Elec. Privacy Info. Ctr. v. Internal Revenue Serv.

261 F.Supp.3d 1

ELECTRONIC PRIVACY INFORMATION CENTER, Plaintiff,

v.INTERNAL REVENUE SERVICE, Defendant.

Civil Action No. 17–670 (JEB)

United States District Court, District of Columbia.

Signed August 18, 2017

Marc Rotenberg, Alan Jay Butler, Washington, DC, for Plaintiff.

Kieran O'Neill Carter, Department of Justice, Tax Division, Megan Eileen Hoffman–Logsdon, U.S. Department of Justice, Washington, DC, for Defendant.

MEMORANDUM OPINION

JAMES E. BOASBERG, United States District Judge

Like many Americans, Plaintiff Electronic Privacy Information Center wants to see President Donald J. Trump's personal income-tax returns. To that end, it has sent Defendant Internal Revenue Service two Freedom of Information Act requests, seeking "all of Donald J. Trump's individual income tax returns for tax years 2010 forward, and other indications of financial relations with the Russian government or Russian businesses." Each time, the IRS responded that the request was incomplete—and therefore could not be processed—absent President Trump's consent to release his tax information. EPIC thus brought the present lawsuit to compel disclosure.

In now seeking dismissal, the IRS argues that EPIC cannot initiate a FOIA suit without perfecting its initial request. EPIC retorts that an exception to the consent prerequisite exists via Congress's Joint Committee on Taxation, which may approve disclosure. Yet, the Committee has not acted, and the IRS has no obligation to request that body to do so. As a result, until President Trump or Congress authorizes release of the tax returns, EPIC (and the rest of the American public) will remain in the dark. The Court, powerless to offer relief, will thus grant the Motion and dismiss the case.

I. Background

EPIC is a non-profit organization focused on issues relating to privacy and civil liberties and dedicated to the oversight of government activities. See ECF No. 1 (Complaint), ¶ 7. It is, in this case, interested in President Trump's personal income-tax returns. As Plaintiff puts it, "In the history of the United States, there has never been greater interest in the public release of an individual's tax records than those of Donald J. Trump." Id., ¶ 9.

EPIC first requested this information from the IRS on February 16, 2017. See ECF 14–2 (Declaration of Michael C. Young), Exh. A (First FOIA Request). The organization's letter sought "all of 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." Id. at 1. In support of its request, EPIC cited an ongoing "Congressional investigation and widespread public interest," a "long-standing tradition of U.S. Presidents" releasing returns, and concern over the President's possible "financial dealings with a foreign adversary." Id. at 1–2.

The IRS responded two weeks later, on March 2, 2017. See Young Decl., Exh. B (First FOIA Response). It wrote that the Internal Revenue Code prohibited release of a third party's return information unless EPIC established in its request that it had the taxpayer's consent. Id. at 1 (citing I.R.C. § 6103 ; Treas. Reg. § 601.702(c)(4)–(5) ). "Without such authorization," the IRS wrote, "the request is incomplete and cannot be processed." Id. The agency proceeded to close EPIC's request. Id.

On March 29, EPIC replied with another letter, this time both appealing the initial IRS response and renewing its request for disclosure. See Young Decl., Exh. C (Second FOIA Request). The second request sought substantially the same information: "Donald J. Trump's tax returns for tax years 2010 forward and any other indications of financial relations with the Russian government or Russian businesses." Id. at 1. EPIC further alleged, this second time, that it had a right to those documents under § 6103(k)(3) of the Internal Revenue Code. Id. at 1–8. The Court will delve into that section later, but briefly notes here that it allows the Secretary of the Treasury Department (which the IRS is part of), in certain situations, to disclose tax information to correct a public "misstatement of fact" regarding a taxpayer's return information if Congress's Joint Committee on Taxation has given permission.

EPIC alleged that Trump had indeed made several misstatements to the public. Specifically, he had insisted on Twitter (and, in substance, elsewhere):

For the record, I have ZERO investments in Russia.

Russia has never tried to use leverage over me. I HAVE NOTHING TO DO WITH RUSSIA—NO DEALS, NO LOANS, NO NOTHING!

See@realDonaldTrump, Twitter (July 26, 2016, 3:50 PM); id. (Jan. 11, 2017, 4:31 AM). Believing these assertions to be "directly contradicted" by investigative reporting and a statement by a member of his immediate family, EPIC argued that § 6103(k)(3) gave the IRS "legal authority to make the tax records available in response to a Freedom of Information Act request." Second FOIA Request at 4–5, 7 (misattributing statement by Donald Trump Jr. to son-in-law and White House advisor Jared Kushner).

