United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued October 24, 1997 Decided January 20, 1998
No. 97-5010
William J. Lehrfeld,
Appellant
v.
Margaret M. Richardson, Commissioner of
Internal Revenue, et al.,
Appellees
Appeal from the United States District Court
for the District of Columbia
(No. 94cv00238)
Bruce L. Stern argued the cause for appellant, with whom
Amber H.C. Wong and William J. Lehrfeld were on the
briefs.
Thomas J. Sawyer, Attorney, U.S. Department of Justice,
argued the cause for appellees, with whom Mary Lou Leary,
U.S. Attorney, Loretta C. Argrett, Assistant Attorney Gener-
al, U.S. Department of Justice, and Jonathan S. Cohen,
Attorney, were on the brief.
Before: Ginsburg, Rogers, and Tatel, Circuit Judges.
Opinion for the Court filed by Circuit Judge Ginsburg.
Ginsburg, Circuit Judge: The appellant William Lehrfeld
asked the Internal Revenue Service for access to documents
the IRS had received from Members of Congress or other
officials in support of the application of the South Africa Free
Elections Fund for tax-exempt status. When the IRS re-
fused that request, Lehrfeld sued to compel disclosure. The
district court granted summary judgment for the IRS on the
ground that the material sought was "return information"
protected from disclosure under s 6103 of the Internal Reve-
nue Code and not subject to disclosure under s 6104. We
affirm.
I. BACKGROUND
As a general rule, the IRS may not disclose tax returns and
return information to the public. I.R.C. s 6103(a). The
Congress has defined "return information" broadly to include
any 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.
I.R.C. s 6103(b)(2)(A). The Congress has also provided a
limited exception to the general rule of confidentiality with
respect to applications for tax-exempt status:
If an organization described in section 501(c) or (d) is
exempt from taxation under section 501(a) for any tax-
able year, the application filed by the organization with
respect to which the Secretary made his determination
that such organization was entitled to exemption under
section 501(a), together with any papers submitted in
support of such application, and any letter or other
document issued by the Internal Revenue Service with
respect to such application shall be open to public inspec-
tion.
I.R.C. s 6104(a)(1)(A) (emphasis added). The Treasury regu-
lation interpreting this section takes the words "any papers
submitted in support of such application" to mean "any
statement or document ... that is submitted by an organiza-
tion in support of its application." 26 C.F.R. s 301.6104(a)-
1(e). In other words, papers submitted by anyone other than
the applicant itself in support of its application for tax-exempt
status need not be disclosed.
A person seeking information from the IRS may rely not
only upon s 6104 but also upon the Freedom of Information
Act, which generally requires that an agency release records
in response to a request that "reasonably describes such
records" and "is made in accordance with published rules
stating the ... procedures to be followed." 5 U.S.C.
s 552(a)(3). Of the enumerated exceptions to that general
rule of disclosure, only Exemption 3 is relevant here: an
agency need not disclose records
specifically exempted from disclosure by statute ... pro-
vided that such statute (A) requires that the matters be
withheld from the public in such 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. s 552(b)(3).
William Lehrfeld, an attorney specializing in the area of
tax-exempt organizations, read in the trade publication Tax
Notes that the South Africa Free Elections Fund (SAFE) had
been granted tax-exempt status under s 501(c)(3) of the
Code. Lehrfeld believed that SAFE's voter registration and
education efforts in South Africa, which were expected to
benefit Nelson Mandela's African National Congress party,
might run afoul of that provision of s 501(c)(3) which prohib-
its charitable organizations from participating or intervening
in a political campaign on behalf of any candidate. He also
wondered whether prominent U.S. politicians had used their
influence to speed up the processing of SAFE's application,
which appeared to have received expedited treatment.
In September 1993 Bruce Stern, an attorney employed in
Lehrfeld's office, submitted IRS Form 4506-A, "Request for
Public Inspection or Copy of Exempt Organization Tax
Form," together with a letter requesting "a copy of the
[SAFE] Fund's exemption application and all other docu-
ments available to the public under IRC 6104." Stern did not
mention the FOIA in his request. The IRS promptly re-
leased certain documents responsive to Stern's request.
Believing that not all relevant documents had been dis-
closed, Lehrfeld instructed Stern to file another request. In
his second request Stern again cited s 6104 as authority and
again made no mention of the FOIA, but this time he did ask
for a "Vaughn index" describing any documents that the IRS
refused to disclose. See Vaughn v. Rosen, 484 F.2d 820, 827-
28 (D.C. Cir. 1973) (outlining requirements agency must meet
in indexing documents for which it claims an exemption from
disclosure under the FOIA). The IRS responded in Decem-
ber 1993 by releasing some previously withheld documents
and explaining that the balance of the requested documents--
which later turned out mainly to be internal IRS memoranda
and routing slips--fell outside the scope of s 6104 and there-
fore could not be disclosed because of s 6103. The IRS
declined, however, to produce an index of the withheld docu-
ments: "The [IRC] neither provides you access to an index of
denied documents," wrote the IRS, "nor a right to appeal our
determination."
