A Pair of FOIA Cases on Similar Trajectories (or not)

On February 21, 2023, the DC Circuit reversed the decision of the district court in Waterman v. IRS in which tax practitioner Brad Waterman sought information from the IRS about a referral made to the Office of Professional Responsibility (OPR) regarding his actions during an audit.  We discussed this case previously here in a post from five years ago after the first district court opinion.  That post sets out the facts in greater detail than I will here. 

As I mentioned in that post, Brad and I want to the same law school where he graduated a year ahead of me before going on to a long and successful career as a tax lawyer.  The post linked above discusses the first opinion in his FOIA journey after which he appealed to the DC Circuit Court which remanded the case.  On the second trip to the district court the court conducted an in camera review of the material and continued to deny access.  He appealed that decision.  The recent decision reverses the district court for most of the documents sought.

Brad is now essentially retired from practice dividing his time between New England and Florida.  While he was in Boston last year, we met for dinner to generally reminisce and discuss our parallel FOIA cases.

Just as I followed Brad at law school, my FOIA litigation follows his.  My FOIA case went from a loss at the district court to a remand from the Eighth Circuit back to the district court where, in Fogg v. United States, it recently upheld its initial decision after making an in camera inspection of the documents.  An earlier post from four years ago on my case is here.  My case may now head back to the Eighth Circuit where I would hope to be so fortunate as Brad.


Although traveling parallel paths, our FOIA cases seek very different types of information invoking different provisions of the FOIA exemptions.  Brad’s case involves the deliberative process exemption.  The IRS audited his client regarding a tax exempt bond issue.  The agent prepared a Suspected Practitioner Misconduct Report and sent it to OPR on March 17, 2014 alleging that Brad unreasonably delayed the prompt disposition of the case in violation of Circular 230.  The referral contained a memorandum authored by the agent and the agent’s manager.  Brad was notified of the referral and that OPR had decided the report “did not warrant further investigation or action.”  The letter also said that if the allegation in the referral was true it did constitute a technical violation of Circular 230 and that OPR would retain the file for 25 years in case it received further referrals since the cumulative effect of referrals could result in a charge against him.

He sought copies of the memos since he wanted to know what was said.  The IRS released 34 of 54 pages it discovered as relevant to his request and invoked FOIA exemptions 3 and 5 to withhold the balance.  In court the IRS relied on exemption 5 regarding the deliberative process privilege.  After the district court in the first instance discussed in the blog post above ruled for the IRS, he appealed and the DC Circuit remanded for the district court to decide if some of the documents might be reasonably segregable in Waterman v. IRS, (Waterman II), 755 F. App’x 26, 27-28 (D.C. Cir. 2019).  When the district court again ruled for the IRS, he again went to the DC Circuit which ruled in the recent decision that significant portions of the documents contained only factual information which did not involve the deliberative process stating:

In camera review has revealed two passages, appearing on pages 5 and 6 of the memorandum, that reflect Marchetti’s [the agent’s] evaluation of particular conduct he viewed as evincing Waterman’s “intent to not cooperate with the disposition of the matter[]” and his failure to “negotiate[] with [the] IRS in good faith,” J.A. 120-21, which is punctuated with references to the IRS’s internal strategy in its audit of Waterman’s client. As to those portions, Marchetti exercised his judgment to select and organize facts to support a discretionary agency decision by the OPR, much like the agency employees in Montrose and other cases in which this court has affirmed the nondisclosure of factual material under Exemption 5….

But the remainder of the Marchetti Memo, which is a chronological collection of Waterman’s statements over the course of the audit, falls outside the scope of Exemption 5. The IRS’s affidavit provides no indication that Marchetti exercised his judgment to “separate[e] the pertinent from the impertinent,” Montrose, 491 F.2d at 68, nor that he omitted a “known datum” in creating the chronology, Mapother, 3 F.3d at 1540. Exemption 5 does not protect such a “comprehensive collection of the essential facts.” Id. Because it is “reasonably segregable” from Marchetti’s evaluative commentary, 5 U.S.C.

10 § 552(b), the chronological portion of the Marchetti Memo is subject to disclosure.

The Circuit Court found that the entirety of the manager’s memo fell outside the protection of exemption 5.  This is an important decision for individuals referred to OPR who want to know the basis for their referral. 

In contrast with Brad’s case, I joined Nick Xanthopoulos in seeking to learn from the IRS what it does with our personal information, such as our social security numbers, when we call on a client’s case.  Does our personal information become part of the taxpayer’s tax return information?  Can the taxpayer access our personal information?  Might the IRS work with the practitioner community to devise a less intrusive method for verifying who we are?

The post above, written by Nick, talks about the reasons for the FOIA request.  Nick has subsequently dropped out of the litigation because of a job change.  The FOIA request sought information in the Internal Revenue Manual (IRM) that describes the practice, but which is shielded from public view.  The suit resulted in some concessions by the IRS opening up more portions of the IRM.  The concessions let many questions unanswered as much of the IRM remained shielded from the public.  The district court declined to engage in an in camera inspection of the shielded portions and held for the IRS based on FOIA exemption 7.

The Eighth Circuit remanded the case to the district court holding, inter alia, that the court should have an in camera inspection of the IRM and that the affidavit submitted by the IRS was insufficient to show that the agency had met its burden of establishing a reason for non-disclosure.  The affidavit relied heavily on the need for the request for personal information of representatives as a part of the IRS law enforcement activities.  The Eighth Circuit was also concerned about the characterization of the IRS:

Although we find no evidence of bad faith by the IRS, the Barnes Declaration contains a legal error in at least one respect: it states “the I.R.M. generally” is “compiled for law enforcement purposes because the I.R.M. is an internal manual for the IRS, a law enforcement agency.”

The Barnes Declaration erroneously characterizes the IRS as only a law enforcement agency. The IRS is instead a federal agency with mixed law enforcement and administrative functions.

On remand, the district court has recently held that after inspection of the IRS, it sustains its initial determination finding:

Exemption 7(E) requires the IRS to show that the withheld material was “compiled for law enforcement purposes.” 5 U.S.C. § 552(b)(7)(E); see John Doe Agency v. John Doe Corp., 493 U.S. 146, 153 (1989) (“Before it may invoke [Exemption 7], the Government has the burden of proving the existence of . . . a compilation for such a purpose.”). Then, the IRS must show that: (1) releasing the records “would disclose techniques and procedures for law enforcement investigations or prosecutions ;” and that (2) “such disclosure could reasonably be expected to risk circumvention of the law.” 5 U.S.C. § 552(b)(7)(E).2 Upon the Court’s in camera inspection of the withheld material and of Mr. Donaghy’s affidavit, the Court finds that the redactions in IRM § meet each of these requirements.

