Court Opinion

ID: 2666296
Source: CourtListenerOpinion
Date Created: 2014-04-04 08:45:43.713858+00
Date Added: 2024-06-11T13:02:01.432555
License: Public Domain

UNITED STATES DISTRICT COURT
                       FOR THE DISTRICT OF COLUMBIA
__________________________________________
                                           )
FPL GROUP, INC.,                           )
                                          )
            Plaintiff,                    )
                                          )
            v.                            )   Civil Action No. 09-652 (ESH)
                                          )
INTERNAL REVENUE SERVICE,                  )
                                           )
            Defendant.                     )
__________________________________________)

                                   MEMORANDUM OPINION

       Plaintiff FPL Group, Inc. (“FPL Group”) has brought this action against the Internal

Revenue Service (“IRS,” “the Service,” or “the agency”) under the Freedom of Information Act

(“FOIA”), 5 U.S.C. § 552, and the Internal Revenue Code (“IRC”), 26 U.S.C. § 6110. FPL

Group seeks to compel disclosure of IRS documents related to determinations regarding its

ability to take certain deductions on the consolidated tax returns that it filed on behalf of its

subsidiary corporations. After searching its records, the IRS identified 15,845 responsive

documents, of which it produced 2,153 pages in their entirety, withheld 12,584 pages, and

produced 1,108 pages in redacted form. The IRS now moves for summary judgment as to those

documents which it has redacted or withheld entirely, and plaintiff cross-moves for summary

judgment. The parties agree that certain issues are no longer disputed, and the only questions

remaining before the Court are (1) whether the IRS performed an adequate, good faith search in

response to plaintiff’s requests, and (2) whether the IRS has established that it properly invoked

the deliberative process, attorney work product, and attorney-client privileges to withhold or

redact certain responsive documents. Upon consideration of the parties’ submissions and the

entire record, and for the reasons discussed herein, defendant’s motion will be granted in part

                                                   1
and denied in part, plaintiff’s motion will be denied in part, and defendant will be required to

supplement its declarations and produce certain documents for in camera review.

                                          BACKGROUND

       Plaintiff is a Florida corporation and parent of an affiliated group of corporations that

includes the wholly-owned subsidiary Florida Power & Light Co. (“Florida Power”). (Def.’s

Statement of Material Facts (“Def.’s SMF”) in Supp. of Mot. for Summ. J. (“Def.’s SJ Mot.”) ¶

2.) This FOIA request arises from plaintiff’s long-running dispute with the IRS, culminating in

litigation in the Tax Court, over the Service’s refusal to let plaintiff characterize certain tax

deductions as repair expenses rather than capital expenditures (“the Tax Court case”). See, e.g.,

FPL Group, Inc. v. Comm’r (“FPL Group I”), 115 T.C. 554, 555 (2000); FPL Group, Inc. v.

Comm’r (“FPL Group II”), No. 5271-96, 2005 WL 2159680 (Tax Ct. Sept. 8, 2005); FPL

Group, Inc. v. Comm’r (“FPL Group III”), Nos. 5271-96, 6653-00, 10811-00, 2008 WL
2199696 (Tax Ct. May 28, 2008). 1

I.     THE TAX COURT CASE

       As explained in FPL Group I, during the taxable years 1988 through 1992, “Florida

Power incurred substantial costs related to its electric plants. The expenditures for these costs

were recorded as either capital expenditures or repair expenses for regulatory accounting and

financial reporting purposes. In preparing its tax returns for the years in issue, petitioner used the

same characterization of expenditures for tax reporting purposes that Florida Power did for

regulatory accounting and financial purposes.” 115 T.C. 558. In 1995, the IRS issued

       1
         The characterization of the deductions was relevant because “whether an expenditure
constitutes a capital expenditure or a currently deductible expense involves the question of the
proper time for taking a deduction,” since “business expenses are currently deductible, [but] a
capital expenditure usually is amortized and depreciated over the life of the relevant asset.” FPL
Group I, 115 T.C. 562 (quotation marks omitted).

                                                   2
plaintiff a notice of deficiency for those five tax years. Id. at 555. In the Tax Court, plaintiff

argued that it had erroneously characterized some repair expenses as capital expenses and sought

an adjustment in the deficiency amount. Id. The IRS responded that plaintiff’s attempted

recharacterization constituted a statutorily impermissible change in plaintiff’s “method of

accounting,” because plaintiff had not previously sought the Service’s consent. Id. at 560. In

2000, the Tax Court found that without the agency’s consent, plaintiff was “retroactively

attempting to recharacterize expenditures that it regularly and consistently capitalized for

regulatory, financial, and tax reporting purposes” without the agency’s consent, id. at 570, 573,

and thus granted the Service partial summary judgment on this issue. Id. at 575-76.

       Subsequently, by letter dated April 10, 2001, plaintiff submitted a “protective request” to

IRS Associate Area Counsel Donald Williamson for permission to change its method of

accounting for the relevant tax years. (Pl.’s Opp’n to Def.’s SJ Mot. & Mem. in Supp. of Cross-

Mot. for Summ. J. (“Pl.’s Opp’n”), Second Decl. of James Dawson (“2nd Dawson Decl.”), Ex. G

(protective request letter) at 2.) Williamson, who supervised the Tax Court case and was based

in Atlanta, Georgia, denied the request by letter dated December 17, 2001. (Id., Ex. J (“2001

Williamson Denial”).) The denial letter nonetheless encouraged plaintiff to contact the

“Examination team” to work towards an agreement “as to which plaintiff items should be

expensed and which items should be capitalized.” (Id. at 1-2.)

       Following Williamson’s retirement in 2002, the litigation was assigned to Chicago-based

attorney manager William Merkle of the Office of Division Counsel, Large and Mid-Size

Business Division (“LMSB”). (Def.’s SMF ¶ 9; Def.’s SJ Mot., Decl. of William Merkle

(“Merkle Decl.”) ¶ 4.) Around that time, the legal and administrative files for the Tax Court case

were transferred from Williamson’s Atlanta office to Merkle’s Chicago office. (Merkle Decl. ¶

                                                  3
4.) Lead counsel in the Tax Court case was Lawrence Letkewicz, a trial attorney supervised by

Merkle. (Def.’s SMF ¶¶ 9-10.) The Service’s audit team included revenue agents Sara

Northard, Kathleen Baryza, and Larry Clarke; the audit team’s legal counsel was Sergio Garcia-

Pages. (Pl.’s Statement of Material Facts in Supp. of Cross-Mot. for Summ. J. (“Pl.’s SMF”) ¶¶

31, 41; Pl.’s Reply to Def.’s Reply & Reply in Supp. of Cross-Mot. for Summ. J. (“Pl.’s Sur-

reply”) at 10.)

       In June 2002, Merkle and plaintiff’s counsel Robert Carney began to explore a possible

resolution regarding “which of certain expenditures should be capitalized and which should be

currently deductible as repairs . . . .” FPL Group III, 2008 WL 2199696, at *1-*2. Although

only Merkle had the authority to settle the repairs issue, Merkle’s subordinate, Robert Shilliday,

was assigned to negotiate on the Service’s behalf. Id. at *2. Throughout 2002, Shilliday

discussed various alternative methodologies with plaintiff’s counsel, and the parties concluded

that “the major component methodology” for classifying whether a replaced piece of equipment

was a repair expense or capital expense “had the most promise for settlement.” Id. However, in

April 2003, Merkle advised Carney that the agency would not settle the repairs issue that was the

subject of FPL Group I, and subsequently, various agency constituencies indicated to Merkle

that they opposed settling the remaining issues as well. See id. at *7-*8. Plaintiff later argued

that it had entered an enforceable settlement agreement with the agency, but the Tax Court

rejected this argument in May 2008. See id. at *13.

II.    THE INDUSTRY ISSUE RESOLUTION PROCESS

       IRS revenue procedures provide for an Industry Issue Resolution (“IIR”) program, whose

objective “is to identify frequently disputed or burdensome tax issues that are common to a

significant number of business taxpayers” and which “may be resolved through published or

other administrative guidance,” Rev. Proc. 2003-36 § 1, 2003 WL 1894524 (May 5, 2003), rather

                                                 4
than post-filing examination. (2nd Dawson Decl. ¶ 50.) “Interested parties” can initiate the IIR

process by requesting that the Service consider a given issue for development and inclusion on a

“Guidance Priority List,” Rev. Proc. 2003-36 § 4.01, guided by factors such as “whether the

requested guidance promotes sound tax administration.” Id. § 4.02. Once an issue has been

selected “as a published guidance project,” an IIR team, consisting of agency counsel and other

employees, is formed to provide analytical assistance. Id. § 6.01. The IIR team may request that

private entities voluntarily participate and submit information to assist the team’s analysis. Id. §

6.02.

        In 2002, following a request by the Edison Electric Institute (“EEI”), which is a utility

industry association, the Service initiated the IIR process to provide guidance on the “deduction

and capitalization of costs incurred by utilities for assets used for power generation,” and

whether such incurred costs “are expenditures to maintain assets or capital improvements.” IRS

News Release 2002-89, 2002 WL 1492975 (July 10, 2002). (See also 2nd Dawson Decl., Ex.

V.) According to defendant, this IIR process was “the precursor” to the process of developing a

revenue ruling (Def.’s Reply in Supp. of SJ Mot. & Cross-Opp’n to Pl.’s Cross-Mot. for Summ.

J. (“Def.’s Reply”) at 12), which defendant defines as “an official interpretation by the Service of

the Internal Revenue Code, related statutes, and regulations on how the law is applied to a

specific set of facts.” (Def.’s SJ Mot., Second Decl. of Matthew Cooper (“2nd Cooper Decl.”) ¶

35; accord Def.’s Reply at 9.) IRS attorneys Merrill Feldstein and Kimberly Koch were

“primarily responsible” for drafting “the proposed guidance resulting from the IIR process.”

(2nd Cooper Decl. ¶ 8.) Feldstein and Koch were attorneys in the section of the Office of Chief

Counsel (“OCC”) “that currently has jurisdiction over tax accounting issues, including whether

an item should be treated as capitalized costs or deductible repair.” (Id.) The IIR team,

                                                 5
consisting of Department of Treasury (“Treasury”) and IRS personnel, “conducted fact-finding

discussions with representatives of the utility industry” and invited their feedback. (Id. ¶ 34;

Def.’s Reply, Third Decl. of Matthew Cooper (“3rd Cooper Decl.”) ¶ 16; see also Def.’s Reply

at 12; Pl.’s Opp’n at 29-30.) At least one industry representative, EEI, also offered the agency

legal analysis in response to its questions. (See 2nd Dawson Decl., Ex. W (responses to

questions 3, 4a, 12a, 12b, and 16).)

       In 2005, after several years were spent “developing a proposed revenue ruling,”

executives in Treasury and the IRS Chief Counsel’s office decided to end the revenue ruling

process and work instead on proposed 2006 regulations for the capitalization of expenditures

related to tangible assets. (2nd Cooper Decl. ¶ 32; see also Pl.’s Opp’n at 30-31.) The proposed

revenue ruling was never published because defendant “decided to roll the IIR project into the

proposed tangible regulations.” (Pl.’s SMF ¶ 90; Def.’s Resp. to Pl.’s SMF ¶ 90.) Feldstein and

Koch also appear to have been the principal drafters of these “proposed regulations regarding the

capitalization of repair expense issue.” (2nd Cooper Decl. ¶ 8.)

