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Fogg v. IRS, No. 23-1620, 2024 WL 3264151 (8th Cir. July 2, 2024) (Grasz, J.)

Date

Fogg v. IRS, No. 23-1620, 2024 WL 3264151 (8th Cir. July 2, 2024) (Grasz, J.)

Re:  Request for terms of tax professional authentication process contained within the Internal Revenue Manual (“IRM”)

Disposition:  Affirming district court’s grant of government’s motion for summary judgment

  • Exemption 7, Threshold:  The Court of Appeals for the Eighth Circuit holds that “[t]he district court determined – and neither party contests – that the redacted contents are compiled for ‘law enforcement purposes’; they protect taxpayer information from fraudulent attempts to access it.”  “Thus, the IRS satisfied Exemption 7(E)’s threshold requirement that the redacted contents be for ‘law enforcement purposes.’”
  • Exemption 7(E):  The Court of Appeals for the Eighth Circuit “affirm[s] the district court.”  The court relates that “[t]he IRS only asserts the IRM’s redacted contents are ‘techniques and procedures’ for law enforcement investigations; it does not contend the redacted contents are ‘guidelines.’”  “Thus, [the court] first need[s] to determine whether the redacted contents are ‘techniques and procedures for law enforcement investigations’ under Exemption 7(E)’s plain language.”  “If they are, [the court] then must determine whether disclosure is nevertheless compelled by some other FOIA provision.”

    “Based on [the court’s] review of [the IRS’s] declaration and the redacted contents of IRM § 21.1.3.3, [the court] conclude[s] Exemption 7(E) applies; the redacted contents all involve techniques and procedures the IRS uses for law enforcement investigations.”  “They are akin to background checks because they help the IRS to authenticate a caller’s identity in special scenarios in which the caller raises a suspicion of fraud.”  “These techniques and procedures are not ‘routine’ and ‘already well known to the public,’ such that any public domain exception should apply.”  “Even if the concept of authenticating a caller’s identity is publicly known, Exemption 7(E) still ‘protects information that would reveal facts about such techniques or their usefulness that are not generally known to the public, as well as other information when disclosure could reduce the effectiveness of such techniques.’”  “As evidenced by [the court’s] in camera inspection and [the IRS’s] declaration, the IRM’s redacted contents apply in non-standard scenarios, not involving every third-party caller.”  “The techniques and procedures help the IRS conduct its law enforcement investigation into callers’ identities, thus preventing tax fraud.”

    Regarding circumvention, the court relates that “[it] has yet to determine whether the circumvention clause also applies to the ‘techniques and procedures’ clause.”  “[The court] can confidently say it does not.”  “As the Second Circuit explained, ‘basic rules of grammar and punctuation dictate that the qualifying phrase modifies only the immediately antecedent “guidelines” clause and not the more remote “techniques and procedures” clause.’”  “Thus, under Exemption 7(E)’s plain language, Congress deemed that disclosure of ‘techniques or procedures for law enforcement investigations’ presumptively risks circumvention of the law.” 

