Elec. Priv. Info. Ctr. v. IRS, No. 18-902, 2021 WL 5769442 (D.D.C. Dec. 3, 2021) (Kelly, J.)

Elec. Priv. Info. Ctr. v. IRS, No. 18-902, 2021 WL 5769442 (D.D.C. Dec. 3, 2021) (Kelly, J.)

Re:  Request for certain tax records related to any accepted offers-in-compromise involving former President Donald J. Trump and his associated business entities

Disposition:  Granting in part and denying in part defendant's motion to dismiss

• Exemption 3:  The court relates that "[t]he IRS invokes 26 U.S.C. § 6103(a) – which, for good reason, generally bars the disclosure of tax returns and return information – as the law that exempts these records from disclosure."  "There is no question that § 6103(a) is a nondisclosure statute for the purposes of Exemption 3."  "And the parties appear to agree that the records sought are within the statute's ambit."  "But § 6103(a) itself contains thirteen limited exceptions, situations in which Congress – for whatever reasons – decided that the general disclosure bar does not apply."  "[Plaintiff] relies on § 6103(k)(1), which provides that '[r]eturn information shall be disclosed to members of the general public to the extent necessary to permit inspection of any accepted offer-in-compromise under section 7122 relating to the liability for a tax imposed by this title.'"  "The IRS makes several arguments why no exception applies and thus that [plaintiff] has failed to state a claim."  "First, the IRS asserts that it may not disclose the records at issue to [plaintiff] because [plaintiff] lacks the taxpayer's consent, as required in § 6103(c), or a qualifying material interest as described under § 6103(e)"  "[Plaintiff], of course, concedes it does not have consent or a qualifying material interest that would satisfy those two exceptions."  "Still, [the court finds that] this argument does not get the IRS very far."  "As noted above, [plaintiff] does not purport to rely on these exceptions."  "And to the extent that the IRS argues that the consent and qualifying material interest requirements apply to § 6103(k)(1) . . . that argument fails as well."  "There is no basis in the statute's text or structure to import these requirements into § 6103(k)(1), which, after all, permits disclosure to 'members of the general public.'"  "Second, [the court relates that] the IRS homes in on § 6103(k)(1), arguing that it does not create a disclosure obligation that requires it to produce records to EPIC under FOIA."  "But once again, [the court finds that] the IRS's argument runs headlong into the text of the statute."  "Section 6103(k)(1) states that return information 'shall be disclosed to the extent necessary to permit inspection of any accepted offer-in-compromise.'"  "That Congress used the word 'shall,' rather than 'may' like in other provisions under § 6103(k), is telling."  "The Court cannot read this language as anything but a disclosure obligation."  The court relates that "[s]eizing on another portion of the exception to support this argument, the IRS asserts that the phrase 'to the extent necessary to permit inspection' gives it discretion to decide both the records it must disclose and the means necessary to disclose them."  "The Court agrees that phrase limits the records the IRS must disclose to those necessary to permit inspection of any accepted offer-in-compromise."  "But the IRS's interpretation goes further."  "In its view, because the Secretary of the Treasury has by regulation established Public Inspection Files and a related non-FOIA in-person inspection process – and determined that nothing more is 'necessary' under § 6103(k)(1) – the exception does not afford [plaintiff] any disclosure rights under FOIA."  "The Court disagrees."  "[T]he Court can see no reason why § 6103(k)(1), or the non-FOIA in-person inspection regime established by the Secretary, operate to extinguish [plaintiff's] right to make an otherwise valid FOIA request for records covered by the exception."  Overall, "the Court finds that § 6103(k)(1) creates a FOIA obligation for the IRS to disclose return information to [plaintiff], to the extent that information is necessary to permit inspection of an accepted offer-in-compromise."  "There is an important caveat to this conclusion, though."  "The IRS is right that § 6103(k)(1), in referencing only 'return information,' does not authorize it to disclose a taxpayer’s returns, which [plaintiff] included in its requests."  "Congress defined the two terms differently and did not include a taxpayer's 'return' in the definition of 'return information.'"  "Indeed, where 'return' is mentioned in definition of 'return information,' it is used only to refer to information about a return, rather than the return itself."  "Thus, [plaintiff] fails to state a claim to obtain tax returns because § 6103(k)(1) does not require – or even authorize – the IRS to disclose tax returns, which remain subject to § 6103(a)'s disclosure bar."  "[Plaintiff] has only stated a claim for 'return information,' as referenced in § 6103(k)(1) and defined in § 6103(b)(2), and only to the extent that return information is necessary to permit inspection of an accepted offer-in-compromise."
   
• Litigation Considerations, Mootness and Other Grounds for Dismissal:  The court rejects defendant's res judicata argument and finds that "[the related case cited by plaintiff] involved a FOIA request seeking the former President's 'tax returns for tax years 2010 forward, and any other indications of financial relations with the Russian government or Russian business.'"  "This case arises from a different FOIA request, invoking a different FOIA provision, seeking return information relating to any accepted offers-in-compromise by the former President and his associated businesses."  "The IRS, which bears the burden of establishing res judicata, has not shown that the return information [plaintiff] now seeks was at issue in [the other case]."  "The only overlap that clearly does exist relates to [plaintiff's] request for tax returns."  "But for reasons explained above, [plaintiff] has not stated a claim for tax returns."