Copyright (c) 1995 Tax Analysts Tax Notes Today JULY 10, 1995 MONDAY DEPARTMENT: Other Court Documents (CTO) CITE: 95 TNT 133-64 LENGTH: 3753 words HEADLINE: 95 TNT 133-64 DECLARATION OF ELISSA M. SISSMAN FILED BY DEFENDANT IRS. (Tax Analysts v. IRS) (94-CV-0220) (United States District Court for the District of Dist. of Columbia) (Section 6104 -- Exempt Organization Information) (Release Date: June 30, 1995) (Doc 95-6649) CODE: Section 6104 -- Exempt Organization Information SUMMARY: The IRS filed the declaration of Elissa M. Sissman in the case of Tax Analysts v. Internal Revenue Service, a suit seeking release of all exempt organization closing agreements entered into by the IRS after Dec. 31, 1992. AUTHOR: Hogan, Thomas GEOGRAPHIC: United States INDEX: exempt organizations, disclosure REFERENCES: Subject Area: Exempt Organizations TEXT: TAX ANALYSTS, Plaintiff, v. INTERNAL REVENUE SERVICE, Defendant. Release Date: June 30, 1995 DECLARATION OF ELISSA M. SISSMAN I, ELISSA M. SISSMAN, pursuant to the provisions of 28 U.S.C. section 1746, declare as follows: 1. I am an attorney with the Office of Chief Counsel, Internal Revenue Service (Service), and am assigned to the staff of the Assistant Chief Counsel (Disclosure Litigation). I have held this position since November 1991. 2. Disclosure Litigation attorneys, as part of their duties, assist the Department of Justice in defending litigation filed under the Freedom of Information Act (FOIA) against the Service. 3. As part of my official duties, I was assigned as the attorney to the case in which this declaration is being filed, and participated in the search the Service conducted for documents responsive to the FOIA request which underlies this lawsuit. I am familiar with the documents and issues in this suit. 4. By letter dated November 10, 1993, a copy of which is attached to this declaration as Exhibit A, William Dobrovir, on behalf of plaintiff, submitted a Freedom of Information Act (FOIA) request to the National Office of the Service. In this FOIA request plaintiff sought copies of: (1) The Closing Agreement or Agreements between the IRS and one or more Church of Scientology organizations, which preceded the IRS' issuance of exemption ruling letters to at least 25 such organizations on October 1, 1993; (2) All other Closing Agreements relating to exempt organizations executed on or after December 31, 1992; and (3) All Closing Agreements relating to taxpayers that are not exempt organizations, executed on or after December 31, 1992, but with the taxpayer names and other taxpayer identifying information deleted. The Office of Disclosure in the National Office received this FOIA request on November 23, 1993. 5. By letter dated December 9, 1993, a copy of which is attached to this declaration as Exhibit B, the Office of Disclosure requested an extension of time to respond to plaintiff's FOIA request. Plaintiff agreed to a thirty-day extension, by letter dated December 15, 1993, a copy of which is attached to this declaration as Exhibit C. 6. Inasmuch as the Office of Disclosure was unable to respond to plaintiff's FOIA request within the thirty day period, due to a backlog of FOIA requests which had been submitted to the Service prior to that submitted by plaintiff, by letter dated January 10, 1994, a copy of which is attached to this declaration as Exhibit D, plaintiff submitted an administrative appeal to my office of the constructive denial of its November 10, 1993 FOIA request. 7. By letter dated February 7, 1994, a copy of which is attached to this declaration as Exhibit E, my office responded to plaintiff's FOIA appeal. In this letter we informed plaintiff that the Service was withholding, in their entirety, all of the documents requested by plaintiff in its FOIA request. The Service asserted FOIA subsection (b)(3), in conjunction with I.R.C. section 6103(a), as legal justification for withholding this information. 8. Based upon the offices having authority under Delegation Order No. 97 to execute closing agreements, a copy of which is attached to this declaration as Exhibit F, the Office of Disclosure, sent search memoranda, with a copy of plaintiff's FOIA request attached, to the appropriate offices. Specifically, in the Internal Revenue Service, search memoranda were sent to the Offices of the Assistant Commissioners (Examination, Collection, and Employee Plans and Exempt Organizations), the National Director of Appeals, and the Executive Secretariat (Commissioner and Deputy Commissioner suite of offices). In the Office of Chief Counsel, search memoranda were forwarded to the Associates Chief Counsel (Enforcement Litigation, Domestic, Employee Benefits and Exempt Organizations, and International). There is no central location in either the Service or the Office of Chief Counsel where all closing agreements entered into between the Service and taxpayers are amassed and maintained. 