    “Even though the circumvention clause does not apply to the techniques and procedures clause, the IRS must still satisfy the standard set by 5 U.S.C. § 552(a)(8)(A)(i), which Congress added to the FOIA in 2016 to curtail agency overuse of FOIA exemptions.”  “That subsection requires an agency to disclose redacted information – even if an exemption otherwise applies – unless ‘the agency reasonably foresees that disclosure would harm an interest protected by an exemption described in subsection (b)’ or ‘disclosure is prohibited by law[.]’”  “This ‘foreseeable harm’ requirement is an independent burden on the agency.”  “Under this amendment, ‘[a]pplicability of a FOIA exemption is still necessary – but no longer sufficient – for an agency to withhold the requested information.’”  “Neither the Supreme Court nor [the court’s] sister circuits have addressed how the foreseeable harm requirement applies to Exemption 7(E), so [the court] must begin by ascertaining what interests Congress intended Exemption 7(E) to protect before proceeding to examine whether disclosure would result in foreseeable harm to those interests.”  “One obvious interest is preventing ‘circumvention of the law.’”  “At first blush, it could seem 5 U.S.C. § 552(a)(8)(A)(i) merely extends Exemption 7(E)’s circumvention clause to the techniques and procedures clause.”  “But whereas Exemption 7(E)’s circumvention clause only requires the IRS to show how disclosing otherwise-exempted guidelines ‘could be reasonably expected to risk circumvention of the law,’ . . . the foreseeable harm requirement requires the IRS to show how disclosure would foreseeably harm the IRS’s interest in preventing circumvention of the law.”  “There is a material difference between speaking of a foreseeable risk of harm on the one hand, and foreseeable harm on the other.”  “As written, the circumvention clause allows an agency to withhold information if it can show a mere risk of harm, a minimal burden, requiring only the agency demonstrate ‘an expectation’ of a risk.”  “This is in contrast with § 552(a)(8)(A)(i), which demands the IRS show foreseeable harm stemming from disclosure.”  “This showing requires more than just an expectation of a risk, but an actual expectation of harm.”  “As the D.C. Circuit explained, ‘the foreseeability requirement means that agencies must concretely explain how disclosure “would” – not “could” – adversely impair [an exemption’s protected interest].’”  “Congress’s addition of the foreseeable harm requirement may mean that Exemption 7(E)’s circumvention clause is left with little independent effect, even in guidelines cases.”  “But such an interpretation is consistent with Congress’s ‘concern’ that the exemptions’ built-in restrictions had proved insufficient to prevent ‘overus[e].’”

    “Even though the district court did not analyze the redacted contents under the heightened foreseeable harm requirement – only analyzing whether the IRS cleared the ‘low bar’ of Exemption 7(E)’s circumvention clause – the record still supports the IRS’s withholding under the heightened standard.”  “First, [the IRS’s] declaration specifically references the IRS’s determination that lax authentication procedures allowed wrongdoers to access taxpayer information in the past.”  “The IRS adopted the redacted techniques and procedures of IRM § 21.1.3.3 to improve its third-party authentication procedures and prevent ongoing circumvention of the law.”  “Thus, the IRS can reasonably foresee harm stemming from disclosing the redacted contents because the harm preceded the adoption of the techniques and procedures.”  “Indeed, the IRS adopted those techniques and procedures in response to ongoing unauthorized third-party access to taxpayer information.”  “Second, [the IRS] explains, to the greatest extent possible, how disclosure of the redacted contents leads to circumvention of the law.”  “As to Redaction 1, [the IRS] states this redacted material ‘explains the identity authentication elements required of a third-party purportedly holding the taxpayer’s [power of attorney] or [tax information authorization] as modified for certain non-standard circumstances.’”  “[The IRS] explains that disclosing these techniques would inform wrongdoers ‘of the modified authentication elements that satisfy the IRS’s investigation or the non-standard circumstances for which they are modified,’ which would enable those wrongdoers to circumvent those procedures, and thus circumvent the law.”  “As to the other four redactions, [the IRS] likewise describes the techniques and procedures to the greatest extent [it] can without revealing the content of the redacted material.”  “Redaction 2 ‘describes alternative identity authentication procedures for a particular group of purported [power of attorney] and/or [tax information authorization] holders’; Redactions 3 and 4 ‘describe[ ] certain procedures IRS employees are instructed to follow with respect to callers who present another specific non-standard circumstance’; and Redaction 5 ‘describes alternative identity authentication procedures for certain purported [power of attorney] and/or [tax information authorization] holders under certain other non-standard circumstances.’”  “[The IRS] also explains that disclosing these procedures could reduce their ‘effectiveness in accurately identifying callers and distinguishing those with taxpayer-authorized access from those attempting to obtain return information fraudulently or without a taxpayer’s authorization.’”  “Granted, [the IRS] references how disclosure would lead to a foreseeable ‘risk’ of circumvention of the law, invoking the language of Exemption 7(E)’s circumvention clause.”  “But even though [the IRS] does not specifically invoke the foreseeable harm requirement, [its] affidavit and accompanying materials nevertheless establish that disclosure would lead to foreseeable harm.”  “This is not the case when an agency attempts to withhold information based only on overly broad generalizations.”
Court Decision Topic(s)
Court of Appeals opinions
Exemption 7(E)
Exemption 7, Threshold
Updated July 31, 2024