Latest Round in PTIN Litigation With District Court Finding For Government In Steele v US

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Longtime readers may recall a series of blog posts discussing the class action litigation challenging the IRS’s statutory authority to charge a fee for PTIN issuance and renewal. After an initial plaintiff victory in district court, the DC Circuit Court of Appeals held that the IRS was within its authority to charge the PTIN fees but remanded the case to determine whether the amount charged was excessive. For more on the DC Circuit opinion, as well as prior rounds in the skirmish, see In Major Victory for IRS DC Circuit Upholds IRS Annual Filing Program.

Late last month in the latest round in Steele v US the district court issued an order on discovery issues. The order includes some strong language about both parties, but the order reflects a decisive government win though the case awaits a resolution on the merits.

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The latest issue concerns the plaintiffs’ motion to compel discovery about the creation and implementation of the original PTIN program. The government alleged that some of the requested information was protected by the deliberative process privilege. In addition, the court considered the sufficiency of government’s responses to interrogatories.

As to deliberative process, as the opinion describes, that privilege protects from discovery “advisory opinions, recommendations and deliberations comprising part of a process by which governmental decisions and policies are formulated.” To benefit from it, the party asserting the privilege must demonstrate that the information is predecisional and deliberative.

The opinion nicely summarizes DC Circuit law on the substance and means for the government to assert deliberative process. It requires proof that the requested document was part of assisting an agency decisionmaker in making the decision, rather than supporting a decision that was already made.

In addition, case law provides the following three elements to benefit from the privilege:

  • A formal claim of privilege by the head of the department possessing control over the requested information,
  • An assertion of the privilege based on actual personal consideration by that official, and
  • Details regarding the information for which the privilege is claimed, along with an explanation why it properly falls within the scope of the privilege.

The major issue that the plaintiffs raised with respect to the government’s assertion of deliberative process was that the government failed to assert the privilege with sufficient detail, instead relying on “boilerplate descriptions” of the withheld documents. The remedy that the plaintiffs sought was discovery of every document withheld solely under the deliberative process privilege.

In strong language, the court disagreed. Calling the proposed remedy “incredible” the court criticized the motion for failing to evaluate the documents and asserted privilege on their own terms:

Plaintiffs’ compact motion shuns individual analysis of the documents in question, instead taking a blanket approach where one bad privilege log entry spoils the bunch.

The order also held that it was  “insincere of plaintiffs to argue that the government has failed to meet its burden in asserting the privilege for every privilege log entry” given that the given the declaration by the IRS’s Deputy Associate Chief Counsel that provided “details why twenty-six of the log entries were withheld.”

The order also included snippets of the government’s privilege log, which in its view also provided sufficient description beyond boilerplate. Some of the included details identified the contractor working with the IRS in setting up the PTIN program, the date, the topic, and who in the government was the intended recipient.  While some of the government’s language was repetitive, the order found that the government met its burden in establishing the elements for the privilege.

While there may have been a question as to whether the government was entitled to rely on deliberative process with specific documents the plaintiffs’ failure to drill down individually was fatal:

Because plaintiffs did not produce “a set of objections that identifies each log entry” that they challenge and because this Court cannot agree that each log entry is insufficient—especially given Goldman’s accompanying declaration—plaintiffs are essentially asking this Court to engage in an entry-by-entry analysis of the privilege log to evaluate whether the government has fulfilled its burden.

The second category of information in this discovery dispute related to interrogatories about the amount of time that IRS employees spent on PTIN-related tasks.  The government argued that the requests were irrelevant and in any event asked for information that the government did not in fact have. As to relevance, information about time spent could be helpful in establishing that the original fees in the PTIN program were excessive, and the court found that the low relevance bar was easily met. 

Unfortunately for the plaintiffs, however, the government prevailed on this challenge. As the order described, the plaintiffs were not really looking for an order forcing a response, but were in fact looking for an order requiring a “different response.”

The government has already provided plaintiffs with numerous declarations from various employees regarding staffing and PTIN work, including some time allocation breakdowns.  However, not all employees kept contemporaneous time records. The government contends that if the information sought by plaintiffs is not included in those materials already provided, it does not exist. 

The court chided the government, stating it “should have stated the nonexistence of this information more clearly in their actual interrogatory answers, instead of in their response to plaintiffs’ letter alleging deficiencies.” Despite that deficiency, the court declined to compel any additional responses, and agreed that “forcing employees and former employees to produce a detailed record of time spent on PTIN tasks over the last ten years based on memory alone is absurd.”

Conclusion

With this round over for now, the case slowly marches towards a resolution, though perhaps other more targeted discovery challenges await. In the meantime, a couple of years ago IRS reworked the PTIN user fees (see IRS Announces New PTIN User Fee in Proposed Regulations), with the fee now at $35.95 for initial applications and renewals. 

About Leslie Book

Professor Book is a Professor of Law at the Villanova University Charles Widger School of Law.

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