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Electronic Privacy Information Center v. Internal Revenue Service

United States Court of Appeals, District of Columbia Circuit

December 18, 2018

Electronic Privacy Information Center, Appellant
Internal Revenue Service, Appellee

          Argued September 13, 2018

          Appeal from the United States District Court for the District of Columbia (No. 1:17-cv-00670)

          John Davisson argued the cause for the appellant. Marc Rotenberg and Alan Butler were with him on brief.

          Michael Murray, Attorney, United States Department of Justice, argued the cause for the appellee. Gilbert S. Rothenberg, Thomas J. Clark, and Geoffrey J. Klimas, Attorneys, were on brief. Richard Caldarone, Attorney, entered an appearance.

          Before: Henderson and Millett, Circuit Judges, and Edwards, Senior Circuit Judge.



         The Internal Revenue Service (IRS) collects more than money. It acquires and maintains a reservoir of sensitive information about taxpayers. And time was, the President could-for any reason or no reason at all-order the IRS to make that sensitive information public. The arrangement worked out fine for decades. Then the Nixon administration compiled a list of political enemies and ordered the IRS to harass them. The resulting scandal prompted the Congress to enact sweeping legislation to protect taxpayer privacy. The Internal Revenue Code (IRC) now mandates that tax "[r]eturns and return information shall be confidential" unless they fall within one of the statute's narrowly drawn exceptions. I.R.C. § 6103(a).

         At first blush, the IRC stands in tension with the Freedom of Information Act (FOIA), which vests the public with a broad right to access government records. 5 U.S.C. § 552(a)(3)(A). One statute demands openness; the other privacy. But as we explain infra, the statutes work well together. Not all records are subject to FOIA requests. An agency need not disclose records "specifically exempted from disclosure by statute." Id. § 552(b)(3). Because the IRC is such a statute, records that fall within its confidentiality mandate are exempt from FOIA.

         This case presents the question whether a member of the public-here, a nonprofit organization-can use a FOIA request to obtain an unrelated individual's tax records without his consent. With certain limited exceptions-all inapplicable here-the answer is no. No one can demand to inspect another's tax records. And the IRC's confidentiality protections extend to the ordinary taxpayer and the President alike. Accordingly, we affirm the dismissal of the Electronic Privacy Information Center (EPIC)'s lawsuit seeking President Donald J. Trump's income tax records.

         I. Background

         EPIC is a nonprofit organization dedicated to focusing "public attention on emerging privacy and civil liberties issues." A few months after the 2016 election, EPIC sent the IRS a FOIA request seeking President "Donald J. Trump's individual income tax returns for tax years 2010 forward, and any other indications of financial relations with the Russian government or Russian businesses." The IRS declined to comply with the request for two reasons. First, the requested "documents, to the extent that any exist, [] consist of, or contain the tax returns or return information of a third party," which "may not be disclosed unless specifically authorized by law." Second, the IRS's rules require that a request for a third party's tax returns include his consent. See 26 C.F.R. § 601.702(c)(5)(iii)(C); see also I.R.C. § 6103(c). In fact, the IRS does not process a FOIA request that violates its rules. Id. § 601.702(c)(4). Because EPIC failed to obtain President Trump's consent, the IRS did not process the request.

         EPIC then sent the IRS a second letter appealing the initial denial and renewing its request for President Trump's above-described tax information. The renewed request invoked 26 U.S.C. § 6103(k)(3), [1] which establishes an exception to the general rule that tax returns and return information are confidential. Under section 6103(k)(3), the IRS may "disclose" return information to correct a misstatement of fact, if doing so is necessary to serve a tax administration purpose. See I.R.C. § 6103(k)(3). Before releasing records under section 6103(k)(3), however, the IRS is statutorily required to obtain approval from the Joint Committee on Taxation- composed of members of the Senate Finance Committee and the House Ways and Means Committee. See id. § 8002(a). EPIC asserted that President Trump made misstatements of fact about his tax information and about his audit history. In EPIC's view, releasing the President's tax returns would promote public confidence in the IRS.

         Again, the IRS declined to process the request, explaining that section 6103 prohibits the release of the requested records "unless disclosure is authorized by Title 26." The second IRS letter stated that section 6103(k)(3) "does not afford any rights to requesters under the FOIA to the disclosure of tax returns or return information of third parties." The letter concluded by telling EPIC "any future requests regarding this subject matter will not be processed."

