Copyright (c) 1995 Tax Analysts Tax Notes Today JULY 10, 1995 MONDAY DEPARTMENT: Other Court Documents (CTO) CITE: 95 TNT 133-62 LENGTH: 7063 words HEADLINE: 95 TNT 133-62 DEFENDANT'S MOTION FOR SUMMARY JUDGMENT. (Tax Analysts v. IRS) (94-CV-0220) (USDC DC) (Section 6104 -- Exempt Organization Information) (Release Date: June 30, 1995) (Doc 95-6647) CODE: Section 6104 -- Exempt Organization Information SUMMARY: The IRS seeks summary judgment in its favor 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 DEFENDANT'S MOTION FOR SUMMARY JUDGMENT Comes Now DEFENDANT, Internal Revenue Service, by and through its undersigned counsel, pursuant to Fed. Rules Civ. P., Rule 56, and hereby moves this Court for entry of summary judgment in its favor. As grounds for this motion, defendant states that there exists no genuine issue of material fact and that it is entitled to judgment as a matter of law. PAGE 95 (c) 1995, Tax Analysts, Tax Notes Today, JULY 10, 1995 In support of this motion the defendant relies upon the declarations of Elissa M. Sissman and Steven T. Miller, attached hereto, and the memorandum in support of this motion, all filed herewith. Also attached is a proposed Order granting the relief requested. Dated: June 30, 1995. Respectfully submitted, MARGARET M. EARNEST Trial Attorney, Tax Division U.S. Department of Justice P.O. Box 227 Ben Franklin Station Washington, D.C. 20044 Tel: (202) 307-6562 OF COUNSEL: ERIC H. HOLDER United States Attorney ORDER Having considered the motion for summary judgment of the defendant Internal Revenue Service, and the opposition thereto, it is this day of , 1995, ORDERED that defendant's motion is GRANTED. It is further ORDERED that the Complaint is DISMISSED with prejudice. The Clerk is directed to mail conforming copies of this Order to the parties listed below. THOMAS F. HOGAN United States District Judge cc: Margaret M. Earnest Trial Attorney, Tax Division U.S Department of Justice P.O. Box 227 Ben Franklin Station Washington, D.C. 20044 William J. Lehrfeld, Esquire Bruce L. Stern, Esquire William J. Lehrfeld, P.C. Suite 740 1250 H Street, NW Washington, DC 20005-3908 William A. Dobrovir, Esquire William A. Dobrovir, P.C. 65 Culpepper Street Warrenton, VA 22186 MEMORANDUM OF POINTS AND AUTHORITIES IN SUPPORT OF MOTION TO DISMISS, OR, IN THE ALTERNATIVE, MOTION FOR SUMMARY JUDGMENT This is an action in which plaintiff seeks to enjoin the Internal Revenue Service from withholding certain documents requested under the Freedom of PAGE 96 (c) 1995, Tax Analysts, Tax Notes Today, JULY 10, 1995 Information Act. QUESTIONS PRESENTED 1.) Has plaintiff failed to exhaust its administrative remedies as to documents other than the Closing Agreements sought in its FOIA request? 2.) Are the documents at issue prohibited from disclosure pursuant to 26 U.S.C. section 6103 and therefore exempt from production pursuant to FOIA subsection (b)(3)? 3.) Are the documents at issue subject to the public inspection provisions of 26 U.S.C. section 6104? 4.) Are the documents at issue subject to disclosure pursuant to 26 U.S.C. section 6110? STATUTES INVOLVED 5 U.S.C. section 552, 26 U.S.C. sections 6103, 6104, 6110. STATEMENT OF FACTS 1. INTRODUCTION. Plaintiff, Tax Analysts, commenced this action under the Freedom of Information Act, 5 U.S.C. section 552, by the filing of its complaint on or about October 14, 1994. The defendant, Internal Revenue Service, served a timely answer to the complaint on November 14, 1994. The complaint seeks access to documents known as Closing Agreements entered into between third parties and the Internal Revenue Service. Defendant now moves the Court for summary judgment. 2. PLAINTIFF'S REQUEST FOR RECORDS. By way of letter dated November 10, 1993, plaintiff submitted a request under the Freedom of Information Act to the National Office of the Internal Revenue Service seeking: 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 21, 1992; and 3. All Closing Agreements relating to taxpayers that are not exempt organizations, executed on or after December 31, 1992, PAGE 97 (c) 1995, Tax Analysts, Tax Notes Today, JULY 10, 1995 but with the taxpayer names and other taxpayer identifying information deleted. (Compl. & Ans. paragraphs 5; Sissman Decl. paragraph 4, Exh. A.) The Office of Disclosure in the National Office received this request on November 23, 1993. (Sissman Decl. paragraph 4.) 