In responding to Stern's requests, an IRS tax law specialist
removed from SAFE's administrative file materials that he
had determined to be outside the scope of the disclosure
mandated by s 6104 and delivered the remaining materials to
the IRS reading room. The specialist did not search the 535
files in which the IRS stores correspondence from Members
of Congress.
In February 1994 Lehrfeld sought an injunction requiring
the IRS to disclose the documents still being withheld, this
time expressly invoking the FOIA in addition to s 6104. The
district court granted the IRS's motion for summary judg-
ment on the ground that the documents Lehrfeld sought were
not subject to disclosure under either s 6104 or the FOIA
and that the IRS's failure to search other files for documents
submitted by third parties was reasonable because those
documents were not subject to disclosure.
II. ANALYSIS
On appeal Lehrfeld seeks access to all papers the IRS
received from third parties in support of SAFE's application
and to all documents the IRS itself created in the course of
considering SAFE's application. Lehrfeld argues that the
Treasury regulation that limits disclosure under s 6104 to
papers submitted by the organization applying for tax-exempt
status is invalid under steps one and two of the analysis in
Chevron U.S.A., Inc. v. Natural Resources Defense Council,
Inc., 467 U.S. 837 (1984). Even if we were to agree with
Lehrfeld on that score, however, and thus to read s 6104
broadly to reach congressional correspondence and other
papers submitted by third parties, s 6104 would still provide
no basis for disclosing the documents internal to the IRS. In
order to reach those documents, Lehrfeld needs the FOIA.
Lehrfeld recognizes that the IRS may not disclose "return
information" in response to a FOIA request because s 6103
specifically exempts such information from disclosure. He
argues, however, that neither the third-party submissions nor
the internal IRS documents he seeks are "return information"
within the meaning of s 6103. The IRS maintains that these
documents are return information and asserts that, in any
event, we should not reach the merits of Lehrfeld's FOIA
claim because he never made a proper FOIA request and
failed to exhaust his administrative remedies. We review the
district court's grant of summary judgment de novo. See,
e.g., DeGraff v. District of Columbia, 120 F.3d 298, 301 (D.C.
Cir. 1997).
A. Disclosure Pursuant to s 6104.
As noted above, the Secretary of the Treasury has by
regulation interpreted s 6104 as requiring disclosure only of
documents submitted by the organization seeking tax-exempt
status, which leaves out papers submitted by Members of
Congress or other third parties. See 26 C.F.R.
s 301.6104(a)-1(e). In order to ascertain the validity of the
regulation, we apply the familiar two-step test of Chevron: if
the Congress has "directly spoken to the precise question at
issue," then the court "must give effect to the unambiguously
expressed intent of Congress"; otherwise the court will defer
to the administering agency's interpretation if it is reasonable
in light of the structure and purpose of the statute. 467 U.S.
at 842-43.
The statute at issue here requires disclosure of "the appli-
cation filed by the organization ... together with any papers
submitted in support of such application." I.R.C.
s 6104(a)(1)(A). Lehrfeld insists that "any papers" means
"all papers," but in doing so he misses the point of the
Government's argument that the statute is ambiguous. We
may assume that he is correct and still not have an answer to
the relevant question--all papers submitted by whom? The
passive voice of the statute certainly gives no answer. The
Congress might well have meant "[all] papers submitted by
the organization," thinking it redundant to say "by the organi-
zation" twice in the same sentence. At any rate the Congress
did not unambiguously say "all papers, regardless of by whom
submitted." And in the absence of an unambiguous expres-
sion of congressional intent, Lehrfeld must rest his hopes
upon the second step of the Chevron analysis.
At the second step, the IRS defends the regulation as a
reasonable interpretation of s 6104. As the IRS observes,
the regulation harmonizes well with s 6104(a)(1)(D), which
provides as follows:
Upon the request of the organization submitting any
supporting papers described in subparagraph (A) or (B),
the Secretary shall withhold from public inspection any
information contained therein which he determines re-
lates to any trade secret, patent, process, style of work,
or apparatus, of the organization, if he determines that
public disclosure of such information would adversely
affect the organization.
The reference in that sentence to "the organization submit-
ting any supporting papers described in subparagraph (A)" is
consistent with the position taken in the regulation that
subparagraph (A) refers only to papers submitted by the
organization seeking tax-exempt status. If papers submitted
by third parties were subject to disclosure pursuant to sub-
paragraph (A), then we would surely expect s 6104(a)(1)(D)
to protect proprietary information not only "[u]pon the re-
quest of the organization" seeking tax-exempt status but
"upon the request of any party submitting supporting pa-
pers." That the protection for valuable information in sub-
paragraph (D) apparently extends only to submissions made
by the applicant suggests that the norm of disclosure in
subparagraph (A) is likewise limited to submissions made by
the applicant; this is the rare case in which it truly may be
said that the exception proves (i.e., tests) the rule.
