CHURCH OF SCIENTOLOGY OF CALIFORNIA v. IRS
Legal provision: Internal Revenue Code
ORAL ARGUMENT OF MICHAEL LEE HERTZBERG ON BEHALF OF PETITIONER
Chief Justice William H. Rehnquist: We'll hear argument next in No. 86-472, Church of Scientology of California versus the Internal Revenue Service.
Mr. Hertzberg, you may proceed whenever you're ready.
Mr. Hertzberg: Mr. Chief Justice, may it please the Court:
The issue in this case is the meaning of the Haskell Amendment.
The Haskell Amendment is found in Section 6103(b)(2) of the Internal Revenue Code.
And it provides that the term, return information, does not include data which is in a form which cannot be associated with or otherwise identify, directly or indirectly a particular taxpayer.
The en banc majority of the Court of Appeals below read a reformulation requirement into the Haskell Amendment, but the term, reformulation, appears nowhere in the plain language of the Statute; appears nowhere in the legislative history of the Statute, indeed, does not even appear in the briefs of the Government below.
By reading this reformulation requirement into the Haskell Amendment the Court of Appeals in effect held that data that is in Internal Revenue Service files which cannot be associated with, or identify a particular taxpayer must nonetheless be considered return information and generally nondisclosable in response to Freedom of Information Act requests or otherwise, unless it is also, in addition to nonidentification, reformulated.
And the problem with this reformulation standard is that it is not articulated in a very precise way in the opinion below.
There is very little guidance as to what is meant by reformulation.
In fact, as the Court of Appeals en banc majority candidly acknowledge in their opinion, it was easier for them to say what they felt that the Haskell Amendment did not mean, than to articulate precisely what it did mean.
And as an example of the imprecision, and the problems that are raised by this reformulation test, the Court of Appeals never specifies in what original form data must be in in tax files before it can be properly reformulated.
As the dissent noted, there is information in Internal Revenue Service files in every kind of conceivable stage of development, and yet we don't know in what original form it must originate before it can be reformulated.
Unidentified Justice: Well, how about your position, Mr. Hertzberg?
I realize you disagree with the Court of Appeals.
But would you say that an individual income tax return should be available if the information that allowed you to identify a taxpayer were redacted?
Mr. Hertzberg: Your Honor, returns themselves are separately nondisclosable under the statutory scheme.
So I don't believe that is an issue that would arise in that context.
We are talking about discreet data return information and whether that can be identified with a particular taxpayer, that was what Congress' purpose was.
Unidentified Justice: Okay.
Well, now where do you and the government differ?
I mean, what kind of thing do you say should be available, in a kind of a concrete illustration, and the government says shouldn't be available?
Mr. Hertzberg: Sure.
Your Honor, we would maintain, and this of course arose in the context of a Freedom of Information Act request, so it's easiest for me to respond in that context.
Let us say a Freedom of Information Act request came in and to properly respond to it, some data in the file of a third party taxpayer included some numbers on a piece of paper that were in the file, and that would be somehow comprehended hypothetically within the confines of the Freedom of Information Act request.
If those numbers divorced from identifying material, and I will now just give as an example, name, address, or social security number, but by no means the exhaustive list of what could be associated with a taxpayer, if that number were disclosable without any of what I have referred to generically as identifying material, it cannot be linked with a particular taxpayer.
We would maintain that it would be disclosable if it came within the term--
Unidentified Justice: So supposing the Freedom of Information Act request was for the number of people who had reported a gross income of $76,855 last year?
Now, you would say that should be disclosable?
Mr. Hertzberg: --I would, Your Honor, if it could in no way be linked to a particular taxpayer, of course.
Unidentified Justice: And that the government should have to collect that information for you, in effect?
Mr. Hertzberg: Well, that would turn on whether it was a proper request under the Freedom of Information Act.
I mean, there are limitations as to what the scope of their search would have to be.
But that's a separate question.
Unidentified Justice: And is it your understanding that the government would say that is not required to be disclosed?
Mr. Hertzberg: And in fact, under the terms, yes, yes, Your Honor.
Under the Freedom of Information Act, but I don't want to say, in a broader sense what I'm trying to say, I don't want to overstate it.
There is a general principle under the Freedom of Information Act that the Government agencies are not required to search all their files just to come up with some data that is requested.
And that is the concept that I was thinking of when I answered your question.
Unidentified Justice: Let's stay away from the peculiarities of the Freedom of Information Act, and concentrate on the tax aspects.
Is it your understanding that the government in this case says that a Freedom of Information Act request for all taxpayers who report a gross income of a particular figure is not disclosable?
Mr. Hertzberg: Yes.
Their position, Your Honor, I'm quite certain is that even if the data that you are implicating in your hypothetical Freedom of Information Act request could not be linked with a specific taxpayer, it would nonetheless not be disclosable unless it were reformulated.
See, we come back to this reformulation concept, and that's what I am addressing, really.
Because this is the whole basis.
An additional thing was read into the statute, an additional level of activity, as it were, is required by the government's reading and by the Court's reading of the Statute.
The Court said it is not enough that the material not identify a taxpayer, or not be associated with a taxpayer, it must in addition be reformulated.
Unidentified Justice: What, to the extent that you can, did the Court of Appeals mean by it being reformulated?
Mr. Hertzberg: Well, Your Honor, that is one of the fundamental problems, here, because they were extremely vague.
They referred to a composite product.
They said, in addition to the fact of non-identification, some alteration by the government of the form in which the return information was originally recorded.
I'm quoting, of course, from the Essence of the Holy.