III.   THE FOIA REQUESTS

       A.      Plaintiff’s Requests

       On April 7, 2008, plaintiff submitted a request for records under FOIA (“the FOIA

request”) to the IRS National Office, as well as the Service’s FOIA disclosure offices in

Chicago; Cincinnati, Ohio; and Jacksonville, Florida. (Pl.’s SMF ¶¶ 1, 3; see Compl., Ex. D

(“FOIA Request”).) The FOIA request sought eight categories of items related to IRS audit

determinations regarding the method of accounting for expenditures on repairs to Florida

Power’s electric generation equipment:

       (1) “[d]ocuments related specifically to the reasons for, or factual considerations
       in connection with,” Williamson’s determination not to allow Florida Power’s

                                                 6
       April 10, 2001 protective request “for a change in the method of accounting for
       items of repair expense”;

       (2) “[a]ny and all directives to Revenue Agents (whether direct or indirect)
       regarding the disallowance of deductions of repair expenses in excess of the
       amounts claimed for financial accounting purposes” on Florida Power’s
       consolidated tax returns;

       (3) “[a]ny documents related to a final decision or basis for the final decision,”
       “including the background files supporting the decision,” not to allow Florida
       Power’s 2001 request for a protective change in the method of accounting for
       repair item expenses;

       (4) affidavits by Williamson and Northard that were described by Williamson in a
       May 30, 2002 letter, “along with any other files or factual background relating to
       the affidavits”;

       (5) “[t]he statement of final decision” (and background files supporting that
       decision, including studies or analyses by IRS employees or outside contractors
       on the agency’s behalf) regarding the IIR process entitled “Costs of Maintaining
       and Improving Power Generating Assets” (reference number RR-108668-03),
       which related to repair expenses and capitalization;

       (6) “[a]ny documents submitted by members of the electric utility industry” who
       participated in the IIR process;

       (7) “[a]ll documents and records” related to the 2006 promulgation of proposed
       regulations regarding the capitalization of repair expenses; and

       (8) “[a]l documents” containing the results of certain studies by IRS representatives or
       outside contractors.

(See FOIA Request at 2-3.) The FOIA request specified that the documents sought could “likely

be located” in the following offices or with certain individuals who had worked on the FPL tax

litigation or other issues related to Florida Power:

          the IRS National Office;

          the office of the LMSB Division’s Associate Chief Counsel;

          Frank Genet, an agency technical advisor, or the agency’s utility industry group in
           Akron, Ohio;

          Merkle and James Lanning, or the Service’s counsel office in Chicago;

          Garcia-Pages, or the Service’s counsel office in Miami, Florida; and

                                                  7
             Ben DeLuna, or the Service’s counsel office in Jacksonville, Florida.

(Id. at 1.)

        That same day, plaintiff submitted a separate request under IRC § 6110 (“the first IRC

request”) for “background file documents” relating to “the preparation and issuance of written

determinations designated as PLR 199903030 and AM 2006-006,” including emails and

telephone conferences notes. (Compl., Ex. B at 9 (“1st IRC Request”).)

        The next day, April 8, 2008, plaintiff submitted a second request under IRC § 6110 (“the

second IRC request”) for all “Chief Counsel Advice” relating to any IRS National Office

directions regarding “the required treatment of items of cost as capitalized costs or deductible

repairs for the consolidated returns” of FPL Group, including emails and telephone conference

notes. (Compl., Ex. C (“2nd IRC Request”) at 1.) This second IRC request was also defined to

include materials sought by the FOIA request that might be subject to disclosure under the IRC

rather than FOIA. (Id.)

        B.       Defendant’s Responses

                 1.      Pre-Litigation Search

        In early June 2008, Brenda Ball and Janice Rudolph of the agency’s disclosure offices in

Jacksonville, Florida and Lanham, Maryland, respectively, began working on plaintiff’s FOIA

requests. (See Pl.’s SMF ¶ 9; Def.’s SMF ¶¶ 6, 13.) Ball reviewed agency records that

referenced plaintiff’s extensive audit and litigation history, and she contacted the individuals

identified in the FOIA request, as well as Letkewicz, who had served as lead counsel in the Tax

Court case. (Def.’s SMF ¶ 14; see Def.’s SJ Mot., Decl. of Brenda Ball (“Ball Decl.”) ¶ 6.) On

June 4, plaintiff’s counsel James Dawson spoke with Ball and learned that she was working on

                                                  8
the FOIA request and coordinating with Rudolph and the National Office. 2 (Pl.’s SMF ¶ 9; see

Pl.’s Opp’n to Def.’s Mot. for Prot. Order (“Pl.’s Prot. Order Opp’n”), Decl. of James Dawson

(“1st Dawson Decl.”) ¶ 2; see also Def.’s SMF ¶ 13.) Ball explained to Dawson that she would

be handling all items of the FOIA request except Item 7. (Def.’s SMF ¶ 14.) A week later on

June 13, Ball informed Dawson that she had contacted the IRS counsel’s Chicago office; sent

emails to Garcia-Pages, Letkewicz, and Merkle; and contacted Genet, who told her that he was

cleaning up his office and that any possibly responsive documents had already been destroyed.

(Pl.’s SMF ¶ 10; see 1st Dawson Decl. ¶ 3.) 3 Thereafter, Ball received responsive documents

from Letkewicz (on behalf of Merkle’s office), from “other [IRS] employees,” and from her

requests pursuant to a search of plaintiff’s tax return identification numbers. (Ball Decl. ¶ 7;

Merkle Decl. ¶ 8.) Ball reviewed those documents for withholdings and redactions. (Ball Decl.

¶ 7.)

        On July 31, 2008, defendant wrote to plaintiff regarding the second IRC request. (See

Pl.’s Opp’n, Decl. of James Dawson (“2nd Dawson Decl.”), Ex. C.) The letter stated that

defendant was busy developing internal record-keeping measures to implement the D.C.

Circuit’s ruling in Tax Analysts v. IRS (“Tax Analysts III”), 495 F.3d 676 (D.C. Cir. 2007)

(holding that informal advice emailed by attorneys in IRS OCC to field personnel constitutes

Chief Counsel Advice that must be disclosed under IRC § 6110). (See 2nd Dawson Decl., Ex. C

        2
         Defendant disputes this statement as hearsay (see Def.’s Resp. to Pl.’s SMF ¶ 9), but the
Court concludes that Ball’s statement is not hearsay but a party-opponent admission. See Fed. R.
Evid. 801(d)(2)(D) (statement by party’s employee “concerning a matter within the scope of the .
. . employment”).
        3
         Again, defendant disputes this statement as hearsay, but as noted, Ball’s statement
constitutes an admission by a party-opponent. See supra note 2. Defendant’s only other
objection to this statement is that it should not be interpreted to mean that Genet destroyed the
records after learning of plaintiff’s FOIA request; however, defendant does not dispute the fact
of the destruction. (Def.’s Resp. to Pl.’s SMF ¶ 10.)

                                                 9
at 2.) Defendant explained that as a result, the agency was presently “unable to divert its

attention from this effort, which [was] under the court’s supervision, in an effort to isolate any

email” that may have been responsive to the second IRC request. (Id.)

       On August 6, 2008, Ball informed Dawson that defendant was sending plaintiff some

documents, but also that “she was ‘not getting responses from her requests.’” (1st Dawson Decl.

¶ 4; Pl.’s SMF ¶ 12.) 4 By letter dated August 8, 2008, plaintiff received a total of 318 pages

from Ball. (See Ball Decl., Ex. A at 2.) These pages were responsive only to Items 1, 3, and 4 of

the FOIA request, because Ball had “found no documents specifically responsive” to Items 2, 5,

6, or 8, and because the National Office would address Item 7. (Id., Ex. B at 1-2; see also Pl.’s

SMF ¶ 13.) 5

       By letter dated September 3, 2008, defendant informed plaintiff that all documents

responsive to the first IRC request for written determination PLR 199903030 were destroyed

pursuant to record retention procedures. (See Def.’s SJ Mot., First Decl. of Matthew Cooper

(“1st Cooper Decl.”), Ex. A.) Several months later, by letter dated February 9, 2009, defendant

responded to the first IRC request for background documents related to AM 2006-006. (Pl.’s

SMF ¶ 16; see 2nd Dawson Decl., Ex. D.) The letter explained that no responsive documents

had been found under the IRC, but defendant nonetheless located 375 pages that were responsive

under FOIA. (2nd Dawson Decl., Ex. D at 1-2.) Of these, 299 were withheld in full under

various FOIA exemptions; 39 pages were disclosed in full, including the AM 2006-006

memorandum and various emails; and 36 pages of emails were disclosed with various privilege

       4
         Again, while defendant disputes this statement as hearsay (Def.’s Resp. to Pl.’s SMF ¶
12), Ball is a party-opponent who purportedly said this to Dawson, plaintiff’s agent. See supra
note 2. Defendant does not otherwise dispute the fact of this statement, just its materiality.
       5
         Although the Ball letter explains that 318 pages were produced, plaintiff suggests that it
received 330 pages. (1st Dawson Decl. ¶ 5.)

                                                 10
redactions under Exemptions 5 and 6. (Id.; Pl.’s SMF ¶¶ 16-18.) The letter also explained that

the remainder of plaintiff’s request would likely be provided on or before April 14. (2nd

Dawson Decl., Ex. D at 2.)

               2.      Post-Litigation Search

       Plaintiff filed this action on April 9, 2009. Counts I through III correspond to plaintiff’s

first IRC request, the second IRC request, and the FOIA request, respectively.

       In May 2009, defendant assigned Matthew Cooper of the Office of the Associate Chief

Counsel to assist with this lawsuit’s defense. (2nd Cooper Decl. ¶¶ 1-2.) Cooper learned that

before plaintiff filed suit, defendant had located but not yet finished reviewing documents

responsive to Items 5-7 of the FOIA request. (Id. ¶ 9.) Cooper “took over the review and

completion of the processing” of those responsive documents and initiated a further search for

electronic records responsive to Items 1-3. (Id. ¶ 10.)

       By email dated July 31, 2009, plaintiff’s counsel Carney informed defendant’s counsel

Carmen Banerjee that plaintiff knew of at least seven boxes of potentially responsive documents

in defendant’s Chicago offices, based upon a 2003 email from Letkewicz to Merkle and

Shilliday. (Pl.’s Prot. Order Opp’n, Decl. Of Robert Carney (“1st Carney Decl.”) ¶¶ 5, 13; see

id., Ex. B; see also Pl.’s SMF ¶ 110; 2nd Cooper Decl. ¶ 11.) 6 Cooper then instructed Merkle’s

office to conduct “a new search of [the] FPL files and provide any additional documents that

[were] potentially responsive” to Items 1-3 of the FOIA request. (Merkle Decl. ¶ 9.) From

September 10 through October 7, the Chicago office searched “all 73 boxes of legal and

administrative files” for FPL’s prior litigation and “all electronic files, e-mails, and personal

       6
          In addition to disputing the materiality of this fact, defendant also objects to plaintiff’s
reliance upon Carney’s exchange with Banerjee under Federal Rule of Evidence 408(a), because
their discussions were part of an effort to negotiate an end to the litigation. (See Def.’s Resp. to
Pl.’s SMF ¶¶ 109-126.) The Court rejects the Rule’s applicability in this particular context.