3. ADMINISTRATIVE PROCEEDINGS. In response to the December 9, 1993, request of the Internal Revenue Service, plaintiff agreed to a thirty day extension of time to have the request processed. (Id., paragraph C.) By letter dated January 10, 1994, plaintiff appealed the de facto denial of its request. (Compl. & Ans. paragraphs 6; Sissman Decl. paragraph 6, Exh. D.) The Service responded to the administrative appeal by letter dated February 7, 1994, in which plaintiff was advised that the Closing Agreements were being withheld pursuant to FOIA exemption (b)(3) in conjunction with Section 6103 of the Internal Revenue Code. (Compl. & Ans. paragraphs 7; Sissman Decl. paragraph 7, Exh. E.) 4. SEARCH FOR DOCUMENTS. In processing plaintiff's FOIA request to the National Office, Elissa Sissman, an attorney in the Office of Chief Counsel for the Internal Revenue Service, coordinated a search for responsive documents. (Sissman Decl. paragraph 8.) Her declaration describes the search for the closing agreements which are at issue in this case. Based upon Delegation Order No. 97, the Office of Disclosure sent search memoranda, with a copy of plaintiff's FOIA request, to all appropriate offices. (Id. paragraph 8, Exh. F.) Specifically, 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). (Id. paragraph 8.) The Office of Assistant Commissioner (International) was not included in the search since the Assistant Commissioner (International) is the Service official responsible for the control of records under the jurisdiction of the Assistant Commissioner (International) pursuant to Treasury Regulation section 601.702(g). (Id. paragraph 9.) Search memoranda also were sent to the offices of Associate Chief Counsels (Enforcement Litigation, Domestic, Employee Benefits and Exempt Organizations, and International). (Id. paragraph 8.) 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.) (Id., paragraph 11.) In the Office of the Assistant Commissioner, five closing agreements, which involved tax exempt organizations and which were executed between December 31, 1992, and November 23, 1993, were located. (Id. paragraph 12.) All of these were located in the Exempt Organizations Division of the Office of Assistant Commissioner (Employee Plans & Exempt Organizations). (Id.) The search for responsive documents was coordinated by a Tax Law Specialist in the Exempt Organizations Division. (Id.) A memorandum was sent to all Division Branches, PAGE 98 (c) 1995, Tax Analysts, Tax Notes Today, JULY 10, 1995 the Systems and Support Unit and the Division Director's immediate Office, including Division Reviewers, requesting them to search for documents responsive to plaintiff's FOIA request. (Id.) The closing agreements located 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. (Id.) Once a possible taxpayer to a closing agreement was identified, efforts were made to locate the executed agreement. (Id.) 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 office conduct a search for documents responsive to the plaintiff's FOIA request. (Id. paragraph 13.) One closing agreement involving a tax exempt organization was located in the Office of Employee Plans & Exempt Organizations Field Compliance. (Id.) This agreement was a duplicate copy of a closing agreement located by the Exempt Organizations Division. (Id.) In conducting the search for responsive documents, each employee personally searched through the files and binders maintained in their offices. (Id.) In the Office of Chief Counsel (Employee Benefits and Exempt Organizations), a physical search of the "front office" closing agreement reading files was conducted. (Id. paragraph 14.) 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. (Id.) One closing agreement, which involved a tax exempt organization and which was executed between December 31, 1992, and November 23, 1993, was located in Employee Benefits and Exempt Organizations. (Id.) No closing agreements involving tax exempt organizations were located in the Office of Associate Chief Counsel (Domestic and International). (Id. paragraph 15.) Two closing agreements, which were duplicate copies of those found in the Office of the Assistant Commissioner (Employee Plans & Exempt Organizations), were located in the Office of Associate Chief Counsel (Enforcement Litigation). (Id.) 5. THE DOCUMENTS AT ISSUE. a. THE GENERAL NATURE OF CLOSING AGREEMENTS. Pursuant to Section 7121 of the Internal Revenue Code, the Secretary is authorized to enter into an agreement with any person relating to the liability of such person in respect of any internal revenue tax for any taxable period. 26 U.S.C. section 7121. A closing agreement may determine the amount of a taxpayer's liability for a particular tax period (Agreement as to Final Determination of Tax Liability), or it may resolve an issue that may have tax implications over several years (Closing Agreement in Final Determination Covering Specific Matters), or some combination of the two (Combined Agreements). (Miller Decl. paragraph 5; Exh. B.) A closing agreement is conclusive, and the matters involved in a closing agreement cannot be reopened without a showing of fraud, malfeasance, or a misstatement of material fact. (Id., see also 26 U.S.C. section 7121(b).) All closing agreements contain five parts: (1) identification of the parties; (2) introductory clauses; (3) the agreed determination; (4) the ending clause; and (5) the signatures. (Miller Decl. paragraph 6.) Generally, closing agreements set