That reformulation will typically, typically consist of statistical tabulation or some other form of combination with other data, so as to produce a unitary product that disguises the origin of its components, as in the tax money.
Unidentified Justice: I would think the Government would surely say the number of people, certain level of income, would be disclosable.
You think it would not?
Mr. Hertzberg: I am not sure.
Perhaps, Your Honor--
Unidentified Justice: Well, all they do is count.
They count and come up with a number and it doesn't even appear in any piece of paper.
They just count it.
Mr. Hertzberg: --Your Honor, then perhaps I misunderstood Chief Justice Rehnquist's question, because I understood him in the hypothetical that he furnished to be asking for the data of that level of income.
Unidentified Justice: But if the question was how many people reported an income of $100,000, you would agree if they just came up with a number?
Mr. Hertzberg: Just a number, yes.
Without requiring any data to be disclosed, any specific data other than the number, I would agree.
Unidentified Justice: Does any example readily occur to you of things like what we're talking about where you think it should be disclosed and the government doesn't, some kind of concrete case?
Mr. Hertzberg: Well, our case.
Unidentified Justice: Yes.
Yes, that's what I would like to know.
Mr. Hertzberg: All right.
In this case, the petitioner made a broad request for information in Internal Revenue Service files which mentioned the petitioner, and the part of the Internal Revenue Service's response, which is implicated by this appeal, was the Internal Revenue Service's refusal to search files where there was every indication that there might be references to the petitioner but these were third party tax files, and the government claimed that everything in those files would be return information because they were third party files which had information in them which would be associated with or identify third party taxpayers.
So in this very case, the petitioner is being deprived of any chance of obtaining information that the Internal Revenue Service maintains about it because the government says--
Unidentified Justice: Can I interrupt you just a minute to get the example.
Supposing there's just one tax return with the name of your client in it, a third party tax return.
Do you contend you have a right to have access to the information on that return, other than the identity of the taxpayer?
Mr. Hertzberg: --Yes, if it refers to the petitioner.
Unidentified Justice: Are you therefore contending that that tax return at the time of the request is not return information?
Mr. Hertzberg: At the time of the request?
I think our position, Your Honor, is clearly any information in that return which does not identify the taxpayer--
Unidentified Justice: Well, in other words, a part of the return is return information and part is not return information.
Mr. Hertzberg: --That's right.
It's a definitional exception.
Unidentified Justice: So is there anything in your view in the concept of return information other than the names of taxpayers?
Mr. Hertzberg: Certainly.
Unidentified Justice: Or things that will specifically identify a return with a particular taxpayer?
Mr. Hertzberg: If I understand the question correctly, anything in the files that the Internal Revenue Service maintains is potentially return information.
Unidentified Justice: Well, but potential, I'm talking about at the time of the request, because I'm not talking about subsequent reformulation or... see, I think there's a big difference between reformulating in response to an FOIA request and reformulation that took place by the government preceding the request when it prepared some statistical study.
And putting that to one side, and just saying, at the time of the request, is it your view that everything on a return that would not identify that return with a particular taxpayer is not return information?
Mr. Hertzberg: Yes, it is, Your Honor.
Unidentified Justice: But if the government just makes a copy of a return in its entirety, and then redacts, crosses out any identifiable information, is that return information, what's left?
Mr. Hertzberg: Yes.
You mean from a return?
Unidentified Justice: Yes.
They just copy a return but then strike out anything that's identifying.
Mr. Hertzberg: No.
The data that is remaining which does not identify the taxpayer, and if it cannot be associated with the taxpayer, is not return information in our view.
And that is consistent with the entire Statutory scheme because Congress was concerned with the improper dissemination of information from the Internal Revenue Service files which could be linked to particular taxpayers.
Unidentified Justice: But how do you tell that?
Whether information can in fact be linked?
I mean, what about a particular individual's report of his gross income for that year?
Just the figure of gross income?
Mr. Hertzberg: We would maintain that in most circumstances, the Agency would have to agree that just a figure would not identify the taxpayer.
You cannot make a request saying, we would like to see John Doe's return.
Under that circumstance, anything you received in response to your FOIA request could not possibly not be identified or associated with John Doe because you are getting material in response to a specific request.
But that's not our case.
If you ask for information about yourself, for instance, or petitioner in this case, and there is information in a taxpayer's file which is responsive to that, and there is no way that it could be linked to John Doe, it's not return information, and that is exactly what Congress was concerned about.
Unidentified Justice: So if I give $25 to the Church of Scientology ten years ago, and you come in and ask IRS for any file that mentions the Church of Scientology, they should disclose the fact that an unknown taxpayer gave $25 to the Church of Scientology according to a return in their possession ten years ago?
Mr. Hertzberg: If the Church of Scientology is mentioned in there, and the $25 donation can be disclosed without any chance that it will identify or be associated with the taxpayer--
Unidentified Justice: How does the IRS know whether there's any chance it'll identify me or not?
Mr. Hertzberg: --Your Honor, this is the kind of determination I think you're alluding to perhaps the informed requester argument that the government makes, this is the kind of decision that agencies make all the time under the Freedom of Information act, and they work in conjunction of course with the de novo review that the Courts have of these determinations to make informed decisions that information will not identify somebody, or under other subsections of the Freedom of Information Act, for instance, like subsections 4, 6 and 7, that they will not constitute unwarranted privacies or lead to furnishing information about investigations that are underway.
This is the kind of every day determination that is made by agencies under the exemption statutes of the Freedom of Information Act.
Unidentified Justice: May I ask you another question about that hypothetical?
There's a return in the IRS files with a $25 donation to the organization shown on it.
