Long v. United States Internal Revenue Service

FILED
NOT FOR PUBLICATION SEP 16 2010

MOLLY C. DWYER, CLERK
UNITED STATES COURT OF APPEALS U .S. C O U R T OF APPE ALS

FOR THE NINTH CIRCUIT

SUSAN B. LONG, No. 08-35672

Plaintiff - Appellee. D.C. No. 2:74-cv-00724-MJP

v.
MEMORANDUM *
UNITED STATES INTERNAL
REVENUE SERVICE,

Defendant - Appellant.

Appeal from the United States District Court
for the Western District of Washington
Marsha J. Pechman, District Judge, Presiding

Argued May 7, 2010
Resubmitted September 16, 2010
Seattle, Washington

Before: WARDLAW and GOULD, Circuit Judges, and WARE **, District Judge.

Pursuant to a Consent Order entered in 1976, Susan Long requested the

Internal Revenue Service (“IRS”) to provide her with Tables 37 and 38 and other

*
This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
**
The Honorable James Ware, United States District Judge for the
Northern District of California, sitting by designation.
statistical tables that were being used internally by the IRS to manage its auditing

activities. Among other objections, the IRS objected to disclosing “cells of one” or

“cells of two” in Tables 37 and 38 on the ground that disclosure would violate an

exemption under Freedom of Information Act (“FOIA”) and a prohibition imposed

by Internal Revenue Code section 6103 against the disclosure of tax return

information. See 26 U.S.C. § 6103(a); 5 U.S.C. § 552(b). Long moved the district

court to compel production of the financial information, and the IRS moved to

modify the Consent Order.

On June 13, 2008, the district court granted Long’s motion and denied the

IRS’s motion. The district court stated that the record contained no evidence to

support the “contention that a ‘cell of one’ in Table 37 could provide sufficient

information to identify the particular taxpayer whose data is included in the cell,”

and thus would not violate section 6103:

While Table 37 may contain “raw tax data,” the IRS effectively reformulates
that data by extracting it from taxpayers’ files and compiling it in a statistical
tabulation. The very act of compiling and tabulating large quantities of data
converts the return information to a “form” not associated with an individual
taxpayer. . . . The data contained in Table 37 is not removed from the realm
of “return information” by virtue of amalgamation alone; when that data is
extracted from individual files and compiled in a statistical representation, it
takes on a form that does not identify an individual taxpayer.

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The district court ordered the IRS to provide Long with “complete, unredacted

copies of Table 37 and the similar tables as previously requested [by Long] and

upon future requests.”

The IRS timely appealed the district court’s June 13, 2008, order.1 We

granted a stay and ordered the IRS to provide Long with redacted copies of Tables

37 and 38 pending the appeal.

We have jurisdiction under 28 U.S.C. §§ 1291, 1292(a)(1), and we affirm in

part, reverse in part, and remand.

A. Disclosure under FOIA

We review de novo a district court’s interpretation of a statute. In re

Heritage Bond Litigation, 546 F.3d 667, 675 (9th Cir. 2008).

“FOIA was enacted to facilitate public access to government records.”

Forest Serv. Employees for Envtl. Ethics v. U.S. Forest Serv., 524 F.3d 1021, 1023

(9th Cir. 2008) (citing John Doe Agency v. John Doe Corp., 493 U.S. 146, 151

(1989)). “[A]mong other things, FOIA requires every federal entity presented with

a request for records under the statute to make such records ‘promptly available to

any person.’” Id. at 1023–24 (quoting 5 U.S.C. § 552(a)(3)(A)). The disclosure

1
The IRS does not appeal the district court’s order that the IRS must
provide Long with Tables 35 and 36.

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requirement does not apply, however, if the requested information falls within one

of nine exemptions enumerated in 5 U.S.C. § 552(b). Forest Serv., 524 F.3d at

1024.

Section 6103 provides that “[r]eturns and return information shall be

confidential.” 26 U.S.C. § 6103(a). Thus, section 6103 qualifies as a statutory

exemption of tax returns and tax return information from disclosure under FOIA.

