Washington, D.C. (July 18, 2019) – U.S. District Court Judge Ketanji Brown Jackson yesterday denied the Internal Revenue Service’s (“IRS”) motion to dismiss Cause of Action Institute’s (“CoA Institute”) Freedom of Information Act (“FOIA”) lawsuit over the agency’s refusal to produce records relating to its dealings with Congress’s Joint Committee on Taxation (“JCT”). To date, the IRS has refused to search for records potentially responsive to CoA Institute’s FOIA requests. The agency instead has argued that all relevant records would categorically be “congressional records” outside the scope of disclosure permitted under the FOIA. In its failed motion, the IRS claimed that the federal district court even lacked the authority—or subject-matter jurisdiction—to adjudicate CoA Institute’s well-pleaded claims in the first instance.
Search Results for: IRS
CoA Institute Defeats IRS Motion to Dismiss Lawsuit Over Access to Congressional Communications
Commerce Provides Poor Excuse in First Substantive Answer on Secrecy of 232 Auto Tariff Report
Washington, D.C. (June 19, 2019) – After nearly four months, Cause of Action Institute (CoA Institute) has finally received an explanation from the Department of Commerce (Commerce) that claims the Commerce Secretary’s final report to the President regarding the Section 232 investigation into the national security impacts of the Administration’s proposed automobile tariffs may constitute a presidential record. In this determination, which is in response to CoA Institute’s Freedom of Information Act (FOIA) request and subsequent litigation, Commerce states it is reviewing whether the report does in fact constitute a presidential record, which would remove it from the scope of the FOIA. It also claims that if the report ultimately is classified as an “agency record,” Commerce will still refuse to provide access to the report under the guise of presidential communications or deliberate process privileges.
Newly Released Records Confirm IRS, DOJ Violated Taxpayer Confidentiality Law
Whether we like it or not, the Internal Revenue Service (IRS) plays a central role in the administration of our tax laws. The agency consequently possesses copious amounts of sensitive financial information about individual Americans, nonprofits, and other corporations. Congress considered the protection of such information so important that it has mandated its confidentiality. Section 6103 of the Internal Revenue Code requires that “returns and return information”—essentially, anything about a taxpayer in IRS files—“shall remain confidential.” The importance of taxpayer confidentiality, and the danger inherent in its unauthorized disclosure, is one reason why the 2010 “Tea Party” targeting scandal was so serious—the Obama White House weaponized the IRS to target individuals and nonprofit groups based on their perceived political alignment.
IRS records recently produced to Cause of Action Institute (CoA Institute) in a Freedom of Information Act (FOIA) lawsuit now shed further light on how carelessly the IRS and the Department of Justice (DOJ) handled sensitive taxpayer information and only belatedly admitted to Congress that they had violated taxpayer confidentiality. In 2012, CoA Institute began its in-depth investigation into the nature and causes of the IRS targeting scandal and the misdeeds of government bureaucrats such as Lois Lerner. Part of our investigation revealed that IRS officials, including Ms. Lerner, willingly handed over twenty-one computer disks, containing over 1.1 million pages of taxpayer information, to the DOJ Public Integrity Section and the Federal Bureau of Investigation (FBI), despite lacking proper legal authorization to do so. This allegedly was done as part of the previous Administration’s efforts to investigate exempt entities suspected of having engaged in prohibited political activity.
After repeatedly insisting that it had received only “publicly available portions” of Form 990s when the IRS turned over those 1.1 million pages of taxpayer information, the DOJ later admitted it was mistaken. The records received by CoA Institute confirm that was the case.
In two requests for investigation (here and here), CoA Institute explained why the IRS’s unauthorized disclosure constituted a serious breach of taxpayer confidentiality laws. But the DOJ Inspector General, while admitting that taxpayer data had been mishandled, choose to do nothing and merely stated that Congress had been “informed” and “this matter does not warrant further investigation.” The DOJ watchdog’s inaction led to a series of further FOIA requests (here, here, and here) that were designed to discover more about what the IRS and DOJ had done, and how Congress was alerted to the violation of Section 6103. CoA Institute obtained the requested records only after filing a lawsuit to compel disclosure.
Section 6103 sets out clear rules for the handling of tax information. Those rules are in place to protect taxpayer privacy. In this case, however, the rules were not followed. The DOJ never had proper authorization to obtain the nonprofits’ tax information, including information about donors. But the IRS nevertheless transferred 1.1 million pages of returns to the DOJ and agreed to provide the data in “raw” format, so that it would be easier for the FBI to process.
