T. Keith Fogg v. Internal Revenue Service

Background

Nicholas Xanthopoulos and T. Keith Fogg jointly submitted a request under the Freedom of Information Act (FOIA), 5 U.S.C. § 552, seeking an unredacted version of § 21.1.3.3 of the Internal Revenue Manual (IRM). That section governs how Internal Revenue Service personnel authenticate third-party representatives who contact the Service on behalf of taxpayers and request sensitive taxpayer information.

The Service had changed its authentication procedures in January 2018. In addition to previously requested information, it generally required third-party representatives to provide their own Social Security numbers. The IRM section stated that the process was intended to confirm callers’ identities, combat identity theft, and protect tax professionals and their clients.

The plaintiffs submitted their FOIA request on June 19, 2019. The Service denied the request for an unredacted version of the section and continued withholding the material under FOIA Exemption 7(E), 5 U.S.C. § 552(b)(7)(E). The plaintiffs filed this action on November 29, 2019. During the litigation, the Service released two previously redacted portions. Five redactions remained: a note, an exception, all of subsections (4) and (5), and approximately two lines under subsection (8).

Parties’ positions

The plaintiffs argued that the remaining material concerned an administrative authentication process rather than law-enforcement investigations or prosecutions. They also argued that the material released during the case did not reveal law-enforcement techniques, that the redactions’ location within the IRM was inconsistent with a law-enforcement purpose, and that the Service had not adequately supported its withholding decision. The plaintiffs also requested that the court review the redacted material privately, known as in-camera review.

The Service argued that the redactions described specialized investigative procedures used when a caller fell into a particular or unusual situation. According to the Service, the procedures helped prevent identity theft, fraudulent use of powers of attorney or tax-information authorizations, and unauthorized disclosure of taxpayer information. It also argued that the procedures helped employees comply with 26 U.S.C. § 6103, which generally protects taxpayer return information from disclosure.

Court’s analysis

The court applied the summary-judgment standard. In a FOIA case, the agency bears the burden of showing that it properly withheld the requested records. Exemption 7(E) permits withholding records compiled for law-enforcement purposes when disclosure would reveal techniques or procedures used in law-enforcement investigations or prosecutions, or would reveal certain guidelines whose disclosure could reasonably be expected to risk circumvention of the law.

Judge Nelson held that the Service had shown that the redacted portions were compiled for law-enforcement purposes. Although the IRM section also served an administrative function, the court found that the redacted procedures were proactive measures designed to prevent identity theft and protect confidential taxpayer information. The court rejected the plaintiffs’ arguments that the section’s administrative setting and location within the IRM prevented the exemption from applying.

The court also held that the redactions revealed law-enforcement techniques and procedures. The ordinary authentication process had largely been disclosed, but the remaining material concerned specialized procedures triggered by particular circumstances. The court found that gathering information about a specific caller to determine whether the caller was engaging in wrongful conduct could qualify as an investigation. It further found that the procedures were not merely universally known authentication concepts; disclosure could reveal how the Service handled particular situations and make those procedures easier to exploit.

The court did not decide whether the FOIA Improvement Act imposed an additional showing that disclosure would reasonably harm an interest protected by the exemption. It concluded that the Service prevailed under either view because it had shown that disclosure could reasonably be expected to increase the risk of identity theft, fraud, and unauthorized disclosure, and could harm the effectiveness of the investigative procedures.

In-camera review and segregability

Judge Nelson declined to conduct an in-camera review. The court found no evidence of bad faith and concluded that the declaration submitted by the Service adequately explained that the five remaining redactions involved specialized authentication procedures. The court also found that the Service had reviewed the records, released two previously withheld portions, and properly separated exempt material from nonexempt material. It therefore found that no reasonably segregable, nonexempt material remained withheld.

Disposition

The court granted the Internal Revenue Service’s motion for summary judgment and denied the plaintiffs’ cross-motion for summary judgment. The order directed that judgment be entered accordingly.