On April 4, after a few days passed, one of EPIC's attorneys and the IRS disclosure manager participated in a telephone call regarding this request. See Compl., ¶ 45; see also ECF No. 15–1 (Declaration of John Davisson), ¶ 5. On that call the Service told the organization that "we're not going to do a (k)(3)" and that "we're not exercising (k)(3)"—referring to the § 6103(k)(3) misstatement-of-fact provision. See Compl, ¶ 46; see also Davisson Decl., ¶ 7.

Two days later, on April 6, the agency followed up with a written response. See Young Decl., Exh. D (Second FOIA Response).

Its letter first informed EPIC that "the Service will not consider an appeal of an incomplete FOIA request that cannot be processed." Id. at 1. The missive then stated that " § 6103(k) does not afford any rights to requesters under the FOIA to the disclosure of tax returns or return information of third parties." Id. Because EPIC still had not obtained President Trump's authorization to view his tax information, the IRS again closed the request as incomplete. Id. at 2. The Service added that "any future requests regarding this subject matter will not be processed." Id.

EPIC subsequently filed this lawsuit. Its Complaint states several causes of action: three FOIA counts alleging that the IRS failed to respond substantively by the statutory deadline, failed to take reasonable steps to release information, and unlawfully withheld agency records; and two APA counts asserting that the Service unlawfully closed the FOIA requests and failed to seek § 6103(k)(3) authorization from the Joint Committee on Taxation to release the tax-return information. See Compl., ¶¶ 54–75. Plaintiff thus requests as relief the disclosure of all responsive, non-exempt tax records. Id., Requested Relief, ¶¶ A–H.

Defendant's Motion to Dismiss these claims is now ripe.

II. Legal Standard

Because Defendant's reasons for dismissal properly fall under Federal Rule of Civil Procedure 12(b)(6), the Court sets forth that legal standard. Rule 12(b)(6) permits a Court to dismiss any count of a complaint that fails "to state a claim upon which relief can be granted." In evaluating the motion, the Court must likewise "treat the complaint's factual allegations as true and must grant plaintiff ‘the benefit of all inferences that can be derived from the facts alleged.’ " Sparrow v. United Air Lines, Inc., 216 F.3d 1111, 1113 (D.C. Cir. 2000) (quoting Schuler v. United States, 617 F.2d 605, 608 (D.C. Cir. 1979) ) (citation omitted). The Court need not accept as true, however, "a legal conclusion couched as a factual allegation" or an inference unsupported by facts set forth in the Complaint. Trudeau v. FTC, 456 F.3d 178, 193 (D.C. Cir. 2006) (quoting Papasan v. Allain, 478 U.S. 265, 286, 106 S.Ct. 2932, 92 L.Ed.2d 209 (1986) ).

This pleading standard is "not meant to impose a great burden upon a plaintiff," Dura Pharm., Inc. v. Broudo, 544 U.S. 336, 347, 125 S.Ct. 1627, 161 L.Ed.2d 577 (2005), as a count will survive so long as there is a " ‘reasonably founded hope that the [discovery] process will reveal relevant evidence’ to support the claim." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 563 n.8, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (quoting Dura Pharm., 544 U.S. at 347, 125 S.Ct. 1627 ). While "detailed factual allegations" are not necessary to withstand a dismissal motion, id. at 555, 127 S.Ct. 1955, the Complaint still "must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ " Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Twombly, 550 U.S. at 570, 127 S.Ct. 1955 ). In other words, a plaintiff must put forth "factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. A complaint may survive even if " ‘recovery is very remote and unlikely’ " or the veracity of the claims are "doubtful in fact" if the factual matter alleged in the complaint is "enough to raise a right to relief above the speculative level." Twombly, 550 U.S. at 555–56, 127 S.Ct. 1955 (quoting Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974) ).

III. Analysis

At bottom, EPIC wants the IRS to reveal another person's income-tax returns without his consent. Although those returns happen to belong to President Trump, that fact does not alter the outcome here. What steps a private individual must take to make such a Freedom of Information Act request and whether she can proceed in court is at the heart of any such tax-records dispute.

Answering this question necessitates understanding the principal federal sunshine law—the Freedom of Information Act. Congress enacted FOIA with a "broadly conceived" purpose "to pierce the veil of administrative secrecy and to open agency action to the light of public scrutiny." Dep't of Air Force v. Rose, 425 U.S. 352, 361, 96...