The district court quoted from the supplemental affidavit submitted by the IRS which stated the redactions were necessary “to combat theft, fraud, and other wrongdoing in the context of telephone calls from third parties who claim to have authorization from a taxpayer for the IRS to disclose that taxpayer’s confidential return information to the caller.”  The court cited to a 2018 report of the Treasury Inspector General finding that the IRS procedures at the time were insufficient to properly authenticate the identity of third parties.  Based on this the court found that the IRS met its threshold burden of showing that the redactions served a law enforcement purpose.

In such a case the IRS must then show that the withheld material would disclose “techniques and procedures for law enforcement investigations or prosecutions.”  The court states:

The Court finds that releasing the redacted portions of IRM § would “disclose techniques and procedures for law enforcement investigations.” 5 U.S.C. § 552(b)(7)(E). As noted above, the redactions address different situations in which the behavior or the information provided by the third party seeking authorization raises a suspicion of fraud. Disclosing the withheld material would reveal techniques that IRS agents use to confirm or disprove their suspicions, including the information that the IRS seeks from individuals in these particular situations.

The IRS must also show that if it discloses the material at issue it could reasonably expect the risk of circumvention of the law.  The court describes this requirement as a low bar the IRS must clear and finds that it cleared that bar.

So, practitioners must continue to provide their personal information without knowing what becomes of it.  Perhaps there will be another journey the circuit court with an outcome as favorable as the one obtained by Brad.  So far, my wonderful attorneys, Tuan Samahon (a colleague when I was at Villanova) and Shawn Rodgers of Goldstein Law Partners have done a great job presenting the case.

FOIA Appeals and Exception 21

We welcome guest blogger Daniel N. Price. Dan is in the process of opening his own law offices in San Antonio, Texas as he completes a year of pro bono work as in-house counsel with a nonprofit. Before his recent pro bono stint, he served as an attorney for the Office of Chief Counsel of the Internal Revenue Service for over 19 years. Dan’s prior government service included extensive work in the arena of international enforcement and included assisting the IRS in completely revising the Voluntary Disclosure Practice. Dan’s government experience also extended to the OVDPs, the Streamlined Filing Compliance Procedures, foreign bank account reporting, Bank Secrecy Act investigations, various LB&I compliance campaigns, expatriation issues, international collection of taxes, and much more. Today, Dan discusses the role of Appeals in FOIA disputes and exception 21 of the proposed regulations, which he writes provide far too much deference to the Office of Chief Counsel.

On September 13, 2022, the Department of the Treasury and the IRS requested public comments on proposed regulations relating to the Independent Office of Appeals’ resolution of Federal tax controversies. The comment public comment period expired November 14, 2022. Only twelve comments in response to the request for public comments have been posted to regulations.gov. I’m surprised by the low number of public comments that are available on regulations.gov. Perhaps some practitioners did not upload their comments to regulations.gov and simply mailed comments to the IRS. Uploading comments to regulations.gov certainly makes it easier for the tax press and general public to access and creates a nice public record that the agency cannot ignore.

Tax Notes and other media have extensively written on many of the comments already. Rather than rehash other coverage, this blog briefly discusses comments by the National Federation of Independent Businesses’ (NFIB) about Appeals role in FOIA disputes and an overlooked subset of comments focusing on exception 21 and the role of Rev. Proc. 2016-22.

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NFIB Comments

The NFIB comments focus on the role of Appeals in FOIA disputes. NIFB proposes carving out FOIA disputes from Appeals’ jurisdiction to save resources. I disagree with that suggestion because without having Appeals consider FOIA matters, practitioners will be left in the lurch without FOIA review. Although Appeals perhaps is not the most well equipped body within the IRS to handle FOIA disputes, there is no other competent part of the IRS to handle the work. Appeals certainly can improve in its handling of FOIA disputes because at times Appeals simply rubberstamps IRS FOIA determinations.

For example, in the high profile pending criminal case involving Mark Gyetvay, his attorneys made FOIA requests and appealed the IRS production to Appeals on May 24, 2022. Appeals acknowledged the appeal on June 2, 2022, and on June 14, 2022 Appeals sustained the IRS FOIA production. The FOIA complaint in the matter alleged: “[T]he June 14, 2022 decision of IRS Appeals similarly failed to respond to the requests in any meaningful way, and again failed to describe the nature of the withheld responsive records or identify which FOIA exemptions or exceptions applied to specific documents withheld from Mr. Gyetvay.” ¶ 21.

About the same time as the events outlined in the Gyetvay FOIA case, I experienced similar rubberstamping by Appeals of a FOIA matter. I submitted my FOIA appeal letter to Appeals on May 18, 2022 and quickly received a final determination dated June 8, 2022 rubberstamping the IRS’ FOIA production. After I received the June 8, 2022 letter from Appeals, I called and begged the Appeals Team Manager (ATM) for an opportunity to discuss Appeals’ FOIA determinations. But the ATM refused to even entertain a ten-minute phone call with the Appeals Officer who “handled” the case.

Even though Appeals may at times struggle with conducting meaningful FOIA review, the simple fact remains that no other alternative exists for FOIA review within the IRS. Some may assert that the Office of Government Information Services (OGIS) could fulfill Appeals’ role since OGIS’ “mission also includes resolving FOIA disputes between Federal agencies and requesters.” From my personal experience with OGIS’ in attempting to mediate a FOIA dispute with the IRS, mediation with OGIS is a complete waste of time.

FOIA is an integral part of tax controversy work. If there is no review process for the IRS’ often inadequate and ill-informed FOIA determinations, taxpayers will ultimately be burdened with even more costly district court litigation. From my perspective in the tax controversy trenches relying on FOIA to piece together IRS actions, the NFIB suggestion to eliminate Appeals from FOIA matters doesn’t help taxpayers at all. Appeals, notwithstanding its occasional struggles with FOIA matters, is still best suited to handle FOIA appeals because of Appeals’ independence and structure within the agency.

Exception 21

Exception 21 of the proposed regs provides far too much deference to Chief Counsel in depriving taxpayers of their right to present their tax controversies to Appeals. If Appeals is truly independent and Congress intended for the TFA to expand taxpayer access to Appeals, then proposed exception 21 in the draft regulations must be amended. Specifically, only cases designated for litigation should be included in exception 21.

Exception 21 reads as follows:

Any case or issue designated for litigation, or withheld from Appeals in accordance with guidance regarding designating or withholding a case or issue. For purposes of this section, designation for litigation means that the Federal tax controversy, comprising an issue or issues in a case, will not be resolved without a full concession by the taxpayer or by decision of the court.

At first blush, exception 21 seems narrowly tailored and focuses on cases designated for litigation. Designating a case for litigation is a very formal process that culminates in the Chief Counsel making that decision. See generally CCDM 33.3.6. The formal process has various levels of review and because the process must be approved by the Chief Counsel, that ensures that only the most serious issues are actually designated for litigation. But another clause of exception 21 builds on authorization by lower level Chief Counsel personnel to deprive taxpayers of their statutory right to Appeals.

