Nosal v. IRS, No. 19-1359, 2021 WL 810852 (D.D.C. Mar. 3, 2021) (Contreras, J.)

Nosal v. IRS, No. 19-1359, 2021 WL 810852 (D.D.C. Mar. 3, 2021) (Contreras, J.)

Re:  Request for records concerning plaintiffs' taxes

Disposition:  Granting defendant's motion for summary judgment

• Litigation Considerations:  The court relates that "Plaintiffs submitted a FOIA request for three categories of records:  past tax forms, audit records, and records related to any whistleblower claims raised against them."  The court finds that "Plaintiffs do not challenge the agency's response to [the first two categories of records]."  "Given Plaintiffs' lack of objection and based on the materials submitted by the IRS, the Court finds that the agency has sufficiently justified its responses to [those items] and therefore grants summary judgment in the IRS's favor for those portions of the FOIA request."
   
• Exemption 3:  "The Court concludes that the IRS appropriately issued a Glomar response in conjunction with Exemption 3."  The court relates that "[t]o support its Glomar response to [the portion of plaintiff's request concerning whistleblower claims raised against plaintiffs], the IRS invokes FOIA Exemptions 3 (in conjunction with 26 U.S.C. § 6103(e)(7)), 5, 6, 7(C), and 7(D)."  "Because the Court finds Exemption 3 appropriately applies, the Court does not address the other claimed exemptions."  The court relates that "26 U.S.C. § 6103(a), . . . states that '[r]eturns and return information shall be confidential.'"  "The IRS may not disclose returns or return information if it 'determines that such disclosure would [ ] seriously impair Federal tax administration.'"  "As an initial matter, the Court finds that the broad definition of 'return information' encompasses not only the contents of whistleblower records, but also the existence or non-existence of such records."  "The existence or non-existence of whistleblower records plausibly falls within two portions of the definition of 'return information.'"  "First, the Court agrees with [defendant] that the existence of whistleblower records 'reflect[s] "whether the taxpayer's return was, is being, or will be examined or subject to other investigation or processing."'"  "If whistleblower records exist with respect to a particular taxpayer, that information tends to show that the taxpayer's return may be subject to examination."  "As such, whistleblower records would fall within the express terms of the statutory definition of 'return information.'"  "Moreover, the existence of whistleblower records plausibly constitutes 'other data, received by . . . furnished to, or collected by the [IRS] with respect . . . to the determination of the existence, or possible existence, of [tax] liability.'"  "Here, the existence of whistleblower records would communicate the factual proposition that someone submitted a whistleblower complaint to the IRS in connection with a particular individual's payment or non-payment of taxes."  "Given the broad sweep of the statutory definition of 'return information,' the Court finds that whistleblower records fall within its ambit."  "The Court agrees with the IRS that disclosure of the existence of whistleblower records would seriously impair Federal tax administration."  "Disclosure of the existence of whistleblower records could lead to three distinct harms that could seriously impair Federal tax administration."  "First, as [defendant] explains in his declaration, protecting the confidentiality of whistleblower records protects the effectiveness of the whistleblower program as a whole, encourages voluntary reporting of information that may lead to prosecution of violations of federal income tax laws, and 'prevent[s] reprisals against whistleblowers who come forward with such information.'"  "Second, with respect to the protection of the identities of individual whistleblowers, the Court agrees that even acknowledging the existence or non-existence of whistleblower records 'may imply or confirm the identity of that whistleblower,' especially in cases where a party 'claim[s] to know the identity or identities of the purported whistleblower(s).'"  "Finally, beyond the protection of whistleblower identities, in cases involving contemporaneous records, acknowledging the existence of whistleblower records may alert a taxpayer of an imminent or ongoing but nonpublic IRS audit/investigation leading that taxpayer to potentially destroy evidence, intimidate witnesses, or engage in other undesirable acts that would also seriously impair Federal tax administration."  "Although such harm is typically prevented through a Glomar response and Exemption 7(A), . . . it can also be prevented in the tax enforcement context through a Glomar response and Exemption 3 in conjunction with 26 U.S.C. § 6103."