On May 29, 2014, after the U.S. House of Representatives Committee on Oversight and Government Reform opened an investigation into the unauthorized transfer of these tax returns, the DOJ claimed that it had obtained only publicly available information, such as the returns available online on Guidestar.org.
Days later, on June 2, 2014, the DOJ again argued that the trove of tax information it obtained from the IRS was not confidential.
And then, only two days after that, the DOJ changed its story—the agency admitted that the IRS had discovered confidential Section 6103 information within the 1.1 million pages of returns and return information. The DOJ claimed that the disclosure had been “inadvertent,” and it indicated that it was “returning [its] copies of the disks to the IRS[.]” Unfortunately, it is impossible to judge just how serious this “inadvertent” breach of confidentiality was because the DOJ has refused to furnish the House Oversight Committee with internal correspondence about the incident. It has withheld this correspondence by citing the deliberative process privilege—a species of executive privilege— and, to date, those records remain secret.
To be clear, by returning the twenty-one CDs to the IRS and informing Congress about what happened, the DOJ followed proper procedure. But that does not exonerate the federal government for having allowed the breach of taxpayer confidentiality to have happened in the first place. All citizens deserve to know their government does not act with political motivations, and that the IRS will safeguard sensitive taxpayer information, especially as it pertains to charitable giving and the operation of nonprofit entities.
The DOJ’s delayed disclosure of records, which finally give a complete picture of what happened, also illustrates another danger of politicization, namely, of the FOIA process. In this case, the DOJ put up so many hurdles to accessing these records that it required a lawsuit to compel disclosure. Even then, it took months for the agency to produce the records. It would have been next to impossible for an ordinary citizen to get the same result.
For government to be truly transparent, it must be held accountable by its citizens. The behavior of the IRS and DOJ in this case is a perfect illustration of why CoA Institute is committed to fighting for an open and transparent government. Government agencies should not be allowed to violate statutes and then stonewall requests that seek to expose the truth. That is why we pursued this investigation and why we will continue to vigorously serve as a government watchdog on behalf of every American.
Ryan Mulvey is Counsel at Cause of Action Institute.
IRS Gives Nod to Its Regulatory Noncompliance, Doesn’t Address Real Issues
The Internal Revenue Service (“IRS”) is notorious for flouting regulatory procedures that are designed both to legitimize the administrative state’s exercise of lawmaking power and to constrain the worst abuses of that authority through information gathering tools and judicial review. One reason the IRS is able to avoid the traditional regulatory process is because the Anti-Injunction Act prevents most lawsuits that would invalidate rules that the IRS promulgates outside that process.
Last week, the IRS acknowledged some of those shortcomings in a policy statement announcing changes to the way it rolls out new rules. These changes are on top of last year’s revocation of a decades-old exemption from White House pre-publication review and approval.
The Administrative Procedure Act (“APA”) has different processes for legislative and interpretative rules, i.e., rules that create new legal obligations on private parties and those that purportedly don’t. The IRS has long maintained that nearly all its rules are interpretative and thus exempt from the APA and notice-and-comment regime. This is a dubious claim, at best. Notwithstanding this self-bestowed exemption, the IRS magnanimously still puts its supposedly interpretative rules out for notice and comment. But it does so without following all of the required procedures, which it justifies by claiming that any process it is following is voluntary anyway, so it can follow which procedures it wants to. In its policy statement, the IRS confirmed that it “will continue to adhere to [its] longstanding practice of using the notice-and-comment process for interpretive tax rules.”
IRS Won’t Seek Deference
An issue that has plagued the IRS is the use of subregulatory guidance to explain the IRS’s view on how it will apply statutes and regulations; these guidance documents often come in the form of revenue rulings, revenue procedures, notices, and announcements. Although these documents are supposed to be interpretative and explanatory, in many cases they create new legal obligations and are thus actually legislative in nature.
For example, the IRS used a subregulatory mechanism to announce new “transactions of interest” that captive insurance companies must report to the IRS or face a penalty and enforcement. This is a classic case of a new law that affects private parties that was slipped through in a policy document, without notice and comment, and which should be invalidated on those grounds.
The IRS now seems to be conceding the issue broadly, although not with regard to the example above, and announced in its policy statement that:
When proper limits are observed, subregulatory guidance can provide taxpayers the certainty required to make informed decisions about their tax obligations. Such guidance cannot and should not, however, be used to modify existing legislative rules or create new legislative rules. The Treasury Department and the IRS will adhere to these limits and will not argue that subregulatory guidance has the force and effect of law. In litigation before the U.S. Tax Court, as a matter of policy, the IRS will not seek judicial deference under Auer v. Robbins, 519 U.S. 452 (1997) or Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), to interpretations set forth only in subregulatory guidance.