                                                  11
notes files” belonging to attorneys under Merkle’s management “who had litigated any FPL

matters since 2002 . . . .” (Id. ¶¶ 10-11.) Materials responsive to Items 1-3 were located and

forwarded to Cooper. (Id. ¶¶ 10-12.) Cooper also contacted other IRS personnel including

Clarke and Garcia-Pages of the audit team, and he received additional documents responsive to

Items 1-4 from Garcia-Pages and the IRS counsel’s office in Jacksonville. (2nd Cooper Decl. ¶

12; 3rd Cooper Decl. ¶ 9.)

          From August through November 2009, defendant provided plaintiff with several

thousand more pages that were responsive to both the FOIA and IRC requests. (See Def.’s

Reply, First Decl. of Carmen Banerjee (“1st Banerjee Decl.”) ¶¶ 2-7 & Exs. A-H; id., Second

Decl. of Carmen Banerjee ¶¶ 2-3 & Exs. A-B.) Those documents were accompanied by two

declarations by Cooper. (1st Banerjee Decl. ¶¶ 3, 6; see 1st Cooper Decl. & 2nd Cooper Decl.)

Cooper’s declarations set forth the number of pages located and deemed responsive after plaintiff

filed this suit, general descriptions of the withheld or redacted documents, the FOIA exemptions

and privileges that had been invoked to justify the withholdings or redactions, and more detailed

descriptions of withheld documents. According to the numbers that Cooper provided, 15,845

pages were deemed responsive to plaintiff’s requests, 12,584 pages were withheld in full, 2,153

pages were released in full, and 1,108 pages were released with redactions, as detailed in the

following table: 7

          7
              The Court created this table after an exhaustive review of the haphazardly presented
record.

                                                    12
Request                       Responsive     Withheld       Released in Full      Redacted

FOIA (pre-litigation)
  Items 1, 3, & 4             318            0              318                   0
  Items 2, 5-8                0              0              0                     0

FOIA (post-litigation) 8
  Items 1 & 3                 51             0              50 (or 51)            1 (or 0)
  Item 2                      0              0              0                     0
  Item 4                      58             0              58 (or 57)            0 (or 1)
  Items 5 & 6                 2,059          908            888                   263
  Item 7                      12,661         11,112         744                   805
  Item 8                      0              0              0                     0

IRC (pre- and post-litigation)
   First request
       PLR 199903030 9        11             2              9                     0
                      10
       AM 2006-006            375            297            39                    39
   Second request             312            265 11         47                    0

Total Documents               15,845         12,584         2,153                 1,108

(See 1st Cooper Decl. ¶¶ 9, 14-15, 26 (IRC requests); 2nd Cooper Decl. ¶¶ 12-16, 32 (FOIA

request).)

       8
          The second Cooper declaration states only that one of the 109 pages responsive to Items
1, 3, and 4 was redacted, but he does not specify the item to which the redacted page was
responsive. (See 2nd Cooper Decl. ¶ 15.) The Court’s tabulations for Items 1, 3, and 4 reflect
this uncertainty.
       9
         Despite the fact that plaintiff was informed in 2008 that documents responsive to the
PLR 199903030 request had been destroyed, Cooper’s post-litigation search uncovered that
Feldstein possessed 11 responsive documents. (See 1st Cooper Decl. ¶¶ 8-9.)
       10
         After defendant informed plaintiff that 299 pages were being withheld in full, Cooper
determined that one of those pages should be released as a background file document under IRC
§ 6110, and another that was withheld under FOIA should be released with redactions. (1st
Cooper Decl. ¶ 15.) The Court’s tabulations reflect this change.
       11
         Although Cooper’s first declaration indicates that 265 pages are being withheld (1st
Cooper Decl. ¶¶ 26, 28 (discussing control numbers CII001-CII032 and CII078-CII310), his
second declaration suggests that only 251 pages are being withheld. (See 2nd Cooper Decl. ¶ 45
(CII001-CII032, CII078-CII142, and CII157-CII310).)

                                                 13
       C.      The Instant Motions

       Defendant now moves for summary judgment, arguing that it has satisfied its disclosure

obligations. Plaintiff cross-moves for summary judgment. Some of the disclosures are no longer

in dispute, but plaintiff continues to take issue with defendant’s responses to the first IRC request

as to AM 2006-006, the second IRC request as to numerous emails, and the FOIA request as to

Items 1, 2, 3, 5, and 6. (See Pl.’s Sur-reply at 2.) Specifically, plaintiff argues that defendant (1)

conducted an inadequate search for responsive documents, particularly with respect to FOIA

request Items 1-3; (2) improperly invoked the deliberative process, attorney work product, and

attorney-client privileges under FOIA Exemption 5 to withhold or redact documents responsive

to the IRC requests and FOIA request Items 5 and 6; and (3) failed to comply with the

requirement that all “reasonably segregable” portions of otherwise privileged records be

disclosed. See 5 U.S.C. § 552(b).

                                            ANALYSIS

I.     STANDARD OF REVIEW

       The Court may grant a motion for summary judgment “if the pleadings, the discovery and

disclosure materials on file, and any affidavits show that there is no genuine issue as to any

material fact and that the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P.

56(c). The moving party bears the burden of demonstrating an absence of a genuine issue of

material fact in dispute. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). Factual assertions

in the moving party’s affidavits may be accepted as true unless the opposing party submits his

own affidavits or declarations or documentary evidence to the contrary. Neal v. Kelly, 963 F.2d
453, 456 (D.C. Cir. 1992).

       The parties agree that FOIA’s standards govern the remaining claims. (See Pl.’s Opp’n at

                                                  14
39; Def.’s Reply at 23.) “FOIA cases typically and appropriately are decided on motions for

summary judgment.” Defenders of Wildlife v. U.S. Border Patrol, 623 F. Supp. 2d 83, 87

(D.D.C. 2009) (citations omitted). “In a FOIA case, summary judgment may be granted to the

government if ‘the agency proves that it has fully discharged its obligations under the FOIA,

after the underlying facts and the inferences to be drawn from them are construed in the light

most favorable to the FOIA requester.’” Fischer v. Dep’t of Justice, 596 F. Supp. 2d 34, 42

(D.D.C. 2009) (quoting Greenberg v. U.S. Dep’t of Treasury, 10 F. Supp. 2d 3, 11 (D.D.C.

1998)). The requester may challenge such a showing by “set[ting] out specific facts showing a

genuine issue for trial,” Fed. R. Civ. P. 56(e), that would permit a reasonable jury to find in his

favor. Laningham v. U.S. Navy, 813 F.2d 1236, 1241 (D.C. Cir.1987). However, agency

affidavits “are afforded a presumption of good faith,” and an adequate affidavit “can be rebutted

only ‘with evidence that the agency’s search was not made in good faith.’” Defenders of Wildlife

v. U.S. Dep’t of Interior, 314 F. Supp. 2d 1, 8 (D.D.C. 2004) (quoting Trans Union LLC v. Fed.

Trade Comm’n, 141 F. Supp. 2d 62, 69 (D.D.C. 2001)). In other words, a requester cannot rebut

the good faith presumption through “‘purely speculative claims about the existence and

discoverability of other documents.’” SafeCard Servs., Inc. v. Sec. & Exch. Comm’n, 926 F.2d
1197, 1200 (D.C. Cir. 1991) (quoting Ground Saucer Watch, Inc. v. Cent. Intelligence Agency,

692 F.2d 770, 771 (D.C. Cir. 1981)). But “if the sufficiency of the agency’s identification or

retrieval procedure is genuinely in issue, summary judgment is not in order.” Weisberg v. U.S.

Dep’t of Justice, 627 F.2d 365, 370 (D.C. Cir. 1980).

                                                 15
II.    ADEQUACY OF SEARCH

       Defendant argues that “it conducted its searches within the four corners of each request,

employed several methodologies in conducting its searches, and thereby conducted reasonable

searches.” (Def.’s Reply at 2; see also Def.’s Mot. at 6-8.) Indeed, Ball and Cooper’s

declarations go into extensive detail about the methodology and scope of defendant’s pre- and

post-litigation searches. Nonetheless, plaintiff contends that defendant failed to conduct a

reasonable and good faith search for responsive documents both before and after this litigation

commenced. Based on the undisputed evidence and applicable legal principles, the Court is

persuaded by some of plaintiff’s arguments.

       “[T]he adequacy of a FOIA search is generally determined not by the fruits of the search,

but by the appropriateness of the methods used to carry out the search.” Iturralde v. Comptroller

of Currency, 315 F.3d 311, 315 (D.C. Cir. 2003). The Court applies a “‘reasonableness’ test to

determine the ‘adequacy’ of search methodology,” Campbell v. U.S. Dep’t of Justice, 164 F.3d
20, 27 (D.C. Cir. 1998), and requires a “reasonable and systematic approach to locating the

requested documents . . . .” Center for Pub. Integrity v. FCC, 505 F. Supp. 2d 106, 116 (D.D.C.

2007). “The agency must demonstrate that it ‘made a good faith effort to conduct a search for

the requested records, using methods which can be reasonably expected to produce the

information requested.’” Fischer, 596 F. Supp. at 42 (quoting Oglesby v. U.S. Dep’t of the Army,

920 F.2d 57, 68 (D.C. Cir. 1990)).

       Plaintiff first argues that defendant incorrectly interpreted Items 1-3 so as to exclude

settlement-related documents as non-responsive. Plaintiff contends that it obtained “numerous

emails” during discovery in the Tax Court case which should have been located in defendant’s

Chicago office as responsive to the FOIA request. (Pl.’s Opp’n at 15-16.) Because these emails

                                                16
were not produced (nor do they appear in Cooper’s privilege log), plaintiff argues that this is

“proof that the search was neither reasonable nor in good faith.” (Id. at 16.) As evidence,

plaintiff cites six emails related to the agency’s rejection of a settlement proposal. (See 2nd

Dawson Decl. ¶¶ 27-37; id., Ex. E at 36-38; id., Ex. K at 14-16.) However, defendant has taken

the position that “records relating to the proposed settlement are not responsive to the [FOIA]

request” (Def.’s Resp. to Pl.’s SMF ¶¶ 44-63), with Cooper declaring that plaintiff did not “seek

any records relating to the proposed settlement issue.” (3rd Cooper Decl. ¶ 8.) The Court agrees

with defendant that settlement-related documents were not responsive to the FOIA request. Item

1 seeks documents “related specifically” to Williamson’s denial of plaintiff’s request for a

retroactive change in its method of accounting for repair expenses, and Item 3 seeks documents

related to “a final decision” not to allow plaintiff’s “requested protective change in the method

of accounting . . . filed in 2001.” (FOIA Request at 2 (emphasis added).) Both items relate only

to Williamson’s denial of plaintiff’s request for a retroactive wholesale change in accounting

methodology, which the Tax Court effectively affirmed in 2005, see FPL Group II, 2005 WL
2159680, at *2, *4 (holding that the 2001 Williamson denial was not abuse of discretion), and

therefore do not relate to post-denial settlement discussions, which focused on methodologies for

prospectively classifying specific items of equipment. 12 FPL Group III, 2008 WL 2199696, at

       12
           Accordingly, the Court also rejects plaintiff’s suggestion that Cooper misread the scope
of Item 3 as identical to the scope of Item 1, thereby supposedly leading him to conclude that
scores of documents were non-responsive. (See Pl.’s Opp’n at 18-19; Pl.’s Sur-reply at 11-13.)
Cooper correctly characterized Items 1 and 3 as limited to “documents relating to the Service
decision to deny plaintiff’s protective request for a change in method of accounting for the
repairs issue.” (3rd Cooper Decl. ¶ 7; see Pl.’s Sur-reply at 11-12.) Cooper explained that “the
only documents relating to this denial of the protective request” had already been given to
plaintiff even before the Chicago office conducted its post-litigation search. (3rd Cooper Decl. ¶
7 (citing FPL Group II).) Further, plaintiff cannot rely upon the 2001 Williamson denial to
argue that “[e]fforts to resolve the method of accounting were ongoing” even after that denial.
(See Pl.’s Sur-reply at 11 (citing Pl.’s SMF ¶ 40 (citing 2nd Dawson Decl. ¶ 24 (citing but
misquoting 2001 Williamson denial))).) Williamson’s letter denied plaintiff’s request for a

                                                 17
*2. The Court also concludes that Items 2 and 4-8 do not encompass settlement-related

documents. Therefore, the six emails accompanying the second Dawson declaration do not

establish the inadequacy of defendant’s search.