9. The Office of Assistant Commissioner (International) was not included in the search for responsive documents although s/he has authority under Delegation Order No. 97 to execute closing agreements. Pursuant to Treasury Regulation section 601.702(g), the Assistant Commissioner (International), rather than the Director, Office of Disclosure, is the Service official responsible for the control of records under the jurisdiction of the Office of the Assistant Commissioner (International). Since the FOIA request at issue here was only directed to, and received by, the Office of Disclosure, only documents under the jurisdiction of the Office of Disclosure were searched for. 10. There are six closing agreements at issue in this litigation, including five closing agreements located in the Office of Assistant Commissioner (Employee Plans and Exempt Organizations) and one closing agreement found in the Office of Associate Chief Counsel (Employee Benefits and Exempt Organizations). 11. With respect to the search conducted in the Service, no closing agreements were located in the offices of the Assistant Commissioners (Examination and Collection), the National Director of Appeals, or the Executive Secretariat (Commissioner and Deputy Commissioner suite of offices). 12. In the Office of the Assistant Commissioner (Employee Plans & Exempt Organizations), five closing agreements involving organizations exempt from taxation, executed during the appropriate time frame, were located. All of these closing agreements were located in the Exempt Organizations Division of the Office of Assistant Commissioner (Employee Plans & Exempt Organizations). The search for responsive documents was coordinated by a Tax Law Specialist in the Exempt Organizations Division. A memorandum was sent to all Division Branches, the Systems and Support Unit and the Division Director's immediate Office, including Division Reviewers, requesting them to search for documents responsive to the FOIA request. The closing agreements located in the Exempt Organizations Division were found as a result of requesting that each employee conduct a physical search through their files, and recollections by individual tax law specialists that an agreement had been negotiated with a specific tax exempt organization. Once a possible taxpayer to a closing agreement was identified, efforts were made to locate the executed closing agreement in the Division. Generally, files relating to closing agreements are not maintained by the Division, but are returned to the Key District involved in the taxpayer's case. 13. At the request of the then-Deputy Assistant Commissioner (Employee Plans & Exempt Organizations), a memorandum was forwarded to the Office of Employee Plans & Exempt Organizations Field Compliance requesting that that office conduct a search for documents responsive to plaintiff's FOIA request. One closing agreement involving an organization exempt from taxation was located in the Office of Employee Plans & Exempt Organizations Field Compliance. This closing agreement was a duplicate copy of a closing agreement located by the Exempt Organizations Division. In conducting the search for responsive documents, each employee personally searched through the files and binders maintained in their offices. 14. With respect to the search conducted in the Office of Chief Counsel, in Employee Benefits and Exempt Organizations, a physical search of the "front office" (immediate office of the Associate Chief Counsel (Employee Benefits and Exempt Organizations)) closing agreement reading files was conducted. In addition, branch personnel were contacted to determine if they were aware of the existence of any closing agreements, and lists of case inventories were checked. There is no workload item in the Counsel Automated Tracking System (CATS) to track closing agreements. Therefore, a CATS search for closing agreements could not be conducted. One closing agreement located in Employee Benefits and Exempt Organizations, executed during the appropriate time frame, involved an organization exempt from taxation. 15. There were no closing agreements involving organizations exempt from taxation located in the offices of Associates Chief Counsel (Domestic and International). Two closing agreements involving organizations exempt from taxation were located in the Office of Associate Chief Counsel (Enforcement Litigation). Both of these closing agreements were duplicate copies of closing agreements found in the Office of the Assistant Commissioner (Employee Plans & Exempt Organizations). Further, declarant says not. I declare under penalty of perjury that the foregoing is true and correct. Executed on June 28, 1995 in Washington, D.C. ELISSA M. SISSMAN Attorney, Disclosure Litigation Office of Chief Counsel Internal Revenue Service Washington, D.C. 20224 * * * Exhibit A November 10, 1993 Mr. Randy Hartman Chief, FOIA/PA Section Internal Revenue Service 1111 Constitution Avenue, NW Washington, DC 20224 Dear Mr. Hartman This is a request for Internal Revenue Service ("IRS") records under the federal Freedom of Information Act ("FOIA"), 5 U.S.C. section 552. On behalf of my client, Tax Analysts, publisher of Tax Notes, I request copies of the following records: 1. THE CLOSING AGREEMENT OR AGREEMENTS BETWEEN THE IRS AND ONE OR MORE CHURCH OF SCIENTOLOGY ORGANIZATIONS, WHICH PRECEDED IRS' ISSUANCE OF