Tax Analysts v. Internal Revenue Service

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued March 20, 2000 Decided June 13, 2000

No. 99-5284

Tax Analysts,
Appellant

v.

Internal Revenue Service and
Christian Broadcast Network, Inc.,
Appellees

Appeal from the United States District Court
for the District of Columbia
(No. 98cv02345)

William A. Dobrovir argued the cause and filed the briefs
for appellant.

Jonathan S. Cohen, Attorney, U.S. Department of Justice,
argued the cause for appellee Internal Revenue Service.
With him on the brief were Teresa T. Milton, Attorney, and
Wilma A. Lewis, United States Attorney.

 J. William Koegel, Jr. argued the cause for appellee Chris-
tian Broadcast Network, Inc. With him on the brief was
Bruce C. Bishop.

Before: Sentelle, Tatel and Garland, Circuit Judges.

Opinion for the Court filed by Circuit Judge Sentelle.

Sentelle, Circuit Judge: Tax Analysts, a publisher of tax
material, sued the Internal Revenue Service (IRS) and the
Christian Broadcasting Network (CBN) under the Freedom
of Information Act (FOIA), 5 U.S.C. s 552 (1994), and Inter-
nal Revenue Code (I.R.C.) s 6104, 26 U.S.C. s 6104 (1994),
respectively, in an effort to obtain copies of a closing agree-
ment reached between the IRS and CBN in conjunction with
CBN's filing for tax exempt status under I.R.C. s 501(a) and
(c)(3), 26 U.S.C. s 501(a), (c)(3) (1994). The IRS filed a
motion for judgment on the pleadings pursuant to Federal
Rule of Civil Procedure 12(c), and CBN filed a motion to
dismiss for failure to state a claim pursuant to Federal Rule
of Civil Procedure 12(b)(6). The district court granted both
motions. Tax Analysts appealed. While we affirm the dis-
trict court's dismissal of the action against CBN, we find the
present record inadequate to resolve Tax Analysts' claim
against the IRS, and remand for further proceedings.

A.

CBN has been an organization exempt from taxation under
I.R.C. s 501(a) and (c)(3) since 1961. In 1985 and 1986, CBN
allegedly engaged in political activities inconsistent with its
status as a tax exempt organization, prompting the IRS to
audit CBN and to examine CBN's continued eligibility for tax
exempt status.

On February 2, 1998, CBN filed with the IRS a Form 1023
Application for Exempt Status. On March 13, 1998, the IRS
granted CBN's application retroactive to April 1, 1987. On
March 16, CBN issued a press release announcing that it had
entered into an agreement with the IRS to conclude an audit
and to preserve its exempt status. Specifically, the press
release indicated that the agreement entailed the loss of

CBN's tax exemption for 1986 and 1987, the relinquishment
of exempt status for three CBN affiliates, a "significant
payment" by CBN to the IRS, and various other promises
and modifications to CBN operations.

On April 6, 1998, Tax Analysts sent a FOIA request to the
IRS seeking a copy of the agreement between the IRS and
CBN referred to in the press release; any closing agreement
relating to the issues described in the press release; any
written correspondence or memoranda of meetings or conver-
sations between the IRS and CBN pertaining to those agree-
ments or the press release; and any renewal, revocation, or
modification of any ruling granting tax exempt status to
CBN. A few months later, on June 29, 1998, the IRS
responded and, citing FOIA Exemption 3, 5 U.S.C.
s 552(b)(3), and I.R.C. s 6103, declined to disclose any of the
requested information except the Form 1023 filed on Febru-
ary 2, 1998, and the March 13, 1998 determination letter from
the IRS to CBN granting exempt status.

On July 20, 1998, Tax Analysts sent a letter to CBN
seeking the same information as requested from the IRS,
citing I.R.C. s 6104 as the basis for its request. Like the
IRS, CBN declined to make available any documents other
than the Form 1023 and letter from the IRS granting exempt
status. Shortly thereafter, Tax Analysts filed this action
against the IRS and CBN seeking access to the requested
records.

As a general matter, FOIA provides for the disclosure upon
request of government-held records and documents. See 5
U.S.C. s 552. FOIA's general disclosure rule is subject to
nine statutory exceptions, however. See id. s 552(b). The
government bears the burden of proving that any requested
documents it withholds fall within one of the nine exceptions.
See id. s 552(a)(4)(B); Petroleum Info. Corp. v. United States
Dep't of the Interior, 976 F.2d 1429, 1433 (D.C. Cir. 1992).