       Plaintiff also argues that even though responsive documents had been destroyed by

Genet, the technical advisor identified by the FOIA request as a likely custodian, defendant was

nonetheless obligated to follow up with other personnel who were likely to have copies of the

destroyed materials. (Pl.’s Sur-reply at 8.) In light of the evidence presented, the Court agrees.

In an attempt to rebut plaintiff’s inference that Genet had inappropriately destroyed the

documents, defendant cited information derived from the purported contents of Ball’s notes from

her pre-litigation telephone conversation with Genet. (See Def.’s Reply at 5 (“With respect to

FPL’s claims about destroyed records, a former Service employee destroyed records prior to the

Service receiving the requests pursuant to a record retention schedule.”).) But instead of

introducing a copy of the notes, and because Ball was supposedly unavailable to provide a

second declaration, defendant relied instead upon a declaration by Ball’s supervisor, Paula

Curren (id., Decl. of Paula M. Curren ¶ 3), in which she reproduced the notes:

       Frank Genet 06/06/08 Utilities Technical Advisor (OH)

       06/06/08 verbal & 6/13/08 email. Verbal: records destroyed. Repair vs Capital
       issue was not a coordinated effort. They did provide some oral advice, but no
       directives. This is a fact of law, no special issue directives, etc. were needed.
       E:mail: I have no records electronic or in hardcopy for the requested information.
       I had a binder for this taxpayer that contained historical information such as

blanket retroactive change in accounting methodology, and then merely suggested that plaintiff
and the audit team might be able to resolve the underlying tax dispute by collaborating to
determine which line items among the power plant expenses would be treated as repair expenses.
(See 2001 Williamson Denial at 1-2 (“[T]his should not end the matter. We previously discussed
the possibility of [plaintiff] and [the agency] working together to reach agreement as to which
plant items should be expensed and which should be capitalized. . . . I suggest that such a
resolution is worth pursuing here. I thus suggest that [plaintiff] broach the subject with the
[audit] team.”).)

                                                  18
       correspondence with the audit team and RARs and destroyed it earlier this year
       due to records retention rules.

(Id. ¶ 3-4 (emphasis added).) 13

       Even assuming that these notes are not hearsay and that they can be relied upon despite

plaintiff’s inability to discover them (but see Pl.’s Sur-reply at 8-9), the notes clarify that Genet’s

documents included “correspondence with the audit team,” which was comprised of revenue

agents Baryza, Clarke, and Northard, legal counsel Garcia-Pages, and possibly other people.

“When all other sources fail to provide leads to the missing record, agency personnel should be

contacted if there is a close nexus . . . between the person[nel] and the particular record.”

Valencia-Lucena v. U.S. Coast Guard, 180 F.3d 321, 328 (D.C. Cir. 1999). Here, “[t]he

undisputed connection between the missing [correspondence] and [the members of the audit

team] should have led the [agency] to inquire of [the audit team] as a source ‘likely to turn up the

information requested’ regarding the missing [correspondence’s] whereabouts.” Id. (quoting

Oglesby, 920 F.2d at 68). Although Cooper contacted Garcia-Pages and Clark as part of the

post-litigation search, there is no evidence that defendant specifically sought to obtain Genet’s

correspondence with them (see 2nd Cooper Decl. ¶ 12), or that Garcia-Pages provided anything

to Cooper beside a May 2002 email “congratulating Mr. Williamson on his retirement.” (Pl.’s

Sur-reply at 10-11; see 2nd Cooper Decl. ¶ 12.) There is also no evidence that defendant

searched for Baryza or Northard’s emails, and although Cooper suggested that Baryza “no longer

work[s] for the Service” (2nd Cooper Decl. ¶ 12), defendant has not yet shown that it would have

been “fruitless”“ to search her email records, which may well have remained in defendant’s

       13
          Although plaintiff had sought these notes during discovery, this Court granted
defendant’s motion for a protective order. (See Pl.’s Prot. Order Opp’n, Ex. A (Pl.’s Interrog.) at
2-3 ¶ 2(e) (seeking descriptions or copies of documents memorializing Ball’s contacts with IRS
employees in connection with securing responsive documents).)

                                                  19
custody and control even after Baryza’s departure. 14 Cf. Valencia-Lucena, 180 F.3d at 328

(“Absent any indication that an inquiry of [a document’s possible custodian] would be fruitless,

either because he is no longer in the [defendant’s service] or because the storage of the

[document] was controlled by other persons or by internal procedures, such an inquiry was

required.”). The record is also unclear as to whether there were any other members of the audit

team. The Court thus cannot conclude that defendant conducted an adequate search for Genet’s

correspondence with the audit team.

       For these reasons, defendant’s motion is denied with respect to the adequacy of its search,

because the agency has not met its burden to “demonstrate beyond material doubt that its search

was reasonably calculated to uncover all relevant documents.” The Nation Magazine v. U.S.

Customs Serv., 71 F.3d 885, 890 (D.C. Cir. 1995) (internal quotation marks omitted). To address

this deficiency, defendant shall search the records of all members of “the audit team” (including

the records for members who are no longer with the IRS, provided that such records are within

defendant’s possession, custody, or control) for correspondence with Frank Genet, 15 and by

April 20, 2010, it shall file an affidavit that (1) identifies all members of “the audit team,” (2)

states whether the records of each member of the audit team was specifically searched for

correspondence with Frank Genet before or after defendant moved for summary judgment, and

(3) states whether any documents have been located and whether they were located before or

after defendant moved for summary judgment. If defendant locates any documents not

previously produced that are responsive, then defendant shall disclose them to plaintiff, unless

defendant seeks to withhold or redact such documents, in which case (1) its affidavit must be
       14
            Northard also appears to have left the IRS.
       15
         However, defendant need not search the records of any audit team member whose
records were previously reviewed by someone who had been specifically instructed to search for
correspondence with Genet.

                                                  20
accompanied by a Vaughn index supporting the withholdings or redactions, and (2) defendant

must produce the documents for in camera review.

III.    EXEMPTION 5

        FOIA requires disclosure of requested “agency records,” including “[a]ny reasonably

segregable portion of a record,” absent a demonstration by the government that the materials fall

within one of nine exemptions. See 5 U.S.C. §§ 552(a)(3) & (b); see also Judicial Watch, Inc. v.

Dep’t of Energy, 412 F.3d 125, 128 (D.C. Cir. 2005). Exemption 5, the only remaining

exemption at issue, “protects from disclosure ‘inter-agency or intra-agency memorandums or

letters which would not be available by law to a party other than an agency in litigation with the

agency.’ To qualify, a document must thus satisfy two conditions: its source must be a

Government agency, and it must fall within the ambit of a privilege against discovery under

judicial standards that would govern litigation against the agency that holds it.” Dep’t of Interior

v. Klamath Water Users Protective Ass’n, 532 U.S. 1, 8 (2001) (quoting 5 U.S.C. § 552(b)(5)).

        The privileges that are incorporated into Exemption 5 include the deliberative process

privilege, the attorney work-product privilege, and the attorney-client communications privilege.

See Nat’l Labor Relations Bd. v. Sears, Roebuck & Co., 421 U.S. 132, 149 (1975). Defendant

asserts all three privileges as follows: 16

        16
           Many pages were also withheld or redacted under Exemptions 3 or 6, whose invocation
plaintiff no longer disputes.

                                                21
Request                 Withheld                                   Redacted
First IRC Request       297 total:                                 39 total:
(AM 2006-006)             297: deliberative process privilege       30: deliberative process privilege
                          unspecified number of emails:             unspecified number of emails:
                           attorney-client privilege                  attorney-client privilege
Second IRC Request      265 total:                                 None
                          265: attorney work product
                          265: attorney-client privilege

FOIA Items 5 & 6        908 total:                                 263 total:
                          806: deliberative process privilege       148: deliberative process privilege
                          294: attorney work product

  (See 1st Cooper Decl. ¶¶ 17, 28; 2nd Cooper Decl. ¶¶ 34, 37; 3rd Cooper Decl. ¶ 17.)

          A.     Privileges

                 1.      Deliberative process

          Exemption 5 has long been interpreted to include a deliberative process privilege serving

  a number of related ends, among them:

          assur[ing] that subordinates within an agency will feel free to provide the
          decisionmaker with their uninhibited opinions and recommendations without fear
          of later being subject to public ridicule or criticism; . . . protect[ing] against
          premature disclosure of proposed policies before they have been finally
          formulated or adopted; and . . . protect[ing] against confusing the issues and
          misleading the public by dissemination of documents suggesting reasons and
          rationales for a course of action which were not in fact the ultimate reasons for the
          agency’s action.

  Coastal States Gas Corp. v. Dep’t of Energy, 617 F.2d 854, 866 (D.C. Cir. 1980). The privilege

  applies to records that the government demonstrates to be both “‘predecisional’” – i.e.,

  “generated before the adoption of an agency policy” – and “‘deliberative,’” – i.e., “reflect[ive]

  [of] the give-and-take of the consultative process.” Id. at 866 (emphasis added). The burden is

  on the agency to “establish[] what deliberative process is involved[] and the role played by the

  documents in issue in the course of that process.” Id. at 868.

                                                   22
        The deliberative process privilege “covers recommendations, draft documents, proposals,

suggestions, and other subjective documents which reflect the personal opinions of the writer

rather than the policy of the agency.” Coastal States, 617 F.2d at 866. However, the privilege

does not shield documents reflecting an agency’s “working law,” such as the reasons which

supplied the basis for a previously adopted agency policy, Sears, Roebuck & Co., 421 U.S. at

152, documents that are “simply straightforward explanations of agency regulations in specific

factual situations,” or documents that do not “reflect ‘agency give-and-take of the deliberative

process by which the decision itself is made.’” Coastal States, 617 F.2d at 868 (quoting Vaughn

v. Rosen, 523 F.2d 1136, 1144 (D.C. Cir. 1975)) (emphasis added). This is because an agency

may not develop “a body of ‘secret law,’ used by it in the discharge of its regulatory duties and

in its dealings with the public, but hidden behind a veil of privilege because it is not designated

as ‘formal,’ ‘binding,’ or ‘final.’” Id. at 867.

        Moreover, “[f]actual material is not protected under the deliberative process privilege

unless it is ‘inextricably intertwined’ with the deliberative material.” Judicial Watch, Inc. v.

Dep’t of Justice, 432 F.3d 366, 372 (D.C. Cir. 2005) (quoting In re Sealed Case, 121 F.3d 729,

737 (D.C. Cir. 1997) (per curiam)). “[E]ven if some materials from the requested record are

exempt from disclosure, any ‘reasonably segregable’ information from those documents must be

disclosed after redaction of the exempt information unless the [non-]exempt portions are

‘inextricably intertwined with exempt portions.’” Johnson v. Executive Office for U.S.

