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Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 

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United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued April 13, 2000 Decided June 9, 2000

No. 99-5089

Bruce E. Gardner,

Appellant

v.

United States of America, et al.,

Appellees

Appeal from the United States District Court

for the District of Columbia

(No. 96cv01467)

Bruce E. Gardner, appearing pro se, argued the cause and

filed the briefs for appellant.

Annette M. Wietecha, Attorney, U.S. Department of Justice, argued the cause for the Federal Appellees. With her

on the brief were Jonathan S. Cohen, Attorney, and Wilma

A. Lewis, U.S. Attorney. R. Craig Lawrence and W. Mark

Nebeker, Assistant U.S. Attorneys, entered appearances.

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Steven J. Green, Dona S. Kahn and Mark D. Silverschotz

were on the brief of appellees State of California and California Franchise Tax Board.

Before: Edwards, Chief Judge, Henderson and Rogers,

Circuit Judges.

Opinion for the Court filed by Circuit Judge Rogers.

Rogers, Circuit Judge: Bruce E. Gardner appearing pro se

appeals the dismissal of his complaint alleging violations of

federal and state law by federal and state authorities, primarily as a result of the disclosure of his tax returns and tax

information, under Fed. R. Civ. P. 12 (b)(1), (2), & (6) and

41(b). For the reasons set forth in a companion case, Gardner v. United States, 2000 WL 562820, No. 99-5065 (D.C. Cir.

May 19, 2000), the dismissal under Rule 41(b) cannot be

affirmed. However, we conclude that the dismissal was

proper under Rule 12(b) essentially for the reasons set forth

in the district court's opinion of January 29, 1999. We need

address only two of Mr. Gardner's contentions for, as the

district court's opinion makes clear, his other contentions fail

under well-settled law. We hold first, that the disclosure of

Mr. Gardner's tax returns and tax information within the

Internal Revenue Service was permissible under the tax

administration exception to the nondisclosure requirements of

26 U.S.C. s 6103 (1994 and Supp. IV 1998), and second, that

Mr. Gardner's exclusive remedy for the disclosures of his tax

records is under the Internal Revenue Code, and not the

Privacy Act, 5 U.S.C. s 552a (1994 and Supp. IV 1998).

Accordingly, we affirm.

I.

As noted in the companion case, Mr. Gardner formerly

worked as an attorney in the Sacramento, California Office of

Chief Counsel to the Internal Revenue Service ("IRS") at the

Treasury Department. His employment was terminated for

alleged failures to comply with federal and state tax laws.

He filed three complaints in the district court, relating to his

compliance with federal and state tax laws, after unsuccessUSCA Case #99-5089 Document #522521 Filed: 06/09/2000 Page 2 of 12
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fully pursuing state and federal administrative remedies. We

summarize the background to his contentions that the disclosure of his tax returns and tax information violated federal

law and that he is entitled to relief under the Privacy Act as

well as the Internal Revenue Code.

Briefly put, Mr. Gardner's supervisors in Sacramento, California, suspected as early as 1992 that he was not in full

compliance with federal and state tax laws. When he agreed

in 1994 to provide relevant information and then failed to do

so, his supervisors obtained his federal tax returns and tax

audit directly from IRS offices in Houston, Texas, and Fresno, California, and his state returns and tax information from

state agencies in California and Maryland, where he had lived

while working for the IRS in the District of Columbia. Upon

concluding that Mr. Gardner had taken several unsupportable

positions on his federal income tax returns for 1990-92 and

that he had not timely filed his Maryland income tax returns

for 1988-90, his supervisors offered him a chance to resign.

When he refused, they commenced disciplinary proceedings

and his employment was terminated November 26, 1994, for

failure to file proper federal and state income tax returns.

Thereafter, his application for unemployment benefits was

denied by the California Unemployment Insurance Appeals

Board, and his challenge to his termination was rejected by

the Merit Systems Protection Board. He then filed a fortyfour count complaint in the district court alleging, among

other things, that the Treasury Department, the IRS, and

individual IRS employees violated the Internal Revenue Code

and the Privacy Act through intra-IRS disclosures of his tax

return information while he was under investigation by the

IRS and during the state and federal administrative proceedings that he commenced after his employment was terminated. Following the filing of dispositive motions by the defendants, the district court dismissed the complaint under Fed.

