Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caDC-99-05284/USCOURTS-caDC-99-05284-0/pdf.json

Parties Involved:
Christian Broadcast Network, Inc.
Appellee
Internal Revenue Service
Appellee
Tax Analysts
Appellant

Document Text:

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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.

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J. William Koegel, Jr. argued the cause for appellee Christian 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 Internal Revenue Code (I.R.C.) s 6104, 26 U.S.C. s 6104 (1994),

respectively, in an effort to obtain copies of a closing agreement 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 district 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

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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 conversations between the IRS and CBN pertaining to those agreements 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 February 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, "Exemption 3," permits the withholding of government records "specifically exempted from disclosure by statute ... provided

that such statute (A) requires that the matters be withheld

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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 nondisclosure 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 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

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 at the national office of the Internal Revenue Service.

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 Amendments 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

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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 Lehrfeld that documents disclosable under I.R.C. s 6104 may

contain material that otherwise constitutes "return information" protected from disclosure by I.R.C. s 6103. Lehrfeld,

132 F.3d at 1467. I.R.C. s 6104 therefore may be characterized 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 Appropriations 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 language slightly, those changes are not relevant to the issue before

us. Accordingly, we need not and do not address those differences

here.

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The IRS has declined throughout this litigation to disclose

whether a closing agreement with CBN exists, and the district 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 constitutes 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) specifically 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 application 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

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stating that "any statement or document not described in

paragraph (d) of this section that is submitted by an organization 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., Lehrfeld, 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 document 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 activities. 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 information 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.

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ments and statements like the applicant's articles of incorporation 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 requires 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 respect to such application"--speak to content without limitation 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 further 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 argument, 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 document 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

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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 content 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 disagreement over the law to be applied, but the narrow and factspecific 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 disclosure under I.R.C. s 6103. As the present record is inadequate 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

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quate record upon which to base the discloseability determination.

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 applicants for tax exempt status. I.R.C. s 6104 does not expressly provide for private action against exempt organizations 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 requirement. 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 structure 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 requirement 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

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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) whether 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 supporting its position. CBN maintains, conversely, that the Supreme 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 Government 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 enforcement," there is a strong presumption that Congress deliberately 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 penalties for s 6104. See I.R.C. s 6652(c)(1)(C)-(D). Additionally,

current IRS regulations offer the public a mechanism for

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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 demonstrated a "comprehensive legislative scheme including an

integrated system of procedures for enforcement," Government 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. Additionally, 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 inadequate 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 judgment in favor of the IRS on Tax Analysts' FOIA claim and

remand for further proceedings, leaving to the district court

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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.

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