out the terms of a negotiated resolution and the factual PAGE 99 (c) 1995, Tax Analysts, Tax Notes Today, JULY 10, 1995 premises upon which the resolution is based. (Id., Exhs. C, D, E, F.) Closing agreements are not intended to provide analysis, interpret the law, or apply the law to a particular set of facts. (Id. paragraph 6.) Closing agreements are not intended to be precedential documents, and are not considered authoritative, except with regard to the particular taxpayer and issue involved. (Id.) b. THE CLOSING AGREEMENTS AT ISSUE. As set forth above, there are six closing agreements at issue, five of which are closing agreements on final determination covering specific matters and one is a combined agreement. (Id., paragraph 16.) Each of the agreements contains the taxpayer's identity, identifies whether the taxpayer's return was subject to examination or other investigation, and contain all or some of the following information: the nature, source and/or amount of the organization's income, payments, receipts, assets, and tax liabilities. (Id.) None of these closing agreements contains legal analysis applied to the facts of the case. (Id.) None of these closing agreements deals exclusively with an application by an exempt organization for recognition of its exempt status by the Service. (Id.) Five of the closing agreements at issue arose, at least in part, either as a result of an examination of the organization to which the closing agreement pertains or as a result of a combination of an examination of the organization and issues voluntarily brought to the Service's attention by the organization. (Id. paragraph 17.) The issues addressed in each of these closing agreements include some of the following: tax liability, litigation matters, political and legislative activities, distribution of cash reserves, distributions for charitable purposes, and assessment of tax. (Id.) Although some or all of these closing agreements acknowledge the fact that the organizations involved are recognized by the Service as tax exempt, none of these closing agreements grant such tax exempt status to the organizations. (Id.) The Service's recognition of the tax exempt status of these organizations is based upon the content of an administrative record or upon the order of a court. (Id.) The organizations' applications for exemption along with information which supported the applications, together with documents issued by the Service with respect to those applications, is contained in the administrative record of those organizations which is available for public inspection pursuant to 26 U.S.C. section 6104. (Id.) In one of these five closing agreements, the organization and the Service agreed to retroactive revocation of exempt status for specified tax years. (Id.) This organization's application for tax exempt status for years subsequent to revocation, which was approved by the Service, along with the documents submitted by the organization in support of the application and the favorable ruling letter, are available for public inspection pursuant to I.R.C. section 6104. (Id.) One closing agreement at issue arose as a result of an issue the organization voluntarily brought to the attention of the Service. (Id. paragraph 18.) This closing agreement addresses the issue of a private foundation's excess business holdings, and it does not grant tax exempt status to the organization. (Id.) The Service had already recognized the tax exempt status of the organization based on the administrative record before the Service. (Id.) The organization's application for exemption, supporting information, and documents issued by the Service with respect to the application are available for public inspection PAGE 100 (c) 1995, Tax Analysts, Tax Notes Today, JULY 10, 1995 pursuant to Section 6104. (Id.) Two of the closing agreements contain provisions and reference waivers which permit the Service to disclose limited information about the closing agreements, the exempt organizations, and the issues involved in the matters being resolved. (Id. paragraph 19.) Under the provisions of one of these closing agreements, the Service can confirm that a closing agreement was entered into with the Church of Scientology to settle a variety of longstanding issues between the Church and the Service, including exemption from tax, as well as a variety of outstanding tax and litigation matters. (Id.) Under the provisions of another of these closing agreements, Old Time Gospel Hour, Inc. agreed to a limited waiver of Section 6103 to permit the issuance of a mutually agreed press statement. (Id. paragraph 20, Exh. O.) The closing agreements at issue do not recite all relevant facts, explain the relevant provisions of law, and show the application of the law to facts. (Id. paragraph 20.) In contrast, the six closing agreements at issue recite the premises upon which the agreements are based and the terms actually agreed