Hobbs v. USA

IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT _______________ m 99-20273 _______________ BOOKER T. HOBBS, JR., Plaintiff-Appellant, VERSUS UNITED STATES OF AMERICA, EX REL. SANDRA RUSSELL IN HER OWN RIGHT, AND INTERNAL REVENUE SERVICE, Defendants-Appellees. _________________________ Appeal from the United States District Court for the Southern District of Texas _________________________ April 20, 2000 Before REAVLEY, SMITH, and EMILIO M. federal income tax returns. Concluding that GARZA, Circuit Judges. the disclosures were authorized under I.R.C. § 6103, we affirm. JERRY E. SMITH, Circuit Judge: I. Booker Hobbs, Jr., pro se, appeals the de- Hobbs was employed by the Internal termination that he is not entitled to recover Revenue Service (“I.R.S.”) as an engineer, damages under the Internal Revenue Code examining corporate and individual tax re- (“I.R.C.”), 26 U.S.C. § 7431, or the Privacy turns. His position required an advanced un- Act, 5 U.S.C. § 552a, for the disclosure of his derstanding of the tax laws. Thus, when it came to his supervisor’s attention that Hobbs ceeding pertaining to tax administration.” The might have improperly filed past tax returns, court also dismissed Hobbs’s Privacy Act the supervisor directed an audit. That inves- claims, holding that I.R.C. § 7431 provides the tigation revealed evidence of improper filings exclusive remedy for unlawful disclosure of and of unsubstantiated deductions, whereupon tax information. Hobbs was discharged. II. Hobbs appealed his dismissal to the Merit Hobbs argues that the dismissal of his Systems Protection Board (“MSPB”). In re- § 7431 claims was improper because his ap- sponse, the IRS submitted the information it peal to the MSPB and his title VII civil trial had found in its investigation, including infor- were not “pertaining to tax administration” as mation from Hobbs’s past federal tax returns. required by the limited exception of § 6103- The MSPB upheld the termination and dis- (h)(4), but were, instead, personnel matters. missed Hobbs’s claim that the IRS had dis- Hobbs also asserts that the IRS made these criminated against him on the basis of race. disclosures in bad faith. Next, he avers that the court erred in dismissing his Privacy Act Hobbs also filed a complaint against the claims, and he challenges the conclusion that IRS in the United States District Court for the § 7431 is the exclusive remedy for unlawful Eastern District of Pennsylvania, alleging that disclosure of tax information. he had been terminated for discriminatory rea- sons in violation of title VII of the Civil Rights A. Act of 1964, Pub. L. No. 88-352, 78 Stat. Section 6103(a) of the I.R.C. states the 241. The jury rejected Hobbs’s claim, and he general rule that tax returns and tax return in- unsuccessfully appealed to the Third Circuit formation are confidential and may not be dis- Court of Appeals.1 The merits of that case are closed by any federal or state officer “except not at issue in the current appeal. as authorized by this title.” Section 7431 creates a federal cause of action for civil Next, Hobbs filed this action against the damages for unauthorized disclosures of re- IRS seeking damages under I.R.C. § 7431 for turns and return information in violation of unauthorized disclosure of tax return infor- § 6103. Included in the exceptions to the mation and damages for violation of the Pri- general rule of confidentiality in § 6103(a), vacy Act, 5 U.S.C. § 552a. The court dis- however, is an allowance for disclosures for missed all of Hobbs’s claims, and specifically, purposes of tax administration: the claims he had brought pursuant to § 7431, because it held that the disclosures were au- (h) Disclosure to certain Federal officers thorized under I.R.C. § 6103(h)(4), which per- and employees for purposes of tax mits the disclosure of “return information in a administration, etc.SS . . . Federal or State judicial or administrative pro- (4) Disclosure in judicial and administrative tax proceedings.SSA 1 return or return information may be See Hobbs v. Rubin, No. 96-4117 (E.D. disclosed in a Federal or State judicial or Pa.), aff’d, 156 F.3d 1224 (3d Cir. 1998) administrative proceeding pertaining to (unpublished). 