Am. Marine, LLC v. IRS, No. 15-0455, 2017 WL 3194167 (S.D. Cal. July 26, 2017) (Moskowitz, C. J.)

Am. Marine, LLC v. IRS, No. 15-0455, 2017 WL 3194167 (S.D. Cal. July 26, 2017) (Moskowitz, C. J.)

Re:  Request for certain tax records concerning plaintiff

Disposition:  Granting in part and denying in part defendant's motion for summary judgment

• Litigation Considerations, Adequacy of Search:  "[T]he Court finds the IRS has failed to carry its burden to demonstrate the adequacy of its search."  The court holds that, "in key respects, [defendant's] declaration is too conclusory to suffice."  "First, the IRS has provided no explanation how it interpreted Plaintiff's FOIA request, nor has it described the scope of documents it sought out in response."  "Without a description of the categories of documents the IRS determined were responsive to the request – that is, what records the IRS was searching for – the Court has no context for evaluating the reasonableness of the methods it used to find them."  "Second, [defendant's] declaration fails to give sufficient information about the IRS's review of [potentially responsive] documents."  "[T]o evaluate the adequacy of the IRS's search, the Court needs information regarding the document review to determine whether the IRS's search of [these documents] was reasonable."
   
• Exemptions 3 & 6:  "At this stage, the Court will reserve ruling on the validity of the IRS's withholding of information under Exemptions 3 and 6[]" "until the record has been more fully developed."
   
• Exemption 5, Attorney-Client Privilege:  "[T]he Court grants the IRS's motion for summary judgment as to its determination that [documents "reflect[ing] . . . confidential communications with agency lawyers for the purpose of obtaining legal advice"] contained attorney-client privileged information and were exempt from disclosure pursuant to Exemption 5."
   
• Exemption 5, Deliberative Process Privilege:  The court holds that documents "["information 'reflect the deliberations of the Service with respect to collection activities' and 'reflect opinions or recommendations . . . that precede the final decisions concerning the collection actions pursued by the Service[]']" "are both predecisional and deliberative in the sense that they are actually related to the IRS's ongoing efforts to determine how to proceed with its enforcement action."
   
• Exemption 7(A):  The court relates that "[defendant] states disclosure of the information [at issue] could 'compromise the Service's on-going efforts to collect plaintiff’s outstanding tax liabilities' because it would 'allow plaintiff to determine the nature, direction, scope and limits of other courses of action the Service may elect to pursue.'"  "The Court finds this evidence sufficient to show disclosure of the referenced information would interfere with its enforcement proceedings such that it fell within the scope of Exemption 7(A)[.]"
   
• Exemption 7(D):  "[T]he Court grants the IRS's motion for summary judgment as to the validity of its withholding of ["documents 'contain[ing] either the identity, or sufficient information from which the identity could readily be discerned, of sources of information that furnished information to the Service . . . with the understanding that it would only be divulged to the extent necessary to facilitate ongoing efforts by the Service to enforce the Federal tax laws as applied to plaintiff'"] under Exemption 7(D)."
   
• Exemption 7(E):  "[T]he Court . . . den[ies] summary judgment without prejudice as to this exemption."  The court relates that "the redacted information relates to Plaintiff's 'Risk Score,' 'which reflects the Service's assessment of the priority of having the taxpayer's account assigned to a dedicated collection specialist to actively pursue collection of the taxpayer's outstanding liabilities.'"  "However, [the court finds that] [defendant's] declaration does not address whether the Risk Score is a 'technique unknown to the general public.'"
   
• Exemption 3:  "The Court finds the IRS's evidence sufficient to show disclosure of the withheld information access would impair tax administration so as to justify its withholding under § 6103(e)(7)."  The court relates that "Section 6103(e)(7) gives the taxpayer 'unrestricted access to his own returns, but as to other information or materials collected by the IRS in the course of determining tax liability,' availability of the returns 'is conditioned on the Secretary's determination that such access would not impair tax administration.'"  The court notes that defendant only states that "all of the withheld information would, if disclosed, 'allow plaintiff to determine the nature, direction, scope and limits of other courses of action the Service may elect to pursue in order to collect plaintiff’s outstanding tax liabilities,' and 'allow plaintiff to circumvent the law' or 'compromise future actions that the Service may pursue[.]'"