Copyright (c) 1995 Tax Analysts Tax Notes Today AUGUST 31, 1995 THURSDAY DEPARTMENT: Other Court Documents (CTO) CITE: 95 TNT 171-38 LENGTH: 5154 words HEADLINE: 95 TNT 171-38 DEFENDANT IRS's RESPONSE TO PLAINTIFF TAX ANALYSTS' MOTION FOR SUMMARY JUDGMENT. (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: July 31, 1995) (Doc 95-7558) CODE: Section 6104 -- Exempt Organization Information SUMMARY: Defendant IRS filed its response to plaintiff Tax Analysts' motion for summary judgment in the case of Tax Analysts v. IRS, 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: July 31, 1995 DEFENDANT'S RESPONSE TO PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT Comes NOW DEFENDANT, Internal Revenue Service, by and through its undersigned counsel, and hereby responds to plaintiff's motion for summary judgment. PAGE 47 (c) 1995, Tax Analysts, Tax Notes Today, AUGUST 31, 1995 I. INTRODUCTION Although plaintiff acknowledges that a closing agreement is a final agreement between a taxpayer and the Service, plaintiff states that the closing agreements at issue in this case are NOT return information protected by Section 6103 of the Internal Revenue Code. (Pltf. Mem. p. 1.) Followed to its logical conclusion, accepting plaintiff's argument would require the Court to find that the confidentiality provisions of Section 6103 do not apply to exempt organizations. As demonstrated below, plaintiff's argument fails. II. STATEMENT OF FACTS A. BACKGROUND INFORMATION REGARDING PLAINTIFF TAX ANALYSTS Plaintiff's "Background Information" recites its numerous publishing activities as well as various litigation it has instituted under the Freedom of Information Act. (Id., pp. 3-4.) Presumably, plaintiff is attempting to persuade this Court of the worthiness of its cause in seeking the documents at issue. It is well-established that neither the purpose for which records are sought nor the requester's identity are proper factors in deciding whether records are to be released under the FOIA. See United States Department of Justice v. Reporter's Committee for Freedom of the Press, 489 U.S. 749, 771 (1989) (purpose for which records sought "has no bearing" on the merits of the request); North v. Walsh, 881 F. 2d 1088, 1096 (D.C. Cir, 1989); Durns v. Bureau of Prisons, 804 F.2d 701, 706 (D.C. Cir. 1986), cert. granted, judgment vacated on other grounds & remanded, 486 U.S. 1029 (1988); Forsham v. Califano, 587 F.2d 1128, 1134 (D.C. Cir. 1978). Moreover, the Supreme Court has stated that one's rights to records under the FOIA "are neither increased nor decreased" because the requester's interest is greater than that of the general public. NLRB v. Sears, Roebuck & Co., 421 U.S. 132, 143, n. 10 (1975). Thus, the fact that plaintiff publishes various tax documents, transcripts, and numerous publications also is of no significance. Accordingly, plaintiff's self-serving statements have no place in the record and should be stricken as irrelevant to this FOIA litigation. B. THE UNDERLYING FOIA REQUEST Plaintiff states that in this litigation it is seeking an order directing the IRS: to produce a "sub-set of the closing agreements requested in its November 10, 1993, request. Specifically, plaintiff is seeking the production of any closing agreement entered into between the IRS and an exempt organization which relates to, or contains provisions regarding, the organization's pending application for recognition of exemption and/or the IRS' initial or continuing determination to recognize the organization as PAGE 48 (c) 1995, Tax Analysts, Tax Notes Today, AUGUST 31, 1995 exempt under IRC 501(a)." (Pltf. Mem. p. 5.) Plaintiff's characterization of the relief it seeks is nothing more than an artful attempt to rephrase the language of its FOIA request. That request sought: 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 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. (Pltf. Mo., Decl. of William Dobrovir, Exh. A.) Accordingly, plaintiff is bound by the description of documents sought in categories one and two of its FOIA request; its attempt to change the language of that request by arguing that it is seeking only a "sub-set" of documents must be rejected. /1/ See Gillin v. IRS, 980 F.2d 819, 822-23 (1st Cir. 1992) (Clarification of FOIA request during the course of litigation, including discovery, is "too late to