The following portion of exception 21 must be deleted to protect taxpayer rights: “or withheld from Appeals consideration in a Tax Court case in accordance with guidance regarding designating or withholding a case or issue.” The portion of this phrase – “in accordance with guidance regarding designating or withholding a case or issue” relates to the long-standing deference to Chief Counsel to withhold cases from Appeals consideration based on procedures in Rev. Proc. 2016-22.

Put simply, Rev. Proc. 2016-22 provides too many opportunities for Chief Counsel to withhold cases (or materially delay cases) from Appeals. Rev. Proc. 2016-22 sec. 3.03 provides an exception to Appeals’ consideration for cases not designated for litigation where “Division Counsel or a higher level Counsel official determines that referral is not in the interest of sound tax administration.” This exception too easily allows Division Counsels to withhold access to Appeals. Division Counsels generally defer to the judgment of their lower level attorney managers and the line attorneys making the recommendations.

Further, Rev. Proc. 2016-22 sec. 3.04 grants significant discretion to materially delay providing access to Appeals under the guise of trial preparation or filing dispositive motions (most commonly motions for partial summary judgment). Delay in this context is tantamount to denying access to Appeals. Delaying access to Appeals while Chief Counsel pursues dispositive motions can be used to improperly force taxpayers into settlements based on cost-benefit analysis of the attorney’s fees required for early motions practice. That tactic is inappropriate and degrades taxpayer rights under the TFA.

Chief Counsel has exercised its ability to restrict access to Appeals in cases large and small for decades. Recently in a small dollar pro bono case I handled in Tax Court involving a withheld refundable credit, the Chief Counsel attorney and his manager (an associate area counsel) refused to send the case to Appeals and refused to put their reasons in writing. The Chief Counsel attorney and manager are both in the Boston office. The case did not involve any frivolous legal arguments or otherwise meet any known criteria which would prohibit consideration by Appeals. I cited the TFA and requested a written position from them for their refusal to promptly send the case to Appeals after Chief Counsel filed its answer. But the Chief Counsel attorney and his manager refused to provide any written position. The attorney simply stated orally over the phone that he was planning on filing a dispositive motion and would only send the case to Appeals if he lost the motion. This type of conduct by Chief Counsel in withholding a small, non-frivolous case from Appeals is a type of situation the TFA was passed to stop. And from my nearly two decades as an attorney and manager in Chief Counsel, I observed other times where Chief Counsel attorneys refused to forward cases to Appeals where they saw opportunities to pursue motions for summary judgment (or partial summary judgment) or they justified not sending cases to Appeals on other grounds.

Although Chief Counsel attorneys generally don’t rely on Rev. Proc. 2016-22 sec. 3.04 to withhold Tax Court cases from Appeals based on trial preparation or filing dispositive motions, the fact remains they have discretion to do so under Rev. Proc. 2016-22. The status quo of Rev. Proc. 2016-22 is not sufficient to implement Congress’ desire to expand access to Appeals under the TFA. If the legislative history and purpose of the TFA have any meaning whatsoever, then the discretion provided to Chief Counsel in Rev. Proc. 2016-22 must be curtailed, and exception 21 in the proposed regulations must be redrafted.  Let’s see if Chief Counsel and Treasury listen to the written comments submitted on this point.

DC Circuit Blesses IRS’ Glomar Defense In Long Running FOIA Dispute

Back in 2018, in District Court Allows IRS to Use Glomar Defense In FOIA Suit Seeking Whistleblower Info I discussed one of the many installments of the litigation between Thomas and Beth Montgomery and the IRS.  The case involved the Mr and Mrs Montgomery’s desire to see documents that shed light on how IRS had gotten wind of their partnerships that threw off mostly phony losses.

Late last month, the DC Circuit Court of Appeals affirmed the district court.


The Montgomery family’s partnership transactions attracted the attention of the IRS, leading to a Fifth Circuit opinion finding that most of the partnerships were shams but that one had a legitimate business purpose.  The finding that one partnership was legitimate led the Montgomerys to initiate separate refund suits that the IRS ultimately settled, leading to an almost $500,000 refund.  

The Montgomerys filed a FOIA claim because they wanted to unearth how the IRS came to scrutinize the transactions, with a particular interest in finding out if there was an informant.

In asserting a Glomar defense to the Montgomery request for documents pertaining to whistleblower forms, the IRS refused to either confirm or deny the existence of the records requested.

As I discussed in my original post, the Glomar defense originates from the Cold War and the CIA wanting to keep secret its efforts to uncover a sunken Soviet submarine:

In certain circumstances, […] an agency may refuse to confirm or deny that it has relevant records. This “Glomar response” derives from a ship, the Hughes Glomar Explorer, about which the CIA refused to confirm or deny the existence of records. See Phillippi v. CIA, 546 F.2d 1009, 1011 (D.C. Cir. 1976). Such responses are appropriate only when “`confirming or denying the existence of records would’ itself reveal protected information.” Bartko v. DOJ, 62 F. Supp. 3d 134, 141 (D.D.C. 2014) (quoting Nation Magazine v. U.S. Customs Serv., 71 F.3d 885, 893 (D.C. Cir. 1995)).

When the government raises a Glomar defense, it still needs to tether the defense to one of the nine statutory FOIA exemptions. In Montgomery, the IRS asserted Exemption 7(D).

Exemption 7(D) excludes from disclosure “records or information compiled for law enforcement purposes, but only to the extent that the production of such law enforcement records or information could reasonably be expected to disclose the identity of a confidential source … [who] furnished information on a confidential basis.” 5 U.S.C § 552(b)(7)(D).

As the DC Circuit described, the district court was “persuaded by the IRS’s explanation that it asserted a Glomar Response because a confirmation of the existence or absence of whistleblower documents in a particular case may lead a savvy requester to the very whistleblower himself. “

In sustaining the district court, it rejected a variety of estoppel type arguments that were premised on prior government admissions that no informant existed. That admission was not sufficient to estop the government from asserting a Glomar defense because it was not quite precisely what was at stake in the FOIA litigation:

The issue of the existence of a confidential informant…is not the same as the issue confronting us now; namely, whether the IRS possesses any documents pertaining to a confidential informant… Indeed, the documents requested by the Montgomerys…include such items as award applications and reportable transaction forms.. As the IRS and the district court correctly point out, the IRS does not pay awards for every form submitted to it.

The key point that the DC Circuit made was that “documents pertaining to a potential whistleblower can exist regardless of whether a whistleblower himself exists” any prior admission about the absence of an informant should not serve as a basis to assert collateral or judicial estoppel or otherwise serve to waive its right to assert a Glomar defense.