Moving beyond the structure of s 6104, the IRS also finds
strong support for the regulation in the legislative history of
s 6104. The regulation captures the intent of the drafters as
revealed in identical terms in the House and Senate reports
on s 6104(a):
If an organization described in section 501(c) or (d) is
exempt from taxation for any taxable year, the applica-
tion filed by the organization ... and any papers submit-
ted by the organization in support of that application, are
to be open to public inspection at the national office of
the Internal Revenue Service.
H.R. Rep. No. 85-775, at 99 (1957) and S. Rep. No. 85-1983,
at 231 (1958) (emphasis added).
We conclude that 26 C.F.R. s 301.6104(a)-1(e) is a permis-
sible construction of s 6104(a)(1)(A). Therefore, the IRS had
no obligation under that statute to disclose materials submit-
ted by third parties in support of SAFE's application.
B. Disclosure Pursuant to the FOIA.
The IRS contends that Lehrfeld never made a proper
FOIA request: IRS regulations require that a FOIA request
state that it is being made pursuant to the FOIA, see 26
C.F.R. s 601.702(c)(3)(ii), whereas Lehrfeld's requests specifi-
cally invoked s 6104 but did not mention the FOIA. Lehrf-
eld counters that his request for a "Vaughn index," together
with his asking for materials outside the scope of s 6104, was
enough to put the IRS on notice that he was making a FOIA
request. Rather than decide whether reference to a Vaughn
index in a request for information suffices to put the agency
on notice that the request is being made pursuant to the
FOIA, we may assume for the purpose of this opinion that
Lehrfeld filed a proper FOIA request. That assumption
matters not because the IRS has already disclosed all the
documents to which Lehrfeld is entitled.
In its letter of December 2, 1993, the IRS took the position,
to which it has consistently adhered, that "the balance of the
documents [he requested] are beyond the scope of the provi-
sions of Internal Revenue Code section 6104" and that "to the
extent they exist" such documents "are protected from disclo-
sure by Code section 6103." And, as the IRS points out,
documents protected under s 6103 are exempt from disclo-
sure under the FOIA as materials "specifically exempted
from disclosure by statute," 5 U.S.C. s 552(b)(3). See Tax
Analysts v. IRS, 117 F.3d 607, 611 (D.C. Cir. 1997) ("That
s 6103 is the sort of nondisclosure statute contemplated by
FOIA exemption 3 is beyond dispute"). That being the case,
it would be futile to require Lehrfeld to file a new request
expressly invoking the FOIA; the IRS has adopted a legal
position under which it can only deny such a reformulated
request.
We apply the two-step analysis of Chevron to the IRS's
interpretation of s 6103 just as we did to the Treasury
regulation interpreting s 6104. As we recently said in Tax
Analysts v. IRS:
The IRS and the Office of Chief Counsel [for the IRS
within the Department of the Treasury] are the gate-
keepers of federal tax information. Through s 6103,
Congress charged these two agencies and their employ-
ees with the duty of protecting return information from
disclosure to others within the federal government, and
to the public at large. If the IRS adopts an interpreta-
tion of s 6103, therefore, Chevron is triggered.
117 F.3d at 613. The IRS has determined that documents it
either receives or creates during the initial investigation of an
organization seeking tax-exempt status constitute "return in-
formation" within the meaning of s 6103 and are therefore
not subject to disclosure. Because the Congress has not
"directly spoken to the precise question at issue," we defer to
this reasonable interpretation of the statute.
Recall that s 6103(b)(2)(A) prohibits disclosure of data the
IRS receives "with respect to a return or with respect to the
determination of the existence, or possible existence, of liabili-
ty (or the amount thereof) of any person under [the IRC]."
Lehrfeld asserts that the materials he seeks are not "return
information" within the meaning of s 6103 because IRS re-
view of an application for tax-exempt status "is to determine
whether the applicant satisfies the statutory criteria for ex-
emption under IRC 501(c)(3) ... and is in no way an attempt
by the Service to determine the existence, or possible exis-
tence, of the applicant's income tax liability."
We find no significance in the distinction Lehrfeld would
have us draw between, on the one hand, an analysis of
"whether the applicant satisfies the statutory criteria for
exemption" and, on the other, an analysis of "the applicant's
income tax liability." Section 501(a) plainly states that "[a]n
organization described in subsection (c) ... shall be exempt
from taxation." Therefore, to determine whether an appli-
cant meets the statutory criteria of s 501(c) is, as a practical
matter, to determine whether the applicant has any income
tax liability. It follows that an application for tax-exempt
status and any documents related to it are received "with
respect to the determination of the existence, or possible
existence, of liability," and as such--an exception such as
s 6104 apart--the IRS may not disclose them.
III. CONCLUSION
With regard to Lehrfeld's claim under s 6104, we hold that
the Treasury regulation limiting disclosure to materials sub-
mitted by the applicant is a reasonable elaboration of a point
upon which the Congress was silent. With regard to Lehrf-
eld's FOIA claim, we hold that the IRS reasonably deter-
mined that Lehrfeld sought "return information" the disclo-
sure of which is prohibited by s 6103. It follows that the
IRS has already disclosed all the documents to which Lehr-
feld is entitled. Accordingly, the judgment of the district
court is
Affirmed.