be relevant," and amounts to "an impermissible attempt to expand the FOIA.") III. ISSUE PRESENTED FOR DETERMINATION Plaintiff's framing of the "Issue Presented For Determination" as: "Whether all or any part of a "closing agreement" entered into between the IRS and a tax-exempt organization WHICH ARISES OUT OF, RELATES TO, OR CONTAINS PROVISIONS REGARDING, A FAVORABLE DETERMINATION OF EXEMPT STATUS ISSUED WITH RESPECT TO AN EXEMPTION APPLICATION, is subject to disclosure under the Freedom of Information Act" (Pltf. Mem. p. 5) (Emphasis added.) is simply incorrect. PAGE 49 (c) 1995, Tax Analysts, Tax Notes Today, AUGUST 31, 1995 As noted above, plaintiff's FOIA request sought closing agreements executed during a particular time period between (1) the IRS and one or more Church of Scientology organizations, and (2) the IRS and exempt organizations. Whether the six documents responsive to plaintiff's request are subject to disclosure under the FOIA is the issue in this case. IV. BACKGROUND ON EXEMPT ORGANIZATIONS, IRS DISCLOSURE RULES, AND IRS USE OF CLOSING AGREEMENTS A. INTRODUCTION Plaintiff acknowledges that in enacting the statutory scheme with respect to exempt organizations, Congress explicitly provided for public disclosure of certain information of exempt organizations, that is, Congress "concluded that disclosure of financial information on exempt organization returns served a public purpose by allowing the public to share in accountability judgments." (Pltf. Mem. p. 7) In 1976, Congress provided a remedy for an applicant who received an unfavorable ruling with respect to an exemption application, that is, a suit for a declaratory judgment under Section 7428 of the Internal Revenue Code. Pub. L. 94-455, Title XIIII, section 1306(a), 90 Stat. 1717 (1976). Such a suit must be brought within ninety days after a final adverse ruling and only after the applicant has exhausted its administrative remedies. Section 7428(b)(2), (3). Judicial review of an action under Section 7428, however, generally is limited to the "administrative record." See Easter House v. United States, 12 Cl, Ct. 476, 482 (1987), aff'd 846 F.2d 78 (Fed. Cir.), cert denied, 109 S.Ct. 257 (1988). B. THE APPLICATION PROCESS FOR INITIAL RECOGNITION OF EXEMPTION UNDER SECTION 501(c)(3); RE-QUALIFICATION RE-QUALIFICATION AFTER RECOGNITION OF EXEMPTION Not only is this section of plaintiff's memorandum misleading, it does not even begin to comport with the testimony in this case. For example, plaintiff states that if an exemption application is approved, "the IRS then purges the administrative file and creates an 'administrative record' which consists solely of the documents from the administrative file which it believes are subject to disclosure." (Pltf. Mem. p. 11.) Plaintiff's insinuation that the Service destroys the administrative file is totally inaccurate as the uncontroverted deposition testimony indicates that the Service maintains an administrative file and an administrative record. Indeed, deponent McGovern testified: Q: I want to clarify some terms here. With respect to exempt organizations, the IRS maintains two types of files as I understand it, an administrative file and an administrative record. Is that correct? A: I believe that's correct. PAGE 50 (c) 1995, Tax Analysts, Tax Notes Today, AUGUST 31, 1995 Q: And the administrative file would include all documents relating to the exempt organization, including internal documents created by the IRS? A: I believe that's correct. Q: And the administrative record would be limited to those documents which were subject to public disclosure, including the organization's exemption application, documents submitted in support of the exemption application and documents issued by the IRS with respect to that application. Is that your understanding? A: I believe that's the definition of, administrative record in 6104. I also believe there is a definition of administrative record in Tax Court rules for those organizations that may litigate. (McGovern Tr. 27/2 - 21.) In addition, deponent Rotz testified to the existence of both an administrative file and an administrative record. Q: I'd also like to establish a term -- an agreement upon the use of the words, "administrative file," and "administrative record." Are you familiar with those terms? A: I think I know what you mean. Q: With respect to an organization applying for exemption under Section 501(c)(3), does the IRS create an administrative file? A: Yes, it does. Q: And that administrative file would contain all documents created by the IRS and received by the IRS with respect to that application. A: That's right. PAGE 51 (c) 1995, Tax Analysts, Tax Notes Today, AUGUST 31, 1995 Q: And the IRS also creates an administrative record with respect to an application for recognition of exemption. Is that correct? A: By that do you mean the publicly disclosable portion -- Q: Right. A: -- of an approved application. Yes, it does. Q: And the administrative record is more limited than the administrative file. A: Yes. (Rotz Tr. 13/24 - 14/23.) Nowhere in the record is there ANY evidence to support plaintiff's bold accusations that the Service "purges" an administrative file to create an administrative record. Indeed, Mr. Schoenfeld testified as to what documents from the administrative file constitute the administrative record. (Id., 38/1 - 39/3.) Plaintiff's intimation that the Service arbitrarily selects what documents will be placed in a particular administrative record is without any support whatsoever. Indeed, the deposition testimony reveals that the documents in the administrative record are those required to be publicly disclosed pursuant to 26 U.S.C. section 6104. /2/ (Owens Tr. 107/3 - 108/5; Schoenfeld Tr. 38/1 - 17.) C. DISCLOSURE PROVISIONS APPLICABLE TO EXEMPT ORGANIZATIONS Plaintiff contends that the applicability of Section 6103 to exempt organizations is "severely limited" by Section 6104. (Pltf. Mem. p. 14.) From that statement, plaintiff makes the gigantic leap to its contention that "unlike non-exempt taxpayers, return information relating to exempt organizations is neither privileged nor exempt from disclosure." (Id.) As demonstrated below, this conclusion is incorrect. 1. PLAINTIFF'S ARGUMENT THAT UNDER IRC 6104, "RETURN INFORMATION" RELATING TO EXEMPT ORGANIZATIONS IS SUBJECT TO PUBLIC DISCLOSURE Plaintiff alleges that "[t]he law requires exempt organizations to annually furnish the IRS with substantial information regarding their activities, assets, income and expenses. The information required to be disclosed allows Congress and the public to decide if the public subsidy of the tax exemption and deductibility remain suitable, by specific organization or by class." (Pltf. Mem., pp. 11- 12.) PAGE 52 (c) 1995, Tax Analysts, Tax Notes Today, AUGUST 31, 1995 Because an exempt organization is required to disclose CERTAIN information on its annual information return (Form 990) in no way leads to the conclusion that Section 6103 does not apply to exempt organizations. Had Congress wanted to exclude exempt organizations from the protection of Section 6103 it certainly could have done so. This is especially relevant given, that when Section 6103 of the Code was enacted by the Tax Reform Act of 1976, Section 6104 was amended at that time to provide for the disclosure of any letter or other document issued by the Internal Revenue Service with respect to an application for exemption. (See Deft. Mo., mem. pp. 16 - 19.) Moreover, plaintiff, by its own admission, recognizes that the statutory requirement of publication of annual returns allows for the accountability it alleges would be lacking if the closing agreements at issue are not disclosed. Indeed, the fact that CERTAIN information can be disclosed pursuant to Section 6104 can only mean that Section 6103 applies to exempt organizations. Nevertheless, plaintiff argues that all "return information" is subject to disclosure under Section 6104 because "[p]ublic review of ALL DOCUMENTS passing between IRS and a successful applicant also ensures integrity in the IRS' system of granting exempt status and provides a safeguard that organizations will not be accorded special treatment by the Service." (Pltf. Mem. p. 17.) While this statement may indeed reflect plaintiff's opinion as to what is in the public's interest, in no way does it reflect the law. /3/ "The short answer is Congress did not write the statute that way." Russello v. United States, 464 U.S. 16, 23 (1983) quoting United States v. Naftalin, 441 U.S. 768, 773 (1979). 