upon. (Id.) ARGUMENT I. PLAINTIFF HAS FAILED TO EXHAUST ADMINISTRATIVE REMEDIES WITH RESPECT TO CERTAIN DOCUMENTS. Exhaustion of administrative remedies is a prerequisite to litigation under the FOIA. Oglesby v. Department of the Navy, 920 F.2d 57, 63-64 (D.C. Cir. 1990); American Federation of Government Employees v. United States Department of Commerce, 907 F.2d 203, 209 (D.C. Cir. 1990); Dettman v. U.S. Department of Justice, 802 F.2d 1472, 1475-76 (D.C. Cir. 1986). Plaintiff's FOIA request dated November 10, 1993, sought Closing Agreements as follows: (1) Closing Agreements between the IRS and one or more Church of Scientology organizations preceding 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. (Sissman Decl., Exh. A.) In its Complaint, plaintiff seeks access to the documents identified in categories one and two of its FOIA request submitted on November 10, 1993. (Id. paragraph 8.) /1/ In addition, however, the Complaint seeks "ALL ATTACHMENTS PAGE 101 (c) 1995, Tax Analysts, Tax Notes Today, JULY 10, 1995 AND SUPPORTING MATERIAL REASONABLY NECESSARY TO MEMORIALIZE OR RECORD THE FULL SCOPE OF THE CLOSING AGREEMENT AND ALL MATTERS ENCOMPASSED WITHIN AND RESOLVED BY IT." (Compl. paragraph 10(a).) The plaintiff has never administratively sought any documents other than Closing Agreements. Indeed, no mention whatsoever is made either in its FOIA request or in its appeal letter of any such documents. (Sissman Decl. paragraphs 4, 6, Exhs. A, D.) Because Tax Analysts has not made a FOIA request for any documents other than the Closing Agreements identified in its November 10, 1993, request, plaintiff has failed to exhaust its administrative remedies with respect to any such documents. Accordingly, to the extent the complaint seeks documents other than the previously described Closing Agreements, this Court lacks subject matter jurisdiction and the complaint should be dismissed. II. THE DOCUMENTS AT ISSUE ARE EXEMPT FROM PRODUCTION PURSUANT TO FOIA SUBSECTION (b)(3) IN CONJUNCTION WITH 26 U.S.C. SECTION 6103. Exemption 3 of the FOIA protects from disclosure information which is: specifically exempted from disclosure by statute (other than section 552b of this title), provided that such 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). In deciding whether this exemption applies to information requested pursuant to FOIA, the relevant inquiry is two-fold: first, does a special statute exist, and second, is the information requested within that statute's coverage. Fund for Constitutional Government v. National Archives & Records Service, 656 F.2d 856, 868 n. 29 (D.C. Cir. 1981); Aronson v. Internal Revenue Service, 973 F.2d 962, 964 (1st Cir. 1992); Meyerhoff v. United States Environmental Protection Agency, 958 F.2d 1498, 1500 (9th Cir. 1992). Section 6103 of the Internal Revenue Code mandates that tax return information be held confidential subject to a number of strictly construed exemptions. See Church of Scientology of California v. Internal Revenue Service, 484 U.S. 9, 11 (1987). The statute provides that: * * * Returns and return information shall be PAGE 102 (c) 1995, Tax Analysts, Tax Notes Today, JULY 10, 1995 confidential, and except as authorized by this title -- (1) no officer or employee of the United States, * * * * * shall disclose any return or return information obtained by him in any manner in connection with his service as such an officer or an employee or otherwise or under the provisions of this section. For purposes of this subsection, the term "officer or employee" includes a former officer or employee. 26 U.S.C. section 6103(a). Quite plainly, "return information" may not be disclosed by any employee or officer of the United States, unless some other provision of Title 26 provides an exception from the general rule. /2/ "Return information" is elaborately defined in 26 U.S.C. section 6103(b)(2) as: (A) 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, or is being 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, AND (B) any part of any written determination or any background file document relating to such written determination (as such terms are defined in section 6110(b)) which is not open to public inspection under section 6110. PAGE 103 (c) 1995, Tax Analysts, Tax Notes Today, JULY 10, 1995 Section 6103(a) has long been held to be an exempting statute under Exemption 3. See Church of Scientology of California v. Internal Revenue Service, 792 F.2d 146, 149 (D.C. Cir. 1986); Wiener v. F.B.I., 943 F.2d 972, 982, n. 16 (9th Cir.), reh'g denied 951 F.2d 1073 (1991), cert, denied, 112 S.Ct. 3013 (1992); Long v. United States, 742 F.2d 1173, 1178-1179 (9th Cir. 1984); Chamberlain v. Kurtz, 589 F.2d 827 (5th Cir.), cert. denied 444 U.S. 842 (1979); Fruehauf Corporation v. IRS, 566 F.2d 574, 578, n.6 (6th Cir. 1977). Since Section 6103 is clearly a qualifying non-disclosure statute under Exemption 3 of the FOIA, the sole issue then is whether the