R. Civ. P. 12(b) and 41(b).

The court has concluded in a companion case that the Rule

41(b) dismissal of Mr. Gardner's complaint must be reversed.

Gardner, 2000 WL 562820, at *1, 3-5. The question remains

whether Mr. Gardner has demonstrated that the district

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court erred in dismissing his complaint under Rule 12(b).

Most of his contentions raise issues that are well-settled in

law adversely to him, and we need not repeat the district

court's opinion.1 There are, however, two contentions that

require some explication.

II.

First, Mr. Gardner contends that the district court erred in

ruling that the disclosure of his tax records fell within the

exception to nondisclosure of s 6103(h)(1) for "tax administration purposes." In making this contention he relies on our

decision in National Treasury Employees Union v. Federal

Labor Relations Board ("NTEU"), 791 F.2d 183 (D.C. Cir.

1986), and therein lies the need for clarification.

The Internal Revenue Code generally prohibits the disclosure of tax returns and tax information. Under 26 U.S.C.

s 6103(a), "return and return information shall be confidential" and "no officer or employee of the United States ...

__________

1 The district court lacked personal jurisdiction over the individual IRS employees-appellees, because Mr. Gardner failed to allege

the requisite contacts between these California and Texas residents

and the District of Columbia under the Constitution and the District's long-arm statute. See, e.g., International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945); D.C. Code Ann. s 13-423 (1995).

Mr. Gardner's defamation claim against the United States is barred,

because suits for libel or slander are prohibited under the Federal

Tort Claims Act. 28 U.S.C. s 2680(h)(1994). The district court

lacked subject matter jurisdiction of Mr. Gardner's claims for

alleged violations of the Family Leave Act and the Whistleblower

Protection Act, because he failed to allege that he had exhausted his

administrative remedies, as required under the Civil Service Reform Act. Hubbard v. EPA, 809 F.2d 1, 5 (D.C. Cir. 1987);

Carducci v. Regan, 714 F.2d 171, 174-75 (D.C. Cir. 1983). Mr.

Gardner's claims against the California state defendants were

barred by the Eleventh Amendment, which prohibits suit against a

state or a state agency in federal court absent their consent or clear

congressional abrogation of immunity, neither of which was present

here. See, e.g., Seminole Tribe of Florida v. Florida, 517 U.S. 44,

54-55 (1996).

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shall disclose any return or return information" unless authorized by statute. As the court observed in NTEU:

This general ban on disclosure provides essential protection for the taxpayer; it guarantees that the sometimes

sensitive or otherwise personal information in a return

will be guarded from persons not directly engaged in

processing or inspecting the return for tax administration purposes. The assurance of privacy secured by

s 6103 is fundamental to a tax system that relies upon

self-reporting.

Id. at 184. In recognition of competing concerns, however,

the Code includes a number of exceptions. Two are relevant

here.

Under s 6103(h)(1), "[r]eturns and return information shall,

without written request, be open to inspection by or disclosure to officers and employees of the Department of the

Treasury whose official duties require such disclosure for tax

administration purposes." 26 U.S.C. s 6103(h)(1). Another

provision, s 6103(h)(4), authorizes disclosure of returns and

return information "in a Federal or State judicial or administrative proceeding pertaining to tax administration ... if the

taxpayer is a party to the proceeding...."2 If the internal

IRS investigation of Mr. Gardner's tax history, and the

related state and federal administrative proceedings commenced by Mr. Gardner were "tax administration" matters,

then the disclosures were proper under s 6103(h)(1) and (4).

We therefore address the scope of the tax administration

__________

2 In the district court, the federal appellees also relied on

s 6103(l )(4)(B), which authorizes the Secretary of the Treasury to

disclose returns and return information to Treasury Department

employees for their use in an "administrative action or proceeding

affecting the personnel rights" of an employee or former employee,

see s 6103(l )(4)(B), (A)(i), and argued that, in addition, the challenged disclosures were made pursuant to a good faith interpretation of s 6103. The district court granted the motion to dismiss the

complaint under Rule 12(b) without indicating which provision

applied to which disclosures. In view of our disposition, we do not

address these subjects.

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exception of s 6103(h)(1) and (4) with respect to these disclosures.

