TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Friday, March 25, 2016

The IRS Scandal, Day 1051

IRS Logo 2Wall Street Journal, Appeals Court in Tea Party Case Puts Nick in Taxpayer Privacy Law:

Attempts to extract information out of the IRS usually run into a solid wall: Section 6103, the part of the tax code setting taxpayer privacy rules. It keeps Donald Trump’s tax returns—and everyone else’s—outside the scope of the federal Freedom of Information Act.

The Sixth U.S. Circuit Court of Appeals in Cincinnati just put a tiny but important dent in that wall, at least in the states covered by that appeals circuit. The IRS office that handles tax-exempt applications is in Cincinnati.

In an appeals court ruling noticed mostly for its rhetorical blasts at the Internal Revenue Service, Judge Raymond Kethledge, writing for a three-judge panel, said the privacy rules that protect “return information” don’t apply to the names and addresses of groups seeking tax-exempt status.

The law “does not entitle the IRS to keep secret (in the name of ‘taxpayer privacy,’ no less) every internal IRS document that reveals IRS mistreatment of a taxpayer or applicant organization—in this case or future ones,” Judge Kethledge wrote Tuesday. “Section 6103 was enacted to protect taxpayers from the IRS, not the IRS from taxpayers.”

Until the ruling, the government, Congress and tax lawyers all operated under the assumption that tax-exempt groups’ names only become public if approved by the IRS. The IRS releases redacted letters denying tax-exempt status, while the names of groups that apply and withdraw–often after questions from the IRS–never become public.

“6103 is usually interpreted pretty broadly by the courts, with a lot of deference from the courts to the IRS,” said Lloyd Hitoshi Mayer, a tax law professor at the University of Notre Dame. “This is a significant change.” ...

George Yin, former chief of staff of the congressional Joint Committee on Taxation, said he was sympathetic to the policy view encapsulated in the court’s ruling. But Mr. Yin, now a law professor at the University of Virginia, said internal IRS processing of applications is covered by the privacy law. “The other Circuits that have looked at this issue are correct,” Mr. Yin wrote in an e-mail, “but the 6th Circuit was not.”

The Hill, IRS Commissioner: Court Ruling Raises Privacy Concerns for Taxpayers:

IRS Commissioner John Koskinen is warning that an appeals court ruling in the agency’s political-targeting scandal could put taxpayers’ privacy at risk.

"If suddenly, your name on an application and your address is available to the public, I think it’s going to … raise a concern by a lot of taxpayers who may not want anyone else to know what they’re applying for,” Koskinen told reporters Thursday, after delivering a speech at the National Press Club.

http://taxprof.typepad.com/taxprof_blog/2016/03/the-irs-scandal-day-1051.html

IRS News, IRS Scandal, Tax | Permalink

Comments

Stonewalling by the IRS and the MSM. Peas in a pod.

Posted by: VoteOutIncumbents | Mar 25, 2016 8:29:20 AM

The WSJ actually has been paying attention. Note carefully, Mr. VOI the words of Prof. Yin, a law professor at the University of Virginia: Internal IRS processing of applications is covered by the privacy law. “The other Circuits that have looked at this issue are correct, but the 6th Circuit was not.” Judge Kethledge, in his zeal to grab an anti-IRS headline (he succeeded mightily), has dealt a serious blow to taxpayer privacy.

The Norcal case is a tribute to the old saw that hard cases make bad law. Bad law has been made by the Sixth Circuit. Moreover, as I wrote previously, most people–particularly those denigrating the DOJ’s litigating position in this case–don't understand what is going on. DOJ has obtained a gold-plated insurance policy for the United States. The district court, now affirmed by the Sixth Circuit, has ordered the release of taxpayer names. Any one of the several hundred taxpayers whose names are going to be released pursuant to the district court's order can sue for damages under IRC 7431 in any circuit in which such taxpayer lives. Now the United States will be able to assert the Sixth Circuit's order in defense to a damages lawsuit. Not stonewalling. Good lawyering.

Posted by: Publius Novus | Mar 25, 2016 9:07:05 AM

No taxpayer entity who was targeted by the IRS is going to object to having their names released in order to join a class-action against the IRS, Publius. This isn't the donor names being released (like the Califonia AG wants), this is a marshalling of those injured by the IRS mishandling of their tax-exempt status.

Posted by: ruralcounsel | Mar 25, 2016 12:43:14 PM

Publius, is there any limit to your defense of the IRS misbehavior?

Posted by: Mike Petrik | Mar 25, 2016 5:59:14 PM

Stonewalling by good lawyers is still stonewalling, Publius Nauseous.

Posted by: Teapartydoc | Mar 25, 2016 6:31:06 PM

Publius, we all know what is going on and you do to.

Posted by: Wodun | Mar 25, 2016 11:50:31 PM

Mr.ruralcounsel: Remind me never to hire you. Remember first year law school? A lawyer does not buy a lawsuit for his client. Nor does a good lawyer rely upon the good will and expected propensities of those who might sue his client.

Messrs. Petrik, Teapartydentist, & wodun: Try to focus on the facts and the law. Not the messenger. It's what we do in the good ole U.S.A.

Posted by: Publius Novus | Mar 28, 2016 8:23:08 AM

"Remind me never to hire you. Remember first year law school? A lawyer does not buy a lawsuit for his client. Nor does a good lawyer rely upon the good will and expected propensities of those who might sue his client."

Care to explain how any of that applies or is relevant? Nor would I hire you.

Posted by: ruralcounsel | Mar 28, 2016 11:54:17 AM