Kamman v. I.R.S., 56 F.3d 46, 48 & n.1 (9th Cir. 1995) (citing 26 U.S.C. §

6103(a)). In pertinent part, section 6103(b) defines “return information” to mean:

[A] taxpayer’s identity, the nature, source, or amount of his income,
payments, receipts, deductions, exemptions, credits, assets, liabilities, net
worth, tax liability, tax withheld, deficiencies, overassessments, or tax
payments, whether the taxpayer’s return was, is being, or will be examined
or subject to other investigation or processing, or any other data, received
by, recorded by, prepared by, furnished to, or collected by the Secretary with
respect to a return or with respect to the determination of the existence, or
possible existence, of liability (or the amount thereof) of any person under
this title for any tax, penalty, interest, fine, forfeiture, or other imposition, or
offense
...

but such term does not include data in a form which cannot be
associated with, or otherwise identify, directly or indirectly, a
particular taxpayer.

26 U.S.C. § 6103(b)(2).

4
 The latter part of the definition of “return information” is commonly referred

to as the Haskell Amendment.2 It removes from inclusion in “return information”

data in a form which cannot be associated with a particular taxpayer. Id.

The financial information in “cells of one” is taken verbatim from Form

5344 of a particular taxpayer, albeit one whose identity is not reported, and the

information in “cells of two” is taken from two taxpayers’ data. Thus, the issue

before us is whether removal of identifying information and reporting the financial

information in a tabular format places the data–in a “form which cannot be

associated with . . . a particular taxpayer”–within the meaning of the Haskell

Amendment.

B. In a Form Which Cannot be Associated with a Particular Taxpayer

In Church of Scientology of California v. I.R.S., 484 U.S. 9, 15, 17 (1987),

the United States Supreme Court held that “the mere removal of identifying details

from return information” did not suffice to put the information “in a form”

contemplated by the Haskell Amendment.

2
The Haskell Amendment was proposed as a floor amendment by Senator
Haskell of Colorado and was adopted by a voice vote during the debate on the
1976 amendments to the Internal Revenue Code. Church of Scientology of Cal. v.
I.R.S., 484 U.S. 9, 12 (1987).

5
 Following the Supreme Court’s ruling in Scientology, we used

“reformulat[ion]” to describe the requirement for bringing unidentified return

information under the Haskell Amendment. See Long v. I.R.S., 891 F.2d 222, 224

(9th Cir. 1989). In Long, we held that deletion of identifying information from so-

called IRS “check sheets,” which included the taxpayer’s identity, financial

information, and “possibly” audit information, did not place the nonidentifying

information outside the definition of “return information.” Id. at 223–24. We

explicitly required reformulation in order for the check sheets to be eligible for

disclosure. Id.

C. Application to “cells of one”

The district court accepted our requirement that return information be

reformulated before it is removed from the exemption from disclosure. According

to the district court, amalgamation is not required to meet the “in a form”

requirement of the Haskell Amendment. The district court found that return

information is “effectively” reformulated by the act of compilation and tabulation

and removal of identifying information. However, with respect to a single

taxpayer, the return information is transposed unaltered from a Form 5344 to the

“cell of one.” Thus, there is no meaningful change in “form” because the financial

information is taken from Form 5344 and placed into a table unchanged.

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 Consistent with our holding in Long, we hold that tax data that starts out as

confidential return information associated with a particular taxpayer maintains that

status when it appears unaltered in a tabulation with only the identifying

information removed. We therefore reverse the district court and hold that “cells

of one” are nondisclosable return information under § 6103(b)(2).

D. Application to “cells of two” or other amalgamation of tax data

“Cells of two” require a different analysis because they are the product of a

combination of two taxpayers’ data. They are unlike the tax data deemed

confidential return information in Scientology and Long, where the courts dealt

with unmodified nonidentifying return information of specific taxpayers. Rather,

they fit the definition of reformulated and amalgamated tax data. See King v.

I.R.S., 688 F.2d 488, 493 (7th Cir. 1982).

We therefore affirm the district court’s conclusion that cells of two are not

return information under § 6103(b)(2).

Because we hold that cells of one are confidential return information under

26 U.S.C. § 6103(b), but cells of two are not, we AFFIRM in part, REVERSE in

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part, and REMAND to the district court for modification of its June 13, 2008,

order consistent with this disposition.3

3
Because the IRS did not properly move the district court for a court-
supervised renegotiation of the Consent Order, we conclude that the issue is not
properly before us on appeal and therefore do not reach it.

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