The Internal Revenue Code defines "tax administration"

fairly broadly, to include "the administration, management,

conduct, direction, and supervision of the execution and application of the internal revenue laws or related statutes (or

equivalent laws and statutes of a State)....," id.

s 6104(b)(4)(A)(i), as well as enforcement and litigation under

the tax laws. Id. s 6104(b)(4)(B). While the language of this

exception appears readily applicable to the daily work that

IRS employees do in auditing and otherwise checking taxpayer returns and tax information, it is perhaps not as clearly

applicable to internal personnel investigations. Taking the

lead from Congress' broad language, however, courts have

acknowledged that such investigations, where necessary to

maintain the integrity of the tax enforcement authorities, are

"tax administration" matters. Thus, in Rueckert v. IRS, 775

F.2d 208 (7th Cir. 1985), the Seventh Circuit held that the tax

returns of a state employee responsible for investigation of

tax fraud were properly disclosed to persons within the state

tax department who were investigating whether the employee

had engaged in unauthorized outside employment. Id. at 212.

Relying on the "tax administration" exception of s 6104(h)(1),

the Seventh Circuit interpreted "the 'management' and 'supervision' of a state's internal revenue laws [to] include[ ]

ensuring that its employees are free from conflicts of interest

that could undermine the integrity of its system of administering the state tax laws." Id. Similarly, the Fifth Circuit

recently held the "tax administration" exception of

s 6103(h)(4) applicable to tax information disclosures made

with regard to an IRS employee's Title VII and Merit Systems Protection Board challenges to the termination of his

employment for noncompliance with the tax laws. Hobbs v.

United States, 209 F.3d 408 (5th Cir. 2000). The Hobbs

Court observed that the IRS employee's "own compliance

with the federal tax laws was something of key concern to the

IRS; his position required him to examine the accuracy of

corporate and individual tax returns and, in turn, to have a

sophisticated understanding of the tax laws," and concluded

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that disclosures made in the context of administrative and

judicial challenges to his termination "unquestionably encompassed tax administration". Cf. United States v. Mangan,

575 F.2d 32, 40 (2d Cir. 1978). Given this reasonable construction of the broad language of s 6103(h)(1) and (4), it

would seem that the disclosures of which Mr. Gardner complains were proper for purposes of enabling the IRS to

conduct its internal investigation of his tax history, and to

explain the basis for the termination of his employment in the

subsequent administrative proceedings.

Mr. Gardner contends, however, that our decision in NTEU

not only bars the wholesale disclosures that he alleges occurred here, but holds that the "tax administration" exception

of s 6103(h)(1) is inapplicable to personnel matters, and thus

to his case. Although there is some broad language in NTEU

suggesting Mr. Gardner's point, properly read in context

NTEU does not demonstrate error by the district court. To

the extent that NTEU concluded that an employee grievance

unrelated to the employee's tax compliance history could

entail disclosure only upon proper authorization under

s 6103(l )(4)(A) and thus implicitly concluded that the grievance was not a "tax administration" matter justifying

s 6103(h)(1) disclosure, NTEU is not dispositive of whether

the IRS may, as a matter of tax administration, disclose an

employee's tax records to IRS officials as part of an internal

investigation of the employee's compliance with the tax laws,

or in subsequent proceedings relating to a resulting termination decision.

In NTEU, the court held that disclosures by two IRS

employees of confidential taxpayer information in the course

of preparing for a grievance proceeding against the IRS

violated the Internal Revenue Code's non-disclosure requirement. 791 F.2d at 184. The employees had disclosed to each

other and to their union attorneys their "Revenue Officer

Dailies" while challenging a negative performance evaluation

of one of the employees. The unredacted dailies showed how

each revenue officer spent his time and included the name of

each taxpayer for whose case the officer was responsible, and

a description of any action taken. Id. at 185. The court,

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recognizing that for a union to fulfill its duty to represent

federal employees, it must have access to agency records for

bargaining and grievance resolution purposes, concluded that

s 6103(l )(4)(A) provided for such access.3 Id. at 184. Pursuant to that provision, IRS had authorized certain upper level

officers to act on the Treasury Secretary's behalf in approving disclosures.4 The problem in NTEU was that the employees had not obtained such authorization, and consequently, the court held, the disclosures violated s 6103. Id. at 184-

