Xanthopoulos v. IRS, No. 19-03006, 2021 WL 1893987 (D. Minn. May 11, 2021) (Nelson, J.)

Xanthopoulos v. IRS, No. 19-03006, 2021 WL 1893987 (D. Minn. May 11, 2021) (Nelson, J.)

Re:  Request for disclosure of certain redacted portions of Internal Revenue Manual ("IRM")

Disposition:  Granting defendant's motion for summary judgment; denying plaintiffs' cross-motion for summary judgment

• Exemption 7, Threshold:  The court holds that "the IRS has established that the redacted materials were 'compiled for law enforcement purposes.'"  The court finds that "the IRS has shown that the redacted portions of IRM § 21.1.3.3 were 'compiled for law enforcement purposes.'"  "The IRS's redacted authentication procedures are 'proactive steps' designed to prevent identity theft and maintain the security of taxpayers' confidential information . . . ."  "Indeed, [defendant's] Declaration specifically explains that identity theft and related fraud are significant problems at the IRS."  "She also explains that the five redactions at issue describe 'specialty situations' in which the IRS uses 'unique' authentication techniques and procedures."  "And these 'unique' procedures are used to combat the unauthorized disclosure of sensitive taxpayer information, identity theft, and criminal fraud."  The court finds that "Plaintiffs paint § 21.1.3.3 with too broad a brush when they argue that § 21.1.3.3 explicitly discloses an administrative purpose.  It is true that § 21.1.3.3 in part serves an administrative purpose."  "[T]he text of § 21.1.3.3 also reveals that it serves a law enforcement purpose as well."  "And some parts of the provision may serve both administrative and law enforcement purposes."  "This Court agrees that '[r]ecords documenting only government surveillance or oversight of the performance of duties of its employees' generally are not compiled for law enforcement purposes in the context of Exemption 7."  "The portions of the IRM at issue in this case, however, do not 'only' relate to governmental oversight of employees’ duties[,]" but also . . . "have another purpose: to combat and prevent identity theft in 'specialty' circumstances."
   
• Exemption 7(E):  "[T]he Court is persuaded that the five limited redactions at issue would reveal techniques and procedures utilized for law enforcement investigations."  "Based on the evidence before the Court, the redactions at issue appear to disclose techniques not generally known and information that, if widely known, could reduce the techniques' effectiveness."  "As the IRS[] . . . has noted, the IRS utilizes 'unique' techniques and procedures to investigate specific callers who fall within 'specialty' circumstances, to better enforce the law and prevent wrongdoing."  "And if disclosed publicly, third-party wrongdoers would know how the IRS handles certain authentication situations and, consequently, would know 'which circumstances might be easier for them to exploit.'"  "Moreover, the IRS was charged with implementing new policies to combat identity theft and related fraud, and IRM § 21.1.3.3(3) expressly identifies those goals, among others."  Regarding circumvention, the court also finds that "[f]irst, the IRS has shown that disclosure could reasonably be expected to risk circumvention of the law in the form of identity theft, unauthorized disclosure of taxpayer information, and fraud."  "Second, [defendant's] Declaration provides a reasonable basis to believe that disclosing the withheld materials would harm interests that Exemption 7(E) aims to protect, such as preserving the effectiveness of techniques and procedures for law enforcement investigations."
   
• Litigation Considerations, In Camera Inspection:  Regarding plaintiffs' request for in camera inspection, "[f]irst, it is clear that the IRS carefully reexamined the previously redacted portions of the text, and decided to release certain portions of that text."  "Nonetheless, it continued to withhold certain other portions of the text because the IRS remains persuaded that they reveal law enforcement techniques and procedures."  "These efforts demonstrate that the IRS made reasonable efforts to segregate exempt text from other text."  "Second, [defendant's] Declaration is not too conclusory to deprive the Court of its ability to conduct a de novo review of the IRS's withholding decisions."  "It specifies that the five redactions at issue all describe 'specialty situations' where the IRS takes certain unique investigative steps to authenticate a caller."  "Consequently, the Court finds that in camera review is not warranted."  Finally, the court finds that "[t]here is simply no evidence of bad faith on the part of the IRS."  "Because 'the court has no reason to question the good faith of the [IRS], the court is entitled to accept the credibility of the [IRS's] affidavit[ ]' and declines to conduct an in camera review."
   
• Litigation Considerations, "Reasonably Segregable" Requirements:  "[T]he Court finds that the IRS has not withheld any segregable, nonexempt material."  "As evidenced by [defendant's] Declaration, the IRS has reviewed all responsive records, including the redacted portions of text at issue, and even released two previously withheld portions, in an effort to appropriately segregate the exempt material that falls within Exemption 7(E) from the nonexempt materials."