Lndmrk Leg Fdn v. IRS

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 12, 2001 Decided October 12, 2001

No. 00-5344

Landmark Legal Foundation,
Appellant

v.

Internal Revenue Service,
Appellee

Appeal from the United States District Court
for the District of Columbia
(No. 97cv01474)

Richard P. Hutchison argued the cause for appellant.
With him on the briefs was Mark R. Levin.

Thomas J. Sawyer, Attorney, U.S. Department of Justice,
argued the cause for appellee. With him on the brief were
Jonathan S. Cohen, Attorney, and Kenneth L. Wainstein,
U.S. Attorney.

 Before: Tatel and Garland, Circuit Judges, and Williams,
Senior Circuit Judge.*

Opinion for the Court filed by Senior Judge Williams.

Williams, Senior Circuit Judge: Early in 1997 there was
public controversy over claims that the Internal Revenue
Service had selectively audited conservative non-profit organi-
zations in response to requests from outside parties. Seeking
to investigate these allegations, Landmark Legal Foundation
filed a request under the Freedom of Information Act seeking
the following records:

[C]opies of any and all documentation (including, but not
limited to, paper correspondence, telephonic inquiries
and/or electronic communications) evincing requests
since January 1, 1992[,] by individuals and/or entities
external to the [IRS] for audits or investigations of
501(c)(3) tax-exempt organizations. Please include the
names of the individuals and/or entities requesting the
audits or investigations and the names of the 501(c)(3)
tax-exempt organizations for which audits or investiga-
tions were requested. We wish to make clear that we
are not asking the IRS to provide information revealing
whether, in fact, any of these entities are actually being
audited.

The request went on to seek documents that would reveal
mere inquiries about the tax status of exempt organizations.

In the course of the usual back and forth between reques-
ter and agency, the IRS released several hundreds of pages
of documents but also withheld thousands. On court order, it
produced a Vaughn index, see Vaughn v. Rosen, 484 F.2d 820
(D.C. Cir. 1973), dividing the papers into 20 categories and
invoking in support of non-disclosure Exemptions 3 and 6, 5
U.S.C. ss 552(b)(3) & (6). On the basis of Exemption 3, the
district court granted the IRS's motion for summary judg-
ment on all but four categories, as to which it found the IRS
affidavits insufficient. See Landmark Legal Foundation v.

__________
* Senior Circuit Judge Williams was in regular active service at
the time of oral argument.

Internal Revenue Service, 87 F. Supp. 2d 21, 26-27, 29
(D.D.C. 2000). It rejected the Service's invocation of Exemp-
tion 6. Id. at 27-28. Finally, it denied most of Landmark's
requests for discovery. Id. at 29-30. Landmark filed an
appeal, which we dismissed for want of a final order, Land-
mark Legal Foundation v. Internal Revenue Service, No.
00-5147 (D.C. Cir. June 29, 2000), and then abandoned its
requests for the four categories as to which the court had not
granted summary judgment. The district court accordingly
entered a final judgment on all claims. Reviewing de novo,
see DeGraff v. District of Columbia, 120 F.3d 298, 301 (D.C.
Cir. 1997), we agree that Exemption 3 is applicable to the
disputed documents and we reject Landmark's other claims of
error. We need not reach the IRS's contention that the
district court erred in rejecting the Exemption 6 defense.

* * *

Exemption 3 provides that documents need not be released
if they are "specifically exempted from disclosure by stat-
ute...." 5 U.S.C. s 552(b)(3). The exemption statute in-
voked by the IRS is 26 U.S.C. s 6103, which provides that
"return information shall be confidential." Id. s 6103(a); see
also Church of Scientology of California v. IRS, 792 F.2d 146
(D.C. Cir. 1986) (holding that s 6103 is an Exemption 3
statute). Section 6103 then defines "return information" as
including:

... a taxpayer's identity, the nature, source, or amount
of his income, payments, receipts, deductions, exemp-
tions, credits, assets, liabilities, net worth, tax liability,
tax withheld, deficiencies, overassessments, or tax pay-
ments, 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 determina-
tion 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.