As to the merits of the underlying Glomar claim, the Montgomerys argued that the 7(D) exemption was not properly at play, claiming that the exemption only runs to the identity of the whistleblower and any information that the whistleblower provided, rather than their mere existence.

The DC Circuit squarely rejected that argument:

We disagree. Exemption 7(D) permits the IRS to withhold information that “could reasonably be expected to disclose the identity of a confidential source.”

Noting that the whistleblower regs require the IRS to use its best efforts to protect a whistleblower’s identity, the IRS’s policy to neither confirm nor deny the existence “makes sense”:

If the IRS only asserts Glomar when whistleblower records exist, and gives a negative answer when no records exist, savvy requesters would both (1) recognize that a Glomar Response indicates the positive existence of whistleblower documents; and (2) may well be able to deduce the identity of a potential whistleblower himself, the very information the IRS is required to protect. This is especially true when the pool of potential whistleblowers is very small, leading a revenge-seeking requester to narrow down the informant with relative ease. Far from violating FOIA’s statutory scheme, the IRS’s Glomar Response to FOIA requests for whistleblower documents aligns with the purpose of Exemption 7(D) and the duties of the IRS to protect whistleblower identities.


For those with a keen interest in FOIA , I recommend reading the opinion, which includes a discussion of when it is appropriate for the government to overcome the presumption of confidentiality for informants, the nature of district court in camera review, and the adequacy of the IRS’ search for other records that the Montgomerys wanted.  To that end and for an even deeper dive, in Saltzman and Book Chapter 2, Taxpayer Access to Information, we have an extensive FOIA discussion, covering materials that are not subject to IRS disclosure as well as myriad FOIA procedural issues.

As I discussed when blogging the 2018 opinion, this case is a significant victory for the IRS and paves the way for future Glomar responses in FOIA cases where someone is seeking information to determine if there was an informant that led to an IRS investigation.

March 2022 Digest

Spring has arrived and the Tax Court has resumed in-person sessions for many locations. In Denver, we have our first in-person calendar call on Monday. I’m looking forward to it, but also need figure out if any of my suits still fit. PT’s March posts focused on issues with examinations, IRS answers, and more.

A Time Sensitive Opportunity

Loretta Collins Argrett Fellowship: The Loretta Collins Argrett Fellowship seeks to support the inclusiveness of the tax profession by encouraging underrepresented individuals to join and actively participate in the ABA Tax Section and Tax Section leadership by providing fellowship opportunities. More information about the fellowships and how to apply are in the post. Applications are due April 3.

Taxpayer Rights

The 7th International Conference on Taxpayer Rights: Tax Collection & Taxpayer Rights in the Post-COVID World: The virtual online conference is from May 18 – 20 and focuses on the actual collection of tax. The agenda and the link to register are in the post. Additionally, the Center for Taxpayer Rights is hosting a free workshop called The Role of Tax Clinics and Taxpayer Ombuds/Advocates in Protecting Taxpayer Rights in Collection Matters on May 16 and a link to register is also in the post.

How Did We Get Here? Correspondence Exams and the Erosion of Fundamental Taxpayer Rights – Part 1: Correspondence exams now account for 85% of all audits, up from about 80% in the previous two years. This post looks at data on correspondence audits and identifies a disproportionate emphasis on EITC audits which burden and harm low income taxpayers. 

How Did We Get Here? Correspondence Exams and the Erosion of Fundamental Taxpayer Rights – Part 2: This post considers the long-term goal of audits, along with recommendations for how the IRS can improve correspondence exams. Such recommendations include utilizing virtual office audits; using plain language, tailored, and helpful audit notices; and assigning the audit to one specific person at the IRS. Making correspondence audits more customer friendly could fall under the purview of the newly created IRS Customer Experience Office.

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Opportunities for Improving Referrals by VITA Sites to LITCs: Taxpayer rights could be better protected if VITA sites better understood when a referral to an LITC may be necessary and how to make such a referral. This post explores opportunities to improve this process, including a training initiative begun by the Center for Taxpayer Rights.

Tax Court Updates and Information

Tax Court is on the Road Again: The Tax Court officially resumed in-person calendars on Monday, February 28, but select calendars are still being conducted remotely. Practitioners who have recently attended in-person calendars share more information about what it’s like to be back.

Ordering Documents from the Tax Court: A “how to” on ordering documents from the Court. Phone requests are currently the only way, but in-person requests may resume once the Court reopens to the public. Both options come with a per page or per document fee.

Tax Court Proposed Rule Changes: The Tax Court has proposed rule changes which are largely intended to clean up language or more closely conform the Tax Court rules to the Federal Rules of Civil Procedure. It invites public comments on the proposals by May 25, 2022.

Tax Court Decisions

Tax Court Takes Almost Five Years to Decide a Dependency Exemption Case: Hicks v. Commissioner highlights the procedures required to claim a qualified child as a dependent when the child does not reside with the taxpayer. The case is noteworthy for the length of time it took the Court to issue an opinion, especially because there were no continuances or other reasons for a delay.

Jeopardy Assessment Case Originating in the Tax Court: The opinion Yerushalmi v. Commissioner is rare because the Tax Court reviews whether jeopardy exists in the first instance, rather than following a district court decision. The post looks at the case, the standard of review, and the facts that can be relevant to the Tax Court when it must decide whether the IRS’s jeopardy assessment was reasonable.

Tax Court Answers

Tax Court Answers: There are issues caused by requiring the IRS to file answers in small tax cases. It delays a review of the case on its merits, the process is slow and impersonal, and there are risks that a taxpayer won’t understand what the answer says. The Court should consider conducting an empirical study, engaging with taxpayer representatives, or forming a judicial advisory committee to identify best practices.

Making the IRS Answer to Taxpayers…By Making the IRS Answer: In the first of a three-part series looking at issues with IRS Counsel answers, Caleb looks at the case of Vermouth v. Commissioner. The case emphasizes the importance of the administrative file during the pleading stages of litigation. Cases involving bad answers and their impact on the burden of proof and burden of production are also discussed.

Making the IRS Answer to Taxpayer Inquiries…By Making the IRS Reasonably Inquire: Tax Court Rule 33(b) requires a signer of a pleading to reasonably inquire into the truth of the facts stated therein. To what degree are IRS Counsel attorneys required to reasonably inquire when filing an answer? This post explores that question and sheds some light on the Court’s expectations.  

Making the IRS Answer to Taxpayer Inquiries…By Making the IRS Reasonably Inquire (Part Two): Continuing the discussion of the IRS’s responsibilities under Rule 33(b), this post looks closer at the consequences to the IRS when a bad answer is filed. Caleb examines the Court’s response in cases where an administrative file was excessively lengthy or not available quickly enough and shares the lessons to be learned.

