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Grasso v. Internal Revenue Service

March 4, 1986


On Appeal from the United States District Court for the District of new Jersey (D.C. Civil No. 84-2385)

Author: Sloviter

Before: ADAMS, SLOVITER and MANSMANN, Circuit Judges


SLOVITER, Circuit Judge.


Facts and Procedural History

The Internal Revenue Service (IRS) appeals an order of the district court permitting disclosure to Paul Grasso, plaintiff-appellee, under the Freedom of Information Act of portions of a Memorandum of Interview with Grasso prepared by agents of the Internal Revenue Service in the course of an investigation of his civil and criminal tax liability.*fn1

No material facts are in dispute. Grasso was interviewed by two Internal Revenue Service (IRS) agents in January 1984. In March 1984, Grasso made a request under the Freedom of Information Act (FOIA), 5 U.S.C. § 552, for a report or memorandum of the interview. The IRS responded by giving Grasso a four-page memorandum of the interview from which significant portions had been deleted. In a letter accompanying this document, the IRS stated that "[c]ertain information . . . has been excised in accordance with the exemption cited in 5 U.S.C. 552(b)(7)(A) and (b)(3)" of FOIA. App. at 8a.

Grasso appealed the decision to excise portions of the memorandum to the Commissioner of Internal Revenue. The IRS acknowledged the appeal, but failed to take any action on it within the statutory time period for such response. See 5 U.S.C. § 552(a)(6)(A)(ii). Thereafter, Grasso filed this action, alleging that the IRS' withholding of the memorandum of the interview with Grasso was unlawful, and unsupported by any exemption of FOIA. In its answer, the IRS asserted that FOIA was inapplicable and that section 6103 of the Internal Revenue Code of 1954, as amended, governed the disclosure or nondisclosure of the document. In the alternative, the IRS alleged that the document was exempt from disclosure pursuant to FOIA sections in 5 U.S.C. §§ 552(b)(3), (b)(7)(A) and (b)(7)(C).*fn2

The parties filed cross-motions for summary judgment. After oral argument, and an in camera inspection of the document by the district court, the district court ordered the IRS to produce the requested document within 60 days. The court rejected the IRS' assertion that federal tax administration would be seriously impaired if the IRS "turn[ed] back to the person who gave you information the same information that person gave you." App. at 51a. The court stated that the document, albeit not a verbatim statement, contains no evaluation by the interviewing agent and that "[e]ach of the excised items purports to reflect what Grasso aid." App. at 55a. The court also noted that Grasso would get the statement if he was prosecuted. The court delayed imposition of its order for sixty days to enable the IRS to complete its investigation of Grasso, and denied Grasso attorney's fees. The IRS appealed, and the district court then stayed its order pending appeal.


Applicability of FOIA

As the Supreme Court has pointed out, FOIA is a "broadly conceived" statute designed "to permit access to official information long shielded unnecessarily from public view." EPA v. Mink, 410 U.S. 73, 80, 35 L. Ed. 2d 119, 93 S. Ct. 827 (1973). It requires that government agencies make available official information "for public inspection". Id. at 79. However, because "Congress realized that legitimate governmental and private interests could be harmed by release of certain types of information," it included nine exemptions to FOIA's disclosure requirements. FBI v. Abramson, 456 U.S. 615, 621, 72 L. Ed. 2d 376, 102 S. Ct. 2054 (1982). See 5 U.S.C. § 552(b). Of these, two are relevant here.

Exemption 7(A) exempts from disclosure investigatory records compiled for law enforcement purposes, but only to the extent that the production of such records would (A) interfere with enforcement proceedings.

5 U.S.C. § 552(b)(7)(A). Exemption 3(B) allows an agency to refuse to disclose matters that are

specifically exempted from disclosure by statute . . . provided that such statute . . . (B) establishes particular criteria for withholding or refers to particular types of matters to be withheld.

5 U.S.C. § 552(b)(3)(B).

The IRS argues that the document sought by Grasso falls within Exemptions 7(A) or 3(B). It also claims, in the alternative, that FOIA is inapplicable because it was superseded by section 6103 of the Internal Revenue Code, which bars disclosure of "returns and return information".

We consider first the government's contention that section 6103 of the Internal Revenue Code supersedes the Freedom of Information Act. This issue has divided the circuits. This court has not yet ruled on the question. The district court did not decide the issue, although it noted that the IRS had relied on FOIA in denying Grasso the complete document, and had to initially contended that the standard for production was governed by section 6103 rather than FOIA.

The provision that the government contends is exclusively applicable, section ...

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