Opinion ID: 27195
Heading Depth: 1
Heading Rank: 7

Heading: Good Faith Erroneous Interpretation of Law

Text: 35 The United States argues that even if Batista made unauthorized disclosures, he did so pursuant to a good faith, but erroneous, interpretation of § 6103. In connection with a § 7134 violation, this circuit evaluates good faith under an objective standard. See Huckaby v. United States Dept. of Treasury, I.R.S., 794 F.2d 1041, 1048 (5th Cir.1986); Barrett II, 51 F.3d at 479. A reasonable IRS agent can be expected to know statutory provisions governing disclosure, as interpreted and reflected in IRS regulations and manuals. An agent's contrary interpretation is not in good faith. Id. Applying this test, the district court found that a reasonable IRS agent would not have violated the express provisions contained in Sections 6103 and 7431 and in the IRS manuals and regulations. Payne, 91 F.Supp.2d at 1026. The district court further explained that Batista initially claimed that although he was familiar with the statutes and the IRS regulations he was not required to try and obtain the needed information from the taxpayer first before with third-parties. Batista eventually admitted that he had violated express provisions regarding disclosure. Id. Accordingly, the court found that Batista's disclosures were not made in good faith. 36 Following the district court's decision, we had occasion to examine the application of the Huckaby standard. In Gandy v. United States, 234 F.3d 281 (5th Cir.2000), we held that two IRS agents who had disclosed return information (the taxpayer's identity and the fact of criminal investigation) to customers of a nursery had acted in good faith. The disclosures at issue were oral, made to customers the agents interviewed following distribution of a circular letter. We noted that Section 347.2 of the IRS Handbook, at least prior to 1992 changes, regulated the format and content of circular letters but did not apply across the board to all disclosures, including oral disclosures. Id. at 286. We then noted Treasury Regulations allowing an IRS agent to disclose the nature of his official duties when investigating a taxpayer, as well as a Handbook provision authorizing display of credentials and badges identifying Criminal Investigation Division agents. We thus concluded that the IRS agents had a good faith belief that they could disclose the criminal nature of their investigation. Id. at 286-87. 37 The district court did not have the benefit of Gandy when it concluded that Batista did not have a good faith belief that he could disclose the fact of a criminal investigation. Also, as noted in Gandy, the section of the Handbook pertinent to that decision was amended in 1992. Furthermore, the district court's finding of bad faith appears to be based on the premise that all third-party contacts by Batista were not authorized. However, as we previously indicated, Payne's evidence of damages was based primarily on the disclosures of the criminal nature of the investigation. The number of third-parties contacted and disclosures made in this case is voluminous. Batista discussed the investigation with third-parties via in-person interviews, telephone calls, letters, and summonses. The holding that Batista lacked good faith is not tied to particularized findings as to precisely what information about a criminal investigation was disclosed to which parties and under which circumstances. Determining which of these disclosures were necessary and reconciliation with Gandy will therefore entail further factfinding by the district court. 2