How, at that time, when the request is made, is that return in your view, as you read the Statute, in a form which cannot be associated with or otherwise identify directly or indirectly a particular taxpayer?
It's on the page of the return with the name of the taxpayer on the top of it.
Mr. Hertzberg: At that moment?
Unidentified Justice: It's clearly return information.
Mr. Hertzberg: It is return information, Your Honor.
Unidentified Justice: If it's return information, then it's exempted from the Statute.
Mr. Hertzberg: Except that you cannot divorce in our view the Statute that we're talking about in the Internal Revenue Code from the duty to segregate and delete--
Unidentified Justice: Yeah, but there's no duty to segregate in the Internal Revenue Code.
Mr. Hertzberg: --But it is in the Freedom of Information Act.
Unidentified Justice: Now, explain that to me.
Mr. Hertzberg: All right.
Unidentified Justice: Where in the Freedom of Information Act is there a duty to make something that is return information into something that's not return information?
Mr. Hertzberg: Well, I would say that the duty flows from the segregability and deletion requirement of Section 552(b) of the Freedom of Information Act which says that, exempt material which can be deleted and segregated... excuse me... when exempt material can be deleted from nonexempt material--
Unidentified Justice: That's right, but the whole return is exempt when you start from it.
Mr. Hertzberg: --I'm sorry?
Unidentified Justice: But at the time of the request, the whole return is exempt material.
Mr. Hertzberg: Yes, but first of all, the Court below, Your Honor, found that the section 6103(B)(2) was a Freedom of Information Act (b)(3) exemption statute, so they must be read together.
Unidentified Justice: [inaudible]
Mr. Hertzberg: That's correct.
We prevailed on that issue in the Court below, Your Honor, against the vigorous opposition of the government.
They did not cross petition, and in fact, the Court of Appeals below found that the two statutes were entirely harmonious.
And when we read them in the context of this particular case, you may take return information, Your Honor, which is return information in the first instance, and if it can be deleted from and separated out from other information, which is not exempt information--
Unidentified Justice: Yes, but my hypothetical is that the whole tax return is return information.
Mr. Hertzberg: --Well, Your Honor, tax returns per se cannot be disclosed under Section 6103(a).
Unidentified Justice: I understand.
But the tax return and its attachments are return information.
Mr. Hertzberg: Yes, Your Honor.
But the Haskell Amendment is in the definitional section for return information, a distinction is made in the statutory scheme between returns and return information.
There is a general prohibition against release of returns and return information in 6103(a).
In (b), there are separate definitional sections of return and return information and the Haskell Amendment appears solely in the definitional section for return information.
So Congress itself made the distinction.
And that's a very critical distinction.
Unidentified Justice: Then returns are never disclosable, you're saying, even if you redact them?
Mr. Hertzberg: That's correct, Your Honor.
Unidentified Justice: So the example we gave, you'd say that was not returnable even if you redacted the names?
Mr. Hertzberg: That's correct, if it's a return.
Unidentified Justice: If it's a return.
Mr. Hertzberg: Yes, Your Honor.
Unidentified Justice: So no information that's in the tax returns themselves under your view of the case must be produced?
Mr. Hertzberg: That's correct, Your Honor.
Unidentified Justice: I see.
Mr. Hertzberg: And I'm sorry because I think that I--
Unidentified Justice: That's not the answer you gave to the hypothetical.
Mr. Hertzberg: --I was just going to say.
I think I misunderstood the question and I was just going to try to retrench on those very grounds.
Unidentified Justice: So you're only seeking information that is in supplementary papers in a file but no information that's in tax returns themselves?
Mr. Hertzberg: That's correct, Your Honor.
Unidentified Justice: I hadn't understood that before.
Mr. Hertzberg: It's my fault I did not make that clear.
I misunderstood the question.
Unidentified Justice: Including the $25 contribution on the return to the Church of Scientology?
Mr. Hertzberg: If that is in the return, would it be excluded?
Unidentified Justice: Yes, in my hypothetical return.
Mr. Hertzberg: Yes, Your Honor.
So that I can be clear on this, the statutory scheme excludes disclosure of returns, and that is not the issue.
We are talking about return information and part of the definition of Return Information in 6103(b)(2) is the Haskell Amendment.
And that's all we're talking about.
We're talking about apparent information about the petitioner in this case responsive to the Petitioner's Freedom of Information Act request, which is in third party taxpayer files, but not in returns.
We are talking about other data, return information.
Unidentified Justice: Now, the Freedom of Information Act doesn't have any standing requirement, does it?
It's not as if you would have to ask about information concerning you in other people's files.
Supposing you just want to go in and ask for information about someone else in third party files?
Mr. Hertzberg: Your Honor, you couldn't do that without implicating, associating and identifying material, because if you name somebody else, and you get a response, then any information you get in response to the request which named a taxpayer would clearly always be identified with that taxpayer or associated with that taxpayer.
And that's why in our case, the Petitioner never said we want to know what's in files of such and such person or such and such organization about ourselves.
They said we want information in Internal Revenue Service files about ourselves, and as it turns out, there is apparently a good chance of considerable information about the Church of Scientology of California being in third party files.
But the Church presumably, the Petitioner here, if the kind of process which is undergone by agencies all the time under the Freedom of Information Act is indulged in, will never be able to associate anything they receive in response to their request with a particular taxpayer.
They won't know what file it came from, if the agencies and the courts supervise the process.
And that is one of the real problems here with the interpretation of this reformulation test that was imposed by the Court of Appeals.
Because it would play havoc with the Freedom of Information Act insofar as it applies to the Internal Revenue Service.