85, 187. The court never addressed the scope of the "tax

administration" exception under s 6103, although it was implicit that the court did not consider the employee grievance

to involve "tax administration," given its reliance on the

authorization procedures of s 6103(l )(4)(A), and its acknowledgment that such procedures would not be necessary for

disclosures made pursuant to "tax administration" matters

under s 6103(h)(1). Id. at 188. Thus, while the court stated

broadly that "disclosures for personnel purposes, whether to

employees or outsiders, are prohibited by statute unless

__________

3 Section 6103(l )(4) provides:

The Secretary may disclose returns and return information--

(A) upon written request--

(i) to an employee or former employee of the Department

of the Treasury, or to the duly authorized legal representative of such employee or former employee, who is or may be

a party to any administrative action or proceeding affecting

the personnel rights of such employee or former employee;

or

(ii) to any person, or to the duly authorized legal representative of such person, whose rights are or may be affected by

an administrative action or proceeding under section 330 of

title 31, United States Code....

26 U.S.C. s 6103(l )(4).

4 In NTEU the court relied on IRS Delegation Order 184-85

(rev. 2, para. 1(e) (Mar. 21, 1982), which set forth the authorization

procedure under s 6103(4)(A) and allowed only certain upper level

officers to act as the Secretary's designees in granting permission

to disclose tax information. NTEU, 791 F.2d at 184-85.

authorized in the precise manner indicated in

s 6103(l )(4)(A)", id., this statement was not made with regard to the scope of the "tax administration exception" under

s 6104(h)(1) or (h)(4), but merely reiterated the court's conclusion that the type of disclosures at issue could not be made

under s 6103(l )(4)(A) absent proper authorization. Id. at

184-85, 187.

Moreover, the court's implicit holding that the grievance

proceeding at issue did not constitute "tax administration"

has no bearing on the instant case. The disclosures in NTEU

occurred in the course of an employee grievance proceeding

against the IRS relating to the quality and quantity of the

employee's work performance. As an adversarial personnel

matter, it did not implicate the IRS' need to guard the

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integrity of its operations. By contrast, the disclosures that

Mr. Gardner challenges, as in Rueckert and Hobbs, occurred

in connection with the IRS' legitimate need to protect the

integrity of its tax enforcement operations by ensuring that

its employees were in compliance with the tax laws. Because

the disclosures of Mr. Gardner's tax records were made for

the limited purposes of determining whether he had failed to

comply with the tax laws and in justifying the resulting

decision to terminate his employment, they were integral to

the IRS' need to ensure that its employees' conduct does not

"undermine the integrity of [the IRS'] system of administering the ... tax laws," Rueckert, 775 F.2d at 212, and thus the

disclosures were proper under the "tax administration" exception of s 6103(h)(1) and (4). Accordingly, the district

court did not err in dismissing Mr. Gardner's disclosures

claims under Rule 12(b).

III.

Second, Mr. Gardner contends that the district court erred

by dismissing under Rule 12(b)(6) his claims under the Privacy Act, 5 U.S.C. s 552a. In his complaint, Mr. Gardner

raised Privacy Act claims that fall into three primary categories: disclosure of his tax information, expungement or

amendment of information in his tax records, and disclosure

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of non-tax related information. Only the first category merits

more than summary discussion.5 As to this category, the

district court ruled that any claims regarding the disclosure

of tax information are preempted by the Internal Revenue

Code. This is a question of first impression for this court.

In dismissing Mr. Gardner's disclosure claims, the district

court relied on Lake v. Rubin, 162 F.2d 113 (D.C. Cir. 1998).

In Lake, the court held that taxpayers could not rely on the

Privacy Act to obtain access to their tax records because the

more specific provisions of the Internal Revenue Code,

s 6103, controlled. Id. at 115-16. While Lake concerned

access by taxpayers to their own records, the decision is

instructive on whether s 6103 preempts Privacy Act claims

regarding disclosure of taxpayer records by third parties.