         EPIC soon sued the IRS. Its complaint advanced three claims under FOIA, 5 U.S.C. § 552, and two under the Administrative Procedure Act (APA), 5 U.S.C. § 706. The FOIA claims fault the IRS for failing to meet statutory deadlines for processing record requests (count one), failing to segregate nonexempt information (count two) and wrongfully withholding the President's tax returns and information (count three). The APA claims assert that the IRS wrongfully withheld the President's tax returns (count four) and failed to seek the Joint Committee's approval (count five). The IRS moved to dismiss the complaint and the district court granted the motion. It dismissed the FOIA claims for failure to exhaust administrative remedies and the APA claims for failure to state a claim upon which relief can be granted.

         II. Analysis

         We review the district court's dismissal de novo and may affirm its judgment on any basis supported by the record. Citizens for Responsibility & Ethics in Washington v. Office of Admin., 566 F.3d 219, 221 (D.C. Cir. 2009); Parsi v. Daioleslam, 778 F.3d 116, 126 (D.C. Cir. 2015).

         A. FOIA Claims

         FOIA requires federal agencies to make "records promptly available" when a requester files a "request for records which (i) reasonably describes such records and (ii) is made in accordance with published rules." 5 U.S.C. § 552(a)(3)(A). But an agency need not produce records that "fall within one of nine exemptions." Milner v. Dep't of Navy, 562 U.S. 562, 565 (2011). A FOIA request often seeks a mixture of exempt and non-exempt records. For such a request, an agency must segregate the non-exempt information from the exempt information, disclosing the former but not the latter. 5 U.S.C. § 552(b) ("Any reasonably segregable portion of a record shall be provided to any person requesting such record after deletion of the portions which are exempt under this subsection"). To withhold records, then, the agency must establish that an exemption applies and, for mixed requests, must still disclose "all reasonably segregable, nonexempt portions of the requested record(s)." Assassination Archives & Research Ctr. v. CIA, 334 F.3d 55, 57-58 (D.C. Cir. 2003).

         The IRS invokes exemption 3 of FOIA, which allows an agency to withhold records "specifically exempted from disclosure by statute" if the statute meets certain criteria. 5 U.S.C. § 552(b)(3). Section 6103(a) of the IRC is an exemption 3 provision. Tax Analysts v. IRS, 117 F.3d 607, 611 (D.C. Cir. 1997) ("That § 6103 is the sort of nondisclosure statute contemplated by FOIA exemption 3 is beyond dispute."). It mandates that tax "[r]eturns and return information shall be confidential" unless they fall into one of thirteen tightly drawn categories of exceptions. [2] I.R.C. § 6103(a), (c)-(o). We have described the relationship between section 6103(a) and FOIA as "entirely harmonious," concluding that tax returns and return information that section 6103(a) bars from disclosure are exempt from FOIA. Church of Scientology of California v. IRS, 792 F.2d 146, 149 (D.C. Cir. 1986). At the same time, the thirteen exceptions to section 6103(a) allow the IRS to disclose certain tax records, id., which records, in turn, are subject to FOIA.

         The district court did not decide whether the IRS had met its burden of establishing that President Trump's tax information is exempt from FOIA. Instead, it dismissed EPIC's FOIA claims for failure to exhaust administrative remedies. Although we agree with the district court's bottom-line determination that EPIC is not entitled to relief, we take a different path to get there. Skinner v. U.S. Dep't of Justice & Bureau of Prisons, 584 F.3d 1093, 1100 (D.C. Cir. 2009) ("[T]his court can 'affirm a correct decision even if on different grounds than those assigned in the decision on review.'" (quoting Razzoli v. Fed. Bureau of Prisons, 230 F.3d 371, 376 (D.C. Cir. 2000), overruled on other grounds, Davis v. U.S. Sentencing Comm'n, 716 F.3d 660 (D.C. Cir. 2013))). As explained infra, exhaustion does not bar review of EPIC's FOIA claims. Because EPIC requested only records that are in fact exempt from FOIA, however, we affirm on the merits the dismissal of the three FOIA claims.

         1. ...

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