Unidentified Justice: Mr. Hertzberg, I think where I get confused in this whole matter as far as your presentation is concerned is how to properly relate the Freedom of Information Act provision that says reasonably segregable portions of a record shall be provided with the exemption provision for return information, together with the Haskell Amendment.
Now, the Haskell Amendment says that the term, return information, doesn't include data in a form which can't be associated with the taxpayer.
I assume that means already in a form which cannot identify the taxpayer.
If it's already in that kind of a form, then it simply isn't exempt, as I read it, from the Freedom of Information Act.
I don't see that you can read the Freedom of Information Act as importing some affirmative duty to redact and to go out and search for things.
That's where I get confused.
It's either exempt or it isn't by looking at the definition of "return information" as amended by the Haskell Amendment.
Am I right?
Mr. Hertzberg: I don't agree, Your Honor.
Unidentified Justice: No?
Mr. Hertzberg: The phrase in the Haskell Amendment says that data which doesn't identify and can't be associated with a taxpayer is not return information.
And in our view, when you read the two statutes together--
Unidentified Justice: If it's already in that form, then it is not exempt; it's disclosable.
Mr. Hertzberg: --Well, you know, the government's position and the Court of Appeals' position below was that even a piece of information or data in a file which in its original form is not combined with any identifying material is also still return information.
They would maintain that that can't be disclosed.
We think that as with many of the other exemptions for the Freedom of Information Act having to be narrowly construed, having to be read in favor of the broad mandate of the Freedom of Information Act to disclose, if you can take data which may be combined with other data which does identify and reasonable segregate it from that identifying data, and delete the identifying data, it must be disclosed under the Freedom of Information Act.
And the implication of not reading it that way is the following.
There is no duty to reformulate files for the Internal Revenue Service or any other agency.
They would have blanket immunity virtually from the Freedom of Information Act if the reformulation test which was imposed in the Court below is affirmed here.
Because they will be able at their own discretion to either reformulate or not reformulate files.
The IRS has a penchant for labeling things, return information.
Unidentified Justice: No, but Mr. Hertzberg, you overlooked something in Justice O'Connor's question.
She said, already in a form.
And there, if they have their own reasons for making up studies and reformulating things, you have no objection to that, do you?
But unless they've done that, and unless it can be looked at without identifying a taxpayer, how can you get around the plain language of the Statute?
Mr. Hertzberg: Well, Your Honor, we think that the plain language supports our position.
As I understand your comment, when you say, if it's in a form, means it's original form.
Unidentified Justice: Already in a form.
I think Justice O'Connor put it very well, and that's what the Statute says, in a form.
And I suppose that means at the time the request is made.
Mr. Hertzberg: We would maintain that, in a form, means, and could mean nothing more than in the manner of, that if it's disclosable in a manner which does not identify, we think that's a plausible reading which cannot be associated with a taxpayer or identify the taxpayer.
If it means more than that, I don't know why it does not mean the action in conjunction with the Freedom of Information Act, data which is in one form which can be reasonably segregated from other data which identifies and released after deletion.
Unidentified Justice: Then it includes everything, of course.
Because you can always redact.
Mr. Hertzberg: I'm not sure if I understand when you say, that would include everything?
Data which does identify a taxpayer or could be linked with a taxpayer could not be under any circumstances disclosed.
Unidentified Justice: No, but you can always redact whatever it is necessary to preclude identification with a particular taxpayer.
Sometimes you have to take the name and address off, and--
Mr. Hertzberg: Yes, you could.
And that is what Congress was--
Unidentified Justice: --sometimes you've got to take a little bit more off.
But you always end up with something that would be disclosable, I would think.
Mr. Hertzberg: --Not always, because if it cannot be reasonably segregated, then it doesn't have to be disclosed.
If it would require the Agency to completely reformulate the document, it would not have to be disclosed under the principles of the Freedom of Information Act.
But if it can be reasonably segregated from identifying material, we maintain that it would have to be released.
Otherwise, it would be conferring blanket immunity on the Internal Revenue Service to maintain their files in their sole discretion to either allow for the release or prevent the release of particular data in their files.
Unidentified Justice: Well, why don't you say that you could take an actual return and redact any identifying materials and then give the return to the requester.
Mr. Hertzberg: Your Honor, Congress exempted returns.
Unidentified Justice: Well, I know, but you have to read it with the Freedom of Information Act, you tell us.
So here's a return and here's a piece of paper with identifying material in it that can be redacted.
Mr. Hertzberg: Because the general prohibition in the Statute, Your Honor, would act as an absolute withholding under the Freedom of Information Act as well.
The (b)(3) exemption says that if a statute precludes something from being disclosed, it can't be disclosed.
And the way 6103 is structured, Congress specifically exempted returns from disclosure, although it did not make the same provision for return information.
I'd like to save the rest of my time for rebuttal, please.
Chief Justice William H. Rehnquist: Thank you, Mr. Hertzberg.
We'll hear now from you, Mr. Lauber.
ORAL ARGUMENT OF ALBERT G. LAUBER, JR. ON BEHALF OF RESPONDENT
Mr. Lauber: Mr. Chief Justice, may it please the Court.
I'd like to begin by giving my answer to a couple of questions that came up during the first argument.
It is important to keep returns and return information distinct in ones mind to the extent one can with these abstract phrases.
Return is basically the Form 1040 and the attached Schedule A, Schedule B, Schedule C, Schedule D, the return itself.
And those are protected absolutely from disclosure.
The Haskell Amendment does not apply to them, and they cannot be disclosed even in redacted form.
Return information is basically everything else as we see it in the taxpayer's audit file, except for the return.
There might be a report of the examining agent showing the results of his audit.
