Court Opinion

ID: 3018045
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:18:31.456524+00
Date Added: 2024-06-11T09:18:57.496720
License: Public Domain

___________

                                    No. 96-1563
                                    ___________

Frank J. Taylor,                        *
                                        *
             Appellant,                 *
                                        *   Appeal from the United States
     v.                                 *   District Court for the
                                        *   Northern District of Iowa.
United States of America;               *
Internal Revenue Service,               *
                                        *
             Appellees.                 *

                                    ___________

                       Submitted:   December 11, 1996

                           Filed:   February 10, 1997
                                    ___________

Before BOWMAN and HEANEY, Circuit Judges, and SMITH,1 District Judge.

                                    ___________

BOWMAN, Circuit Judge.

     Frank J. Taylor appeals from the decision of the District Court2
granting summary judgment to the United States on some of his claims
against the Internal Revenue Service (IRS), and dismissing the rest for
failure to state a claim.      See Taylor v. United States IRS, 915 F. Supp.
1015 (N.D. Iowa 1996); Taylor v. United States IRS, 186 B.R. 441 (N.D. Iowa
1995).    We affirm.

     1
      The HONORABLE ORTRIE D. SMITH, United States District Judge
for the Western District of Missouri, sitting by designation.
     2
      The Honorable Mark W. Bennett, United States District Judge
for the Northern District of Iowa.
                                     I.

     For tax years 1981 through 1988, Taylor did not timely file federal
income tax returns, nor did he file state income tax returns.   In 1987, he
filed a petition in bankruptcy under Chapter 7 of the Bankruptcy Code.   In
1989, he was denied a discharge for various infractions, including failing
to follow court orders and to keep records, and transferring assets in
violation of the Bankruptcy Code.         Five years later, the trustee had
located only eighteen dollars in assets, so the bankruptcy court made no
determinations as to creditors' claims.      The case was dismissed on April
27, 1993.

     In 1986, 1987, and 1991, the IRS made three disclosures of written
tax information concerning Taylor to the Iowa Department of Revenue and
Finance (IDORF), pursuant to specific written requests from the IDORF.   The
IRS had been investigating Taylor, but did not bring criminal charges
against him.   The state of Iowa, however, following an investigation by the
IDORF that was based at least in part on the information it received from
the IRS, filed criminal charges against Taylor for his failure to pay state
taxes or file returns.   Taylor was convicted.

     On March 11, 1993, Taylor brought an adversary proceeding in the
Bankruptcy Court, claiming violations of the Internal Revenue Code (IRC),
the Privacy Act, and his alleged constitutional privacy rights.3    He also
asked the court to determine his federal tax liabilities for certain tax
years.   The court granted summary judgment for the United States on some
of Taylor's claims and dismissed the rest of his claims.     Taylor appeals.

     3
      Soon after Taylor filed his complaint, on April 19, 1993, the
IRS moved to withdraw the reference of the case to the Bankruptcy
Court so that the case could proceed in the District Court. The
motion was granted on August 3, 1993. See Taylor v. United States
IRS, 186 B.R. 441, 444 (N.D. Iowa 1995).

                                    -2-
                                        II.

       We address first Taylor's arguments that the IRS wrongfully disclosed
his tax information to the IDORF in violation of federal statutes.              The
court granted summary judgment to the United States on those causes of
action, and we review de novo.         Initially we note that any fact issues
Taylor asserts do not concern material facts, so we are faced only with the
question whether the United States is entitled to judgment as a matter of
law.   See Fed. R. Civ. P. 56(c).

                                         A.

       Under the IRC, federal tax "[r]eturns and return information shall
be   confidential"   and   are   not   subject   to   disclosure   under   ordinary
circumstances.    26 U.S.C. § 6103(a) (1994).         Certain exceptions obtain,
however, including one that permits disclosure to state tax officials "upon
written request by the head of" the state taxing authority, "for the
purpose of, and only to the extent necessary in, the administration of
[state tax] laws."   Id. § 6103(d)(1) (1994).         Taylor asserts that federal
officials disclosed his tax information without the requisite written
request from the IDORF.4

       4
       Taylor also makes a summary challenge to the scope of the
materials the IRS disclosed, but he fails to identify with
specificity which of the documents that were disclosed to the IDORF
do not fall within the rather broad definitions of "return" and
"return information," and why they do not. See 26 U.S.C. § 6103(b)
(1994) (defining return and return information). In addition to
the expansive definition of return found in § 6103(b)(1),
"§ 6103(b)(2) contains an elaborate description of the sorts of
information related to returns that [the IRS] is compelled to keep
confidential," Church of Scientology v. IRS, 484 U.S. 9, 15
(1987)--or is permitted to disclose pursuant to an exception.