This is a positive development, but it remains to be seen whether IRS attorneys really will abide by the constraint when faced with a rule that they’re trying to save in court. Further, the policy only applies in “litigation before the U.S. Tax Court,” and so will not apply when challenges are brought to federal district court, as many procedural challenges to rulemaking are. Another limitation of the statement appears to be that the IRS is only forswearing seeking deference to interpretations of subregulatory tax guidance and not other rules that litigants might dispute the IRS has violated, such as the APA or the Regulatory Flexibility Act, which the IRS claims does not apply to nearly all of its rules.
“Good Cause”
One of the APA procedures the IRS sidesteps is providing “good cause” for when interim final rules become immediately effective upon publication. Treasury and the IRS have decided to now “commit to include a statement of good cause when issuing any future temporary regulations under the Internal Revenue Code.” This is a good, if minor, change and adherence to general practice used elsewhere in the government.
The biggest issue plaguing the IRS’s compliance with procedural rules that constrain the agency is the Anti-Injunction Act, which prevents many challenges that would clean up the IRS’s lack of compliance. Unless and until there is a shift in judicial interpretation of that provision or Congress exempts Title 5 challenges to IRS rules, we will continue to see the IRS operate outside the bounds of standard administrative practice. The IRS’s recent policy statement does nothing to change that.
James Valvo is counsel and senior policy advisor at Cause of Action Institute.
DOJ Releases First Set of Documents Showing High-Level Employee Using Private Email
“[L]ack of transparency is a huge political advantage. And basically, call it the ‘stupidity of the American voter’ or whatever, but basically that was really, really critical to getting the thing to pass.” – Jonathan Gruber, architect of Obamacare.
A fundamental pillar of an open and free society is a transparent and accountable government and the reason why Cause of Action Institute (“CoA Institute”) is investigating the use of non-governmental email for official government business by current and former high-level employees at the Department of Justice.
On March 1, 2017, Politico’s Edward-Isaac Dovere tweeted Sarah Isgur Flores, the new spokesperson at the U.S. Department of Justice, used her personal Gmail account to send out an official statement.
Sessions spox & now DOJ employee Sarah Isgur Flores is responding to Washington Post story w/pushback sent from her personal Gmail account
— Edward-Isaac Dovere (@IsaacDovere) March 2, 2017
While public officials, by accident or necesity, use personal devices from time-to-time, the Obama Administration was notorious for using personal email and secretive government email accounts to avoid disclosure.
CoA Institute filed a Freedom of Information Act (“FOIA”) request the next day seeking the statement allegedly sent from Flores’ Gmail account along with all emails sent or received by Flores from a non-governmental email account since January 20, 2017, when the Trump Administration took office.
After a year and a half of waiting for a response, we filed suit on August 1, 2018 to obtain the documents. On September 27, 2018, the DOJ Office of Information Policy (“OIP”) provided a final response on the Flores request and claimed that the records were located in an official DOJ email account:
As is evident from the enclosed records, Ms. Flores forwarded emails sent to her personal account to her official Department of Justice email account, including through an automatic forward. As such, all of these emails were located pursuant to our search of Ms. Flores’ official Department of Justice email account.
OIP’s production included 112 pages of emails showing Flores either forwarding or carbon copying her official DOJ email in late February through the end of March 2017. Yet despite the assurance from OIP that they have provided all the emails sent from a non-governmental account, OIP failed to include the original March 1, 2017 press statement that prompted CoA Institute’s FOIA request. It’s unclear whether Flores failed to forward it to her official account, or if OIP failed to identify and include it in its document production.
The Flores records are only the first production owed to CoA Institute from DOJ in this litigation. The other records at issue concern the use of non-governmental email accounts by former FBI Director James Comey and former FBI Chief of Staff James Rybicki. In a September 20, 2018 Joint Status Report, the FBI’s search for records uncovered more then “1,200 potentially responsive records”:
The FBI has completed its search and has located approximately 1,200 potentially responsive records, some of which may require consulting subject matter experts or referrals to other agencies. It anticipates a four-month processing timeline with the first release on October 31, 2018, and additional releases following on a monthly basis.
The 1,200 potentially responsive records is significant because the June 2018 Department of Justice Office of Inspector General (“IG”) report found “numerous instances in which Comey used a personal email account (a Gmail account) to conduct FBI business,” but only cited five examples. Further, Rybicki claimed that the use of non-governmental accounts was “rare”, and Comey stated that it was only used for documents that would be “disseminated broadly.” From the DOJ IG report:
Comey stated that he did not use his personal email or laptop for classified or sensitive information, such as grand jury information. Comey told us that he only used his personal email and laptop “when I needed to word process an unclassified [document] that was going to be disseminated broadly, [such as a] public speech or public email to the whole organization.”