The exemption asserted by the IRS in this case, "Exemp-
tion 3," permits the withholding of government records "spe-
cifically exempted from disclosure by statute ... provided
that such 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. s 552(b)(3). The I.R.C. explicitly provides for the
confidentiality of tax returns and "return information."
I.R.C. s 6103(a), 26 U.S.C. s 6103(a). This court and others
have recognized consistently that I.R.C. s 6103(a) is a non-
disclosure statute falling within the scope of FOIA Exemption
3. See, e.g., Church of Scientology v. IRS, 484 U.S. 9, 11
(1987); Lehrfeld v. Richardson, 132 F.3d 1463, 1466 (D.C. Cir.
1998); Tax Analysts v. IRS, 117 F.3d 607, 611 (D.C. Cir.
1997); Aronson v. IRS, 973 F.2d 962, 964 (1st Cir. 1992).

I.R.C. s 6104(a)(1)(A), cited by Tax Analysts in its request
to CBN, provides for the disclosure of certain documents
relating to organizations exempt from tax under I.R.C.
s 501(c)(3), like CBN:

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 at the national office of the Internal Revenue Ser-
vice.

26 U.S.C. s 6104(a)(1)(A).1 I.R.C. s 6104 also requires an
exempt organization to make available for public inspection a

__________
1 All editions of the United States Code since 1970 have actually
read "any paper" instead of "any papers" as we set forth above.
See 26 U.S.C. s 6104 (1970); see also United States Code editions
of 1976, 1982, 1988, and 1994. However, the original language "any
papers" was inserted into s 6104 in 1958, see Technical Amend-
ments Act of 1958, Pub. L. No. 85-866, s 75(a), 72 Stat. 1606, 1660-
61 (1958), and appeared in the 1958 and 1964 editions of the United
States Code. The United States Statutes at Large are "legal
evidence" of the law, 1 U.S.C. s 112 (1994), whereas the titles of the

copy of its application for exemption, "together with a copy of
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." 26 U.S.C.
s 6104(e)(2)(A)(ii) (Supp. III 1997).2 We recognized in Lehr-
feld that documents disclosable under I.R.C. s 6104 may
contain material that otherwise constitutes "return informa-
tion" protected from disclosure by I.R.C. s 6103. Lehrfeld,
132 F.3d at 1467. I.R.C. s 6104 therefore may be character-
ized as an exception to the exception from the general
disclosure rule offered by FOIA Exemption 3 and I.R.C.
s 6103. The parties in this case agree that s 6104, where it
applies, controls s 6103; and we will assume as much for the
purpose of this case.

__________
United States Code only serve as "prima facie" evidence of the law
unless they are enacted as "positive law," in which case they too
serve as legal evidence of the laws. 1 U.S.C. s 204(a) (1994); see
also Stephan v. United States, 319 U.S. 423, 426 (1943) (per curiam)
(Statutes at Large prevail over prima facie portions of U.S.C.).
The I.R.C. has been enacted as a separate code and is therefore
positive law. See Internal Revenue Code of 1954, ch. 736, 68A Stat.
1 (1954). Though both the Statutes at Large and I.R.C. could be
said to be authoritative here, we use the "any papers" language of
the original enactment appearing in the Statutes at Large. The
difference is irrelevant to the outcome of the case, and we will thus
disregard an apparent scrivener's error made by a codifier without
congressional direction. Cf. United States v. Welden, 377 U.S. 95,
98 n.4 (1964) (holding that a "change of arrangement" by a codifier
to a section not enacted as positive law "should be given no
weight").

2 Legislation enacted in 1998 amended s 6104, repealing former
subsections (d) and (e) and inserting a new subsection (d) that
includes the public inspection requirement of former s 6104(e). See
Omnibus Consolidated and Emergency Supplemental Appropria-
tions Act, 1999, Pub. L. No. 105-277, s 1004(b), 112 Stat. 2681,
2681-888 to 2681-889 (1998) (codified at 26 U.S.C.A. s 6104 (West
Supp. 1999)). Although the amendment altered the statutory lan-
guage slightly, those changes are not relevant to the issue before
us. Accordingly, we need not and do not address those differences
here.