information sought is of the type to which the section applies. The documents sought in this case are closing agreements entered into between taxpayers (or potential taxpayers) and the Internal Revenue Service. Pursuant to Section 7121 of the Internal Revenue Code, the Secretary is authorized to enter into an agreement in writing with any person relating to the liability of such person (or of the person or estate for whom he acts) in respect of any internal revenue tax for any period. Each of the agreements at issue contains the taxpayer's identity, identifies whether the taxpayer's return was subject to examination or other investigation, and contain all or some of the following information: the nature, source and/or amount of the organization's income, payments, receipts, assets, and tax liabilities. (Miller Decl. paragrpah 17.) Accordingly, there can be no doubt that these documents contain return information as that term is defined in Section 6103(b)(2) of the Internal Revenue Code. Plaintiff contends, however, that "[n]o claim of exemption lies under section 6103 of the Code. Information relating to exempt organizations is divested of confidentiality." /3/ (Sissman, Decl., Exh. A.) Neither case law nor the statute support such an argument. In Breuhaus v. Internal Revenue Service, 609 F.2d 80 (2d Cir. 1979), plaintiff brought suit under the FOIA for production of a letter written to a congressman by the Commissioner explaining a determination as to whether a tax-exempt organization would be liable for termination tax. In holding that the document was exempt from disclosure pursuant to FOIA subsection (b)(3) in conjunction with Section 6103 of the Internal Revenue Code, the Court expressly rejected Breuhaus' argument (advanced by plaintiff here) that documents pertaining to tax exempt organizations have no protection under Section 6103. (Id. at 83.) Similarly, in Belisle v. Commissioner, 462 F.Supp. 460 (W.D. Okla. 1978), plaintiff sought production under the FOIA of the "results" of the Service's investigation of an alleged Section 501(c)(3) violation by an exempt organization. In finding that none of the exceptions to the nondisclosure requirement of Section 6103 applied, the Court found the information exempt from disclosure under the FOIA pursuant to Exemption (3). (Id. at 462.) As noted above, a closing agreement is the result of negotiations between a person and the Internal Revenue Service. As demonstrated below, the provisions of Title 26 relied upon by plaintiff (Sections 6104 and 6110) do not permit disclosure of this confidential return information. Accordingly, Section 6103 prohibits such disclosure and the documents are exempt from production pursuant to FOIA subsection (b)(3). PAGE 104 (c) 1995, Tax Analysts, Tax Notes Today, JULY 10, 1995 III CLOSING AGREEMENTS ARE NOT SUBJECT TO THE PUBLIC INSPECTION PROVISIONS OF 26 U.S.C. SECTION 6104. Section 6104 of the Internal Revenue Code provides that for an organization which is exempt from taxation for any taxable year, that the application filed by the organization with respect to which the Secretary made his determination that such organization was entitled to exemption under section 501(a), together with any papers submitted in support of such application, and any letter of other document issued by the Internal Revenue Service with respect to such application shall be open to public inspection. 26 U.S.C. section 6104(a)(1)(A). As originally enacted in 1954, Section 6104 provided that (with certain exceptions not relevant here) the annual returns required to be filed by exempt organizations were to be open to the public. The Technical Amendments Act of 1958, Pub. L. No. 85-66, 72 Stat. 1606, changed Section 6104(a) to provide that certain additional documents relating to section 501(c) and (d) organizations would be available to the public: If an organization described in section 501(c) or (d) is exempt from taxation under section 501(a) for any taxable year, [1] the application filed by the organization with respect to which the Secretary or his delegate made his determination that such organization was entitled to exemption under section 501(a), [2] together with any papers submitted in support of such application, shall be open to public inspection at the national office of the Internal Revenue Service. This amendment to Section 6104 is noteworthy in two respects. First, it applies only to organizations whose applications for exemption are GRANTED. Second, Congress chose NOT to make open to public inspection ALL documents relating to exempt organizations. Instead, only the application for exemption and papers submitted in support of the application were to be made available. Documents included in the "application for exemption" are set forth in T. Reg. section 301.6104(a)-1(d)(1) and include the prescribed application form and all other documents and statements required to be filed with the form. An application