Attorneys, 310 F.3d 771, 776 (D.C. Cir. 2002) (quoting 5 U.S.C. § 552(b) and Mead Data Cent.,

Inc. v. Dep’t of the Air Force, 566 F.2d 242, 260 (D.C. Cir. 1977)).

        Finally, although deliberative documents are typically prepared within an agency, “in

some circumstances a document prepared outside the Government may nevertheless qualify as

                                                   23
an ‘intra-agency’ memorandum under Exemption 5.” Klamath, 532 U.S. at 9. Thus, “intra-

agency” records can include documents submitted in response to “formal agency solicitation of

advice from a discrete group of experts,” Nat’l Institute of Military Justice v. U.S. Dep’t of Def.

(“NIMJ”), 512 F.3d 677, 680, 687 (D.C. Cir. 2008), such as recommendations by lawyers whose

confidential counsel was solicited “based on their undisputed experience and qualifications.” Id.

at 683. However, documents from “random citizens volunteering their opinions” would not be

protected, id., nor would “communications to or from an interested [non-governmental] party

seeking a Government benefit at the expense of other applicants.” Klamath, 532 U.S. at 12 n.4.

                2.       Attorney Work Product

        “The work product doctrine shields materials ‘prepared in anticipation of litigation or for

trial by or for [a] party or by or for that . . . party’s representative (including the . . . party’s

attorney, consultant, . . . or agent).” Tax Analysts v. Internal Revenue Serv. (“Tax Analysts I”),

117 F.3d 607, 620 (D.C. Cir. 1997) (quoting Fed. R. Civ. P. 26(b)(3)). “The purpose of the

privilege, however, is not to protect any interest of the attorney, who is no more entitled to

privacy or protection than any other person, but to protect the adversary trial process itself.”

Coastal States, 617 F.2d at 864. A document “prepared for use in litigation, whether the

litigation was underway or merely anticipated,” United States v. Textron Inc. & Subsidiaries, 577
F.3d 21, 29 (1st Cir. 2009) (en banc), and “not just the portions concerning opinions, legal

theories, and the like, is protected by the work product doctrine and falls under [E]xemption 5.”

Tax Analysts I, 117 F.3d at 620. For this reason, “segregability is not required” for a document

that is “fully protected as work product . . . .” Judicial Watch, 432 F.3d at 371.

                3.       Attorney-client communications

        “The attorney-client privilege protects confidential communications from clients to their

                                                    24
attorneys made for the purpose of securing legal advice or services.” Tax Analysts I, 117 F.3d at

618. The privilege also “protects communications from attorneys to their clients if the

communications ‘rest on confidential information obtained from the client.’” Id. (quoting In re

Sealed Case, 737 F.2d 94, 98-99 (D.C. Cir. 1984)). Where a government entity’s documents do

not “rest upon confidential information obtained from” a government client, it is “not covered by

the attorney-client privilege” and may not be withheld on that basis. Citizens for Responsibility

& Ethics in Wash. v. Office of Admin., 249 F.R.D. 1, 4 (D.D.C. 2008).

       B.      First IRC Request (Count I)

       For the first IRC request, 298 withheld pages and 39 redacted pages remain at issue.

These pages consist of “drafts, handwritten notes, and e-mails relating to the revenue ruling”

contained in AM 2006-006. (Def.’s Reply at 7.) According to defendant, these documents are

“draft memoranda and email discussions among Chief Counsel employees on the exact same

issue addressed in the written determination” found in AM 2006-006, i.e., “what is the

appropriate tax treatment of costs of restoring property when the taxpayer has claimed a casualty

loss.” (1st Cooper Decl. ¶ 17.)

       Defendant argues that the deliberative process privilege properly applies to the draft

memoranda because they are pre-decisional, having been “prepared prior to the final approval of

the memoranda by the Associate Chief Counsel,” and deliberative, as “they ‘reflect the suggested

revisions and recommendations of Chief Counsel attorneys involved in’” the memorandum’s

drafting. (Def.’s Mem. of P. & A. in Supp. of SJ Mot. (“Def.’s SJ Mem.”) at 33 (quoting 1st

Cooper Decl. ¶ 17).) Although defendant did not provide a Vaughn index for these documents,

Cooper’s second declaration offers some descriptions of the responsive documents being

withheld in full. (See 2nd Cooper Decl. ¶ 41.) Plaintiff responds that defendant’s assertion of

                                                25
the privilege is insufficiently specific and overbroad, and that some of the documents at issue are

not deliberative but rather relate to the application of established law to the specific facts of

plaintiff’s method of accounting for repair expenses. (Pl.’s Opp’n at 27-29; Pl.’s Sur-Reply at

19.) 17

          Cooper’s declarations provide sufficient detail about 296 of the 298 withheld pages “to

inform plaintiff of the nature of the information withheld and the reasons therefore and to permit

the Court to determine the applicability of each exemption claimed.” Fischer, 596 F. Supp. 2d at

44. These pages are described as deliberations related to AM 2006-006’s development, whose

release could discourage candid intra-agency discussion and also confuse the public by

disclosing tentative rationales not ultimately published in support of AM 2006-006. 18 (See 2nd

          17
           The Court rejects plaintiff’s argument that defendant’s invocations of the deliberative
process privilege “should be overruled because they were not properly made by the appropriate
delegate of the [IRS] Commissioner” as set forth in an agency delegation order, and because they
“did not meet the standards for assertion” set forth in that delegation order and in a FOIA
guidance memorandum issued by Attorney General Holder. (Pl.’s Sur-reply at 13-15; see also
Pl.’s Opp’n at 31-33; 1st Carney Decl., Ex. A at 4-6 (“Holder Memorandum”).) First, “[t]here is
simply no basis in law or practice for believing that the personal invocation of a privilege is a
prerequisite to withholding under FOIA.” Lardner v. U.S. Dep’t of Justice, No. 03-CV-180,
2005 WL 758267, at *8 (D.D.C. Mar. 31, 2005). Second, the IRS order cited by plaintiff
addresses delegation authority for situations where “[c]ertain federal courts recognize claims of
executive privilege by the head of the agency as the sole basis for protecting internal or inter-
agency records . . . .” See IRS Delegation Order 30-4 (Oct. 1, 2009) (emphasis added), available
at http://www.irs.gov/pub/foia/ig/disclosure/do-30-4.pdf (last visited March 10, 2010). This is
not such a situation. See Lardner, 2005 WL 758267, at *8 (“There is no indication in the text of
the statute or elsewhere that Congress anticipated – much less demanded – that the decision to
withhold documents under Exemption 5 would need to be made personally by the head of the
agency . . . . [N]o court has ever indicated that [a high-level agency] official must make the
determination that a document comes within Exemption 5 . . . .”). Third, Attorney General
Holder’s memorandum regarding “a presumption of openness” is non-justiciable, especially
given that it states that it does not create any enforceable rights against the government. (See
Holder Memorandum at 3.)
          18
         Plaintiff also argues, citing Cooper’s third declaration, that these documents have been
improperly withheld as “agency working law.” (See Pl.’s Sur-reply at 19.) This misconstrues
Cooper’s declaration, which explains merely that the agency has withheld “deliberative
documents underlying ‘agency working law’” – i.e., deliberations underlying the AM 2006-006

                                                  26
Cooper Decl. ¶ 42.) In addition, Cooper declared under penalty of perjury that the documents

“withheld in their entirety” were either wholly exempt or contained nonexempt material that was

“so inextricably intertwined with exempt material as to be non-segregable.” (1st Cooper Decl. ¶

16; see also id. at 15 (oath and signature).) From this, and because “there is nothing in the record

to indicate that such [withholdings] are inappropriate,” the Court concludes that defendant has

satisfied its segregation burden. Judicial Watch, Inc. v. U.S. Dep’t of Justice, No. 01-CV-639,

2006 WL 2038513, at *5-*6 (D.D.C. July 19, 2006) (rejecting plaintiff’s segregation claim

where agency declaration “very clearly declare[d], under penalty of perjury, . . . that ‘all

reasonably segregable information has been disclosed’”). Defendant’s motion is granted as to

these 296 withheld pages.

       However, two withheld pages lack adequate descriptions and are identified by control

numbers CI090 (“Internal emails” from June 2006 between two agency attorneys “discussing the

results of initial research on casualty losses”) and CI109 (“Handwritten notes mentioning certain

issues under section 162 of the Internal Revenue Code”). (2nd Cooper Decl. ¶ 41.) These

descriptions are not specific enough to establish that the documents “make[] recommendations or

express[] opinions on” the drafting of AM 2006-006, Vaughn, 523 F.2d at 1144, or even “what

deliberative process is involved” or “the role played by the documents . . . in the course of that

process.” 19 Coastal States, 617 F.2d at 868. Defendant’s motion for summary judgment is

written determination. (3rd Cooper Decl. ¶ 22 (emphasis added).) To withhold such underlying,
preliminary deliberations does not run counter to Coastal States’s admonition against “secret
law.”
       19
          Defendant asserts that page CI090 consists of “facts selectively assembled by the
Service” whose disclosure would reveal the contours of defendant’s deliberations. (Def.’s Reply
at 11.) This argument relies upon the D.C. Circuit’s opinion in Montrose Chemicals Corp. of
California v. Train, 491 F.2d 63 (D.C. Cir. 1974). (See Def.’s Reply at 10.) However, Montrose
involved a situation where “all the facts” contained in the withheld documents were “in the
public record,” and what was protected was the agency’s “evaluation and selection of certain

                                                 27
denied as to these two pages.

       Defendant also concedes that Cooper’s declarations offer no information about the 39

pages that were disclosed with redactions. (See Def.’s SJ Mem. at 33; 2nd Cooper Decl. ¶ 41.)

This leaves the Court without any basis to conclude that the redacted material is protected by

either the deliberative process or attorney-client privilege. And because defendant has not

sustained its burden to establish Exemption 5’s applicability, defendant has necessarily failed to

show that all reasonably segregable non-exempt portions of these records have been disclosed.

Defendant’s motion is denied as to the 39 redacted pages.

       By April 20, 2010, defendant shall produce pages CI090 and CI109 and unredacted

versions of the 39 redacted pages for in camera review. Defendant shall specify the privilege

invoked for each withholding or redaction, and if defendant continues to invoke the attorney-

client privilege for any of these documents, the documents must be accompanied by an affidavit

submitted in camera explaining how each withholding or redaction reflects “confidential

communications from clients to their attorneys made for the purpose of securing legal advice or

services” or “communications from attorneys to their clients” that “‘rest on confidential

information obtained from the client.’” Tax Analysts I, 117 F.3d at 618 (quoting In re Sealed

Case, 737 F.2d at 99). By April 20, 2010, defendant shall also file (1) a Vaughn index that

summarizes each document produced in camera, identifies each document’s author(s), states

whether it is responsive to FOIA request Item 5, Item 6, or both, and states whether it is

facts from the 9200-page public record.” 491 F.2d at 70. Montrose “is to be distinguished from
a situation in which the only place certain facts are to be found is in [the withheld documents].”
Id. Where a court “confront[s] a case in which some facts are only found in the [agency’s
withheld documents],” then “the Government would bear the burden of putting the record in
such shape that all facts are in the public record, separate from analysis which need not be
disclosed.” Id. at 70-71. Because the record is silent as to the type of research and facts
contained in page CI090, the Court cannot determine which situation is presented by the
document.