 The IRS has declined throughout this litigation to disclose
whether a closing agreement with CBN exists, and the dis-
trict court did not examine the documents in question before
dismissing the complaint. Instead, the court concluded from
the pleadings that the information requested by Tax Analysts
represents a closing agreement as defined by I.R.C.
s 7121(a), 26 U.S.C. s 7121(a) (1994), and therefore consti-
tutes tax return information that as a matter of law is outside
the scope of I.R.C. s 6104 and exempt from disclosure under
FOIA Exemption 3 and I.R.C. s 6103. Accordingly, the
district court granted judgment on the pleadings as a matter
of law pursuant to Federal Rule of Civil Procedure 12(c) in
favor of the IRS.

With respect to the claim against CBN, the district court
also concluded that I.R.C. s 6104 does not contemplate a
private right of action to enforce the obligation of an applicant
for tax exempt status to make its application papers available
to the public. Accordingly, the district court dismissed the
action against CBN for failure to state a claim upon which
relief can be granted pursuant to Federal Rule of Civil
Procedure 12(b)(6). Tax Analysts appeals both the judgment
and dismissal.

B.

We first consider whether the information requested by
Tax Analysts falls within the scope of I.R.C. s 6104(a)(1)(A),
and thus must be disclosed despite FOIA Exemption 3 and
I.R.C. s 6103. As noted above, I.R.C. s 6104(a)(1)(A) specifi-
cally requires disclosure of the application for exempt status,
"any papers submitted in support of such application," and
"any letter or other document issued by the [IRS] with
respect to such application." Statutory phrases like "any
papers" and "any letter or other document" suggest breadth
within those delineated categories of disclosable information.
Regulations promulgated by the Department of the Treasury
reinforce this suggestion by providing both a list of applica-
tion materials, see Treas. Reg. s 301.6104(a)-1(d)(2), 26
C.F.R. s 301.6104(a)-1(d)(2) (1999), and a catch-all provision

stating that "any statement or document not described in
paragraph (d) of this section that is submitted by an organiza-
tion in support of its application." Treas. Reg. s 301.6104(a)-
1(e). The catch-all provision further offers a legal brief as an
example of a disclosable document. See id. Despite the
breadth of I.R.C. s 6104(a)(1)(A) and related regulations,
however, it is also clear from the statute that not every
document pertaining to an exempt organization that the IRS
has on file falls within the provision's scope. See, e.g., Lehr-
feld, 132 F.3d at 1465-66 (concluding that I.R.C.
s 6104(a)(1)(A) does not cover papers submitted by third
parties because such documents are neither submitted by the
applicant nor issued by the IRS).

Beyond the obvious examples of the exemption application
itself and the final determination letter issued by the IRS, the
statute does not articulate exactly what constitutes a docu-
ment that "supports" an exemption application or is "issued
... with respect to" an exemption application. Tax Analysts
argues that an applicant might submit a closing agreement as
a supporting document for an exemption application, and that
both the closing agreement and documents generated in the
process of negotiating the closing agreement might also be
submitted by the applicant in support of or issued by the IRS
concerning that application. Also, Tax Analysts asserts that
the IRS may possess legal briefs, letters, memoranda, and
other papers submitted by CBN's attorneys, accountants,
officers, or directors presenting arguments in favor of CBN's
exempt status or explaining or excusing CBN's political activ-
ities. Accordingly, Tax Analysts maintains that the district
court erred in concluding that there was no set of facts under
which Tax Analysts could state a cause of action under FOIA.

The IRS, on the other hand, while not acknowledging
whether the sought documents exist, takes the position that a
closing agreement and its documentary precursors, by their
very nature and regardless of their content, are return infor-
mation protected by FOIA Exemption 3 and I.R.C. s 6103,
beyond the scope of I.R.C. s 6104(a)(1)(A). The IRS points
to the list of application materials in Treas. Reg.
s 301.6104(a)-1(d)(2), which includes particular types of docu-

ments and statements like the applicant's articles of incorpo-
ration and bylaws, financial statements, and organizational
charts, but does not mention closing agreements. See Treas.
Reg. s 301.6104(a)-1(d)(2).

If IRS forms and regulations require the filing of particular
types of documents as part of an application for exemption,
then clearly such documents are submitted in support of the
application regardless of their content. The converse, that
other types of documents cannot be included in the statutory
phrase "submitted in support of such application," does not
necessarily follow. While I.R.C. s 6104(a)(1) explicitly re-
quires disclosure of applications for exempt status and letters,
the descriptions that define which documents and letters are
disclosable--"in support of such application," and "with re-
spect to such application"--speak to content without limita-
tion as to type of document. Also, the catch-all provision of
Treas. Reg. s 301.6104(a)-1(e), by its express inclusion of
other documents, denies the notion that the prescribed list
represents the outer bounds of disclosability. We note fur-
ther that I.R.C. s 6103(b)(2), in defining "return information,"
similarly uses descriptions of content rather than titles and
labels to articulate which taxpayer records should be held
confidential.