2. PLAINTIFF'S ARGUMENT THAT IRC 6104 PROVIDES AN EXCEPTION TO IRC 6103'S NON-DISCLOSURE PROVISIONS Plaintiff next asserts a somewhat different argument that Section 6104 "severely limits what constitutes 'return information' with respect to tax-exempt organizations." (Pltf. Mem. p. 18.) Contrary to plaintiff's assertion, Section 6104 does not limit what constitutes return information; rather, it requires that certain information, which would otherwise be confidential, be made available to the public. This is exactly what Section 6103 provides, returns and return information shall be confidential EXCEPT AS AUTHORIZED BY THIS TITLE. Plaintiff erroneously assumes that the items of return information which must be made available to the public pursuant to Section 6104 must be disclosed in every situation, not only in the exemption application process. However, if information is included in a document generated or compiled in connection with the Service's audit or investigation, it is confidential return information prohibited from disclosure under Section 6103. See Brehaus v. Internal Revenue Service, 609 F.2d 80 (2d Cir. 1979); Belisle v. Commissioner, 462 F. Supp. 460 (W.D. Okla. 1978). The deposition testimony of Marcus Owens illustrates this point. Q: if, subsequent to a favorable ruling on such an application, there was an audit of that organization, would information PAGE 53 (c) 1995, Tax Analysts, Tax Notes Today, AUGUST 31, 1995 submitted relating to that audit be within 6104? A: No, that information would be protected from public disclosure by Section 6103. Q: And, if subsequent to the granting of such application, a taxpayer voluntarily disclosed information to the Internal Revenue Service which related to, perhaps, a technical violation of its -- of the law, would that information be within Section 6104? A: No. Q: Would that information be prohibited from disclosure under Section 6103? A: In our view, it would be protected from public disclosure by Section 6103. If it was a request for a proposed transaction ruling, there are certain Code sections that would trigger a limited disclosure under Section 6110, disclosure without identifying information. (Owens Tr. 124/18 - 125/12.) By its acknowledgement that Section 6104 operates to authorize disclosure of certain return information otherwise confidential, plaintiff concedes that under Section 6104, not all return information is subject to disclosure. (Pltf. Mem. pp. 18-19.) Indeed, plaintiff admits that return information of an exempt organization concerning whether the organization is liable for any tax, penalty, interest or fine, or whether it is or will be under examination by the Service, is confidential return information pursuant to Section 6103. (Id.) In fact, plaintiff does not even attempt to argue the correctness of the decisions in Breuhaus v. Internal Revenue Service, 609 F.2d 80 (2d Cir. 1979) and Belisle v. Commissioner, 462 F. Supp. 460 (W.D. Okla. 1978). Equally as important, plaintiff cannot cite any case, any statute, or any regulation to support its position that Congress intended Section 6104 to eviscerate the protection afforded exempt organizations under Section 6103. D. THE IRS' USE OF CLOSING AGREEMENTS WITH EXEMPT ORGANIZATIONS Plaintiff acknowledges the authority of the Service under Section 7121 to enter into a written closing agreement RELATING TO THE LIABILITY OF ANY PERSON IN RESPECT OF ANY INTERNAL REVENUE TAX. (Pltf. Mem., p. 19.) Plaintiff states that it learned in discovery that the Service has used closing agreements to PAGE 54 (c) 1995, Tax Analysts, Tax Notes Today, AUGUST 31, 1995 resolve outstanding issues with respect to one or more organizations' application for recognition of exempt status and that these agreements are the ones at issue. (Pltf. Mem. p. 19) The deposition testimony in this case reveals that a closing agreement does not grant exempt status. (Schoenfeld Tr. 114/4-5; McGovern Tr. 109/13 - 110/5.) And, as noted above, NONE of the documents responsive to plaintiff's FOIA request deals exclusively with an application by an exempt organization for recognition of its exempt status by the Service. (Deft. Mo., Decl. of Steven Miller paragraph 16.) 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.) One closing agreement arose as a result of an issue the organization voluntarily brought to the attention of the Service. (Id., paragraph 18.) 