     Taylor further argues that "the District Court ruling totally
fails to address the Fourth Amendment unreasonable search and
seizure ramifications" of the disclosures, an issue that, he
contends, arises because the disclosures were made without a
warrant and the IRS's investigation was criminal.      Appellant's
Brief at 11.    Taylor does not contend that he even made this
argument in the District Court, but if he did, his brief's single

                                        -3-
     Taylor contends that the written correspondence from the IDORF to the
IRS specifically requesting tax information on Taylor came too late,
because the tenor of the correspondence proves that an oral discussion of
protected tax information took place before the IRS received the written
requests.   The District Court granted summary judgment to the United States
on the grounds that an Agreement on Coordination of Tax Administration
(March 30, 1983) and three Federal-State Implementing Agreements (June 4,
1984; October 20, 1986; and May 7, 1990) between the IRS and the IDORF
constitute the necessary written request.    We agree.

     There is no indication in the text of the IRC's confidentiality and
disclosure statute that Congress intended to require an individualized
request in order to satisfy the strictures of § 6103 relevant to disclosure
to state tax officials.   What is required of the written statement is: (1)
that the request be made "by the head of" the state agency charged under
state law "with responsibility for the administration of State tax laws";
(2) that the request designate the individuals who are the representatives
of the state taxing authority to receive the tax information; and (3) that
the representatives named not be the chief executive officer of the state
or any person who is not an employee of the taxing authority (nor certain
other state employees described in the statute).     Taylor does not claim
that the Agreement on Coordination and the Implementing Agreements between
the IRS and the IDORF do not meet the requirements of the statute.
Moreover, we have examined the portions of the agreements that the parties
submitted in the record on appeal and we see nothing to suggest that these
documents fail to satisfy the statutory requirements of § 6103(d).      Our
conclusion accords with those

sentence on this issue fails to make a legal argument that we may
consider in this appeal of his civil action against the IRS.

                                    -4-
reached by two of our sister circuits.           (The IRS has coordinating and
implementing agreements with the taxing authorities of all fifty states.)
See Long v. United States, 972 F.2d 1174, 1179 (10th Cir. 1992); Smith v.
United States, 964 F.2d 630, 633 (7th Cir. 1992), cert. denied, 506 U.S.
1067 (1993).

     Taylor argues that, if we allow the agreements at issue to operate
as standing requests for disclosure of taxpayer information, we will
"totally eviscerate[] Section 6103 as a statutory implementation of a right
of privacy."   Appellant's Brief at 12.        We disagree.    The confidentiality
of taxpayer information is by no means absolute.               The bulk of § 6103
constitutes exceptions to the general rule of non-disclosure.           See Church
of Scientology v. IRS, 484 U.S. 9, 15 (1987) ("Subsections (c) through (o)
of § 6103 set forth various exceptions to the general rule that returns and
return information are confidential and not to be disclosed.                   These
subsections    provide   that   in    some    circumstances,    and   with   special
safeguards, returns and return information can be made available to . . .
state tax officials . . . .").       Notwithstanding the need to prevent abusive
disclosure of federal taxpayer information by the IRS and others, Congress
clearly recognized the need for disclosure of such information in certain
carefully delineated circumstances.           Disclosure of individual taxpayer
information by the IRS to a state taxing authority via a standing written
agreement that is carefully crafted to satisfy concerns for confidentiality
implements rather than "eviscerates" the will of Congress.

                                         B.

     Taylor also argues that the District Court erred in granting summary
judgment to the United States on his claim that the disclosures to the
IDORF violated the Privacy Act, 5 U.S.C. § 552a (1994).               Section 552a
prohibits federal agency disclosure of "any record" kept by that agency
"unless disclosure of the record would

                                        -5-
be . . . for a routine use as defined in subsection (a)(7) of this section
and   described    under   subsection    (e)(4)(D)   of    this   section."     Id.
§ 552a(b)(3).     A "routine use" is defined as "the use of such record for
a purpose which is compatible with the purpose for which it was collected."
Id. § 552a(a)(7).    Subsection (e)(4)(D) requires the agency to publish in
a timely manner in the Federal Register a notice of "each routine use of
the records contained in the system, including the categories of users and
the purpose of such use."

      It is undisputed that the IRS published the necessary notices in the
Federal Register for its "Individual Returns Files, Adjustments and
Miscellaneous     Documents   Files"    records   system   and    its   "Examination
Administrative File" records system.           See 50 Fed. Reg. 29,821, 29,857
(1985) ("Disclosure of returns and return information may be made only as
provided by 26 U.S.C. 6103.").         Further, it is clear that the disclosure
of federal taxpayer information collected for the purpose of federal tax
administration to state tax officials for the purpose of state tax
administration is "use of [the] record for a purpose . . . compatible with
the purpose for which it was collected."       5 U.S.C. § 552a(a)(7).       Taylor's
argument that the IRS may disclose federal tax information only for the
purpose of federal tax administration is unavailing.          Under § 6103, which
(as the Federal Register notice states) governs the "routine use" of
taxpayer information, "tax administration" includes "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)."           26 U.S.C. § 6103(b)(4)(A)(i) (1994)
(emphasis added).    As we have already discussed, the IRS's disclosures were
in compliance with the restrictions set forth in § 6103(d).

      We conclude that the District Court did not err in granting summary
judgment for the government on Taylor's Privacy Act claim.