Circuit Court Decisions

Naked Owners Lose Wrongful Levy Appeal: Goodrich et. al. v. United States demonstrates the interplay of state and federal law upon lien and levy law under the Internal Revenue Code. The 5th Circuit affirmed that a taxpayer’s children had a claim against their father’s property, but only as unsecured creditors according to state law. As a result, the children’s interests were not sufficient to sustain a wrongful levy claim.

Confusion Over Attorney’s Fees in Ninth Circuit Stems from Statute and Regulation…: In Dang v. Commissioner the parties debated the starting point in which reasonable administrative costs are incurred in the context of a CDP hearing. The IRS argued it’s after the notice of determination. Petitioners argued it’s after the 30-day notice which provides the right to request a CDP hearing. The Court decided no costs were incurred before the commencement date of the relevant proceeding without deciding when that date was. The case provides another reason why the statute and regulation involving the recovery of administrative costs from administrative proceedings should be changed.

Attorney’s Fees Cases in the Ninth Circuit and Requesting a Retirement Account Levy: The concurring judge in Dang demonstrates that he understands the entire argument and finds that the exclusion of collection action from the definition of administrative proceedings is contrary to the plain language of the statute. 

Oh Mann: The Sixth Circuit Holds IRS Notice Issued in Violation of the APA; District Court in CIC Services Finds Case is Binding Precedent: The decision Mann v. United States is binding on CIC Services and is examined more closely in this post. In Mann, the Sixth Circuit found that the IRS notice at issue was invalid because the public was not provided a notice and comment opportunity. The case is significant because it is another circuit court opinion that applies general administrative law principles to the IRS.

You Call That “Notice”? Seriously?:  General Mills, Inc. v. United States involves refund claims that were made within the two-year period under section 6511, but outside of the six-month period which starts when a notice of computational adjustment is issued to partners. The Court seemingly concluded that notices, unless misleading, need only to comport with statutory requirements regardless of due process considerations. The post also evaluates and discusses the adequacy of common notices in relation to the notice of computational adjustment.

No Rehearing En Banc for Goldring: Is Supreme Court Review Possible?: The issue in Goldring was how underpayment interest should be computed on a later assessed deficiency when a taxpayer elects to credit forward an overpayment from an earlier filed return. The government’s rehearing en banc petition was denied leaving in place the circuit split. IRS Counsel has advised that there are thousands of similar cases, which could result in refunds of multiple millions of dollars, so it is yet to been seen if the government will petition the Supreme Court.

Challenging Levy Compliance: In Nicholson v. Unify Financial Credit Union the Fourth Circuit affirmed the dismissal of a suit to stop a levy brought by a taxpayer against his credit union. The law requires a third party to turn over the property to the IRS and then allows the taxpayer whose property was wrongfully taken to seek the return of that property from the IRS, so suing the credit union is not an effective avenue.

Offers in Compromise

Suspension of Statute of Limitations Due to an Offer in Compromise: The statute of limitations on when the IRS can bring suit to reduce a liability to judgment is at issue in United States v. Park. An offer in compromise suspends the collection statute and can give the IRS more time than a taxpayer would expect. It’s good idea to consider the risks before submitting an offer.

Public Policy and Not in the Best Interest of the Government Offer in Compromise Rejections: Cases where the IRS rejects an offer in compromise based on public policy or for not being in the best interest of the government are reviewed to better understand the reasons for such rejections. The IRS may look at past and future voluntary compliance and criminal tax convictions. The IRS should make offer decisions easily reviewable to provide more transparency in this area.

Correction on Making Offers in Compromise Public: Keith has learned that the IRS has updated the way in which the public can inspect accepted offers. It is by requesting an Offer Acceptance Report by fax or mail. The report, however, only contains limited and targeted information, so FOIA is still the only way to receive broad and general information.

Bankruptcy and Taxes

General Discharge Denial in Chapter 7 Based on Taxes: In Kresock v. United States, a bankruptcy court’s denial of discharge was sustained by an appellate panel due tothe debtor’s bad behavior in connection with his tax debts. It is seemingly unusual for a general discharge denial to occur where the basis for denial is tax related.


The Passing of Michael Mulroney: Les and Keith share remembrances of Michael Mulroney, an emeritus professor at Villanova Law School.

Congress Should Make 2022 Donations to Ukraine Relief Deductible in 2021: In order to encourage taxpayers to make donations in support of Ukraine, this post recommends that Congress create a deduction similar to the one permitted for the Indian Ocean Tsunami Act, which allowed deductions made in the current tax year to be claimed on the prior year’s return.

Correction on Making Offers in Compromise Public

On February 21, 2022, I wrote a post because of the FOIA case involving EPIC v. IRS, 128 AFTR 2d 2021-6808 (DDC 2021).  My description of the EPIC case was accurate and my conclusion on how to get information about offers in compromise from the IRS was accurate – use FOIA; however, my description of the IRS method for delivering information about accepted offers in compromise was outdated.  I thank Steve Bauman of IRS SB/SE Collection for setting me straight.

In the earlier post I wrote about the system the IRS had devised for allowing public inspection of accepted offers.  The system did not make sense to me and was criticized in a TIGTA report in 2016 to which I cited in the post.  The IRS took the criticism from TIGTA to heart and revamped the system for accessing accepted offers.  I cannot say that I find the new system very user friendly for reasons I will describe further below, but it is not a system which will cost $100,000 per offer viewed which is what TIGTA calculated was the per view cost of the prior system.


The IRS closed the public reading rooms as the depository of accepted offers back in 2018 and now keeps all accepted offers in a computer database that inquiring persons can access through the process described below:

Public Inspection files contain limited information regarding accepted Offers in Compromise such as the taxpayer name, city/state/zip, liability amount, and offer terms. View a sample Form 7249, Offer Acceptance Report PDF, to see the information you will receive by requesting a copy of a public inspection file.

The IRS makes available for public inspection a copy of Form 7249, Offer Acceptance Report, for one year after the date of acceptance.

If you wish to submit a request, complete and send the Offer in Compromise Public Inspection File Form PDF [aka Form 15086.] We will respond in 15 business days. Fax is the preferred method; if mailing, allow an additional 5 business days for a response.

If you link to the Offer Acceptance Report, you will see that you obtain very little information about the person or the offer.  As I mentioned in my original post several years ago about making offers public, I don’t find the information the IRS chooses to make public particularly helpful for stopping the type of abuse and scandal that caused offers to be made public in the first place.  Here’s my brief discussion of the history behind making offers public:

In the early 1950s, a scandal came to light in which an IRS employee used the compromise provisions to write off the liabilities of members of the criminal element.  The employee was prosecuted (see page 148 for a brief discussion of the events) and President Truman issued an executive order requiring that the IRS make accepted offers public.  Subsequently, Congress passed IRC 6103(K)(1) which provides for public inspection and copying of accepted OICs. 

You can look at the information provided on Form 7249 and decide for yourself if that information will assist in ferreting out inappropriate offers that might cause a scandal.