1. THE CHURCH OF SCIENTOLOGY CLOSING AGREEMENT /4/ In targeting the Church of Scientology, /5/ plaintiff states that "[d]ue to the controversial nature, the Church of Scientology's applications were not processed pursuant to the IRS' standard procedures." (Pltf. Mem. pp. 20-21.) Plaintiff particularly criticizes the filing of exemption applications with the National Office of the Internal Revenue Service and the Service's use of a negotiations committee. Plaintiff, however, fails to note that the deposition testimony revealed that there are a variety of instances in which exemption applications are filed with the National Office of the Internal Revenue Service. (Gessay Tr. 22/15-20, 24/8-20; Owens Tr. 126/10 - 128/2.) This is noteworthy especially considering plaintiff's acknowledgement of the Church's applications filed between 1983 and 1991. (Pltf. Mem. p. 20.) Moreover, the deposition testimony revealed that the Internal Revenue Service has used negotiations committees a number of times. Q: Now when you say "negotiations" would that encompass the term "negotiations committee?" A: I would say, yes. The process of negotiation and coordination of a closing agreement is, as I indicated, a flexible one. Depending on the particular issues that might arise in any case in a given time, you might have a varying group of individuals advising or involved in a particular negotiation. (Owens Tr. 52/23 - 53/6.) Indeed, the deposition testimony as well as the administrative record demonstrate that the processing of the Church of Scientology's exemption applications was scrupulous and painstaking. (See McGovern Tr. 92/23 - 93/19; PAGE 55 (c) 1995, Tax Analysts, Tax Notes Today, AUGUST 31, 1995 Schoenfeld Tr. 101/12 - 102/7, Second Declaration of Steven T. Miller [attached hereto as Exhibit A, pp. 2 - 31.) Were this not so, plaintiff would be arguing in this case that the administrative record does not support granting tax exempt status. Since plaintiff cannot make such an argument, it resorts to insinuating that there was no substantive review of the exemption applications filed by the Church of Scientology. Although that is legally irrelevant to the issues in this FOIA suit, extensive information constitutes the administrative record that is available to the public regarding the Scientology applications. (Second Declaration of Steven T. Miller, pp. 2 - 31.) The deposition testimony in this case also established that a closing agreement and the granting of exempt status are two distinct matters. (McGovern Tr. 109/14 - 110/5.) Plaintiff's attempt to have the Court believe that the Service failed to follow proper procedures with respect to the Church of Scientology's applications for exempt status is nothing short of astounding. VI. LEGAL ARGUMENT A. DISCLOSURE UNDER FOIA Plaintiff's reference to President's Clinton's FOIA Memorandum and the Attorney General's Memorandum regarding the FOIA is a good example of why its lengthy memorandum with its citations to numerous authorities fails to prove its case. The Memoranda concern DISCRETIONARY disclosures of information under the FOIA. Exemption 3 of the FOIA serves to accommodate nondisclosure provisions of other statutes, such as section 6103 of the Internal Revenue Code. The documents at issue in this case are prohibited from disclosure pursuant to 26 U.S.C. section 6103. Accordingly, there is no discretion to release this information under the FOIA. See Association of Retired R.R. Workers v. Railroad Retirement Board, 830 F.2d 331, 335 (D.C. Cir. 1987) (FOIA jurisdiction does not extend to exercise of agency disclosure discretion within Exemption 3 statute.) Thus, plaintiff's citation to the Memoranda provides no authority whatsoever for the release of the documents at issue. B. PLAINTIFF'S ARGUMENT THAT THE IRS HAS IMPROPERLY WITHHELD AGENCY RECORDS FROM PLAINTIFF. 1. THE REQUESTED DOCUMENTS ARE "AGENCY RECORDS." There is no dispute that the documents at issue are agency records within the meaning of the FOIA. Defendant has not contended otherwise. 