                                         -6-
                                      III.

     The claims remaining in Taylor's lawsuit after the summary judgment
motion was granted were dismissed on motion of the United States for
failure to state a claim.     We review de novo.   See Labickas v. Arkansas
State Univ., 78 F.3d 333, 334 (8th Cir.) (per curiam), cert. denied, 117
S. Ct. 395 (1996).

     Taylor argues that "Congress lacks the power to legislate Section
6103," because the statute violates his "fundamental right to financial
privacy."   Appellant's Brief at 8.   He cites two cases for the proposition
that "[t]he right to financial privacy is in fact deeply rooted in this
Nation's    history and tradition."      Id.   It is apparent that Taylor
misapprehends the nature of the privacy right he invokes, despite the
District Court's thorough discussion of the distinctions between privacy
as it relates to the confidentiality of information and privacy as it
relates to personal autonomy.     See Taylor, 915 F. Supp. at 1022.   Taylor
cites Moore v. City of East Cleveland, Ohio, 431 U.S. 494 (1977), wherein
the Supreme Court held, in a plurality opinion, that "choices concerning
family living arrangements" are constitutionally protected.       Moore, 431
U.S. at 499.     Such constitutional protection for freedom of choice in
family living arrangements is unrelated to the right to privacy Taylor
asserts here.   In the other case Taylor relies upon, this Court held there
is no fundamental right to give a newborn a surname of one's choice.     See
Henne v. Wright, 904 F.2d 1208, 1214 (8th Cir. 1990), cert. denied, 498
U.S. 1032 (1991).    The opinion in Henne is inapposite, not only because the
Court found no such privacy right in the Constitution, but also because the
case, like Moore, concerned an asserted privacy right in the realm of
personal autonomy.   Taylor's contention that "[t]he `liberty' right to make
certain decisions does include a right to financial privacy which is
fundamental,"   Appellant's Brief at 8, thus proposes a faulty relationship
between the privacy rights of confidentiality and autonomy; the "right" he
asserts has nothing to

                                      -7-
do with, and is not a part of, the right to make certain decisions free of
government interference.

      The District Court's opinion discusses the issue of financial privacy
at some length, concluding that, although financial privacy is not a
fundamental right, citizens are entitled to some protection from government
disclosure of financial information.      We agree, first, that Taylor has not
asserted a fundamental right, and so any restriction that § 6103 may impose
on   Taylor's "right to financial privacy" is not entitled to strict
scrutiny.      We further agree, employing the lower level of scrutiny
applicable here, that the government has the requisite interest (tax
administration) and that § 6103 is sufficiently related to such interest,
without unnecessarily infringing on any privacy rights Taylor may have in
his tax information, to pass constitutional muster.            See Taylor, 915 F.
Supp. at 1023-24.

      Taylor also makes a facial challenge to § 6103, arguing that the
statute   is    unconstitutional   because    "it   imperils     the   concept   of
`federalism.'"     Appellant's Brief at 9.     Taylor contends that § 6103(d)
operates so that the federal government enhances the state's ability to
collect tax revenues, thus infringing on the state's sovereignty.           Surely
no infringement on a state's sovereignty results from a federal statute
that gives states the option of requesting information that actually may
assist them, and cannot impede them, in the enforcement of state tax laws,
and thus in the operation of state government.       Likewise, § 6103 does not
permit, and certainly does not compel, federal and state officials to
"collaborate or conspire together to violate the rights of individual
citizens."     Appellant's Brief at 10.   We conclude that Taylor's arguments
based on federalism and state sovereignty are without merit.

                                      -8-
                                      IV.

     Taylor challenges the District Court's decision to abstain in favor
of an action in the Tax Court regarding the assessment of Taylor's tax
liabilities for certain years.   Given that the Tax Court action was pending
when Taylor filed his motion and that a decision from the Tax Court
apparently will be reviewable on appeal, and in the absence of any showing
that the Tax Court is unable or unwilling to act appropriately, we cannot
say the District Court abused its discretion in denying Taylor's motion.

     Finally, Taylor contends that the District Court erred in denying as
futile his motion to amend his complaint to add a challenge to the
constitutionality of the Tax Court.    We disagree. The law in this Circuit
on the constitutional issue is well-settled.   See Shenker v. Commissioner,
804 F.2d 109, 114 n.6 (8th Cir. 1986) (observing that courts, including the
Eighth Circuit, "have uniformly upheld the constitutionality of the Tax
Court," and citing cases), cert. denied, 481 U.S. 1068 (1987).      We hold
that the District Court did not abuse its discretion in denying as futile
Taylor's motion to amend.   See Ferguson v. Cape Girardeau County, 88 F.3d
647, 651 (8th Cir. 1996) (noting that permission to amend may be denied
"where amendment would be futile" and that denial is reviewed for abuse of
discretion).

                                      V.

     The judgment of the District Court is affirmed in all respects.

     A true copy.

           Attest:

                 CLERK, U. S. COURT OF APPEALS, EIGHTH CIRCUIT.

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