26 U.S.C. s 6103(b)(2)(A) (emphasis added). This definition
of "return information" has, in the words of some commenta-
tors, "evolved to include virtually any information collected by
the Internal Revenue Service regarding a person's tax liabili-
ty." Allan Karnes & Roger Lirely, Striking Back at the IRS:
Using Internal Revenue Code Provisions to Redress Unau-
thorized Disclosures of Tax Returns or Return Information,
23 Seton Hall L. Rev. 924, 933 (1993).

Landmark's original FOIA request may be broken down
into three parts: (1) the identities of tax-exempt organiza-
tions; (2) the identities of third parties who requested audits
or investigations of those organizations; and (3) any other
material or information included in those third-party re-
quests.

We first note a constructional ambiguity that we will not
resolve. Section 6103(b)(2)(A) starts with a long list of specif-
ic items (starting with "a taxpayer's identity"), and then
refers to "other data," followed by a modifying clause--
"received by ... the Secretary with respect to a return or
with respect to the determination of the existence, or possible
existence, of liability...." 26 U.S.C. s 6103(b)(2)(A). The
modifying clause may apply to all the preceding items, or
only to "other data." Under the latter reading, Congress
would be understood to have thought that the specifically
identified information, if in the hands of the IRS at all, should
be categorically sheltered from disclosure. Because we must
construe the modifying clause for purposes of the third-party
identities and the contents of their communications, and
under the view we take it would clearly embrace the taxpayer
identities, we need not resolve whether taxpayer identities
would be covered if for some reason they did not satisfy the
modifying clause. See Ryan v. Bureau of Alcohol, Tobacco
and Firearms, 715 F.2d 644, 646 n.3 (D.C. Cir. 1983) (also
declining to resolve that question).

As noted, the statute specifically covers "a taxpayer's iden-
tity." Landmark does not claim that an entity's classification

as tax-exempt excludes it from that category--a claim that
would surely be weak in light of the statute's additional
inclusion of "data ... furnished ... with respect to ... the
determination of the existence, or possible existence, of [tax]
liability ... of any person." See Breuhaus v. IRS, 609 F.2d
80, 83 (2d Cir. 1979) (holding that s 6103 applies to informa-
tion relating to tax-exempt organizations).

The remaining two categories--the identities of third par-
ties who requested audits or investigations and the contents
of their communications--are covered only if they constitute
"[1] data, [2] received by ... the Secretary with respect to a
return or with respect to the determination of the existence,
or possible existence, of liability...." 26 U.S.C.
s 6103(b)(2)(A) (bracketed enumeration added). (The IRS
does not claim that any of the contents at issue here might fit
any of the categories listed in s 6103 between "taxpayer's
identity" and the catch-all reference to "other data.") We
address first whether these materials meet the requirements
of the modifying clause, then whether they constitute "data."

We would owe deference to the IRS's interpretation of
s 6103 under Chevron U.S.A. Inc. v. National Resources
Defense Council, Inc., 467 U.S. 837 (1984), if the Service had
reached the interpretation asserted here in a notice-and-
comment rulemaking, a formal agency adjudication, or in
some other procedure meeting the prerequisites for Chevron
deference stated in United States v. Mead, 121 S. Ct. 2164,
2172-75 (2001). But the Service makes no claim that the
interpretation it developed in litigation here arose in any such
procedure. Accordingly, we can give its views no more than
the weight derived from their "power to persuade." See id.
at 2172 (quoting Skidmore v. Swift & Co., 323 U.S. 134, 140
(1944)).

First, were the third-party identities and the contents of
their communications "received by ... the Secretary with
respect to a return or with respect to the determination of the
existence, or possible existence, of liability"? In Lehrfeld v.
Richardson, 132 F.3d 1463 (D.C. Cir. 1998), we found that
this language did not resolve "the precise question" whether

it covered data received by the IRS in its initial investigation
of a party's application for tax-exempt status. Id. at 1467.
Under the standards then applied by this court for Chevron
deference, however, we found the IRS's conclusion that the
language did cover such data reasonable. Id.

