Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-97-05010/USCOURTS-caDC-97-05010-0/pdf.json

Nature of Suit Code: 895
Nature of Suit: Freedom of Information Act of 1974
Cause of Action: 

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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,

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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 refused 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 § 6103 of the Internal Revenue Code and not subject to disclosure under § 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. § 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. § 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 taxable 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 

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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 inspection.

I.R.C. § 6104(a)(1)(A) (emphasis added). The Treasury regulation 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 organization in support of its application." 26 C.F.R. § 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 § 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. 

§ 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 ... provided 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. § 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 § 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 § 501(c)(3) which prohibits charitable organizations from participating or intervening 

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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 documents available to the public under IRC 6104." Stern did not 

mention the FOIA in his request. The IRS promptly released certain documents responsive to Stern's request.

Believing that not all relevant documents had been disclosed, Lehrfeld instructed Stern to file another request. In 

his second request Stern again cited § 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 December 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 slipsfell outside the scope of § 6104 and therefore could not be disclosed because of § 6103. The IRS 

declined, however, to produce an index of the withheld documents: "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 § 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.

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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 § 6104. The 

district court granted the IRS's motion for summary judgment on the ground that the documents Lehrfeld sought were 

not subject to disclosure under either § 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 § 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 § 6104 

broadly to reach congressional correspondence and other 

papers submitted by third parties, § 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 § 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 § 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).

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A. Disclosure Pursuant to § 6104.

As noted above, the Secretary of the Treasury has by 

regulation interpreted § 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. 

§ 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 application filed by the organization ... together with any papers 

submitted in support of such application." I.R.C. 

§ 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 questionall 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 organization" 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 expression 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 § 6104. As the IRS observes, 

the regulation harmonizes well with § 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 

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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 submitting 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 subparagraph (A), then we would surely expect § 6104(a)(1)(D) 

to protect proprietary information not only "[u]pon the request of the organization" seeking tax-exempt status but 

"upon the request of any party submitting supporting papers." That the protection for valuable information in subparagraph (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 § 6104, the IRS also finds 

strong support for the regulation in the legislative history of 

§ 6104. The regulation captures the intent of the drafters as 

revealed in identical terms in the House and Senate reports 

on § 6104(a):

If an organization described in section 501(c) or (d) is 

exempt from taxation for any taxable year, the application filed by the organization ... and any papers submitted 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. § 301.6104(a)-1(e) is a permissible construction of § 6104(a)(1)(A). Therefore, the IRS had 

no obligation under that statute to disclose materials submitted by third parties in support of SAFE's application.

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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. § 601.702(c)(3)(ii), whereas Lehrfeld's requests specifically invoked § 6104 but did not mention the FOIA. Lehrfeld counters that his request for a "Vaughn index," together 

with his asking for materials outside the scope of § 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 provisions of Internal Revenue Code section 6104" and that "to the 

extent they exist" such documents "are protected from disclosure by Code section 6103." And, as the IRS points out, 

documents protected under § 6103 are exempt from disclosure under the FOIA as materials "specifically exempted 

from disclosure by statute," 5 U.S.C. § 552(b)(3). See Tax 

Analysts v. IRS, 117 F.3d 607, 611 (D.C. Cir. 1997) ("That 

§ 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 § 6103 just as we did to the Treasury 

regulation interpreting § 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 gateUSCA Case #97-5010 Document #324455 Filed: 01/20/1998 Page 8 of 10
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keepers of federal tax information. Through § 6103, 

Congress charged these two agencies and their employees 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 interpretation of § 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 information" within the meaning of § 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 § 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 liability (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 § 6103 because IRS review of an application for tax-exempt status "is to determine 

whether the applicant satisfies the statutory criteria for exemption under IRC 501(c)(3) ... and is in no way an attempt 

by the Service to determine the existence, or possible existence, 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 applicant meets the statutory criteria of § 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 suchan exception such as 

§ 6104 apartthe IRS may not disclose them.

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III. CONCLUSION

With regard to Lehrfeld's claim under § 6104, we hold that 

the Treasury regulation limiting disclosure to materials submitted by the applicant is a reasonable elaboration of a point 

upon which the Congress was silent. With regard to Lehrfeld's FOIA claim, we hold that the IRS reasonably determined that Lehrfeld sought "return information" the disclosure of which is prohibited by § 6103. It follows that the 

IRS has already disclosed all the documents to which Lehrfeld is entitled. Accordingly, the judgment of the district 

court is

Affirmed.

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