard of Notice CC-2004-012 was not "issued" to the field within the meaning of § 6110(i), and the documents withheld under FOIA were exempt from disclosure under the deliberative process privilege of § 552(b)(5). (Def.'s Mem. in Supp. at 20-21.)*fn3 Tax Analysts responded by moving for a Vaughn index of all documents at issue in the case. (See Pl.'s Mot. for a Vaughn Index.) The Court denied plaintiff's motion in a January 9, 2006 Memorandum Opinion on the grounds that such an index was not required to resolve plaintiff's § 6110 request, and in lieu of a Vaughn index, it ordered the IRS to produce those documents withheld under § 552(b)(5) for in camera review. Tax Analysts v. Internal Revenue Serv., No. 05-cv-0934 (D.D.C. Jan. 9, 2006) (Mem. Op.). The Court has reviewed the submitted documents, which number over five-hundred pages, and will now turn to the merits of this dispute.


I. IRS' ...

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