Moving past the information on the publicly available form which has not changed, I need to explain how the IRS has made its offer disclosure system better.  I think it is better but still not what it should be.  Gone are the remote reading rooms.  In their place the IRS has digitized its system for storing and retrieving Forms 7249.  Now, you send a request to the IRS via fax using the inspection file form linked above.  The problem with this form is that it will only cause the IRS to send you information about offers you already know about.  The first box on the form requests you to

Identify the Accepted Offer in Compromise (e.g. offer number, name, state) as specifically as possible below.

You can only do that if you already know about the offer.  How many people are looking for offers who already know an offer exists.  Maybe lots of people but I am unconvinced.  There is now way to browse through accepted offers to try to get a sense of what was accepted.  You must make a targeted request to use the new system.

The new system eliminates the wasteful reading room.  For that it is to be applauded.  If the goal is to prevent another scandal like the one in the 1950s, I think more information needs to be provided on Form 7249 and the accepted forms need to be browsed.

The IRM was updated in December of 2019 and provides the following guidance: (12-17-2019)

Public Inspection File

1. Public inspection of certain information regarding all offers accepted under IRC § 7122 is authorized by IRC § 6103(k)(1).

2. Treasury Reg. § 601.702 (d) (8) requires that for one year after the date of execution, a copy of Form 7249 Offer Acceptance Report, for each accepted offer with respect to any liability for a tax imposed by Title 26, shall be made available for inspection and copying. A separate file of accepted offer records will be maintained for this purpose and made available to the public for a period of one year.


Revenue Ruling 117, 1953-1 C.B. 498 complements Treasury Reg. § 601.702(d)(8) and explains that Form 7249 serves two different purposes. First, it provides the format for public inspection, which is mandated by Executive Order 10386. Second, it satisfies the filing requirement and other criteria arising under section 7122(b).

3. For each accepted offer, a copy of the Form 7249 should be uploaded to the PIF SharePoint site. Form 7249 must be free of any PII.

4. The office that has accepted the offer will be responsible for providing the Form 7249. The PIFs should be uploaded, without delay, to the PIF SharePoint site after acceptance.

5. The PIF must be:

– Maintained for one-year.

– Uploaded in the appropriate monthly folder and designated location based on the taxpayer’s entity address at the time of acceptance.

– Created with the established naming convention for uploading documents to the PIF SharePoint site.(Offer number. Name Control. Date Accepted) i.e. (1234567890.ABCD.MMDDYY)

– If within one year of acceptance a Form 7249 needs to be corrected (e.g. to remove periods that were discharged in bankruptcy, compromise of a compromise, or to obtain the signatures required in Delegation Order 5-1), the original Form 7249 should be deleted from the PIF SharePoint site, and the corrected Form 7249 uploaded with the same naming convention

6. Due to the potential disclosure of Personal Identifiable Information (PII) the Form 7249 will be reviewed and any PII will be redacted.

7. Memphis COIC will be the centralized PIF site which will monitor and track all Form 15086 PIF requests. Requests for OIC PIF will be provided by mail or fax per the instructions on www.irs.gov, the taxpayer will complete and submit Form 15086. If a request is received to copy more than 100 pages, contact OIC Collection Policy.


A visitors log with the Form 15086 information will be retained on the PIF Sharepoint site. The visitor log book and the Form 15086 will be maintained by Memphis COIC.

I asked Steve how someone would make a broad request.  He said that for those seeking large volumes of data that would point to trends such as numbers of offer accepted, submitting a FOIA request would be necessary.  That’s why I said at the outset that although I wrongly described the continued existence of the reading rooms, the bottom line is that FOIA may be the only way to obtain meaningful information about accepted offers (as meaningful as you can get with the information provided on Form 7249) is by making a FOIA request.  I didn’t ask and it’s not clear to me if a FOIA request can allow someone to obtain information about offers going back past one year

Aside from my continued disappointment at the amount of information available and the process for getting the information, I want to thank Steve for taking the time to set me straight.  He disclosed useful information to me about the process of obtaining information about offers.

Making Offers in Compromise Public

I wrote a post several years ago about the public reading rooms that exist in a few cities around the country where the IRS makes public, for one year, the offers in compromise for the region covered by the city which houses the reading room.  I would be curious to learn how accessible those reading rooms have been during the pandemic considering they were not very accessible prior to the pandemic.  Because I believe very few people visited these reading rooms prior to the pandemic, I doubt that much has been lost if they have been relatively inaccessible the past couple years.  Back in 2016 when I wrote that post, TIGTA estimated that it cost the IRS about $100,000 per public viewing to maintain its Rube Goldberg system of publicly disclosing accepted offers.

TIGTA suggested that putting accepted offers online would provide a meaningful method for making offers public.  To my knowledge nothing has been done to implement TIGTA’s suggestion even though it would potentially save the IRS money while granting the public access.  Perhaps if the IRS had accepted TIGTA’s proposal, the case discussed in this post would not exist.

If you want to know more about accepted offers and are unwilling to seek to visit the public reading rooms, a better path may exist as suggested by a recent case.  This better path, if that accurately describes multi-year litigation, is not better than TIGTA’s suggestion to put this information online but may be better than cross-country travel to the well-hidden reading rooms.  Read on.


The recent case of EPIC v. IRS, 128 AFTR 2d 2021-6808 (DDC 2021) provides another way to learn about offers in compromise – the Freedom of Information Act (FOIA).  EPIC is an acronym for Electronic Privacy Information Center.  It sent a FOIA request to the IRS seeking, inter alia, certain tax records related to offers in compromise (OICs) involving former President Donald Trump and business entities associated with him.  As you might expect, the IRS opposed this request but before it opposed the request in court it failed to respond to the FOIA request, causing EPIC to bring a suit in order to seek to have a district court order the IRS to turn over this information, some of which might have been available in the OIC reading room in Buffalo, N.Y. based on the discussion in the prior blog post and where the former President lived.

EPIC requested:

((1)) All accepted offers-in-compromise relating to any past or present tax liability of Donald John Trump, the current President of the United States.

((2)) All other “return information…necessary to permit inspection of [the] accepted offer[s]-in-compromise” described in Category 1 of this request. Records responsive to Category 2 include, but are not limited to, “income, excess profits, declared value excess profits, capital stock, and estate or gift tax returns for any taxable year,” as applicable.

Similarly, with respect to the records of business entities associated with the former President, EPIC requested:

((3)) All accepted offers-in-compromise relating to any past or present tax liability of any entity identified in Appendix A [a fifteen-page list of the business entities associated with President Trump] of this request.

((4)) All other “return information…necessary to permit inspection of [the] accepted offer[s]-in-compromise” described in Category 3 of this request. Records responsive to Category 4 include, but are not limited to, “income, excess profits, declared value excess profits, capital stock, and estate or gift tax returns for any taxable year,” as applicable.