EXEMPTION RULING LETTERS TO AT LEAST 25 SUCH ORGANIZATIONS ON OCTOBER 1, 1993. The requested Closing Agreement or Agreements were executed by IRS and the organizations, who were represented by Monique E. Yingling, Esq. of Zuckert, Scoutt & Rasenberger, and Thomas C. Spring, Esq. They also preceded Rev. Rul. 93-73 (Nov. 1, 1993), which "obsoleted" Rev. Rul. 78-189, a Revenue Ruling that the United States Supreme Court had upheld in Hernandez v. Commissioner, 490 U.S 680 (1989). Disclosure of the requested records is required on several grounds. (a) Closing Agreements include reasoning and explanation of the IRS' interpretation of applicable provisions of law. In this case they doubtless contain an explanation of the IRS' reasoning behind its change in position from that in Rev. Rul. 78-189, and how that change might square with the decision in Hernandez. It therefore is the same kind of IRS "secret law" that the courts held disclosable in such cases as Taxation With Representation Fund v. IRS, 646 F.2d 666 (D.C. Cir. 1981), and Tax Analysts & Advocates v. IRS, 505 F.2d 350 (D.C. Cir. 1974), on remand, 405 F.Supp. 1065 (D.D.C. 1975). (b) The Closing Agreement, although it is in the nature of settlement of a controversy, loses any claim for exemption because by necessity it was shared with the opposing party. See County of Madison v. U.S Dep't of Justice, 641 F.2d 1036 (1st Cir. 1981). (c) No claim of exemption lies under section 6103 of the Code. Information relating to exempt organizations is divested of confidentiality. The rulings published on October 1, 1993, establish the nonconfidential exempt organization character of materials relating to Churches of Scientology. 2. ALL OTHER CLOSING AGREEMENTS RELATING TO EXEMPT ORGANIZATIONS EXECUTED ON OR AFTER DECEMBER 31, 1992. These Agreements are disclosable for all three reasons stated in part 1 above. 3. ALL CLOSING AGREEMENTS RELATING TO TAXPAYERS THAT ARE NOT EXEMPT ORGANIZATIONS, EXECUTED ON OR AFTER DECEMBER 31, 1992, BUT WITH THE TAXPAYER NAMES AND OTHER TAXPAYER IDENTIFYING INFORMATION DELETED. These Closing Agreements with taxpayer identifying information deleted are disclosable for the reasons stated in 1(a) and (b), and under the principle applied in U.S Dep't of the Air Force v. Rose, 425 U.S. 352 (1976), and codified in section 6110. 4. Tax Analysts will pay the reasonable charges for duplication of the records. Tax Analysts is a media requester as defined in 26 C.F.R. section 601.702(f)(3)(i)(B); see Tax Analysts v. U.S Dep't of Justice, 965 F.2d 1092, 1095-96 (D.C. Cir. 1992), and therefore may only be charged costs of duplication, id. (ii)(B). I look forward to your response within 10 working days. Sincerely yours, William A. Dobrovir cc: Tax Analysts * * * Exhibit B December 9, 1993 Mr. William A. Dobrovir Your Request Date: 1614 Twentieth St., NW November 10, 1993 Washington, DC 20009 Control Number: 93-3082 Person to Contact: H. A. Williamson Contact Telephone Number: (202) 622-6250 Dear Mr. Dobrovir: We are sorry, but we must ask for additional time to locate and consider releasing the Internal Revenue Service records to which you have requested access. We will make every effort to respond within 30 days from the date of this letter. If you agree to this extension of time, no reply to this letter is necessary. You will still have the right to file an appeal if we subsequently deny your request. We hope you will agree to a voluntary extension of time. If you do not agree, you have the right to consider this letter as a denial and, if you wish, immediately file an appeal. The information on the back of this letter explains your appeal rights. If you have any questions or need information about the status of your request, please contact the person whose name and telephone number are shown above. Thank you for your cooperation. Sincerely yours, H. A. Williamson Tax Law Specialist FOI/Privacy Section * * * Exhibit C December 15, 1993 Mr. H. A. Williamson Tax Law Specialist FOI-Privacy Section Internal Revenue Service U.S. Department of the Treasury Washington, DC 20224 Re: Control Number 93-3082 Dear Mr. Williamson: My client, Tax Analysts, has authorized me to agree to one 30 day extension, i.e. to January 8, 1994. We will not agree to any further extensions. Sincerely yours, William A. Dobrovir Exhibit D January 10, 1994 Commissioner of Internal Revenue c/o Director, Disclosure Litigation Division, Office of Chief Counsel (CC:D) National Office of the Internal Revenue Service Room 3704 1111 Constitution Avenue, NW Washington, DC 20224 Re: FREEDOM OF INFORMATION ACT (FOIA) APPEAL, NO. 93-3082 Gentlemen: The enclosed FOIA request for Closing Agreements was faxed to the IRS on November 22, 1993, and the records of the FOIA/PA section show its receipt on November 23, 1993. I am counsel for the requester, Tax Analysts. The ten working days required by the FOIA expired on Wednesday, December 8, 1993. At the IRS' request the requester, Tax Analysts, agreed to a 30 day extension, to January 8, 1993. No response was received by that date. On Tax Analysts' behalf, I hereby appeal the de facto denial of Tax Analysts' November 