We also asked Rybicki about Comey’s use of a personal email account. In response to the OIG’s questions and in consultation with Comey, Rybicki sent the OIG an email on April 20, 2017, that stated: In rare circumstances during his tenure, Director Comey sends unclassified emails from his official FBI.gov email account address to [his Gmail account]. (emphasis added)
The information we have thus far casts doubt on Comey and Rybicki’s statements to the IG about the frequency and nature of their use of non-governmental email accounts. As James Comey recently wrote, “little lies point to bigger lies.” Stay tuned.
Kevin Schmidt is Director of Investigations for Cause of Action Institute. You can follow him on Twitter @KevinSchmidt8
Cause of Action files lawsuit against DOJ relating to Lois Lerner-IRS data scandal
WASHINGTON, D.C. – Sept. 14, 2018 – Cause of Action Institute (CoA Institute) has filed a lawsuit against the Department of Justice (DOJ) seeking records relating to the infamous Lois Lerner-IRS scandal. In 2010, the Internal Revenue Service (IRS) improperly released 21 CDs of confidential taxpayer information to the DOJ. This illegal release of confidential tax information resulted in several internal investigations, but the government has refused to release any of its internal reports or communications relating to the scandal.
“Taxpayers deserve to a have a full and clear picture of what took place nearly a decade ago when the U.S. Department of Justice and Internal Revenue Service were partnering in an effort to target nonprofits,” said Ryan Mulvey, counsel at Cause of Action Institute. “We have repeatedly requested the release of the internal investigation reports and the records revealing when and what the DOJ shared with Congress about this improper release. Taxpayers deserve a clear picture of who knew what and what really took place in the targeting of nonprofits by the DOJ and the IRS.”
In its investigation of this matter, CoA Institute has engaged with various DOJ components and Treasury Inspector General for Tax Administration (TIGTA), filed multiple unanswered Freedom of Information Act (FOIA) requests, and sought records regarding the potentially illegal access to and disclosure of this confidential taxpayer information.
Background:
- In 2013, the public learned that the IRS Exempt Organizations Section, led by then-Director Lois Lerner, had been involved in unfairly targeting nonprofits, allegedly for political purposes.
- Before then, the IRS and DOJ met on several occasions to discuss targeted prosecutorial efforts.
- At one of those meetings, the IRS improperly provided the DOJ with 21 CDs containing statutorily protected confidential taxpayer information. That information could have been disclosed to the DOJ pursuant to statutory exemptions, none of which applied to this disclosure.
- DOJ returned to the IRS, the CDs contained 1.1 million pages of confidential information regarding tax return information of various tax-exempt groups.
- CoA Institute wrote to both the TIGTA and the DOJ Office of Inspector General (DOJ OIG) to request investigations into this illegal access to and disclosure of confidential taxpayer information. TIGTA and DOJ OIG both opened investigations of this matter.
- TIGTA refused to release its findings.
- DOJ OIG, in a letter to CoA Institute, explained that, “[b]ased upon [its] initial inquiries, it appears that some protected taxpayer information was included on compact disks (CDs) that the IRS provided to the Department in response to a Department request.” Once “the Department learned of this, it returned the CDs to the IRS and informed Congress about it.” Citing “the absence of available information,” DOJ-OIG “determined that [CoA Institute’s request] does not warrant further investigation.”
- In October 2016, CoA Institute sent a FOIA request to the DOJ-OIG seeking records of its communication with Congress relating to this unauthorized disclosure.
- In October 2017, CoA Institute sent two additional FOIA requests to various DOJ components to ensure that CoA Institute received all relevant records pertaining to the IRS’s unlawful disclosure, particularly regarding the DOJ’s communications with Congress.
- DOJ has refused to respond to any of the CoA Institute FOIA requests for this matter.
- On Thursday, Sept. 13, 2018 Cause of Action Institute filed the following complaint against the U.S. Department of Justice, Cause of Action Inst. v. U.S. Dep’t of Justice, 18-2126 (D.D.C.)
Full complaint can be viewed below.
About Cause of Action Institute
Cause of Action Institute is a 501(c)(3) non-profit working to enhance individual and economic liberty by limiting the power of the administrative state to make decisions that are contrary to freedom and prosperity by advocating for a transparent and accountable government.
Media Contact:
Matt Frendewey
matt.frendewey@causeofaction.org
202-699-2018
Loading...
