Copyright (c) 1995 Tax Analysts Tax Notes Today JULY 10, 1995 MONDAY DEPARTMENT: Other Court Documents (CTO) CITE: 95 TNT 133-63 LENGTH: 2205 words HEADLINE: 95 TNT 133-63 DEFENDANT'S STATEMENT OF MATERIAL FACTS AS TO WHICH THERE IS NO GENUINE ISSUE. (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 95-6648) CODE: Section 6104 -- Exempt Organization Information SUMMARY: The IRS files its statement of material facts as to which there is no genuine issue 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 STATEMENT OF MATERIAL FACTS AS TO WHICH THERE IS NO GENUINE ISSUE In support of its motion for summary judgment, defendant Internal Revenue Service submits the following statement of material facts as to which there is no genuine issue. PAGE 111 (c) 1995, Tax Analysts, Tax Notes Today, JULY 10, 1995 1. By 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, but with the taxpayer names and other taxpayer identifying information deleted. (Compl. & Ans. paragraphs 5; Sissman Decl. paragraph 4, Exh. A.) 2. The Office of Disclosure in the National Office received this request on November 23, 1993. (Sissman Decl. paragraph 4.) 3. 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.) 4. 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.) 5. 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.) 6. In processing plaintiff's FOIA request to the National Office, Ms. Sissman coordinated a search for responsive documents. (Sissman Decl. paragraph 8.) 7. 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.) 8. 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). (Id. paragraph 8.) PAGE 112 (c) 1995, Tax Analysts, Tax Notes Today, JULY 10, 1995 9. 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.) 10. 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.) 11. 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.) 12. 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, 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.) 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 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.) 14. 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.) PAGE 113 (c) 1995, Tax Analysts, Tax Notes Today, JULY 10, 1995 15. 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.) 16. 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).) 17. 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.) 18. Generally, closing agreements set out the terms of a negotiated resolution and the factual premises upon which the resolution is based. (Id., Exhs. C, D.) 19. Closing agreements are not intended to provide analysis, interpret the law, or apply the law to a particular set of facts. (Id. paragraph 6.) 20. 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.) 21. 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.) 22. Each of the closing 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. (Id.) 23. None of the closing agreements at issue contains legal analysis applied to the facts of the case. (Id.) 24. None of the closing agreements deals exclusively with an application by an exempt organization for recognition of its exempt status by the Service. (Id.) 25. 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 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.) 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 PAGE 114 (c) 1995, Tax Analysts, Tax Notes Today, JULY 10, 1995 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.) 26. 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.) 27. 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 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 pursuant to Section 6104. (Id.) 28. 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.) 29. 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 21.) In contrast, the six closing agreements at issue recite the premises upon which the agreements are based and the terms actually agreed upon. (Id.) Date: June 30, 1995. Margaret M. Earnest Trial Attorney, Tax Division U.S. Department of Justice P.O. Box 227 Ben Franklin Station Washington, D.C. 20044 Telephone:(202) 307-6562 (COUNSEL FOR DEFENDANT) OF COUNSEL: ERIC H. HOLDER United States Attorney PAGE 115 (c) 1995, Tax Analysts, Tax Notes Today, JULY 10, 1995 * * * CERTIFICATE OF SERVICE IT IS HEREBY CERTIFIED that the foregoing MOTION FOR SUMMARY JUDGMENT ON BEHALF OF THE INTERNAL REVENUE SERVICE, DECLARATION OF ELISSA M. SISSMAN, DECLARATION OF STEVEN T. MILLER, supporting MEMORANDUM, DEFENDANT'S STATEMENT OF MATERIAL FACTS AS TO WHICH THERE IS NO GENUINE ISSUE, and proposed ORDER were caused to be served upon plaintiff this 30th day of June, 1995, by sending a copy by first class mail, postage prepaid, addressed as follows: 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 MARGARET M. EARNEST