The IRS seeks to dismiss the suit, arguing that the FOIA request fails because it falls within Exemption 3 which “allows an agency to withhold records `specifically exempted from disclosure by statute’ if the statute meets certain criteria.”  The court notes that the parties agree that the requested records would fall within the ambit of FOIA but for the exception.  It states:

Thus, whether EPIC has stated a claim turns on whether the records at issue are covered by any of the thirteen exceptions such that the IRS must disclose them, which would in turn subject them to EPIC’s FOIA request. EPIC relies on § 6103(k)(1), which provides that “[r]eturn information shall be disclosed to members of the general public to the extent necessary to permit inspection of any accepted offer-in-compromise under section 7122 relating to the liability for a tax imposed by this title.” 26 U.S.C. §§ 6103(k)(1).

The IRS argues that the exception applies because EPIC lacks the taxpayer’s consent to receive these records and has no qualifying material interest in the records as described in § 6103(e).  EPIC says it doesn’t need consent or a qualifying material interest because of the requirement to make OICs public.  The court states:

There is no basis in the statute’s text or structure to import these requirements into § 6103(k)(1), which, after all, permits disclosure to “members of the general public.”

So, the IRS next argues that (k)(1) does not create a disclosure obligation to produce records to EPIC but the court quotes from the statute that Section 6103(k)(1) states that return information “shall be disclosed to the extent necessary to permit inspection of any accepted offer-in-compromise.”

Next the IRS argues:

that the phrase “to the extent necessary to permit inspection” gives it discretion to decide both the records it must disclose and the means necessary to disclose them. The Court agrees that phrase limits the records the IRS must disclose to those necessary to permit inspection of any accepted offer-in-compromise. But the IRS’s interpretation goes further. In its view, because the Secretary of the Treasury has by regulation established Public Inspection Files and a related non-FOIA in person inspection process—and determined that nothing more is “necessary” under § 6103(k)(1)—the exception does not afford EPIC any disclosure rights under FOIA.

The court disagrees.  It sees nothing in the statute that prohibits disclosure to EPIC and finds also that case law does not support the position that the IRS has no disclosure obligations to EPIC under (k)(1).  It finds that the IRS must disclose information to EPIC “to the extent that information is necessary to permit inspection of an accepted offer-in-compromise.”  The court does, however, make it clear that EPIC cannot receive former President Trump’s tax returns as part of this request.

I don’t know if EPIC received anything in the end.  I would think that if it did we would have learned about it in the popular press.  The case is not important to me as a way to learn the former President’s tax information but as a way of opening a window to offers in compromise generally.  The court does not seem to limit the time frame of the requirement to respond to the request.  So, FOIA might allow a party to obtain offer information beyond the information for only one year provided in the remote and relatively inaccessible reading rooms.  It might allow targeted requests for OIC information regarding individuals or entities but also might allow for broad based information requests that could save someone the time and effort of getting to one of the reading rooms. 

I do not have any projects going where I want to learn about offers the IRS has accepted.  If I did, EPIC seems to have laid out a path for using FOIA to bypass the remote and inaccessible reading rooms.  Hope springs eternal that the IRS might adopt TIGTA’s suggestion to put this information online, but until it does FOIA seems a better path than frequent flier miles.

FOIA Lawsuit for Information Gathered from Tax Practitioners

Today we welcome guest blogger Nick Xanthopoulos.  Nick was a staff attorney at Nevada Legal Services’ Low Income Taxpayer Clinic (LITC) from December 2014 until October 2016, and a staff attorney at Mid-Minnesota Legal Aid’s LITC from November 2016 until July 2019.  From August 2019 until November 2019, Nick was an attorney at Kennedy Law Offices, P.A., a boutique law firm in Eagan, Minnesota that represents clients in tax, business, and estate related legal matters.  Nick is currently on sabbatical. Tuan Samahon, a colleague of mine from Villanova, and Shawn Rodgers, both of whom specialize in FOIA litigation at Goldstein LP, will be handling the case. (Their pro hac vice motions are pending). Keith

Before 2018, tax professionals with an IRS power of attorney (Form 2848) on file went through a familiar process when calling the IRS to represent someone: we provided the taxpayer’s Social Security number (SSN) and name, our name and Centralized Authorization File (CAF) number (a unique identifier), and which tax years and forms we were authorized to discuss.  During these calls we were often asked additional information about the taxpayer to verify the taxpayer’s address or phone number but not personal information about ourselves.  Indeed, the Internal Revenue Manual (IRM), a guide that IRS employees are supposed to follow, says that only those items are needed to verify that a caller is an authorized third party.  (IRM


In January 2018, the IRS changed the procedure with no advance notice, and obviously, no opportunity for comment by the affected parties.  Since then, IRS employees begin nearly every phone call by forcing practitioners to say our own SSN, date of birth, and other personal information.  In gathering this information, the IRS should take responsibility for the protection of this information under Internal Revenue Code (IRC) section 6103 but also allow practitioners to know how it uses and protects that information.  If we refuse to state our confidential information during the recorded phone call, IRS will not let us represent our clients, thereby worsening an access to justice gap.  If we do answer the questions about our personal information, it becomes part of the client’s file.  I know that the IRS records calls and keeps them in taxpayers’ files because I have secured at least 4 such recordings through Freedom of Information Act (FOIA) requests.  In at least 2 of them, an IRS employee insisted on me stating my SSN despite knowing that my client was listening.

I have had several clients who were victims of tax-related identify theft.  ID theft damage can only be mitigated, never fixed.  Yet no IRS employee has ever instilled me with any confidence that the IRS would redact my SSN from all recordings and all case notes.  As a result, I have refused to state my SSN during any call when I was representing a client.  Practitioners should never be forced to choose between representing someone as effectively as possible and protecting ourselves from identity theft or other misuse of our own personal information.  If the IRS published the procedures it follows to ensure practitioners’ information is kept separate from clients’ files, then practitioners could make an informed decision about whether it is safe to state our SSNs in order to represent our clients.

In June 2019, Professor Keith Fogg and I made a FOIA request for “IRS agency records relating to precautions taken to safeguard the confidentiality of return and return information taken by the IRS from tax practitioners.”  In response, the IRS directed us to the www.irs.gov version of IRM, which is heavily redacted, and provided no other agency records.  In explaining why it redacted much of IRM, the IRS claimed the “records or information [was] compiled for law enforcement purposes” and that release “would disclose techniques and procedures for law enforcement investigations or prosecutions or would disclose guidelines for law enforcement investigations or prosecutions if such disclosure could reasonably be expected to risk circumvention of the law.” When Professor Fogg and I administratively appealed the partial denial of our FOIA request, the IRS Independent Office of Appeals summarily upheld the IRS decision.