Reload document 
Open in new tab
Department of Veterans Affairs Discloses 2014 Guidance on Intra-Agency Consultations for FOIA Requests of “Substantial Interest” to Agency Leadership
The Department of Veterans Affairs (“VA”) has released a February 2014 memorandum reiterating the need for “consultations” on certain Freedom of Information Act (“FOIA”) requests, including those of “substantial interest” to the agency’s political leadership. Cause of Action Institute (“CoA Institute”) obtained the record after submitting a disclosure request in the wake of Senate Democrats expressing concern over possible politicization of VA FOIA processes.
The memorandum, which is addressed to “Under Secretaries, Assistant Secretaries, and Other Key Officials,” indicates that VA regulations require intra-agency consultation or referral whenever incoming FOIA requests implicate records that originate with another component or prove to contain “information” of “substantial interest” to another VA office. While “referral” entails the effective transfer of responsibility for responding to a request, “consultation” refers to discussing the release of particular records.
Consultation within an agency or with other entities can be a positive practice that ensures records are processed in accordance with the law. Indeed, in some cases, “consultation” is required. Executive Order 12600, for example, requires an agency to contact a company whenever a requester seeks confidential commercial information potentially exempt under Exemption 4. Yet consultations occur in less-easily defined situations, too.
The FOIA only mentions “consultation” in the context of defining the “unusual circumstances” that permit an agency to extend its response deadline by ten working days.
[“Unusual circumstances” include] the need for consultation, which shall be conducted with all practicable speed, with another agency having a substantial interest in the determination of the request or among two or more components of the agency having substantial subject-matter interest therein.
Unfortunately, the phrase “substantial interest” is not itself defined. This is where problems begin. The Department of Justice’s (“DOJ”) guidance on consultation suggests that a “substantial interest” only exists when records either “originate[] with another agency” or contain “information that is of interest to another agency or component.” The DOJ’s FOIA regulations, and the Office of Information Policy’s model FOIA regulation, while not dispositive, do provide a little more context. They suggest “consultation” should be limited to cases when another agency (or agency component) originated a record or is “better able to determine whether the record is exempt from disclosure.”
CoA Institute has long sought clarification on the exact nature of a “substantial interest.” In November 2014, we submitted a public comment to the Department of Defense (“DOD”) arguing that consultation should be restricted to situations where another entity has created a responsive record or is “better positioned to judge the proper application of the FOIA exemptions, given the circumstances of the request or its familiarity with the facts necessary to judge the proper withholding of exempt material.” Although our proposed definition was admittedly non-ideal—DOD did not accept that portion of our comment—it hinted at the troubling abuse, politicization, and unjustifiable delay that can occur with consultation.
The best example of such abuse and politicization is found with “White House equities” review, which is carried-out as a form of “consultation.” As CoA Institute has repeatedly documented, however, this form of “consultation” extends far beyond “White House-originated” records or records containing information privileged by White House-controlled privileges. Instead, pre-production White House review has been extended to almost anything that is potentially embarrassing or politically damaging to the President. In May 2016, CoA Institute sued eleven agencies and the Office of the White House Counsel in an effort to enjoin the Obama Administration from continuing “White House equities” review, but that lawsuit was dismissed. It is unclear to what extent President Trump has continued the practice, although at least one other oversight group has uncovered evidence of recent White House review of politically sensitive records from the Department of Housing and Urban Development.
As for the VA, the recently disclosed memorandum is silent about the precise meaning of a “substantial interest.” But, at least for the “substantial interest” of the agency’s political leadership, the memorandum indicated that “[f]ollow-up guidance will be forthcoming.”
This is especially troubling. Last week, I discussed how DOD failed to address Inspector General recommendations concerning the agency’s so-called “situational awareness” process for notifying political leadership about “significant” FOIA requests that may “generate media interest” or be of “potential interest” to DOD leadership. I noted that agencies hide behind technical phrases—like “substantial interest” or “situational awareness”—while allowing non-career officials to inappropriately interfere with FOIA processes. This could be what is happening with the VA. Why is special “guidance” needed to identify the “substantial interest” that the VA Secretary may have in a specific request? Does this not hint of the same sort of inappropriate “sensitive” review implemented at countless other agencies?
CoA Institute has appealed the VA Office of the Secretary’s response. The 2014 memorandum was the only record produced in response to our FOIA request. The “follow-up guidance” should also have been located and disclosed. It must be made public. Other VA offices are still processing portions of our request; the Office of Inspector General, for its part, was unable to locate records about recent investigations into FOIA politicization. As further information becomes available, we will post additional updates.
Ryan P. Mulvey is Counsel at Cause of Action Institute