2 tax administration, but onlySS defined the term broadly.2 And these interpretations seem correct in light of the (A) if the taxpayer is a party to the expansive terms employed by Congress: Tax proceeding, or the proceeding arose out administration includes “administration, of, or in connection with, determining management, conduct, directi on, and the taxpayer’s civil or criminal liability, supervision.” I.R.C. § 6103(b)(4)(A)(i). or the collection of such civil liability, in respect of any tax imposed under this In response, the IRS argues that the title. disclosures of Hobbs’s tax return documents in the MSPB and title VII proceedings were “in 26 U.S.C. § 6103(h). a Federal or State judicial or administrative proceeding pertaining to tax administration.” Hobbs challenges the dismissal of his See § 6103(h)(4) (emphasis added). The IRS § 7431 claims and the determination that the is correct. IRS properly disclosed his tax return information in accordance with the “tax There can be little doubt that, like the administration” exception in § 6103(h)(4). He situation in both Rueckert and Mangan, asserts that this exception is not applicable, Hobbs’s own compliance with the federal tax because neither the MSPB nor the title VII laws was something of key concern to the IRS; civil action was “pertaining to tax his position required him to examine the administration.” “Tax administration” is defined as 2 See, e.g., Rueckert v. IRS, 775 F.2d 208, 210-12 (7th Cir. 1985) (holding that ensuring that (i) the administration, management, con- a state’s internal revenue service employees are duct, direction, and supervision of the free from conflicts of interest that could undermine execution and application of the internal the integrity of the state’s tax collection system are revenue laws or related statutes (or “management” and “supervision” equivalent laws and statutes of a State) under § 6103(b)(4)(A)(1)); United States v. and tax conventions to which the United Mangan, 575 F.2d 32, 40 (2d Cir. 1978) (approving the admission of federal tax returns States is a party, and under the tax administration exception in criminal proceedings against an IRS agent, even though (ii) the development and formulation of such proceedings did not involve the determination Federal tax policy relating to existing or of tax liability). Inexplicably, Hobbs cites proposed internal revenue laws, related National Treasury Employees Union v. F.L.R.A., statutes, and tax conventions. 791 F.2d 183 (D.C. Cir. 1986), for the proposition that “it is an established settled principle of law 26 U.S.C. § 6103(b)(4)(A). The courts that that the term ‘tax administration’ does not include have considered whether certain activities personnel matters.” National Treasury does not qualify as “tax administration” uniformly have support this proposition. Instead, that case was solely about whether the disclosures made pursuant to § 6103(1)(4)(A) were properly authorized by IRS personnel. The court never discusses “tax administration.” 3 accuracy of corporate and individual tax B. returns and, in turn, to have a sophisticated Although the majority of the courts that understanding of the tax laws. The IRS’s have considered the interaction of § 6103 with decision to terminate him for failure accurately the Privacy Act, 5 U.S.C. § 552a, have to file his own returns was motivated in large concluded that § 6103 and § 7431 provide the part by the fact that this failure undermined the exclusive remedy for disclosures of tax return IRS’s confidence in his ability to perform his information,4 Hobbs challenges the district essential job functions, which unquestionably court’s conclusion that § 7431 is the exclusive encompassed tax administration. remedy and relies on the minority position adopted in Sinicki v. United States Dep’t of When Hobbs then challenged the Treasury, No. 97 Civ. 0901 (JSM), 1998 U.S. employment action in subsequent Dist. LEXIS 2015 (S.D.N.Y. Feb. 24, 1998) administrative and judicial proceedings, the (unpublished). In Sinicki, the court was IRS was required to defend its termination by unwilling to go as far as other courts and hold disclosing the ground for his dismissal. that § 6103 amounts to a repeal of the Privacy Naturally, this required the IRS to prove that Act in all cases involving unauthorized it was Hobbs’s improper filing of past tax disclosures of tax return information. Instead, returns, and not his race or some other factor, the court held that “Section 6103 should only that motivated its decision. These disclosures, implicitly repeal the Privacy Act to the extent then, were “pertaining to tax administration.” it presents an irreconcilable conflict.” Id. at *13. As a result, the district court did not err in concluding that Hobbs could not maintain a suit under § 7431 for a violation of (...continued) § 6103(a)’s general rule of confidentiality. (“IRM”). Those IRM provisions relate only to The IRS properly disclosed his tax return disclosures made pursuant to § 6103(l)(4), and not information under § 6103(h)(4)(A) in to disclosures under § 