Following the approach in Cheek v. IRS, 703 F.2d 271, 271-

72 (7th Cir. 1983), the court in Lake noted with approval the

conclusion of the Seventh Circuit that s 6103 "overrides any

inconsistent provisions of ... the Privacy Act". Lake, 162

F.3d at 116. That conclusion, the court observed, was supported by the legislative history, in view of the Senate

Report's statement "that [tax information] should generally

be treated as confidential ... except in those limited situations delineated in ... section 6103...." Id. at 116, n.3

(citing S. Rep. No. 94-938 at 318 (1976)). In addition, the

Lake court viewed the conclusion of exclusivity to be analo-

__________

5 In view of the plain language of the Internal Revenue Code,

the district court correctly ruled that 26 U.S.C. s 7852(e) stripped

the court of subject matter jurisdiction over Mr. Gardner's Privacy

Act claims for expungement or amendment of his tax records. 26

U.S.C. s 7852(e) (1994). See also, e.g., England v. Commissioner,

798 F.2d 350, 351-52 (9th Cir. 1986). Similarly, the district court

correctly ruled that the alleged disclosures of non-tax information,

including "defamatory statements" made in state and federal administrative proceedings by IRS officials and intra-Treasury/IRS

disclosures of Mr. Gardner's wage records, constitute "routine uses"

exempt from Privacy Act protection. See 5 U.S.C. s 552a(b)(3); 57

Fed. Reg. 13900, 14058-59 (1992). Cf. Department of the Air Force

v. Federal Labor Relations Authority, 104 F.3d 1396, 1401-02 (D.C.

Cir. 1997).

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gous to its precedent that the Freedom of Information Act

does not govern the disclosure of information when another

statute more specifically addresses the disclosure of that

information through " 'comprehensive, carefully tailored and

detailed' provisions 'designed to protect both the interest of'

those seeking the information and the interest in 'confidentiality.' " Id. at 116 (citing Ricchio v. Kline, 773 F.2d 1389,

1395 (D.C. Cir. 1985)). That precedent is even more directly

analogous to the instant case than it was to Lake, because it

concerns the preemption of statutory provisions regarding

disclosure to third parties by other, more specific provisions.

From the analysis in Lake, the district court could properly

conclude with regard to Mr. Gardner's unauthorized disclosure claims that s 6103, with its detailed framework for

access to and disclosure of tax records, preempts the relatively generic provisions of the Privacy Act. The Fifth Circuit,

citing Lake and Cheek, likewise concluded that s 6103 trumps

Privacy Act claims for unauthorized disclosures where the

disclosures fall within s 6103's "tax administration" exception.

Although declining to opine on whether preemption would

exist absent a direct conflict between the Internal Revenue

Code and the Privacy Act, the Fifth Circuit concluded that

such a conflict did exist, and that the former thus trumped

the latter, where a disclosure that related to "tax administration" (and thus was exempt from the Internal Revenue Code's

nondisclosure restriction) was the basis for a claim under the

Privacy Act.6 The Fifth Circuit also cited Cheek and Lake for

the broader proposition that the majority of courts to confront the issue have concluded that the Internal Revenue

Code preempts the Privacy Act in "provid[ing] the exclusive

remedy for disclosures of tax return information." Hobbs,

209 F.3d at 411. Those circuit courts of appeals allowing

Privacy Act claims based on tax return disclosures neither

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6 In Hobbs, the Fifth Circuit cited Sinicki v. United States

Department of the Treasury, No. 97 Civ. 0901, 1998 WL 80188

(S.D.N.Y. Feb. 24, 1998), in which the district court had ruled that

" '[s]ection 6103 should only implicitly repeal the Privacy Act to the

extent it presents an irreconcilable conflict.' " Hobbs, 209 F.3d at

412 (quoting Sinicki, 1998 WL 80188, at *5).

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addressed s 6103 preemption directly nor faced a situation in

which the Privacy Act provided a remedy for conduct permissible under the Internal Revenue Code. See Taylor v. United States, 106 F.3d 833, 836-37 (8th Cir. 1997); Long v. IRS,

891 F.2d 222, 224 (9th Cir. 1989).

Because our analysis in Lake, supported by decisions in the

Fifth and Seventh Circuits, leads inexorably to the conclusion

that the Internal Revenue Code preempts the Privacy Act for

remedies for disclosure of tax information, we hold that

s 6103 is the exclusive remedy for a taxpayer claiming unlawful disclosure of his or her tax returns and tax information.

The district court, therefore, did not err in dismissing under

Rule 12(b)(6) Mr. Gardner's Privacy Act claims based on IRS

disclosures of his tax returns and tax information.

Accordingly, we affirm the judgment of the district court.

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