                                                28
protected by the deliberative process privilege, attorney-client privilege, or both; and (2) an

affidavit explaining the role of each document’s author(s) within the IRS, the role (if any) played

in the deliberative process by each document or by each document’s redacted portions, and

whether each document contains privileged attorney-client communications as defined above.

       C.      Second IRC Request (Count II)

       For the second IRC request, 265 withheld pages remain at issue. They “all involve

discussions among Chief Counsel employees prepared during or in anticipation of active

litigation with the plaintiff” with respect to the Tax Court case. (2nd Cooper Decl. ¶ 45; see also

Def.’s SJ Mem. at 28.) The records “were primarily created by attorneys from [OCC], including

attorneys setting forth the service’s legal position in the [Tax Court] litigation in documents

called workplans.” (Def.’s Reply at 17 (citing 2nd Cooper Decl. ¶ 45).) Defendant asserts both

the attorney work product privilege and attorney-client privilege for each document.

       Defendant asserts that the withheld pages constitute attorney work product because they

“involve discussions among counsel employees prepared during or in anticipation of active

litigation with the plaintiff” in the Tax Court case. (1st Cooper Decl. ¶ 28 (emphasis added); see

Def.’s SJ Mem. at 28.) For example, the records include drafts and comments upon workplans

that set forth defendant’s case strategy in the Tax Court litigation. (1st Cooper Decl. ¶ 28.)

       Defendant accurately states the legal standard with respect to documents prepared “in

anticipation” of litigation. But it appears that defendant may be overstating the privilege’s scope

by suggesting that it also applies to materials described simply as having been prepared “during”

active litigation. As plaintiff observes, “documents containing discussions of [p]laintiff’s

accounting methods do not become ‘work product’ by the mere happenstance that the

discussions occurred during a pending case involving a different taxpayer with the same or

                                                 29
similar issues.” (Pl.’s Sur-reply at 21.) In other words, an attorney’s mental impressions do not

become protected work product simply because they were expressed concurrently with some

form of litigation. Rather, the expressions must be prepared either “in anticipation of” litigation

or, if the litigation is ongoing, “for” litigation, whether for trial, appeal, or litigation resolution.

See Textron, 577 F.3d at 29; Fed. Trade Comm’n v. Grolier Inc., 462 U.S. 19, 25 (1983)

(observing in FOIA case that “the literal language of [Federal Rule of Civil Procedure 26(b)(3)]

protects materials prepared for any litigation or trial” (emphasis added; original emphasis

removed)); see, e.g., N.Y. Times Co. v. U.S. Dep’t of Defense, 499 F. Supp. 2d 501, 517

(S.D.N.Y. 2007) (exempting from disclosure records that provided guidance for responding to

motions).

        Cooper’s declarations provide sufficient detail about 235 of the 265 withheld pages to

support the privilege’s application, because these pages are described as litigation strategy

workplans or comments upon those workplans. (See 2nd Cooper Decl. ¶ 45.) Because these 235

documents are “fully protected as work product, . . . segregability is not required.” Judicial

Watch, 432 F.3d at 371. Accordingly, defendant’s motion is granted as to these 235 pages.

        By contrast, the Court concludes that the following 30 pages have not been described

with sufficient clarity to sustain the invocation of either the attorney work product or attorney-

client privilege:

           CII001 and CII014 (“A string of emails dated December 10, 2008 pertaining to the
            submission of [an] attached workplan . . . for review by attorneys in [Feldstein’s OCC
            section]”);

           CII078-CII099 (to the extent that they constitute “[t]he same strings of emails in
            CII001”); and

           CII267-268, CII281-282, and CII297-298 (“e-mail string[s]” between agency
            attorneys, to the extent that they “pertain[] to the submission of one of the
            workplans”).

                                                    30
(2nd Cooper Decl. ¶ 45.) Cooper describes these 30 pages as involving attorney discussions

“prepared during or in anticipation of active litigation” (id.), so it cannot be determined from his

declaration whether these 30 pages of emails were written “during” – i.e., concurrently with –

but not “in anticipation of” the active litigation. If they were prepared “during” litigation, then

the fact that they “pertain[ed] to” the submission of litigation workplans would be too vague to

establish that the emails were prepared “for” litigation, whether ongoing or anticipated, as would

be required to merit the privilege. See Textron, 577 F.3d at 29; Grolier, 462 U.S. at 25. The

Court also cannot determine from Cooper’s descriptions of these emails (see also 1st Decl. ¶ 29)

whether they are protected by the attorney-client privilege. Accordingly, defendant’s motion for

summary judgment is denied as to these 30 pages.

       By April 20, 2010, defendant shall produce pages CII001, CII014, CII078-CII099,

CII267-268, CII281-282, and CII297-298 for in camera review. Defendant shall specify the

privilege invoked for each withholding, and if defendant continues to invoke the attorney-client

privilege for any of these documents, the documents must be accompanied by an affidavit

submitted in camera explaining how each withholding reflects “confidential communications

from clients to their attorneys made for the purpose of securing legal advice or services” or

“communications from attorneys to their clients” that “‘rest on confidential information obtained

from the client.’” Tax Analysts I, 117 F.3d at 618 (quoting In re Sealed Case, 737 F.2d at 99).

By April 20, 2010, defendant shall also file (1) a Vaughn index that summarizes each document

produced in camera, identifies each document’s author(s), states whether it is responsive to

FOIA request Item 5, Item 6, or both, and states whether it is protected by the attorney work

product privilege, attorney-client privilege, or both; and (2) an affidavit explaining the role of

each document’s author(s) within the IRS and whether each document was prepared “in

                                                 31
anticipation of” litigation, whether it was prepared “for” litigation, or whether it contains

privileged attorney-client communications.

       C.      FOIA Request Items 5 & 6 (Count III)

       The withheld and redacted pages at issue that are responsive to Item 5 and 6 of the FOIA

request relate to the IIR process. (See Def.’s Reply at 7.) In support of its reply brief, defendant

submitted a third declaration by Cooper that was accompanied by a privilege log for these

documents. (See 3rd Cooper Decl. ¶ 20 & Ex. F (“Privilege Log”).) The privilege log lists each

document’s Bates number, date, description, and claimed exemption, but plaintiff contests the

log’s adequacy. (See Pl.’s Sur-reply at 3 n.1.)

       Based on the Court’s review of the log’s listing of 178 discrete documents, 137

documents were withheld or redacted under Exemption 5. The withheld and redacted documents

at issue are (1) “drafts of the proposed revenue ruling and related documents prepared by the

drafting team,” (2) “email discussions” among agency counsel and other employees about “the

potential content of two sets of proposed regulations,” (3) “briefing memoranda . . . prepared by

the drafting team analyzing various legal issues in the draft revenue ruling,” (4) “conference

reports” prepared by the drafting team which summarize meetings of agency counsel and other

employees “discussing legal issues in the draft revenue ruling,” (5) “[b]ackground information

notes, handwritten notes, and other documents prepared by the drafting team during the review

of the proposed revenue ruling” (2nd Cooper Decl. ¶ 35; accord Def.’s Reply at 7, 9), and (6)

email discussions among agency counsel and other employees regarding the agency’s then-active

litigation in Federal Express Corp. v. United States, 412 F.3d 617, 617 (6th Cir. 2005) (affirming

district court’s conclusion that taxpayer could deduct equipment maintenance costs as repair

expenses instead of capitalizing them) (“the FedEx litigation”), and “its effect on the issue under

                                                  32
consideration” – i.e., the repair expense issue. (2nd Cooper Decl. ¶ 37; 3rd Cooper Decl. ¶¶ 17-

18; accord Def.’s Reply at 15.)

       Defendant has invoked the deliberative process privilege for 134 documents. Defendant

contends that their disclosure could, inter alia, confuse the public by disclosing tentative

rationales not ultimately published and discourage candid intra-agency discussion about the

drafting of revenue rulings, thus undermining defendant’s ability to perform its “‘tax

administration function of publishing guidance.’” (Def.’s Reply at 13-14 (quoting 3rd Cooper

Decl. ¶ 14); see also 2nd Cooper Decl. ¶ 36.)

       As a threshold matter, plaintiff argues that because EEI and its counsel participated

“extensive[ly]” with defendant in the course of the IIR process, including by sharing information

and comments regarding the proposed revenue ruling, “it can hardly be argued that the IIR

process consisted of an internal deliberative process solely undertaken by” the agency. (Pl.’s

Sur-reply at 17-18.) 20 Defendant correctly observes that the mere participation of outside entities

       20
          Plaintiff further contends that even if the IIR program was a deliberative process, the
proposed revenue ruling was ultimately adopted by the agency as working law that must be
disclosed. (See Pl.’s Sur-reply at 18.) Because defendant supposedly “conceded that the
proposed ruling was incorporated (‘rolled’) into [d]efendant’s published proposed ‘tangible
property’ regulations,” plaintiff concludes that “the proposed revenue ruling became
[d]efendant’s final policy as to the issues raised during the IIR process,” rendering “any
underlying facts, analysis, documents, and memoranda supporting [d]efendant’s final policy, i.e.,
the proposed revenue ruling, . . . subject to disclosure.” (Id. (emphasis added).)
        This argument fails because plaintiff overstates defendant’s concession. All that is
undisputed is that “the IIR project was rolled into the proposed tangible [asset] regulations.”
(Pl.’s SMF ¶ 90; Def.’s Resp. to Pl.’s SMF ¶ 90 (emphases added).) There is no evidence that
the proposed revenue ruling itself was incorporated into anything. (Cf. 2nd Dawson Decl., Ex.
NN (Feldstein email referencing EEI counsel’s “concern[] about the prospect of rolling this IIR
project into the tangible regs” (emphasis added)); id., Ex. OO (Feldstein email explaining that
EEI’s concern stemmed from that the possibility that “we may hold up the ruling for the tangible
regulation” (emphasis added)).) Further, even if it were proper to assume that “the IIR project”
is synonymous with “the proposed revenue ruling” and that the latter was incorporated into the
proposed 2006 tangible asset regulations, there is no evidence that it was incorporated into any
final regulations or was otherwise “adopted, formally or informally, as the agency position on an

                                                 33
in agency decision-making does not necessarily abrogate the privilege. (See Def.’s Reply at 12.)

See, e.g., NIMJ, 512 F.3d at 681. Defendant also represents that while the IIR team did solicit

feedback from utility industry representatives, “[t]he Service is not withholding the utility

representatives’ feedback,” and that “the information [being] withheld consist[s] of purely

internal comments.” (Def.’s Reply at 12 (citing 3rd Cooper Decl. ¶ 16).) 21 This representation

appears to be contradicted by the privilege log’s statement that defendant has “[w]ithheld in full”

a letter from Miller & Chevalier, EEI’s outside legal counsel, to Ron Loncharich, an IRS

Territory Manager. 22 (See Privilege Log at 5.) Given this entry in the log, it cannot be said that

every withheld document listed in the log is necessarily an “intra-agency memorandum” within

the meaning of Exemption 5. See 5 U.S.C. § 552(b)(5). The Court concludes that the

descriptions offered in the privilege log and by Cooper are insufficient to establish that the Miller

& Chevalier letter and the following three withheld documents are “intra-agency memoranda”:

            “Response to IIR Questionnaire on Electric Generation Assets – Capital vs. Expense”
             (Bates number 2422);

            “Document titled ‘Treatment of Utility Assets IIR – Research Summary’” (Bates
             numbers 3476-3479); and

            “Write-up for Utility Assets IIR Team regarding certain factors to consider in
             addressing an issue in the proposed published guidance” (Bates number 3480).

