Summary
explaining that “deleting the employees' name or social security numbers would not change the fact that the requested records are derived from specific return information filed by individual taxpayers”
Summary of this case from Judicial Watch, Inc. v. Soc. Sec. Admin.Opinion
No. C 01-4021 EMC
May 16, 2002
ORDER GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT (No. 14)
In this case the plaintiff, a law firm, seeks to obtain under the Freedom of Information Act (FOIA), 5 U.S.C. § 552, et seq., certain records of the Social Security Administration relating to the reported social security numbers of employees of two companies. The records are derived from information contained in W-2 and W-3 forms filed with the Social Security Administration and the Internal Revenue Service. For the reasons stated below, the Court concludes that the records constitute tax return information confidential under Internal Revenue Code § 6103, 26 U.S.C. § 6103, and are thus exempt from disclosure under 5 U.S.C. § 522(b)(3).
FACTUAL SUMMARY
On November 22, 2000, and September 27, 2001, plaintiff Davis, Cowell Bowe, LLP (hereinafter "Plaintiff") requested documents from defendant the Social Security Administration (hereinafter the "SSA") under the FOIA. Plaintiff requested three categories of records from the SSA: [1] records reflecting inquiries to the SSA by Rel's Foods, Inc. and Raintree Enterprises — Mart Plaza, Inc. (hereinafter "Mart Plaza") about their employees' social security numbers; [2] records reflecting the SSA's response to such inquiries; and [3] notices from the SSA to employers that social security numbers reported on Rel's Foods' or Mart Plaza's wage reports do not match the corresponding employee's name, date of birth and/or sex (otherwise known as "no-match letters").
According to Plaintiff's counsel, these records would help determine whether employers were using (or abusing) the wage reporting process to target particular workers.
The records sought entail information derived from the Internal Revenue Service W-2 and W-3 forms filed with the SSA. The Social Security Act, 42 U.S.C. § 432 (processing of tax data), requires the Internal Revenue Service (hereinafter the "IRS") to make available to the SSA these returns for, inter alia federal retirement and disability insurance benefits purposes. Section 432 also provides that the IRS and the SSA may enter into agreements for the SSA's processing of withholding tax statements for said purposes. 42 U.S.C. § 432. Because the IRS and the SSA both utilize wage-reporting information (albeit for different purposes), and in order to reduce duplication of reporting requirements and processes, Combined Annual Wage Reporting (CAWR) was implemented. Combined Annual Wage Reporting, 43 Fed. Reg. 60158 (Dec. 26, 1978). Under CAWR, employers report the amount of wages paid, the amount of FICA withholdings and other information for each of their employees by filing IRS W-2 (and in some cases W-3) forms with the SSA. Id. see Alex Tse Decl. ¶¶ 3 and 4, Ex. 2 and 3; Thomas Marusin Decl. ¶ 3. The forms contain employee identification data including their social security numbers. Darrell Blevins Decl. ¶¶ 7-8. The SSA processes the various forms, records the wage information on each employee's earnings record and forwards the forms to the IRS. Combined Annual Wage Reporting, 43 Fed. Reg. 60158.
Section 432 provides in pertinent part that: "[t]he Secretary of the Treasury shall make available information returns . . . to the Commissioner of Social Security for the purposes of this subchapter and subchapter XI of this chapter." Subchapter II, within which § 432 is contained, involves federal old-age, survivors and disability insurance benefits. Subchapter XI involves general provisions and peer review.
The Federal Insurance Contributions Act (FICA) requires employers to withhold taxes from employees for Social Security and Medicare and is codified at § 3101 of the Internal Revenue Code. 26 U.S.C. § 3101.
In response to Plaintiff's FOIA requests, the SSA made an effort to determine whether it possessed any potentially responsive documents. Without confirming the existence of said documents, the SSA concluded that if it possessed the documents in question, they would be protected from disclosure as tax returns or return information under 5 U.S.C. § 552(b)(3) (FOIA Exemption 3) and due to privacy concerns under 5 U.S.C. § 552(b)(6) (FOIA Exemption 6). Blevins Decl., ¶¶ 3-5, Ex. 3-4.
After exhausting all administrative remedies pursuant to the FOIA, on January 24, 2002, Plaintiff filed suit against the SSA for injunctive relief for failure to produce the requested documents and to abide by time deadlines pursuant to the FOIA, 5 U.S.C. § 522(a)(6).
The SSA has filed a motion for summary judgment.
STANDARD OF LAW
In a FOIA case, summary judgment is proper where the defendant agency establishes that it has fully discharged its obligations under the FOIA.Hayden v. NASA, 608 F.2d 1381, 1387 (D.C. Cir. 1979), cert. denied, 446 U.S. 937 (1980). Where, the agency contends it is exempt from disclosure, it has the burden of demonstrating that it is in fact exempt, see Department of Justice v. Reporters Comm. for Freedom of the Press, 489 U.S. 749, 755 (1989), after the court draws all reasonable inferences in the light most favorable to the FOIA requester. See Weisberg v. Department of Justice, 705 F.2d 1344, 1350 (D.C. Cir. 1983). This burden may be fulfilled where the agency submits affidavits that "contain reasonably detailed descriptions of the documents and allege facts sufficient to establish an exemption." Lewis v. Internal Revenue Service, 823 F.2d 375, 378 (9th Cir. 1987); see Minier v. Central Intelligence Agency, 88 F.3d 796, 800 (9th Cir. 1996) ("the agency may meet its burden by submitting a detailed affidavit showing that the information logically falls within the claimed exemptions"). While boilerplate affidavits are insufficient to carry this burden see Weiner v. Federal Bureau of Investigation, 943 F.2d 972, 978-79 (9th Cir. 1981), the agency need not specify its objections in such detail that it would reveal information exempt from disclosure. See Lewis, 823 F.2d at 378.