There might be a protest from the taxpayer protesting the proposed deficiency of the agent once set up.
There could be internal IRS correspondence about the nature of the taxpayer's claims.
There can be a Notice of Deficiency issued by the IRS to the taxpayer proposing an increase in his taxes.
There could be a tax bill billing the taxpayer for a tax deficiency.
All these other things are return information because they are data that are either furnished to, collected by, prepared by the IRS in connection with the determination of that person's tax liability.
Now, the point is, a lot of the numbers on the return will find their way into the rest of the file because if you audit somebody's charitable contributions, you'll put down in your report what those contributions were.
The point is, all the little numbers on the return will find their way into all the other documents that are called return information in the file.
And that gives a concrete example of what the Chief Justice asked about.
What we're saying is all those other documents are immune from disclosure.
They're saying, except for the return, you have to redact all those other documents: the revenue agent's report, the tax bill, notice of deficiency, and then disclose them in redacted form.
Now, Justice White asked a question about would the IRS have to disclose in response to a request how many people earned income of $45,212?
The answer is, no.
The IRS cannot be required, nor can any agency, to create a new document by doing research for the taxpayer, and saving okay, we think based on our records, there were 572 returns filed of that sort.
Unidentified Justice: That's because of the Freedom of Information Act?
Mr. Lauber: That's because of the FOIA, there's no requirement for an agency to create a document.
If there were no list in the files when the request came in, listing the number of guys who had returns with that amount of income, you wouldn't have to create such a list.
What they would say you would have to do is disclose every piece of return information of people who had that amount of income, removing their names.
Unidentified Justice: Well, let's suppose that there is a document in the file that's not a return, but by anybody's definition, that document has return information in it?
Mr. Lauber: Well, the document is return information if it is a document created by the IRS in connection with the determination of liability.
Unidentified Justice: Yes.
Mr. Lauber: It's not just the numbers but the document itself is return information.
Unidentified Justice: Well, it's got some identifying information in it, and it is return information.
Now, is it your position that the government would have to redact that document to eliminate the identifying information?
Mr. Lauber: No.
As Justice O'Connor said, once it starts life as return information, it stays that way forever.
Unidentified Justice: Yes, it's just a like a return.
You don't have to redact a return.
This is return information and is exempt.
Mr. Lauber: Yes.
And that's a very good point, because if petitioners are right in their redaction, why did Congress say, you can't disclose returns even if they are redacted, when the same numbers are on the other stuff in the file, and they said it has to be.
It doesn't make any sense.
Unidentified Justice: Well, the statute exempts return information.
Mr. Lauber: Right.
Unidentified Justice: And just like it does returns.
And if returns aren't redactable, I would suppose other documents that are return information don't have to be redacted either.
Mr. Lauber: That is our position.
And we make that point in pages 25 and 26 of our brief.
I think Justices O'Connor and Stevens hit on the key point in the case, which is where do you get this redaction requirement.
Where does it come from.
Here we have these documents like a revenue agent's report that is return information.
Now, what is it that causes the IRS, requires it to redact it to turn it into something that is not return information?
Where does this requirement come from?
It can't come from Section 6103.
it says nothing at all about redaction.
Now, significantly in Section 6110 which was enacted in the same bill as 6103 governs the disclosure of redacted private letter rulings and background file documents.
It does have a redaction requirement in it.
And although it was enacted in the same bill as our Statute, there's no redaction requirement in 6103.
And I think that's quite a telling distinction.
Rather, petitioner gets the redaction requirement not from the Taxpayer Privacy Act, but from the FOIA, which requires that reasonably segregable portions of documents be released, once you redact them to remove the FOIA exempt material.
But this is really just circular reasoning, when you come right down to it.
The FOIA redaction requirement only comes into play when you have a document that is subject to FOIA, whereas here you have a document that is exempt from FOIA, as these tax related documents are, you never get to the redaction requirement.
I mean, you can't argue that FOIA requires you to redact a document to cause it to lose its exemption 3 status.
It's just circular reasoning.
I think that's what this Court--
Unidentified Justice: Are you defending the Court of Appeals decision in this case?
Mr. Lauber: --I think that does it for us.
Unidentified Justice: Sir?
Is that right?
Mr. Lauber: Yes.
They're relying entirely--
Unidentified Justice: Are you defending--
Mr. Lauber: --What they want is redaction of individual taxpayer information.
They had to get that from somewhere.
Unidentified Justice: --Are you defending then the Court of Appeals decision?
Is that the reasoning?
Mr. Lauber: I think that was what Judge Scalia, then-Judge Scalia, reasoned.
He said you can't import this redaction requirement into the Statute.
He then gave an interpretation of what this in a form language means.
Unidentified Justice: What about the--
Mr. Lauber: --which I'll get to now, if you like.
Unidentified Justice: --I was hoping you would get to it.
Mr. Lauber: I think the best place to start is from Senator Haskell's introduction of this thing on the floor.
It was introduced--
Unidentified Justice: You don't need this argument, do you?
Mr. Lauber: --I'm sorry?
Unidentified Justice: You don't need the reformulation argument?
Mr. Lauber: Well, I think it will inevitably be true that most of the documents covered by that exemption will be reformulated.
And that's what Senator Haskell was plainly thinking about when he introduced this amendment on the floor.
Unidentified Justice: Okay.
Go ahead, go ahead.
Mr. Lauber: He said introducing it,
"the purpose of this amendment is to insure that statistical studies and other compilations of data now prepared by the IRS and disclosed by it to outside parties will continue to be subject to disclosure to the extent allowed under present law. "
And the ensuing few sentences, Senator Haskell uses the phrase,
"statistical studies and compilations of data. "
now fewer than six times.