22, 1993, request for Closing Agreements. I look forward to your response within 20 working days, or no later than Tuesday, February 8, 1994. Sincerely yours, William A. Dobrovir Chartered Washington, D.C. Enclosures * * * Exhibit E February 7, 1994 CC:EL:D-2036-94 Br2:ESissman Mr. William Dobrovir Third Floor 1614 20th Street, N.W. Washington, D.C. 20009 Dear Mr. Dobrovir: This is in response to your letter dated January 10, 1994, in which you appealed the constructive denial of the Freedom of Information Act (FOIA) request, dated November 10, 1993, you submitted on behalf of your client, Tax Analysts. In light of the Government's closing on January 27, 1994, the statutory period for response to this appeal expires on February 9, 1994. In this FOIA request you sought: 1. The Closing Agreement or Agreements between the IRS and one or more Church of Scientology organizations, which preceded IRS' issuance of exemption ruling letters to at least 25 such PAGE 123 organizations on October 1, 1993. 2. All other Closing Agreements relating to exempt organizations executed on or after December 31, 1992. 3. All Closing Agreements relating to taxpayers that are not exempt organizations, executed on or after December 31, 1992, but with the taxpayer names and other taxpayer identifying information deleted. After careful consideration, we are withholding the Closing Agreement between the Church of Scientology and the Internal Revenue Service (Service) in its entirety. To the extent that there exist any Closing Agreements as described in the remainder of your FOIA request, these are also being withheld in their entirety. The Service is asserting FOIA subsection (b)(3) in conjunction with 26 U.S.C. section 6103(a) as legal justification for withholding all of the information in question. Exemption (b)(3) of the FOIA permits withholding of records that are specifically exempted from disclosure pursuant to a statute other than FOIA, provided the statute: (A) requires that the matters be withheld from the public in such a manner as to leave no discretion on the issue, or (B) establishes particular criteria for withholding or refers to particular types of matters to be withheld. 5 U.S.C. section 552(b)(3). Section 6103(a) of Title 26 of the United States Code has been held to be a statute meeting the criteria set forth in Exemption 3 of the FOIA. See Chamberlain v. Kurtz, 589 F.2d 827 (5th Cir. 1979), cert. denied, 444 U.S. 842 (1979); and Church of Scientology v. IRS, 484 U.S. 9 (1987). All of the information you requested pertains to taxpayers other than your client. Section 6103(a) establishes the general rule that "[r]eturns and return information shall be confidential" unless Title 26 authorizes disclosure. 26 U.S.C. section 6103(a). Return information is defined as: a taxpayer's identity, the nature, source, or amount of his income, payments, receipts, deductions, exemptions, credits, assets, liabilities, net worth, tax liability, tax withheld, deficiencies, overassessments, or tax payments, whether the taxpayer's return was, is being, or will be examined or subject to other investigation or processing, or any other data, received by, recorded by, prepared by, furnished to, or collected by the Secretary with respect to a return or with respect to the determination of the existence, or possible existence, of liability (or the amount thereof) of any person under this title for any tax, penalty, interest, fine, forfeiture, or other imposition, or offense . . . 26 U.S.C. section 6103(b)(2)(A). Closing agreements are agreements entered into between the Commissioner and any person relating to the liability of such person in respect of any internal revenue tax for any taxable period. As such, they constitute return information as that term is defined in 26 U.S.C. section 6103. None of the statutory exceptions to confidentiality contained in Title 26 of the United States Code applies here to permit your client's access to this otherwise confidential return information. We are therefore asserting FOIA subsection (b)(3) in conjunction with 26 U.S.C. section 6103(a) to withhold the requested closing agreements. In reference to certain points raised in your November 10, 1993 request, we note that not all information relating to exempt organizations is available to the public by virtue of 26 U.S.C. section 6104, see Breuhaus v. IRS, 609 F.2d 80 (2d Cir. 1979); Belisle v. Commissioner of Internal Revenue, 462 F. Supp. 460 (W.D. Okla. 1978); Slotnick v. IRS, 566 F.2d 1167 (1st Cir. 1977) (per curiam). Furthermore, the Service may not delete identifiers from third party return information and then release such return information in redacted form, Church of Scientology of California v. IRS, 484 U.S. 9, 14 (1987). The FOIA requires us to advise you of the judicial remedies granted in the Act. You may file a complaint in the United States District Court for the District in which your client resides, or has its principal place of business, or in which the agency records are located, or in the District of Columbia. Sincerely, Peter V. Filpi Assistant Chief Counsel (Disclosure Litigation) * * * Exhibit F [Omitted]