form for recognition of tax exempt status under Section 501(c) of the Internal Revenue Code is Form 1023. As indicated thereon, Form 1023 requires particular documents to be attached to it. The required documents are dependent upon the type of organization submitting the form. A corporation must attach the Articles of Incorporation (including amendments and restatements) showing approval by the appropriate state official and a copy of the bylaws. A trust must attach a copy of the Trust Indenture or Agreement, including all PAGE 105 (c) 1995, Tax Analysts, Tax Notes Today, JULY 10, 1995 appropriate signatures and dates. An association must attach a copy of the Articles of Association, Constitution, or other creating document, with a declaration or other evidence the organization was formed by adoption of the document by more than one person, and a copy of the bylaws. Form 1023 also requires the submission of additional documents depending upon the applicant's answers to specific questions on the form. For example, a successor to a "for profit" institution must attach a copy of the agreement of sale or other contract that sets forth the terms and conditions of sale of the predecessor organization or of its assets to the applicant organization. The phrase "supporting documents" with respect to an application for tax exemption is defined by T. Reg. section 301.6104(a)-1(e) to be any statement or document not described in paragraph (d) of that section but that is submitted by an organization in support of an application for tax exemption. An example of a supporting document given in the regulation is a legal brief submitted in support of an application for tax exemption. Clearly, a closing agreement, which is a bilateral resolution signed by both the taxpayer and the Internal Revenue Service, is neither an application for exemption nor a supporting document, either as contemplated by the statute, or as more specifically described in the regulations. Nor is a closing agreement a letter or other document issued by the Service with respect to an application for exemption. In Breuhaus v. Internal Revenue Service, supra, the Court was faced with the question of whether Section 6104(a) required production under the FOIA of a letter written to a congressman by the Commissioner explaining a determination as to whether a tax-exempt organization would be liable for termination tax. In deciding that it did not, the Court necessarily determined that not every document relating to a tax exempt organization is open to public inspection by virtue of Section 6104(a). Significantly, the Breuhaus decision came after the Tax Reform Act of 1976, which further amended Section 6104(a) to provide that in addition to the application for exemption and papers submitted in support of such application, any letter or other document ISSUED by the Internal Revenue Service with respect to such application shall be open to public disclosure. Indeed, the Breuhaus Court expressly noted that the letter written by the Commissioner did not appear to satisfy the statutory requirement of Section 6104(a)(1)(A) that the letter or other document be issued by the Internal Revenue Service with respect to such application. Breuhaus v. Internal Revenue Service, 609 F.2d at 82 n.2. As the name implies, a closing agreement cannot be created unilaterally. Because it sets out the terms of a negotiated resolution and the factual premises upon which that resolution is based, it must be signed by the taxpayer as well as the Service. Accordingly, it is not a document ISSUED BY THE SERVICE, The regulations support this analysis. Treasury Regulation section 301.6104(a)-1(b) refers to Treasury Regulation section 301.6110-2(h) for definition of "issuance." Under the latter, "issuance" of a written determination occurs, with respect to rulings and determination letters, upon the mailing of the ruling or determination letter to the person to whom it pertains. "Issuance" of a technical advice memorandum occurs upon its adoption by the district director. Thus, the term "issued" contemplates that the PAGE 106 (c) 1995, Tax Analysts, Tax Notes Today, JULY 10, 1995 Service is the only party in control of when a document is issued. Under plaintiff's theory, ANY document which even acknowledges the tax exempt status of an organization is open to public inspection under Section 6104. This simply is not the law. Indeed, the regulations recognize that documents may be filed with or issued by the Internal Revenue Service which relate to an organization's tax exempt status but not to the application for exemption. See Treasury Regulation section 301.6104(a)-1(i)(6) (Any other letter or document filed with or issued by the Internal Revenue Service, which although it relates to an organization's tax exempt status as an organization described in section 501(c) or (d), does NOT relate to that organization's application for tax exemption within the