Chevron being inapplicable here in light of Mead, we must
decide for ourselves the best reading of the modifying clause
(pretermitting the issue of whether the IRS may later adopt a
different--but nonetheless "reasonable"--interpretation).
We conclude that indeed the statutory phrase--"the exis-
tence, or possible existence, of liability"--naturally encom-
passes the issue of tax-exemption vel non.

But Landmark goes on to question whether these materials
were "received by ... the Secretary with respect to a return
or with respect to" any issue. In many cases we know little
more than that the communications arrived at the IRS, with
no indication that it used them in any way or subjected them
to anything more than minimal processing. But s 6103
seems deliberately sweeping in this respect, reaching data
"received by, recorded by, prepared by, furnished to, or
collected by" the Secretary. It appears to take no interest in
the Secretary's actual use of the material. To reach Land-
mark's reading we would have to excise the words "received
by" and "furnished to," and to disregard the extremely gener-
al character of the connecting phrase--"with respect to."

The second issue is whether the identities of the third
parties and the contents of their communications are "data."
Dictionary definitions, a common start, are rather broad.
Webster's Third New International Dictionary 577 (1981)
("datum" [the singular] means "detailed information of any
kind"); Oxford English Dictionary (2d ed. 1989) ("facts ...
or information"). And in Tax Analysts v. IRS, 117 F.3d 607
(D.C. Cir. 1997), where we tried to distinguish between
"factual" and "legal" matters, we observed that "[e]ach of the
specific items listed in the beginning of s 6103(b)(2)(A),"
including the "taxpayer's identity," are "factual in nature."
Id. at 613-14 (emphasis added). Moreover, the catch-all
phrase at the end is "other data," suggesting that Congress

regarded all the preceding items, including the taxpayer's
identity, as data. A third-party complainer's identity seems
no less so. Presumably a statement of a "taxpayer's identity"
communicates the factual proposition that someone's name is
in the IRS files in connection with that person's payment or
non-payment of taxes. Similarly, revelation of any third-
party complainer "identity" expresses the factual proposition
that the person identified has communicated with the IRS
about the status of a taxpayer or potential taxpayer.

The IRS has indulged in what seems to us an inconsistency
on this point, as it released to Landmark letters written by
representatives and senators (with their names not redacted),
typically enclosing a constituent's letter urging that the IRS
investigate a tax-exempt organization, or in some cases actu-
ally urging the same at the behest of a constituent. When we
asked government counsel at oral argument to reconcile these
releases with the IRS position here, he was quite tongue-tied.
As Skidmore deference looks in part to an agency's consisten-
cy, see 323 U.S. at 140 (consistency over time); FEC v.
Democratic Senatorial Campaign Committee, 454 U.S. 27, 37
(1981) (treating consistency under Skidmore as embracing
logical consistency), this must count against the Service's
position. Despite that debit, we think that for the reasons
given above the term "data" is correctly understood to cover
the identity of third parties who urge the IRS to withdraw or
reexamine an entity's tax-exempt status.

It remains to consider whether the contents of the third
parties' communications were "data." To judge from the
letters of congressmen and IRS responses appearing in the
Vaughn index, they characteristically assert obviously factual
propositions. For example, an IRS letter responding to a
senator notes that the senator had forwarded a letter from a
constituent complaining that a tax-exempt church had been
the "cosponsor of an advertisement 'posing a number of moral
questions regarding the candidacy of Bill Clinton.' " Joint
Appendix ("J.A.") 84-85. And a representative's letter urges
that the IRS "investigate" a constituent's allegations that an
organization had "contracted services with a non-profit entity

he [the constituent] feels has instituted discriminatory policies
which violate the civil rights of minorities." J.A. 91.