The IRS has never denied that an applicant might submit a
particular document both to negotiate a closing agreement
and to support an exemption application where the two
processes share overlapping issues. Moreover, at oral argu-
ment, the IRS conceded that a closing agreement which
would generally in its view be exempt from disclosure as
return information nevertheless might become disclosable if
submitted in support of an exemption application. Precluding
disclosure of a closing agreement, without regard to its
content or circumstances, merely because it carries that
particular label is therefore inconsistent with the statutory
inclusion of "any papers submitted" and "any letter or docu-
ment issued." Particularly in this case, where the press
release suggests that the closing agreement and application
for exempt status were part of a single, overall negotiation
between the IRS and CBN, the IRS's rigid reliance on the

type of documents at issue rather than their content is
questionable.

In arguing against remand for further discovery, the IRS
relies heavily upon another case involving closing agreements,
Tax Analysts v. IRS, 53 F. Supp. 2d 449 (D.D.C. 1999). In
that case, the district court granted summary judgment for
the IRS on the ground that the closing agreements were not
disclosable under I.R.C. s 6104(a)(1)(A) because they were
not " 'issued' by the IRS," but were instead bilateral contracts
between the IRS and the applicants in question. Id. at 453.
Without endorsing this view of the meaning of "issued by the
IRS," we note that the district court in that case conducted
an in camera review of the agreements in question before
concluding that they did not fall within the scope of I.R.C.
s 6104(a)(1)(A). That court based its decision principally
upon "the character of the closing agreements themselves,"
id. at 453 n.6, explicitly leaving open the question of whether
a closing agreement might itself constitute an application for
exempt status disclosable under I.R.C. s 6104(a)(1)(A). See
id. at 453 n.7. In other words, far from supporting the IRS's
argument that further discovery would be fruitless, that case
better supports the conclusion that some review of the con-
tent of the documents in question is necessary before the
court can adequately determine whether or not I.R.C.
s 6104(a)(1)(A) applies.

At bottom, the case before us does not present a disagree-
ment over the law to be applied, but the narrow and fact-
specific question of whether the closing agreement between
the IRS and CBN and any accompanying documentation
represent material discloseable under I.R.C. s 6104(a)(1)(A),
despite their apparent status as material exempt from disclo-
sure under I.R.C. s 6103. As the present record is inade-
quate for such determination, further discovery is necessary.
We therefore vacate the district court's judgment in favor of
the IRS and remand for further proceedings consistent with
this opinion. We leave to the district court in the first
instance the question of whether in camera examination or
the filing of a Vaughn index is sufficient to create an ade-

quate record upon which to base the discloseability determi-
nation.

C.

We turn next to Tax Analysts' claim against CBN. The
district court dismissed that claim after concluding that I.R.C.
s 6104 does not contemplate a private right of action to
enforce the public inspection requirement imposed upon ap-
plicants for tax exempt status. I.R.C. s 6104 does not ex-
pressly provide for private action against exempt organiza-
tions that fail to make available their exemption applications
and supporting documentation. Indeed, the provision offers
no language at all concerning remedies for its violation. Tax
Analysts argues that this omission does not preclude its cause
of action against CBN for allegedly violating that statute's
public inspection requirement, and that Congress intended a
private remedy to effectuate the public inspection require-
ment. CBN, unsurprisingly, maintains that I.R.C. s 6104
does not support an implied private right of action.

Although violation of a federal statute alone is inadequate
to support a private cause of action, see, e.g., Touche Ross &
Co. v. Redington, 442 U.S. 560, 568 (1979) (quoting Cannon v.
University of Chicago, 441 U.S. 677, 688 (1979)), the Supreme
Court has repeatedly recognized that, in some cases, the
courts may infer such a remedy from the language or struc-
ture of a statute or the circumstances of its enactment. See,
e.g., Karahalios v. National Fed'n of Fed. Employees, Local
1263, 489 U.S. 527, 532-33 (1989); Transamerica Mortgage
Advisers, Inc. v. Lewis, 444 U.S. 11, 18 (1979). The question
we must resolve is whether Congress intended to provide a
private remedy for violations of the public inspection require-
ment of I.R.C. s 6104. See, e.g., Thompson v. Thompson, 484
U.S. 174, 179 (1988); Transamerica, 444 U.S. at 15.