2. THE REQUESTED DOCUMENTS WERE NOT "IMPROPERLY" "WITHHELD" FROM PLAINTIFF. Contrary to plaintiff's assertions, the documents at issue were not improperly withheld from the plaintiff. Even the plaintiff acknowledges that certain return information under Section 6103 is not subject to public disclosure under Section 6104 of the Code. The closing agreements at issue, which were the result of an examination of the organization to which the closing agreement pertains, or a combination of an examination of the organization and issues voluntarily brought to the Service's attention by the organization, or PAGE 56 (c) 1995, Tax Analysts, Tax Notes Today, AUGUST 31, 1995 an issue the organization voluntarily brought to the attention of the Service, constitute such return information prohibited from disclosure under Section 6103. Consequently, it is for the Court to determine whether Section 6104 expressly authorizes the disclosure of this information. C. PLAINTIFF'S ARGUMENT THAT THE REQUESTED CLOSING AGREEMENTS ARE NOT EXEMPT FROM DISCLOSURE. Plaintiff asserts that because the Service mails a signed copy of the closing agreement to the exempt organization to which it pertains, the Service has "issued" the agreement for purposes of Section 6104. This argument is without merit. 1. CLOSING AGREEMENTS MAILED TO THE TAXPAYER BY THE IRS How a document is physically delivered is not determinative of whether it is issued for purposes of Section 6104. According to plaintiff, any time that the Service mails a document to an exempt organization, the Service has "issued" that document for purposes of section 6104. (Pltf. Mem. p. 29.) This argument challenges common sense. In fact, the Treasury regulations explicitly provide that a document which relates to an organization's tax exempt status but not to the application for exemption does not relate to that organization's application for tax exemption within the meaning of T. Reg. section 301.6104(a)-1(d). (See Deft. Mo., Mem. pp. 20 - 21.) 2. CLOSING AGREEMENTS ARE NOT ADOPTED BY THE IRS Without a single reference to any record evidence, plaintiff incredibly asserts that closing agreements are adopted by the Service in the same manner as technical advice memoranda, and therefore, under T. Reg. section 301.6110-2(h), the closing agreements are issued upon mailing. Contrary to plaintiff's assertions, a closing agreement is in no way analogous to a technical advice memorandum. The latter sets forth the Service's rendition of the facts and the law; the taxpayer may or may not agree with this or with the analysis and conclusions drawn by the Service. This unilateral character of a technical advice memorandum is what makes it issued by the Service once it is mailed. In marked contrast, a closing agreement is a method by which a controversy with a taxpayer may be resolved with finality. It is a document containing the terms of a negotiated resolution. Indeed, the closing agreements at issue do not recite all relevant facts, explain the relevant provisions of law, or show the application of the law to those facts. (Deft. Mo., Miller Decl. paragraphs 16, 20.) Accordingly, a closing agreement is not "issued" by the Service for purposes of Section 6104, no matter how the document is delivered nor is it adopted by the Service. 3. THE REQUESTED CLOSING AGREEMENTS ARE EXEMPT FROM DISCLOSURE UNDER IRC 6103. PAGE 57 (c) 1995, Tax Analysts, Tax Notes Today, AUGUST 31, 1995 This paragraph of plaintiff's memorandum is noteworthy only insofar as it completely misrepresents the import of Christian Echoes National Ministry v. United States, 404 F.2d 1066 (10th Cir. 1969). Plaintiff suggests that case would allow this Court to conduct an in camera review of the closing agreements at issue and permit the Service to redact information not pertaining to the exemption application process prior to ordering disclosure of the documents. In fact, Christian Ministries was a tax refund suit brought by an exempt organization whose tax exempt status had been revoked. The district court had ordered the United States to produce certain documents to the organization despite the Government's argument that the "good cause" requirement of Fed. R. Civ. P. 34 had not been met and that some of the documents were attorney work-product. In vacating the district court's order, the Tenth Circuit held that the district court could not make such a determination without some disclosure, perhaps in camera, of the nature of the documents. D. PLAINTIFF'S ARGUMENT THAT ALLOWING THE IRS TO WITHHOLD THE REQUESTED CLOSING AGREEMENTS WOULD FRUSTRATE THE INTERESTS OF PUBLIC POLICY AND ALLOW THE IRS TO SUBVERT ITS OWN DISCLOSURE RULES This case does not involve discretion on the part of the Service or the