Court Opinion

ID: 185202
Source: CourtListenerOpinion
Date Created: 2011-02-05 02:28:59+00
Date Added: 2024-06-11T09:13:24.759664
License: Public Domain

213 F.3d 735 (D.C. Cir. 2000)
Bruce E. Gardner, Appellantv.United States of America, et al.,Appellees
No. 99-5089
United States Court of AppealsFOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued April 13, 2000Decided June 9, 2000

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.
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:

1
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, 211 F.3d 1305 (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 RevenueService 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.

2
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 unsuccessfully 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.

3
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 forty four 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).

4
The court has concluded in a companion case that the Rule  41(b) dismissal of Mr. Gardner's complaint must be reversed. Gardner, 211 F.3d at 1305, 1308-10.  The question remains  whether Mr. Gardner has demonstrated that the district 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 opinion1.  Thereare, however, two contentions that require some explication.

II.

5
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 § 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.

6
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 ... shall disclose any return or return information" unless authorized by statute.  As the court observed in NTEU:

7
This general ban on disclosure provides essential protection for the taxpayer;  it guarantees that the some times 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 s6103 is fundamental to a tax system that relies upon self-reporting.

8
Id. at 184.  In recognition of competing concerns, however,  the Code includes a number of exceptions.  Two are relevant  here.

9
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 exception of § 6103(h)(1) and (4) with respect to these disclosures.

10
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 otherwisechecking 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 § 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 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 § 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.

11
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.

12
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, 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  authorized in the precise manner indicated in  § 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 § 6103(l )(4)(A) absent proper authorization.  Id. at  184-85, 187.

13
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  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 § 6103(h)(1) and (4).  Accordingly, the district  court did not err in dismissing Mr. Gardner's disclosures  claims under Rule 12(b).

III.

14
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 of non-tax related information.  Only the firstcategory 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.

15
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,  § 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.

16
Following the approach in Cheek v. IRS, 703 F.2d 271, 27172 (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 analogous 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.

17
From the analysis in Lake, the district court could properly  conclude with regard to Mr. Gardner's unauthorized disclosure claims that § 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 § 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 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).

18
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.

19
Accordingly, we affirm the judgment of the district court.

Notes:

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).

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.

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 byan 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.

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).

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).