Of course part (or conceivably all) of some communications
may be entirely exhortational. But even such material would
be "unique to a particular taxpayer," the factor we used in
Tax Analysts to help distinguish between non-disclosable
facts and disclosable legal conclusions. See 117 F.3d at 614.
Conceivably a court could order redaction of the identities of
taxpayers and third parties, and of all assertions of empirical
propositions, leaving only the non-cognitive portions to be
released. Thus Landmark would receive pieces of paper
reading, for example, "I, _______, think that _______ should
be audited because _______ [redacted factual proposition
thought by the author to be relevant to the entity's exempt
status] and because it is a pestilential organization [or similar
meaningless pejorative]." But nothing in Landmark's briefs
suggests that it meant to request any such a nonsensical
document.

Our reading of s 6103(b)(2)(A) finds some support in
s 6104, which carves out a narrow exception to s 6103 by
providing that any tax-exempt organization's application for
tax-exempt status and any "paper[s] submitted in support of
such application" shall be "open to public inspection."
s 6104(a)(1)(A). The presence of this exception suggests that
Congress viewed s 6103(b)(2)(A)'s non-disclosure provision as
broad enough to encompass any comparable papers, such as
ones like those at issue here, which were submitted in opposi-
tion to claims of tax-exempt status. Cf. Lehrfeld, 132 F.3d at
1466 (accepting as permissible under Chevron the IRS's
conclusion that s 6104(a)(1)(A) was "limited to submissions
made by the applicant" itself).

Landmark lays great stress on Tax Analysts, but that case
held simply that s 6103(b)(2)(A) did not cover certain commu-
nications by which the national office of the IRS's General
Counsel gave field offices legal advice on specific factual
situations. 117 F.3d at 616. The case rested primarily on
the distinction between facts, which are "data," and legal
analysis, which we held was not. We had no occasion to

consider whether propositions that were neither factual nor
legal qualified as "data." Nor need we here, as we find no
request for completely non-cognitive statements. Certainly
the taxpayer-specific character of the entirety of these com-
munications points under Tax Analysts toward their classifi-
cation as "data." 117 F.3d at 614. Moreover, we note that
insofar as Tax Analysts might be thought to have narrowed
the concept of "data," it was explicitly driven by the force of
26 U.S.C. s 6110. 117 F.3d at 616. That section requires
disclosure of "Technical Advice Memoranda," legal analyses
that we said were almost indistinguishable (for these pur-
poses) from the "Field Service Advice Memoranda" that Tax
Analysts held were not "data" for purposes of
s 6103(b)(2)(A). Id.

In closing we note Landmark's argument that the statute
protects only "return information," and thus can cover only
information that relates to an actual tax return. But this
rather wistful point disregards the actual statutory definition,
which plainly reaches far beyond what the phrase "return
information" would normally conjure up.

Thus we agree with the district court that the materials in
dispute are exempt from FOIA disclosure under Exemption
3.

Landmark makes a number of additional claims. First, it
contends that the Vaughn index was inadequately detailed.
Given the index's purpose of enabling the court to rule
without full disclosure of the documents themselves, Dellums
v. Powell, 642 F.2d 1351, 1360 (D.C. Cir. 1980), we think it
specific enough. See generally PHE, Inc. v. Department of
Justice, 983 F.2d 248 (D.C. Cir. 1993).

One of Landmark's complaints about the Vaughn index is
novel--that the index essentially parrots the language of
s 6103 innumerable times. So it does. But a Vaughn index
is not a work of literature; agencies are not graded on the
richness or evocativeness of their vocabularies. The index
offers individualized descriptions of the documents themselves
and then, typically, asserts the application of s 6103(b)(2)(A)
in language that tracks that of the statute itself. It is not the

agency's fault that thousands of documents belonged in the
same category, thus leading to exhaustive repetition.

Finally, Landmark complains about the district court's
orders limiting its discovery. Such orders are to be over-
turned only if they were "clearly unreasonable, arbitrary, or
fanciful." Hull v. Eaton Corp., 825 F.2d 448, 452 (D.C. Cir.
1987) (internal quotation marks omitted) (quoting Northrop
Corp. v. McDonnell Douglas Corp., 751 F.2d 395, 399 (D.C.
Cir. 1984)). None of the court's rulings here remotely fits
that description.

The judgment of the district court is

Affirmed.