As a result, Professor Fogg and I sued the IRS. We filed a complaint on November 29, 2019, in US District Court in the District of Minnesota seeking production of the requested records.  The IRS claims that the new authentication procedure’s “intent is to enhance protections for tax professionals and their clients.”  (IRM  The public and tax practitioners should have the right to see agency records about how the IRS is protecting tax professionals when the IRS forces professionals to state their own confidential information in order to represent a taxpayer.

The treatment of the information of professionals seeking to represent taxpayers should not be the type of information that the IRS hides from the professionals to protect law enforcement.  These professionals are not the taxpayers in the case and are seeking only to represent the taxpayers.  To hide from them the uses of the information and the safeguards surrounding the information denies them the opportunity to make an informed decision.  This is particularly important when the IRS has adopted a procedure without notice and comment and without input from the affected community.

Tax professionals provide an important service to the tax system.  They should not be treated as criminals entitled to no voice in what personal information is elicited from them nor have the use of the information hidden from them. Of course, the IRS has an important job in making sure that it only provides a taxpayer’s information to a properly authorized representative. That aspect of its mission, however, does not give it carte blanche to gather and use all manner of information from the professionals who practice before it, especially without giving those professionals a voice in what information is gathered, the safeguards placed on that information and the uses of that information.

The goal of the FOIA litigation is to find out answers to these questions so that the practitioner community can begin to have a voice in how its information is used by the IRS and protected from abuse.  Please take a moment to learn more about this important issue by reading the FOIA complaint.  You can access the complaint (including exhibits) for free here, thanks to Syracuse University’s Transactional Records Access Clearinghouse (TRAC).

FOIA Suit Seeking Trump’s Returns Fails

Over the past two plus years we have written four posts about Mr. Trump’s returns here, here, here and here. A good argument could be made that this is four posts too many; however, the recent decision of the DC Circuit in a FOIA case seeking those returns brought by the Electronic Privacy Information Center (EPIC) provides an opportunity to go beyond speculation about obtaining those returns and focus on how, in the interaction between FOIA and IRC 6103, the law does not permit third parties to use FOIA as a means of obtaining the returns or return information of others. In the course of ruling on this case the DC Circuit sets the IRS straight on the appropriate standard to apply to those making a FOIA request.


Shortly after the 2016 election EPIC submitted a FOIA request to the IRS seeking the tax returns of Donald Trump for the years 2010 and forward. It also sought “any other indications of financial relations with the Russian government or Russian businesses.” Not surprisingly, the IRS declined to comply with the request. In declining the IRS provided two reasons: 1) the requested “documents, to the extent that any exists, consist of, or contain the tax returns or return information of a third party,” which “may not be disclosed unless specifically authorized by law” and 2) the IRS rules require consent of the third party when a request is made for their tax return. Because the IRS rules require the consent of the third party when a return is requested, the IRS did not even process the FOIA request.

EPIC submitted a second request trying a slightly different tack by citing to IRC 6103(k)(3). This provision allows the IRS to disclose return information to correct a misstatement of fact if correcting the misstatement is necessary to a tax administration purpose. This provision also requires that the IRS obtain the approval of the Joint Committee on Taxation before making a disclosure. The IRS responded to EPIC’s second request by notifying it that the second request also did not cite a basis for turning over to it the returns of President Trump. The IRS concluded this letter by notifying EPIC that it would not process any further requests from it on this topic.

EPIC brought suit seeking relief under both FOIA and the Administrative Procedure Act. The district court dismissed the suit and the DC Circuit affirmed the dismissal but in doing so provided some clarity regarding the reason for denying the request. The circuit court explained the interplay between FOIA and the IRC. It provided an explanation for how and when tax records stand outside the type of government record that can be obtained through a FOIA request. It noted, however, that the district court denied the request for failure to exhaust administrative remedies. That basis for dismissal was wrong but even though it was wrong other reasons for dismissing the case existed making the decision to deny the requested relief correct.

The court points out that this is not an ordinary exhaustion of remedies case where the litigant rushes to court without giving the agency the chance to consider the argument. Here, EPIC tried to get the IRS’ attention and got pushed away. The IRS argues that because EPIC’s request violated its published rules for considering a FOIA request by not obtaining President Trump’s permission to seek his tax returns EPIC did not exhaust the available administrative remedies. This is an interesting interpretation of the exhaustion doctrine which views the requester’s failure to do the impossible, obtain permission from a party who does not want to consent, as a failure to exhaust remedies.

According to the DC Circuit, the IRS “misunderstands its FOIA disclosure obligations. FOIA unambiguously places on an agency the burden of establishing that records are exempt.” To prevail, the IRS cannot rely on a perceived failure by the requester but must show that the information sought is subject to the IRC 6103(a) bar on disclosure. Although the Court agrees with the IRS that it can create published rules regarding the procedures to follow in making a request, the Court disagrees with the IRS that those rules can substantively shift the burden from the agency to the requester regarding the basis for denying the request. Here, “[n]one of the purposes of exhaustion supports barring judicial review of EPIC’s claims.” Still, the IRS has the ability to show that EPIC should not receive the requested documents by making a showing on the merits of the applicable statutes – which it does.

The scope of IRC 6103 in protecting taxpayer records is broad but is still limited in scope. The court notes that “[n]ot all IRS records constitute tax returns or return information.” It cites as an example of material not covered by those definitions the legal analysis contained in IRS Field Service Advice Memoranda. Here, the first part of EPIC’s request, the request for President Trump’s tax returns, clearly falls within the scope of tax returns and return information and “is plainly covered by section 6103(a)’s bar.”

With respect to the requested information concerning financial relations with Russia, the court finds that the request is framed in such a way that answering it reveals the fact that tax returns were filed, making any response one which would disclose tax returns or return information. Therefore, the court denies this request as well.

Moving on to EPIC’s revised request citing to 6103(k)(3), the court finds that this provision was not designed as a provision for parties to make a request to the IRS but rather for the IRS to make a decision to disclose information to avoid problems with tax administration. The court finds “Congress’s omission of any public right to ‘request’ disclosure under section 6103(k)(3) is intentional.” So, this provision affords the requestor no disclosure right. EPIC’s claim based on this provision fails.

Lastly, the court looks at the APA as a basis to disclose the returns. It finds that the APA claim should be dismissed because FOIA, not the APA, provides the basis for the remedy sought by the requestor. The fact that FOIA does not allow disclosure under this circumstance does not mean that the APA provides a separate remedy.

No doubt we have not heard the last of attempts to obtain President Trump’s returns. The harder people try to obtain the returns without success, the more respect I have for the IRS and the states in their administration of the disclosure laws. Maybe one day we will see the returns and learn great secrets. In the meantime we should appreciate that the disclosure laws which were tightened significantly in response to President Nixon’s attempts to misuse the IRS seem to be working well.