As a result, the Court cannot rule out that these documents might consist of non-exempt

issue” or “used by the agency in its dealings with the public” so as to become non-exempt
working law. Coastal States, 617 F.2d at 866. (See also Pl.’s SMF ¶ 91 (stating that proposed
2006 tangible asset regulations were withdrawn in 2008 “with the issuance of new proposed
regulations”).)
       21
          Cooper similarly asserted that the documents responsive to Items 5 and 6 were either
documents “prepared by the drafting team” or emails exchanged among agency attorneys and
other personnel. (2nd Cooper Decl. ¶¶ 35, 37; 3rd Cooper Decl. ¶¶ 17-18.)
       22
            The document is identified by Bates numbers 2621-2622.

                                                 34
submissions by non-agency entities such as EEI. 23 For this reason, defendant’s motion for

summary judgment is denied as to these four documents. 24

       With respect to the other 130 documents withheld or redacted under the deliberative

process privilege, plaintiff also argues that defendant “has not provided a sufficiently

individualized description of the ‘deliberative’ nature of any of the documents, or how those

documents relate to a ‘deliberative process’ . . . .” (Pl.’s Sur-reply at 16; see also Pl.’s Opp’n at

27.) Although this argument is unpersuasive with respect to 51 documents, the Court agrees

with plaintiff that the other 79 documents are inadequately described.

       First, defendant has met its burden with respect to the 17 documents described as

       23
           The Court is skeptical that a submission from EEI (or other outside entities) to the
agency as part of the IIR program, such as EEI’s factual and legal analyses (see 2nd Dawson
Decl., Ex. W), should be considered an “intra-agency” document. Unlike situations where
Exemption 5 applies to documents “submitted by non-agency parties in response to an agency’s
request for advice,” NIMJ, 512 F.3d at 681, this is not a case where the agency “sought these
[taxpayers] out and solicited their counsel based on their undisputed experience and
qualifications.” Id. at 683. EEI was merely a representative of “random citizens volunteering
their opinions” when it initially requested published guidance on the repairs expense issue. Id.
And unlike NIMJ, where the agency asked individual lawyers to provide confidential legal
views, see id., the IIR program’s relevant revenue procedure expressly advises that outside
submissions “may be subject to disclosure” under FOIA and that “[a]ll submissions under the
IIR program will be made available for public inspection and copying in their entirety.” Rev.
Proc. 2003-36 § 6.03 (emphasis added). Finally, the record does not show that EEI was an
indifferent agency consultant; rather, it was an industry representative advancing industry
interests when it made the unsolicited offer to “provide whatever information is deemed
necessary for a successful resolution of this key industry issue.” (2nd Dawson Decl., Ex. V at 3.)
Cf. Klamath, 532 U.S. at 12 (rejecting Exemption 5’s application to Indian tribes’
communications with agency undertaken “with [the tribes’] own, albeit entirely legitimate,
interests in mind,” where the tribes were “self-advocates at the expense of others seeking
benefits inadequate to satisfy everyone”).
       24
           The log describes the Miller & Chevalier letter as the “[s]ame as Pages 01888-01889”
except for “many handwritten notes” written upon the letter by an OCC attorney. Cooper’s
second declaration suggests that Bates numbers 1884-1896 have been produced to plaintiff in
full, despite the log’s statement that the letter is being withheld in its entirety. Nonetheless, even
if only the handwritten notes are being withheld, defendant has still failed to sufficiently describe
those notes’ role in the deliberative process and whether the notes contain unprivileged working
law that must be disclosed. The same is true of the other three documents.

                                                  35
summaries of IIR team meetings, notes from Chief Counsel briefings on the proposed revenue

ruling, or briefing memoranda, outlines, charts, and notes related to legal analyses and

recommendations for the proposed ruling. 25 Based on the descriptions provided in the privilege

log and by Cooper (see 2nd Cooper Decl. ¶ 35), the Court concludes that these are “notes taken

by employees in internal meetings” or documents “exchanging thoughts and opinions about

various legal and policy decisions,” all of which are “part of the group thinking and preliminary

actions encompassed by the policy making process in an agency. Disclosure of such documents

would risk causing an injury to the quality of this process, which is what Exemption 5 seeks to

avoid.” Hornbostel v. U.S. Dep’t of Interior, 305 F. Supp. 2d 21, 31 (D.D.C. 2003); see also Am.

Civil Liberties Union v. F.B.I., 429 F. Supp. 2d 179, 190-91 (D.D.C. 2006) (granting summary

judgment as to “working proposals and briefing papers regarding policy that reflect predecisional

discussion by [IRS] employees”).

       Defendant has also sufficiently described seven documents as deliberations from

subordinate personnel to superior agency decision-makers 26 and four documents as status reports

and questions regarding the proposed revenue ruling. 27 See Morley v. CIA, 508 F.3d 1108, 1127

       25
        Bates numbers 2723-2731, 2792-2814, 2949-2975, 2989-2990, 3073-3074, 3077-3074,
3153-3154, 3178-3200, 3207-3210, 3253-3275, 3380-3405, 3481-3484, 3485-3508, 3524-3549,
3550-3554, 3555-3557, and 3558-3562.
       26
         Three documents are described as a technical advisor’s “comments on IIR team
proposals” to Area Counsel (Bates numbers 2508-2509, 2658-2659, and 2943-2944), one is
described as a memorandum from a revenue agent to a Territory Manager expressing the agent’s
views on the repair expenses issues (2544-2548), and three are described as emails to the IRS
Chief Counsel from subordinate attorneys regarding issues “surrounding whether to publish” the
proposed ruling (3120-3140, 3141-3146, and 3147-3152).
       27
           The log sufficiently describes one internal email among Feldstein and others
“regarding the status of, and suggested revisions to, the proposed revenue ruling” (Bates
numbers 2656-2657), and three other documents that that were inadequately described by the
privilege log are given fuller descriptions by Cooper: “comments and questions” emailed by
Sharon Russell, Capitalization Technical Advisor, to Feldstein regarding a draft of the proposed
ruling (2331); an email from Feldstein to agency special counsel “providing an update on the

                                                36
(D.C. Cir. 2007) (“‘The identity of the parties to the memorandum is important; a document from

a subordinate to a superior official is more likely to be predecisional, while a document moving

in the opposite direction is more likely to contain instructions to staff explaining the reasons for a

decision already made.’” (quoting Coastal States, 617 F.2d at 868)); Hornbostel, 305 F. Supp. 2d

at 31 (finding Exemption 5 was properly invoked for “status reports, briefings, opinion papers,

and proposals” that “contained the opinions, speculations, suggestions, updates, corrections, and

proposed plans involved in the decision-making process behind defendant’s project,” where

“disclosure of such information would stifle the candor necessary in an agency’s policy making

process”). Accordingly, defendant has established that these 11 documents reflect the privileged

“give-and-take of the consultative process.” Coastal States, 617 F.2d at 866.

       Plaintiff’s argument also fails with respect to 21 documents that defendant specifically

described as “drafts” 28 of revenue rulings and other materials. “Draft documents, by their very

nature, are typically predecisional and deliberative,” see Exxon Corp. v. Dep’t of Energy, 585 F.

Supp. 690, 698 (D.D.C. 1983), and these documents’ role in the deliberative process are

adequately described by Cooper and in the privilege log.

       By contrast, defendant has failed to satisfy its burden with respect to eight documents

whose descriptions suggest that they could contain unprivileged agency working law,

particularly because they may “concern[] specific taxpayers or classes of taxpayers,” Tax

status of the utilities IIR project and the significant issues that need to be resolved” (2514-2515);
and emails between Feldstein and another agency special counsel “regarding the status of the
proposed revenue ruling” (2684-2687). (See 2nd Cooper Decl. ¶ 35.)
       28
          The documents falling into these categories are identified by Bates numbers 1961-
1977, 2710-2718, 2770-2791, 2815-2818, 2821-2857, 2871-2914, 2977-2986, 2987-2988, 3155-
3158, 3159-3177, 3227-3230, 3231-3252, 3276-3279, 3280-3300, 3301-3376, 3377-3379, 3406-
3409, 3410-3430, 3431-3434, 3457, and 3514-3523. Additionally, most of these documents are
described either as draft revenue rulings and “background information notes,” which are
specifically protected by the privilege. See Arthur Andersen & Co. v. Internal Revenue Serv.,
679 F.2d 254 (D.C. Cir. 1982).

                                                 37
Analysts v. I.R.S. (“Tax Analysts II”), 294 F.3d 71, 81 (D.C. Cir. 2002), or may otherwise be

“straightforward explanations of agency regulations in specific factual situations.” 29 Coastal

States, 617 F.2d at 868. If the documents “propose[] solutions to a potential legal problem,” they

would likely be privileged as deliberative, but if they merely recite or apply departmental

positions, then they may have to be disclosed as agency working law, “whether or not those who

use the working law make the final decisions about program implementation.” Tax Analysts II,
294 F.3d at 81.

        For the same reason, the Court concludes that defendant has too vaguely described 62

documents as “regarding” the proposed revenue ruling or agency attorneys’ “comments” on or

“concerns,” “problems,” or “issues” with that proposal. 30 Plaintiff correctly observes that these

descriptions do not permit the Court to determine whether the documents “‘discuss the wisdom

or merits of a particular agency policy’” or “‘simply explain and apply established policy.’” Tax

Analysts II, 294 F.3d at 81 (quoting Coastal States, 617 F.2d at 869). (See Pl.’s Sur-reply at 16

& n.7.) 31

        29
          These documents consist of the response to a summary and analysis of the repair
expense issue for “various third party taxpayers” (Bates numbers 2549-2620 and 2993-3071), a
write-up and correspondence by Feldstein to an agency engineer regarding “proposed facts and
analysis relating to a specific situation” for the proposed ruling (3472-3474 and 3475); and four
documents comparing the legal arguments from the FedEx litigation with the proposed revenue
ruling (2699-2708, 2745-2758, 3211-3220, and 3221-3226).
        30
         Bates numbers 2483-2507, 2510-2513, 2516-2524, 2525-2530, 2531-2540, 2541-2543,
2655, 2660-2661, 2662-2663, 2664-2665, 2666, 2667, 2668-2670, 2671-2672, 2673-2674, 2678-
2682, 2683, 2688-2689, 2690-2695, 2696-2697, 2698, 2732-2739, 2740-2741, 2742-2743, 2744,
2759-2760, 2761-2762, 2763-2764, 2765-2767, 2768, 2769, 2819-2820, 2858-2860, 2861-2868,
2869-2870, 2925-2926, 2927-2928, 2930-2931, 2933-2934, 2935, 2936-2937, 2938, 2939, 2940,
2941, 2942, 2946, 2947-2948, 2976, 2991-2992, 3072, 3435-3436, 3437, 3438, 3439-3442,
3443-3449, 3450, 3451-3453, 3454-3455, 3458-3460, 3463-3464, and 3467-3468.
        31
           The concern that these documents may reflect official agency policy is heightened by
the fact that many of them are emails to or from Feldstein, one of the two principal drafters of the
proposed guidance and regulations.