Court. If, as the Internal Revenue Service contends, the documents at issue are prohibited from disclosure pursuant to Section 6103 and thus exempt from production under Exemption 3 of the FOIA, the result is clear. Plaintiff's public policy arguments simply do not provide a basis on which disclosure of the documents can be made. Plaintiff also suggests that unless this Court creates a remedy, the Service may use closing agreements as substitutes for the exemption application process. (Pltf. Mem. p. 33.) Again, there is no record evidence to support this notion. In fact, James McGovern testified that the closing agreement process is separate and distinct from the exemption application process. (McGovern Tr. 109/13 - 110/5.) Plaintiff's reference to "political intervention" in the case of Center for Corporate Responsibility, Inc. v. Schulz, supra, is [sic] this regard is mystifying. (Pltf. Mem. p. 34.) Center for Corporate Responsibility was not an action under the FOIA; it was a tax refund suit in which a discovery dispute developed. In fact, the case was decided prior to the enactment of Section 7428. In marked contrast to the plaintiff in Center for Corporate Responsibility, Tax Analysts is NOT bringing an action under Section 7428 to challenge ITS 501(c)(3) nor is this a tax refund suit. E. PLAINTIFF'S ARGUMENT THAT THE IRS' FAILURE TO PRODUCE THE WITHHELD DOCUMENTS FOR PUBLIC INSPECTION CONTRAVENES THE STATED POLICY OF THE NATIONAL OFFICE'S EXEMPT ORGANIZATION'S TECHNICAL DIVISION Despite plaintiff's assertions, it is not the policy of the IRS' Exempt Organizations Division that ANY closing agreement the Service enters into regarding a pending exemption application with an exempt organization is subject to public disclosure under Section 6104. Indeed, the deposition testimony of Marcus Owens stated that with regard to the cases with which he was familiar that involved applications for exemption and closing agreements, the agreements were included in both the administrative file and the administrative record. PAGE 58 (c) 1995, Tax Analysts, Tax Notes Today, AUGUST 31, 1995 Plaintiff asserts that this testimony supports that the closing agreements at issue in this case must be disclosed under the FOIA. To the contrary, this testimony concerns closing agreements which solely embodies [sic] the basis for the granting of a tax exemption application. (See McGovern Tr. 109/18 - 110/6.) As noted above, NONE of the closing agreements at issue deals exclusively with an application for exemption. Accordingly, these six documents are protected from disclosure pursuant to Section 6103. Dated: July 31, 1995. Respectfully submitted, MARGARET M. EARNEST Trial Attorney, Tax Division U.S. Department of Justice P.O. Box 227 Ben Franklin Station Washington, DC 20044 Telephone: (202) 307-6562 FOOTNOTES /1/ It is noteworthy (though not surprising) that plaintiff has chosen NOT to litigate category three of the documents identified in its FOIA request inasmuch as the legislative history indicates that Congress specifically intended to exclude closing agreements from the disclosure provisions of Section 6110 of the Internal Revenue Code. (See Deft. Mo., Mem. pp. 22-26.) Moreover, even if closing agreements did come within Section 6110, the Court lacks subject matter jurisdiction to order disclosure under the FOIA pursuant to 26 U.S.C. section 6110(l). (Id.) /2/ Plaintiff concedes as much in its memorandum by stating that what's required to be disclosed pursuant to Section 6104 is the "administrative record." (pltf. Mem. p. 23.) /3/ Plaintiff's references in its footnote 13 to the Teamsters' Central States Pension Fund and general ERISA Enforcement hearings before the Subcommittee on Oversight of the Committee on Ways and Means, H. Rep. 95th Cong., First Sess. demonstrates that if Congress wishes to hear testimony regarding the exemption process, it obviously can do so. Moreover, Section 6103(f) of the Internal Revenue Code expressly provides for disclosure of return information to committees of Congress. Thus, Congress' review of exempt organizations is not unnecessarily impeded by Section 6103. /4/ For purposes of this response, "Church of Scientology" refers to the Church of Scientology and its organizations as used by the plaintiff in its memorandum. /5/ See Pltf. Mem., p. 20, n. 23; p. 21, n.24. END OF FOOTNOTES