6103(h)(4); consequently, defending its employment decision in both the we have no occasion to consider whether they are MSPB and title VII civil suits. Accordingly, consistent with, or are trumped by, the I.R.C. because those disclosures were authorized, the 4 See, e.g., Lake v. Rubin, 162 F.3d 113, court also did not err in failing to reach the 115-16 (D.C. Cir. 1998) (holding that § 6103, question whether the disclosures were made although not framed as an express exception to the in bad faith.3 Privacy Act, provides the exclusive statutory route for taxpayers to access their tax records), cert. denied, 119 S. Ct. 1465 (1999); Cheek v. IRS, 703 3 Because we do not reach the alternate ground F.2d 271, 272 (7th Cir. 1983) (per curiam) that the IRS argues justifies affirming the summary (holding that § 6103 is exclusive to both the judgmentSSi.e, that the disclosures also were au- Privacy Act and the Freedom of Information Act); thorized under § 6103(l)(4) for use in “personnel or Gardner v. United States, Civ. Ac. No. 96-1467 claimant representative matters” SSwe also need not (EGS), 1999 U.S. Dist. LEXIS 2195, at *16 reach Hobbs’s assertion that the disclosures (D.D.C. Jan. 29, 1999) (opining that “§ 6103 is the violated provisions of the Internal Revenue Manual exclusive remedy for alleged wrongful disclosures (continued...) of returns and return information”). 4 Repeals by implication are not favored. See dity that the IRS properly could make a Jackson v. Stinnett, 102 F.3d 132, 135 (5th disclosure of tax return information in a Cir. 1996) (citing cases). “However, courts judicial or administrative proceeding long ago established an exception to the re- “pertaining to tax administration” in peal-by-implication rule: ‘Where provisions in accordance with § 6103(h)(4), but would be the two acts are in irreconcilable conflict, the exposed to liability under the more general later act to the extent of the conflict provisions of the Privacy Act. Consequently, constitutes an implied repeal of the earlier we refuse to subject the IRS to such an absurd one.’” Id. at 136 (quoting Posadas v. result. To the extent that the Privacy Act National City Bank, 296 U.S. 497, 503 would recognize a cause of action for (1936)). 5 This exception apparently was not unauthorized disclosure of tax return implicated in Sinicki, in which the court information even where § 6103 would provide concluded that “[t]hus far, Section 6103 has an exception for the particular disclosure, not been shown to be in irreconcilable conflict § 6103 trumps the Privacy Act. with the Privacy Act,” but the court went on to recognize the possibility of such conflict in We draw further support for this conclusion future cases. See Sinicki, 1998 U.S. Dist. by invoking the principle that “a precisely LEXIS 2015, at *10. drawn, detailed statute preempts more general remedies.” Jett v. Dallas Indep. Sch. Dist., Here, on the other hand, there is a present 491 U.S. 701, 734 (1989) (quoting Brown v. conflict. Although the Privacy Act and § 7431 General Servs. Admin., 425 U.S. 820, 834 create damages actions for unauthorized dis- (1976)). Section 6103 dedicated entirely to closures, only § 6103 provides for a variety of confidentiality and disclosure issues related to tax-return-specific exceptions to the general tax returns and tax return information. It confidentiality rule. Thus, if Hobbs were able covers approximately thirty-five pages of the to maintain a suit under the Privacy Act even United States Code. The Privacy Act, by con- where his § 7431 damages action was trast, prohibits disclosures at a generic level, unsuccessful, this would punish the IRS for providing that “[n]o agency shall disclose any disclosing tax return information it was record which is contained in a system of authorized to disclose under the express terms records.” 5 U.S.C. § 552a(b). It is fair to say, of § 6103. Of course, this conflict becomes then, that § 6103 is a more detailed statute that apparent only where the disclosures fall under should preempt the more general remedies of one of the § 6103 exceptions, but here the the Privacy Act, at least where, as here, those IRS’s disclosure qualified for the “tax remedies are in conflict.6 administration” exception. AFFIRMED. Congress could not have intended the od- 5 See also United States v. Ardoin, 19 F.3d 6 177, 180 (5th Cir. 1994) (noting that “the only per- We have no occasion, however, to consider missible justification for repeal by implication is whether § 6103 operates as an implied repeal of the when the earlier and later statutes are irrecon- Privacy Act to the extent that the two provisions cilable”). are not in conflict. 5