                                                38
       Defendant also fails to describe the contents of six sets of handwritten notes that were

redacted from documents provided by non-governmental entities. 32 Cooper’s declaration that

members of the drafting team wrote these notes “during” – i.e., concurrently with – the IIR

process is insufficient to establish the role of these notes in that process. (3rd Cooper Decl. ¶

19.) In addition, one withheld document that is duplicative of a withheld draft also contains a set

of “numerous handwritten comments” by Feldstein “on [the] side of [the] page.” 33 Because

there is no further description of any of these notes, defendant has failed to establish, as it must,

“the role played by” these seven sets of notes in the deliberations. Coastal States, 617 F.2d at

868.

       The remaining four documents relate to requests for “Technical Assistance” (“TA”). In

Tax Analysts II, the D.C. Circuit explained that “[t]he distinction between deliberative TA[]

[memoranda] and TA[] [memoranda] that represent the OCC’s considered legal conclusions [and

which are not privileged] is not amenable to a categorical formula. It can turn on the subject

matter of the TA [memoranda], on its recipient, on its place in the decisionmaking process, and

even on its tone.” 294 F.3d at 82. Here, two of the documents are TA requests from Feldstein to

“Chief, Branch 6, Associate Chief Counsel,” “providing analysis and requesting assistance

regarding the definition of a unit of property.” 34 As TA requests, these two documents are

necessarily precursors to TA memoranda and therefore are deliberative and predecisional, even if

the TA memoranda written in response are not privileged. The other two documents are

       32
          Bates numbers 1882-1883 (notes written on Feldstein’s letter to EEI’s counsel), 1897-
1905 (notes written on EEI’s IIR factual submission), 1919 (notes written on a letter from EEI’s
counsel to Loncharich), 1926-1930 (same), 1933 (same), and 2019 (notes written on a diagram
of a power plant).
       33
            Bates numbers 3461-3462 (otherwise identical to Bates numbers 2508-2509).
       34
            Bates number 3465 and 3512-3513.

                                                  39
described as identical copies of a memorandum from “P. Friedman” to Feldstein “providing

advice regarding the definition of a unit of property.” 35 This could well be a TA memorandum

responding to Feldstein’s TA request. But because defendant offers no further description of the

memorandum or the deliberative role of “P. Friedman,” it is possible that these two documents

may be unprivileged if they “reflect[] OCC’s considered position on a precise issue.” Tax

Analysts II, 294 F.3d at 80.

       With respect to the 51 documents that defendant described in sufficient detail, the Court

concludes that defendant has also met its segregation burden. Cooper declared, under penalty of

perjury, that the documents “withheld in their entirety” were either wholly exempt or contained

nonexempt material that was “so inextricably intertwined with exempt material as to be non-

segregable,” and “that the documents redacted in part were properly redacted.” (2nd Cooper

Decl. ¶ 33; see also id. at 42 (oath and signature).) Defendant has already “voluntarily

segregated and disclosed factual portions of hundreds of other [pages]” responsive to Item 7.

Loving v. U.S. Dep’t of Defense, 496 F. Supp. 2d 101, 110 (D.D.C. 2007), aff’d, 550 F.3d 32, 41

(D.C. Cir. 2008). Given that plaintiff does not dispute those Item 7 redactions, for which Cooper

gave an identical segregability declaration (see 2nd Cooper Decl. ¶ 17), and because there is

nothing in the record indicating that the redactions to these 51 documents are inappropriate, see

Judicial Watch, 2006 WL 2038513, at *5-*6, the Court concludes that defendant has satisfied its

segregability obligation with respect to these 51 documents. Defendant’s motion is granted, but

for the reasons discussed, defendant’s motion is denied as to the 79 documents insufficiently

described as deliberative.

       Defendant has also withheld 294 pages, comprising 16 documents, as attorney work

       35
            Bates numbers 3469-3471 and 3509-3511.

                                                40
product. (2nd Cooper Decl. ¶ 37; see Privilege Log. 36) Plaintiff has conceded that two of these

documents are protected work product 37 (see Pl.’s Sur-reply at 22), so the Court grants

defendant’s motion as to these documents. And as already discussed, six of the documents are

described sufficiently to merit protection under the deliberative process privilege. 38 Thus, the

Court need only consider whether the remaining eight documents are protected work product. 39

       Cooper declared that these emails, memoranda, and briefing materials “involve

discussions among Counsel and Service employees regarding” the FedEx litigation and its effect

on the issue under consideration” in the proposed revenue ruling (2nd Cooper Decl. ¶ 37; 3rd

Cooper Decl. ¶ 17), as well as the proposed revenue ruling’s impact on “any other litigation in

the future . . . .” (3rd Cooper Decl. ¶ 18.) However, it is not enough that these documents

“involve discussions” among agency employees “regarding” the FedEx litigation, the revenue

ruling, or future related litigation; rather, the documents must have been prepared “for” or “in

anticipation of” litigation. 40 See Textron, 577 F.3d at 29; Grolier, 462 U.S. at 25. The privilege

       36
          The privilege log suggests that some of these pages were in fact released with
redactions. The Court’s tabulations have ignored this discrepancy.
       37
         Bates numbers 2623-2652 (a draft appellate brief in the FedEx litigation) and 3201-
3206 (a letter from OCC to the appellate brief’s author regarding whether to appeal the adverse
FedEx district court decision).
       38
         Bates numbers 2710-2718, 2723-2731, 3120-3140, 3141-3146, 3147-3152, and 3153-
3154. See supra notes 25-28 and accompanying text.
       39
          As described, four documents are comparisons or similar analyses of the legal
arguments made in the FedEx litigation and the proposed revenue ruling (Bates numbers 2699-
2708, 2745-2758, 3211-3220, and 3221-3226), and four are emails among Feldstein and other
agency attorneys “regarding discussions with DOJ as to ongoing issues with [the] proposed
revenue ruling” (2696-2697, 2732-2739, and 2763-2764) or “regarding unresolved issues with
[the] proposed revenue ruling” (2915-2924).
       40
           Although Cooper declared that some documents responsive to the second IRC request
were discussions among OCC employees’ “prepared during or in anticipation of active
litigation” (2nd Cooper Decl. ¶ 45), his work product declaration as to the FOIA request
conspicuously lacks any similar assertion, stating merely that the documents were discussions
among OCC and other IRS employees “regarding active litigation . . . .” (See id. ¶ 37; see also

                                                 41
log’s descriptions of these eight documents also say nothing about whether they were created for

or in anticipation of litigation. Because the Court cannot rule out that they contain non-exempt

applications of the FedEx litigation as agency working law (see Pl.’s Sur-reply at 22-23),

defendant’s motion is denied as to these eight documents.

       By April 20, 2010, defendant shall produce the pages identified by Bates numbers 1882-

1883, 1897-1905, 1919, 1926-1930, 1933, 2019, 2422, 2483-2507, 2510-2513, 2516-2524, 2525-

2530, 2531-2540, 2541-2543, 2549-2620, 2621-2622, 2655, 2660-2661, 2662-2663, 2664-2665,

2666, 2667, 2668-2670, 2671-2672, 2673-2674, 2678-2682, 2683, 2688-2689, 2690-2695, 2696-

2697, 2698, 2699-2708, 2732-2739, 2740-2741, 2742-2743, 2744, 2745-2758, 2759-2760, 2761-

2762, 2763-2764, 2765-2767, 2768, 2769, 2819-2820, 2858-2860, 2861-2868, 2869-2870, 2915-

2924, 2925-2926, 2927-2928, 2930-2931, 2933-2934, 2935, 2936-2937, 2938, 2939, 2940, 2941,

2942, 2946, 2947-2948, 2976, 2991-2992, 2993-3071, 3072, 3211-3220, 3221-3226, 3435-3436,

3437, 3438, 3439-3442, 3443-3449, 3450, 3451-3453, 3454-3455, 3458-3460, 3461-3462, 3463-

3464, 3467-3468, 3469-3471, 3472-3474, 3475, 3476-3479, 3480, and 3509-3511 for in camera

review. 41 Defendant shall specify the privilege invoked for each withholding or redaction. By

April 20, 2010, defendant shall also file (1) a Vaughn index that summarizes each document

produced in camera, identifies each document’s author(s), states whether it is responsive to

FOIA request Item 5, Item 6, or both, and states whether it is protected by the attorney work

product privilege, deliberative process privilege, or both; and (2) an affidavit explaining the role

of each document’s author(s) within the IRS, the role (if any) played in the deliberative process

3rd Cooper Decl. ¶¶ 17-18).
       41
          This list consists of 84 discrete documents: 76 for which defendant claimed only the
deliberative process privilege, one for which defendant claimed only the attorney work product
privilege (Bates numbers 2915-2924), and seven for which defendant claimed both privileges
(2696-2697, 2699-2708, 2732-2739, 2745-2758, 2763-2764, 3211-3220, 3221-3226).

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by each document or by each document’s redacted portions, and whether each document was

prepared “in anticipation of” litigation or whether it was prepared “for” litigation. If the affidavit

addresses Bates numbers 2422, 2621-2622, 3476-3479, or 3480, then it shall also explain why

those documents constitute intra-agency memoranda within the meaning of Exemption 5.

                                          CONCLUSION

       Having considered the pleadings and the entire record herein, and for the foregoing

reasons, defendant’s motion for summary judgment in granted in part and plaintiff’s cross-

motion is denied in part with respect to the propriety of withholding or redacting all documents

except those specified below. Defendant’s motion is denied as to the adequacy of its search and

its withholding or redaction of the 39 redacted pages that are responsive to the first IRC request;

the unspecified number of withheld emails that are responsive to the second IRC request; the

pages identified by control numbers CI090, CI109, CII001, CII0014, CII078-CII099, CII267-

268, CII281-282, and CII297-298; and the pages identified by Bates numbers 1882-1883, 1897-

1905, 1919, 1926-1930, 1933, 2019, 2422, 2483-2507, 2510-2513, 2516-2524, 2525-2530, 2531-

2540, 2541-2543, 2549-2620, 2621-2622, 2655, 2660-2661, 2662-2663, 2664-2665, 2666, 2667,

2668-2670, 2671-2672, 2673-2674, 2678-2682, 2683, 2688-2689, 2690-2695, 2696-2697, 2698,

2699-2708, 2732-2739, 2740-2741, 2742-2743, 2744, 2745-2758, 2759-2760, 2761-2762, 2763-

2764, 2765-2767, 2768, 2769, 2819-2820, 2858-2860, 2861-2868, 2869-2870, 2915-2924, 2925-

2926, 2927-2928, 2930-2931, 2933-2934, 2935, 2936-2937, 2938, 2939, 2940, 2941, 2942,

2946, 2947-2948, 2976, 2991-2992, 2993-3071, 3072, 3211-3220, 3221-3226, 3435-3436, 3437,

3438, 3439-3442, 3443-3449, 3450, 3451-3453, 3454-3455, 3458-3460, 3461-3462, 3463-3464,

3467-3468, 3469-3471, 3472-3474, 3475, 3476-3479, 3480, and 3509-3511.

       By April 20, 2010, defendant shall comply with the separate Order that accompanies this

                                                 43
Memorandum Opinion, which requires defendant to conduct an additional search, produce

certain documents for in camera review, and file an additional affidavit. The remainder of

plaintiff’s cross-motion shall be held in abeyance pending the Court’s review of defendant’s

affidavit and in camera submissions.

                                                                /s/
                                                    ELLEN SEGAL HUVELLE
                                                    United States District Judge

DATE: March 12, 2010

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