meaning of T. Reg. section 301.6104(a)-1(d).) Thus, even if a closing agreement could be considered to be a document filed with or issued by the Internal Revenue Service, it does not relate to the organization's application for tax exemption, and, therefore, it is not open to public inspection pursuant to Section 6104. In Belisle v. Commissioner, supra, the Court decided that the public inspection requirement of Section 6104(a) pertains only to the application for exemption and related documents. In that case, plaintiff sought disclosure under the FOIA of the "results" of the Service's investigation of an alleged Section 501(c)(3) violation by an exempt organization. The Court found that Section 6104(a)(1)(A) "does not encompass IRS investigation files related to such organizations." (Id. at 461.) As indicated above, five of the closing agreements at issue arose, at least in part, either as a result of an examination of the organization to which the closing agreement pertains or as a result of a combination of an examination of the organization and issues voluntarily brought to the Service's attention by the organization. (Miller Decl. paragraph 17.) Although some or all of these closing agreements acknowledge that the organizations involved are recognized by the Service as tax exempt, none of these closing agreements grants such tax exempt status to the organization. (Id.) One closing agreement at issue arose as a result of an issue the organization voluntarily brought to the attention of the Service. (Id. paragraph 18.) This closing agreement addresses the issue of a private foundation's excess business holdings. (Id.) It does not grant tax exempt status to the organization. Id.) The administrative record for each organization for which a closing agreement is at issue in this case is available for public inspection pursuant to Section 6104. (Id. paragraphs 17, 18.) The information plaintiff seeks, that is disclosure of the closing agreements, is not mandated by Section 6104, and, as set forth above, is prohibited by Section 6103 of the Internal Revenue Code. Accordingly, these documents are exempt from production under the Freedom of Information Act. IV THE DOCUMENTS AT ISSUE ARE NOT SUBJECT TO DISCLOSURE PURSUANT TO SECTION 6110 OF THE INTERNAL REVENUE CODE. a. SECTION 6110 DOES NOT APPLY TO CLOSING AGREEMENTS. PAGE 107 (c) 1995, Tax Analysts, Tax Notes Today, JULY 10, 1995 Section 6110 of the Internal Revenue Code states that except as otherwise provided, the text of any written determination and any background file document shall be open to public inspection. 26 U.S.C. section 6110(a). A written determination means a ruling, determination letter, or technical advice memorandum. 26 U.S.C. 6110(b). A ruling is a written statement issued by the National Office to a taxpayer that interprets and applies tax laws to a specific set of facts. T. Reg. section 301.6110-2(d). A determination letter is a written statement issued by a district director in response to a written inquiry by an individual or an organization that applies principles and precedents previously announced by the National Office to the particular facts involved. T. Reg. section 301.6110-2(e). A technical advice memorandum is a written statement issued by the National Office to, and adopted by, a district director in connection with the examination of a taxpayer's return or consideration of a taxpayer's claim for refund or credit. T. Reg. section 301.6110-2(f). The legislative history of Section 6110 indicates that a "written determination would not be considered a ruling, technical advice memorandum, or determination letter unless it recites the relevant facts, explains the applicable provisions of law, and shows the application of the law to the facts." S. Rep. No. 94-938 reprinted in 1976 U.S. Code Cong. & Adm. News p. 3736. The closing agreements at issue do not provide analysis, interpret the law, or apply the law to a particular set of facts. (Miller Decl. paragraphs 16, 20.) Thus, the closing agreements are not written determinations within the meaning of Section 6110. Significantly, the legislative history of this section confirms that in enacting Section 6110 Congress did not intend for closing agreements to be open to public inspection. Additionally, the committee amendment would not require disclosure of a closing agreement entered into between the IRS and a taxpayer which finally determines the taxpayer's tax liability with respect to a taxable year. (Where it is in the interest of a taxpayer and the IRS, a closing agreement may be made in order to provide certainty as to a person's past liability.) The committee understands that a closing agreement is generally the result of a negotiated settlement and, as such, does not necessarily represent the IRS view of the law. S. Rep. No. 94-938 reprinted in 1976 U.S. Code Cong. & Adm. News p. 3736. PAGE 108 (c) 1995, Tax Analysts, Tax Notes Today, JULY 10, 