To answer that question, we turn to the long line of cases
stemming from Cort v. Ash, 422 U.S. 66 (1975). In Cort, the
Supreme Court articulated four factors for the courts to
weigh in discerning congressional intent to provide an implied
private right of action: (1) whether the plaintiff is one of the

class for whose benefit the statute was enacted; (2) whether
some indication exists of legislative intent, explicit or implicit,
either to create or to deny a private remedy; (3) whether
implying a private right of action is consistent with the
underlying purposes of the legislative scheme; and (4) wheth-
er the cause of action is one traditionally relegated to state
law, such that it would be inappropriate for the court to infer
a cause of action based solely on federal law. See id. at 78;
see also Suter v. Artist M, 503 U.S. 347, 364 n.16 (1992)
(recognizing the four Cort factors); Thompson, 484 U.S. at
179 (expressing reliance upon the Cort factors). Over the
years, the proper application and continued vitality of Cort's
four factors have been matters of great debate, as reflected in
the parties' arguments. Tax Analysts contends that we
should mechanically consider and weigh each of the four
factors, and cites numerous Supreme Court cases as support-
ing its position. CBN maintains, conversely, that the Su-
preme Court has discarded step-by-step evaluation of the
Cort factors, and cites as many cases sustaining its view.

Turning to our own jurisprudence in this area, in Govern-
ment of Guam v. American President Lines, 28 F.3d 142
(D.C. Cir. 1994), we reviewed Cort and its progeny and
concluded that, in assessing whether Congress intended an
expressly provided remedy to be the only remedy, "the
central analysis is directed at discovering legislative intent by
means of 'the language of the statute, the statutory structure,
or some other source.' " Id. at 145 (quoting Karahalios, 489
U.S. at 532-33). We also acknowledged that, where Congress
has otherwise enacted "a comprehensive legislative scheme
including an integrated system of procedures for enforce-
ment," there is a strong presumption that Congress deliber-
ately did not create a private cause of action. Id. at 145-46
(quoting Massachusetts Mut. Life Ins. Co. v. Russell, 473
U.S. 134, 147 (1985)).

Although I.R.C. s 6104 does not articulate a remedy for its
violation, elsewhere in the tax code, Congress provided an
enforcement mechanism of IRS-imposed civil fines and penal-
ties for s 6104. See I.R.C. s 6652(c)(1)(C)-(D). Additionally,
current IRS regulations offer the public a mechanism for

complaining to the IRS about an exempt organization's failure
to comply with s 6104. See 26 C.F.R. s 301.6104(d)-1(g).
Although these regulations did not take effect until after Tax
Analysts filed suit, we note that the IRS has long accepted
information from third parties regarding taxpayers' failure to
comply with the tax laws, even in the absence of a specific
regulatory mechanism for doing so. If ever a case demon-
strated a "comprehensive legislative scheme including an
integrated system of procedures for enforcement," Govern-
ment of Guam, 28 F.3d at 145-46, it would be this one.

Moreover, we note that the exempt organization is not the
only source from which an interested party can obtain copies
of the organization's exemption application and supporting
documents. As Tax Analysts' claim against the IRS amply
demonstrates, I.R.C. s 6104 permits interested parties to
gain access to the same documents from the IRS. Addition-
ally, we note that I.R.C. s 6104(e) does not require an exempt
organization to release for public inspection any document
that the public could not otherwise procure from the IRS. In
other words, Tax Analysts achieves nothing through a private
right of action against CBN that cannot be obtained from the
government in the alternative.

Our analysis comports with that of the only other courts to
consider whether I.R.C. s 6104 creates an implied private
remedy. See Schuloff v. Queens College Found., Inc., 994
F. Supp. 425, 427-28 (E.D.N.Y. 1998), aff'd, 165 F.3d 183 (2d
Cir. 1999). For all of these reasons, we conclude that I.R.C.
s 6104 does not provide a private right of action, and affirm
the district court's dismissal of Tax Analysts' claim against
CBN.

Conclusion

In summary, because we find the present record inade-
quate to determine whether the closing agreement between
the IRS and CBN and any accompanying documentation are
disclosable under I.R.C. s 6104(a)(1)(A), we vacate the judg-
ment in favor of the IRS on Tax Analysts' FOIA claim and
remand for further proceedings, leaving to the district court

the question of how best to create an adequate record. We
hold, however, that s 6104 does not provide Tax Analysts
with a private right of action against CBN, and affirm the
district court's dismissal of that claim.