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Sutton v. Internal Revenue Service

January 4, 2007


The opinion of the court was delivered by: Judge Virginia M. Kendall


Plaintiff seeks judicial review of the Internal Revenue Service's ("IRS" or "Defendant") response to his request under the Freedom of Information Act, 5 U.S.C. § 552 ("FOIA"). Plaintiff's request sought "all underlying files, work papers, and documents pertaining to IRS notice of deficiency and review of ["Plaintiff's] offer of compromise" for the 2000 tax year. Defendant turned over most of the documents responsive to this request but withheld other responsive material claiming that it was exempt from disclosure under FOIA. Plaintiff filed this action under §552(a)(4)(B) to compel Defendant to produce any agency records improperly withheld.

Defendant now moves for summary judgment on the ground that it has produced all non-exempt documents responsive to Plaintiff's FOIA request. Plaintiff responds that Defendant has not proved that the documents are exempt from disclosure or, in the alternative, that this Court should review the documents in camera to determine whether they are exempt. This Court finds that Defendant's declarations describe the documents withheld and the justifications for nondisclosure in enough detail that no in camera inspection is necessary. Also, this Court finds that the material withheld falls within the exemptions claimed.

Background Facts

In March 2002, the IRS notified Plaintiff that it was investigating the $44,847.00 alimony deduction claimed on his year 2000 tax return. The IRS subsequently determined that Plaintiff's payment to his wife was a property settlement, not alimony, and denied his claimed deduction. The IRS also assessed a penalty due to Plaintiff's alleged reckless or intentional disregard for the Internal Revenue Code ("the Code"). Plaintiff made an Offer in Compromise on August 27, 2002, an offer that the IRS rejected on April 19, 2004.

On August 2, 2004, Plaintiff submitted a FOIA request to Defendant for "all underlying files, work papers, and documents pertaining to IRS notice of deficiency and review of [Plaintiff's] offer of compromise." The IRS located 530 pages of responsive documents, and produced 466 pages in whole or in part. The records the IRS is withholding contain three general categories of information: return information of persons other than Plaintiff (third-party taxpayers), discriminant function ("DIF") scores and personal information of third parties or IRS personnel.


FOIA requires an agency "upon any request for records which . . . reasonably describes such records . . . [to] make the records promptly available." 5 U.S.C. § 552(a)(3). In this way, FOIA allows citizens to peek behind the curtain and find out "what their government is up to. " United States Dep't of Justice v. Reporters Comm. for Freedom of the Press, 489 U.S. 749, 773 (1989) ("Reporters Comm."); Solar Sources, Inc. v. United States, 142 F.3d 1033, 1037 (7th Cir. 1998) (FOIA serves the "basic purpose of ensuring an informed citizenry, vital to the functioning of a democratic society"). A federal district court has jurisdiction under FOIA to "order the production of any agency records improperly withheld from the complainant." 5 U.S.C. § 552(a)(4)(B).

Although "disclosure, not secrecy, is the dominant objective of [FOIA]," FOIA provides a number of exemptions to its disclosure requirement. Department of Air Force v. Rose, 425 U.S. 352, 360-361 (1976). The burden is on the government agency to establish that the withheld information should be excepted from disclosure. 5 U.S.C. § 552(a)(4)(B); see Rose, 425 U.S. at 360-361 (FOIA embodies "a general philosophy of full agency disclosure unless information is exempted under clearly delineated statutory language"). A district court determines de novo whether any claimed exemptions apply. Id. The court has discretion to review the withheld documents, in camera, to make this determination. Id. An in camera review, however, is unnecessary when the agency submits affidavits which "(1) describe the withheld documents and the justifications for non-disclosure with reasonably specific detail, (2) demonstrate that the information withheld falls logically within the claimed exemption, and (3) are not controverted by either contrary evidence in the record or by evidence of bad faith."*fn1 Stein v. Department of Justice and Federal Bureau of Investigation, 662 F.2d 1245, 1253 (7th Cir. 1981).

The IRS has withheld material under one or more of FOIA exemptions 3, 6 and 7. See 5 U.S.C. § 552(b)(3), (6), and (7). Exemption 3 restricts the disclosure of material which is specifically protected from disclosure by another statute. See 5 U.S.C. § 552(b)(3). Exemption 6 prohibits the disclosure of personnel and medical files and similar files when it would constitute a clearly unwarranted invasion of personal privacy. See 5 U.S.C. § 552(b)(6). Exemption 7 provides a limited exemption for the disclosure of records or information compiled for law enforcement purposes. See 5 U.S.C. § 552(b)(7).

I. Exemption 3

FOIA does not apply to information that is specifically exempted from disclosure by another statute; "provided that the statute (A) requires that the matters be withheld from the public in such a manner as to leave no discretion on the issue, or (B) establishes particular criteria for withholding or refers to particular types of matters to be withheld." 5 U.S.C. § 552(b)(3). Section 6103 of the Code falls within Exemption 3 because "[i]t establishes particular criteria for withholding information in subsections (b)-(o), and particular types of matters to be withheld in subsection (b)(2)." King v. I. R.S., 688 F.2d 488, 496 (7th Cir. 1982). Defendant contends that § 6103(a) and 6103(b)(2), in conjunction with FOIA Exemption 3, exempt from disclosure the return information of third-party taxpayers and the DIF methodology and scores used by Defendant to identify which tax returns should be examined or audited. Section 6103(a) of the Code provides that tax returns and return information shall be kept confidential. 26 U.S.C. § 6103(a). Section 6103(b)(2) defines "return information" and exempts from disclosure "standards used or to be used for the selection of returns for examination, or data used or to be used for determining such standards, if the Secretary determines that such disclosure will seriously impair assessment, collection, or enforcement under the internal revenue laws." 26 U.S.C. § 6103(b)(2).

A. Third-Party Taxpayer Return Information

Defendant is withholding thirty-seven pages in full and four pages in part pursuant to FOIA Exemption 3 in conjunction with § 6103(a). The withheld information on these pages is: (1) Internal Data Retrieval System*fn2 ("IDRS") information pertaining to third-party taxpayers including information obtained through the Individual and Business Master File; (2) Form 9984 (Examining Office's Activity Record) where the information contains the return information of a third-party taxpayer; and (3) information ...

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