1995 Moreover, Section 6110 expressly excepts any matter for which the determination of whether public inspection should occur is made pursuant to Section 6104. See 26 U.S.C. section 6110(k)(1); Reg. section 301.6110-1(a). Treasury Regulation section 301.6104(a)-1(i) describes material which is not open to public inspection under Section 6104 or Section 6110. As noted above, the regulation provides that any other letter or document filed with or issued by the Internal Revenue Service which, although it relates to an organization's tax exempt status as an organization described in section 501(c) or (d), does not relate to that organization's application for tax exemption within the meaning of T. Reg. section 301.6104(a)-1(i)(d). Accordingly, the closing agreements plaintiff seeks are not subject to disclosure under Section 6110. Plaintiff initially sought disclosure of closing agreements not only for tax exempt organizations but for "taxpayers that are not exempt organizations, executed on or after December 31, 1992, but with the taxpayer names and other identifying information deleted." (Sissman Decl. paragraph 4, Exh. A.) The Internal Revenue Service asserted that these documents are prohibited from disclosure pursuant to Section 6103 of the Internal Revenue Code, and thus, exempt from production under FOIA subsection (3). Interestingly, in this litigation plaintiff does not seek any closing agreements with respect to taxpayers that are not tax exempt organizations. Indeed, it is clear that such documents, even with the taxpayer identifying information deleted, are not available to the plaintiff under Section 6110, and, therefore, are prohibited from disclosure pursuant to Section 6103. Section 6110 does not provide any basis for having the same type of document, which is NOT open to public inspection with respect to a taxpayer who is not tax exempt, be made available simply because an organization is tax exempt. Accepting plaintiff's argument that the closing agreements at issue must be disclosed under Section 6110 requires the Court to determine not only that a closing agreement is a written determination within the meaning of that statute but that the exception set forth in Section 6110(k)(1) serves no purpose. b. EVEN IF CLOSING AGREEMENTS ARE WRITTEN DETERMINATIONS WITHIN THE MEANING OF SECTION 6110, THE COURT LACKS SUBJECT MATTER JURISDICTION TO ORDER DISCLOSURE UNDER THE FREEDOM OF INFORMATION ACT. Even if closing agreements are written determinations within the meaning of Section 6110, which defendant does not concede, the Court lacks subject matter jurisdiction to order disclosure under the FOIA as Section 6110 supplanted FOIA with respect to requests for such determinations. (See 26 U.S.C. 6110(l).) In Conway v. United States, 447 F.Supp. 1128 (D.D.C. 1978), plaintiff brought suit under the FOIA for technical advice memoranda and background documents. The Court noted that "the legislative history of section 6110 clearly indicates that Congress intended the provisions of this section to replace those of the FOIA in this area." Id. at 1131; see also Grenier v. United States, 449 F.Supp. 834 (D. Md. 1978). Indeed, Congress provided specific statutory safeguards for those about whom such written determinations are made by creating a complex set of procedures regarding disclosure. See 26 U.S.C. section 6110(f), (i). PAGE 109 (c) 1995, Tax Analysts, Tax Notes Today, JULY 10, 1995 Accordingly, because Section 6110 is the exclusive remedy for disclosure of written determinations, even if this Court were to conclude that the closing agreements at issue are written determinations and are not excluded within Section 6110(k)(1), the Court lacks jurisdiction to order disclosure of the documents under the FOIA. CONCLUSION It is the position of the Internal Revenue Service that its motion for summary judgment ought to be granted. Dated: June 30, 1995. Respectfully submitted, MARGARET M. EARNEST Trial Attorney, Tax Division U.S. Department of Justice P.O. Box 227 Ben Franklin Station Washington, D.C. 20044 (202) 307-6562 OF COUNSEL: ERIC H. HOLDER United States Attorney FOOTNOTES /1/ It appears that plaintiff has abandoned, or at least is not prosecuting in this case, the documents described in category 3 of the November 10, 1993, FOIA request. (See Compl. paragraph 10(a), req. for relief no. 1.) /2/ This prohibition is given effect by two other provisions of the Internal Revenue Code, viz., 26 U.S.C., Secs. 7213 (which provides criminal felony sanctions for willful violations of Sec. 6103(a)) and 7431 (which creates a private cause of action in tort for negligence, willful and intentional violations of Sec. 6103(a)). /3/ Under plaintiff's theory, all IRS records relating to it would be open for public inspection. (See Compl. paragraph 3 which alleges that Tax Analysts is a nonprofit corporation with exempt status under Section 501(c) of the Internal Revenue Code.) END OF FOOTNOTES