He referred moreover to studies and compilations that were now prepared by the IRS, that is, prepared as of 1976, and disclosed by it to outside parties at that time.
Now, these remarks by the amendment's sponsor are the only explanation of its purpose.
It was a floor amendment adopted without a roll call vote.
The entire history of it is one-third of one page in the Congressional Record.
All we have to go on is what Senator Haskell said.
The only other remark was the floor manager's remark, that said--
Unidentified Justice: We've got the language.
Mr. Lauber: --We have to kind of come to that last because the language is the most difficult part.
The floor manager said it might not be entirely necessary, but good idea, I'll be happy to take it to conference.
Unidentified Justice: He said the idea was to confirm an existing practice of the IRS?
Mr. Lauber: That seemed to be his intention, exactly.
And what petitioners here are asking, they're not asking for a compilation of data, or a statistical study.
They're asking for individual tax documents out of peoples' audit files, a redacted version.
This kind of stuff was not redacted and disclosed by the IRS in 1976.
It was exempt under prior Treasury Regulations.
Now, I think the limited purpose Senator Haskell announced for his amendment on the floor is reflected perfectly well in the text.
Because it says,
"return information excludes data in a form which cannot be associated with a particular taxpayer. "
And clearly, if you have reformulated data into a statistical study compilation, it is then in a form that cannot be associated with a particular taxpayer.
Unidentified Justice: But it might also be in such a form even though it hadn't been so-called reformulated.
Mr. Lauber: Well, that's right.
Now, I think if you didn't have Senator Haskell's remarks on the floor, all you had to go on was the phrase, in a form, one could imagine a document that would be return information that would be collected in connection with a liability.
Unidentified Justice: Exactly.
Mr. Lauber: And not be a compilation.
For example, say a newspaper story about bible tax shelters.
Unidentified Justice: Right.
Mr. Lauber: Say an agent was auditing somebody who had a bible tax shelter, and he cut out the things in the newspaper, didn't mention the taxpayer, just some article and stuck it in the file.
That, I think, you could say was in a form that could not be associated.
Unidentified Justice: Right.
Mr. Lauber: But I think that reading should be rejected in favor of Judge Scalia's reformulation test, because of Senator Haskell's remarks.
He was talking about studies and compilations of data.
And I think to treat the words, in a form, as meaning a reformulation, is most consistent with the sponsor's remarks in introducing his amendment.
Unidentified Justice: Well, but the sponsor also referred to the tax model, and as I understand it, before 1981, at least, the tax model included material that was actual nonaggregated tax return information, and it was routinely furnished.
Mr. Lauber: Okay.
I have a long answer to that question.
There are two parts.
First of all, what the tax model was back then, and secondly, why it doesn't help the petitioners.
The tax model is kind of a misnomer.
What it is is actually raw data.
It's a compilation of data that was drawn from a stratified sample of about 100,000 individual tax returns.
It was basically a pile of numbers on a computer tape.
For every return that was chosen for the sample, there were about 150 what they call fields or like entry boxes, where you would put the numbers for that sample.
About 30 of these entry boxes did not correspond at all to numbers or line items on a return.
Rather, they were computed amounts reflecting economic concepts like expanded income or capital gains tax at fifty percent rate.
This is all in the description of the tax model the IRS put out for 1976.
Most of the other entry boxes on each sample did correspond roughly to line items on a return like salaries and wages, salaries and wages.
But there were a number of exceptions from that.
First of all, the numbers on the return would be corrected for mathematical errors and to eliminate any internal inconsistencies on the taxpayer's return.
And then entered onto the tax model.
A number of the items on the taxpayer's return might be combined before transferring them to the tax model.
For example, if a taxpayer reported a bonus or a director's fee as miscellaneous income, that would be added back to wages and salaries and combined with it before it was put onto the tax model.
So it would be different treatment from the return.
And finally, some items would be treated differently on the tax model for economic reasons than they were shown on the return.
For example, an earned income credit which was shown on the return as a tax payment was shown on the model as a reduction in tax liability.
So basically, in 1976, the tax model was a compilation of data many of whose entries were lifted verbatim from tax returns with all identifiers removed.
But there also was some reformulation of the data by the IRS.
Unidentified Justice: Are you saying that the pre-1981 versions of the tax model are reformulated in fact within the meaning of the opinion of the Court of Appeals below?
Mr. Lauber: I think.
Some of the items were.
Some items just came over line for line, some would be changed, and new items would be added to the tax models.
So I think it was arguably a reformulation under Judge Scalia's test.
But what ever one calls it, it doesn't help the petitioners here for three reasons: first of all, the tax model was plainly a compilation of data.
Indeed, Senator Haskell described it as a compilation of data on the floor when he referred to it.
Unidentified Justice: But what if he were wrong?
Supposing it was simply a copy of somebody's return with the name taken off?
Say they just used a sample return or something like that, but it didn't identify any taxpayer.
It had already been put in that form at the time without any reformulation, compilation.
It clearly would be covered by the language of the Amendment, wouldn't it?
Mr. Lauber: Well, the tax model we think is covered by the language of the Amendment, because we think it is in a form--
Unidentified Justice: I mean, it would be even if it were not a compilation.
I don't see why you have to get into all this argument about compilations?
Mr. Lauber: --Well, because that's what Senator Haskell said his amendment was meant to do was to protect the continuous exposure--
Unidentified Justice: Well, I understand that.
But I'm saying, assume he's wrong, and assume there was a regularly disclosed piece of paper that was a copy of Mr. Average Taxpayer's return, but with his name taken off of it, so nobody could identify it with Mr. Average Taxpayer.
That would be disclosable, wouldn't it?
Mr. Lauber: --Well, the return would not be.
Unidentified Justice: No, but this tax model, which is some thing's used for some other purpose, just happens to be a copy of an anonymous taxpayer's return?
Why wouldn't that... at least it wouldn't be return information because of the language it doesn't identify--
Mr. Lauber: No.
We agree that the tax model is disclosable.
Unidentified Justice: --And would be even if it were not a compilation.
That's what I'm trying to say.
I don't see why the argument about compilations is even necessary.
Mr. Lauber: You mean if you only had one, rather than 100,000 of these things?
Unidentified Justice: Yeah.
Mr. Lauber: Okay.
I think I'd agree with you about that.
But the key thing is, it must be an existing thing.
there's no redaction requirement.
That's the next point.
The tax model was something IRS already prepared.
It was right there in the file as is.
You didn't have to redact it in order to make it something to be disclosed.
And they want redaction.
The things that do not currently exist in disclosable form, but we have to put them into disclosable form.
And the third point is that the tax model had been prepared by the IRS, and disclosed by it to the public for at least ten years before 1976.
It therefore fit exactly within Senator Haskell's reference to documents that were now prepared by the IRS and disclosed by it to third parties.
Unidentified Justice: Yes, but take the other side of the coin.
Supposing there is in a lot of files a mimeographed commentary on people who make deductions by make contributions to the Church of the Scientologists.
I mean, say we found a lot of trouble with these taxpayers, and we wanted you to follow a special procedure when you're auditing returns with this kind of a deduction.
It's a general thing, it doesn't identify and in a lot of files.
Now, that clearly would be disclosable?
Mr. Lauber: Yes.
But the key thing is, that would not be in an individual taxpayer's audit file.
There might be--
Unidentified Justice: Why is that?
Mr. Lauber: --Well, that's how we keep our records, basically.
I mean, what you would have there would be like a general scientology file, or a general petroleum industry file, with guidelines for examiners about how to conduct audits of that kind of tax shelter or that kind of taxpayer.
And those files would be searched in response to a FOIA request, and such things would be disclosed because they are not collected by the IRS in connection with the particular taxpayers' liability.
They are general instructions about how to audit a class of people.
And that would be disclosable, too.
But you see, that wouldn't even be return information.
You don't even need the Haskell Amendment for that because it wouldn't even be return information.
Unidentified Justice: Well, I was thinking of a possible case where copies of those instructions got in one agent's file in connection with his audit work.
He just, he got a copy of them and he stuck it in that file.
And couldn't it be return information?
Mr. Lauber: Well, theoretically.
You see, this whole case began with the question about what is a proper scope of the search.
And the IRS has just miles and miles and miles of file documents.
And their position was all the individual audit files of particular named taxpayers we don't need to search, because the way we keep our records, there should be nothing in there but return information.
And it would simply be impossible to go rummaging through all those files looking for some, one little study that somebody kind of found its way into a file by mistake.
That study would appear somewhere else, and you'd look for it there.
But Judge Scalia clearly held in the panel opinion below that if the IRS can produce affidavits on remand that a whole group of individual audit files, for example, have nothing but return information in them, they don't even have to be searched.
And that is the only practical way to administer the Privacy Act.
You can't go looking for a needle in a haystack through files that are not meant to contain things like compilations of data or studies.
Now, there are a lot of very kind of technical textural arguments which we have made in our brief.
And I'm not going to go through those things... they're pretty complicated... one by one.
They're drawn from various subsections of the statute we're construing.
But the bottom line is as follows:
Judge Scalia, writing for the majority below, concluded that petitioner's construction produces nine illogical or bizarre consequences at various points in the Statute, whereas his construction, which we embrace, produced only two.
Judge Wald, in dissent, had a different count.
She tallied up the score as only being 5 to 3 in the Government's favor.
But all ten judges on the en banc Court agreed that as a matter of pure textural analysis, our position is superior to petitioner's, demonstrably superior to petitioner's.
The defense response to that problem was to say that, well, normal principles of textural analysis should be kind of called off here, or given less importance because the Haskell Amendment was a last minute floor thing that kind of made a mess of the statute.
And we think that kind of agnostic approach just is unacceptable.
The statutory law consists of the words that Congress enacts.
And you can't bypass the logical meaning of those words or the logical inferences from a text on the theory that Congress didn't know what it was doing, or was acting hastily or carelessly.
Another factor, I think, that cuts against the Petitioner's position is the way the Haskell Amendment was adopted.
As we've explained, the general definition of return information excludes literally billions of documents in individual taxpayer files all around the country.
They would be immune from disclosure.
Petitioner's theory is that all these documents become disclosable after being redacted by virtue of the Haskell Amendment.
Their interpretation, therefore, is to really turn the statute upside down.
Because you'd be making billions of documents--
Unidentified Justice: Well, I take it they do not say you need to redact a return, and then deliver the rest of the return?
Mr. Lauber: --Right, but the return may be only one of 70 documents in that file.
Unidentified Justice: Right.
Is this a new position of their's or?
Mr. Lauber: No, they've agreed... well, they don't highlight it because it's bad for their argument, but they've agreed all along because of the way the statute's drafted, the Haskell Amendment only applies to (b)(2), that is, return information.
It does not apply to returns.
They agree with that, but they have not made a big deal of it, for good reasons.
So what they're saying is this floor amendment had the effect of converting all these billions of documents that under the Committee bill would have been absolutely protected into potentially disclosable documents by virtue of redaction.
And I think that's quite implausible because if you look at how their thing was adopted.
It was on the floor without debate without even a roll call vote.
And only two Senators even discussed it.
It just seems very unlikely that Congress would have brought about this huge change in the scheme of the committee bill without something more than this kind of, ho hum well, it might be a good idea, let's send it to conference.
It just doesn't sound like the kind of language Congress uses when their vastly reconstructing a Committee proposal.
Finally, I'd like to make a point about this Court's decision in Baldridge v. Shapiro.
This was the case that held that raw census data is absolutely immune from disclosure under FOIA.
The Census Act provided, much as our Statute provides, that Census data and information were to be kept confidential.
And the Court held that the Census Act was an Exemption 3 Statute, and that all census data were protected from disclosure thereunder.
And the Court expressly rejected the argument,
"that the confidentiality provisions protect raw data only if the individual respondent can be identified. "
That's 455 U.S. at 355.
The Court clearly rejected any notion of redacting raw census data to remove the name or other identifiers of the census respondents.
The Court held the data is absolutely protected.
And that shows, I think, how you treat redaction under an Exemption 3 Statute.
If information is protected under FOIA Exemption 3, as census data was there, and is tax information is here, its simply not covered.
It's exempt from FOIA.
You don't go and redact it in order to make it subject to FOIA by kicking it out of the Exemption 3 status.
Chief Justice William H. Rehnquist: Thank you, Mr. Lauber.
Mr. Hertzberg, you have three minutes remaining.
ORAL ARGUMENT OF MICHAEL LEE HERTZBERG ON BEHALF OF PETITIONER -- REBUTTAL
Mr. Hertzberg: The Baldridge case is fairly illustrative of a different kind of statute and a dispositively different kind of result was reached in that case because the statute itself was a blanket prohibition against the release of census data.
The analogy, if there would be one, between the Baldridge census data statute and our case would be if the Census Data Act provided that raw census data which does not identify or cannot be associated with the person furnishing the data is not census data.
That would be the proper analogy.
That's what makes our case different from Baldridge, and that's why you cannot ignore the Freedom of Information Act read in conjunction with the Haskell Amendment.
The Haskell Amendment says something that is not return information if it doesn't identify.
In the Census Statutes, this Court found without question, a blanket prohibition against disclosure.
That is a classic Freedom of Information Act (b)(3) withholding language.
This category of materials under no circumstances will ever be disclosed.
That's an easy case.
But when it says, this category of materials will not be disclosed unless it cannot be identified with or associated with a person, you have an absolutely different situation.
And that's why we cannot ignore, as the Government would here, the Freedom of Information Act, because the two statutes must be read together as the three judge panel below said.
And the way they are read together is that the blanket prohibition, the (b)(3) Freedom of Information Act withholding prohibition pertains to return information.
But the Haskell Amendment tells us that return information does not include data which does not identify or cannot be associated with the taxpayer, and that is where the deletion and reasonable segregability provision of the Freedom of Information Act applies.
And it applies to everything.
It applies under Exemption 1 to National Security documents.
There can be a document, and if there is a portion which does not comprise--
Unidentified Justice: Why doesn't it apply to a return?
Mr. Hertzberg: --Your Honor, Congress, for reasons that I cannot discern from the legislative history and which was specifically not referred to by my colleague here, made a distinction between returns and return information in the Statute.
Unidentified Justice: I know, but return information is also exempt if its identified.
Mr. Hertzberg: Yes, that's correct, Your Honor.
Unidentified Justice: All right.
Here's a document that identifies and is return information.
It's identifying return information, but it would be very easy to redact it.
And you say the redaction has to take place--
Mr. Hertzberg: With a return?
Unidentified Justice: --No.
Return information that's identified?
Mr. Hertzberg: Return information because that's exactly what the plain language of the Haskell Amendment... the Haskell Amendment says if it doesn't identify, it's not return information.
Unidentified Justice: Well, it is identifying in the form that you find it in the file, absolutely identifying, just like the return is.
Mr. Hertzberg: Yes, Your Honor.
That may be correct, but the Freedom of Information Act provides that if you can release something which can be segregated and which cannot be specifically withheld, it must be released.
And the "in a form" language, we maintain that the in a form language can refer to that exactly.
Chief Justice William H. Rehnquist: Thank you, Mr. Hertzberg.
The case is submitted.
Marshal Wong: The Honorable Court is now adjourned until tomorrow, at 10:00 o'clock.
Argument of Chief Justice Rehnquist
Mr. Rehnquist: I have the opinion of the Court to announce in No. 86-472, the Church of Scientology of California versus the Internal Revenue Service.
Section 6103 of the Internal Revenue Code lays down a general rule that returns and return information shall be confidential.
This confidentiality of return information is modified by the so-called "Haskell Amendment", which provides that such term does not include data in a form which cannot be associated with or otherwise identified directly or indirectly a particular taxpayer.
Petitioner, the Church of Scientology is requested under the Freedom of Information Act data from the IRS and it argued that the Haskell Amendment removed from the confidentiality protection of 6103 all return information that does not by identify a particular taxpayer.
It also believes that the IRS has an obligation to delete identification from all return information and disclose the information when requested to do so under FOIA.
We disagree and hold that the mere deletion of identifiers from otherwise protected return information does not deprive of its confidential nature.
Neither the language nor the legislative history of Section 6103 suggests this intent.
Since such deletion will not make protected information disclosable, we hold the IRS has no duty under the Freedom of Information Act undertake such redaction.
We therefore affirm the judgment of the Court of Appeals which held the same way.
Justice Brennan and Justice Scalia took no part in the consideration or decision of this case.