The Freedom of Information Act requires that federal agencies provide the public certain information or access to certain information, upon request. The overarching charge of the FOIA is the broad disclosure of government documents. See 5 U.S.C. § 522, et seq.; Department of Air Force v. Rose, 425 U.S. 352, 361 (1976) (FOIA was enacted "'to pierce the veil of administrative secrecy and to open agency action to the light of public scrutiny'"). Where a request is made to a federal agency under the FOIA, the agency must provide the documents, or access thereto, unless the information requested falls within one of the nine statutory FOIA exemptions created by Congress. 5 U.S.C. § 522 (a) and (b); see Federal Bureau of Investigation v. Abramson, 456 U.S. 615, 621 (1982) (noting that Congress created the nine FOIA exemptions recognizing that "legitimate governmental and private interests could be harmed by release of certain types of information"); Dobronski v. FCC, 17 F.3d 275, 277 (9th Cir. 1994); Church of Scientology of California v. U.S. Department of the Army, 611 F.2d 738, 742 (9th Cir. 1979) (stating that the exemptions are narrowly construed in light of the FOIA's goal of broad disclosure).
Exemption 3 of the FOIA permits federal agencies to withhold records that are "specifically exempted from disclosure by statute . . ., provided that such statute (A) requires that the matters be withheld from the public in such a manner as to leave no discretion on the issue, or (B) established particular criteria for withholding or refers to particular types of matters to be withheld." 5 U.S.C. § 552(b)(3).
Section 6103(a) of the Internal Revenue Code, 26 U.S.C. § 6103 (a), provides that tax returns and return information are confidential and prohibits the disclosure of such information except in defined circumstances. Section 6103(a) provides in pertinent part: "no officer or employee of the United States . . . shall disclose any return or return information obtained by him in any manner in connection with his service as such officer or an employee or otherwise or under the provisions of this section." 26 U.S.C. § 6103 (a); see Kamman v. United States Internal Revenue Service, 56 F.3d 46, 48 (9th Cir. 1995),citing, Church of Scientology of California v. Internal Revenue Service, 484 U.S. 9, 11-12 (1987) ("Church of Scientology"); Willamette Industries Inc. v. United States, 689 F.2d 865, 867 (9th Cir. 1982), cert. denied, 460 U.S. 1052 (1983).
Section 6103 was created with the purpose of providing blanket protection to tax information. See Johnson v. Sawyer, 120 F.3d 1307, 1322 (5th Cir. 1997). Enacted as part of the Tax Reform Act of 1976, Section 6103 was enacted in part in response to concerns that tax information was being inappropriately used for political purposes and not afforded the necessary protections. S. REP No. 94-938(I), at 317-18, reprinted in, 1976 U.S.C.C.A.N. 3439, 3746-47. In addition, Congress was concerned that the public as well as various governmental agencies not have wholesale unregulated access to tax information and that federal tax administration not be serious impaired. McSurely v. McAdams, 502 F. Supp. 52, 56-57 (D.D.C. 1980). Congress sought to protect the taxpayer's right to privacy and "the related impact of the disclosure upon the continuation of compliance with our country's voluntary assessment system." S. REP No. 94-938(I), at 318, reprinted in, 1976 U.S.C.C.A.N. at 3747. On the other hand, by creating specific exceptions in § 6103, Congress recognized "the legitimate need of federal and state agencies for access to tax information for a purpose useful, often essential, in carrying out their government function." United States v. Bacheler, 611 F.2d 443, 446 (3rd Cir. 1979); see S. REP. NO. 94-938(I), at 317-18, reprinted in, 1976 U.S.C.C.A.N. at 3746-47.
Section 6103 is a statute exempting materials from disclosure within the meaning of Exemption 3 of FOIA, and the sections are "viewed harmoniously through the operation of Exemption 3." Grasso v. Internal Revenue Service, 785 F.2d 70, 75 (3rd Cir. 1986) ("section 6103 provides only a substantive standard, and thus can more reasonably be viewed as subsumed into Exemption 3"); see De Salvo v. Internal Revenue Service, 861 F.2d 1217, 1221 (10th Cir. 1998). Importantly, under FOIA the burden remains with the government to prove the application of § 6103 under Exemption 3. See Kamman, 56 F.3d at 49; De Salvo, 861 F.2d at 1221.
RECEIPT OF RETURN INFORMATION BY THE SSA
Plaintiff makes several arguments why § 6103 and thus Exemption 3 of FOIA do not apply. First, while Plaintiff concedes that § 6103 properly exempts tax returns and "return information" from disclosure under Exemption 3, Plaintiff argues the records in question do not constitute "tax returns" containing "return information" because the W-2 and W-3 forms from which the records derive are not initially received by the IRS, but instead are submitted in the first instance to the SSA. Plaintiff cites Stokwitz v. United States, 831 F.2d 893 (9th Cir. 1987) (stating that § 6103 applies "information that is passed through the IRS"), cert. denied, 485 U.S. 1033 (1988), and Ryan v. United States, 74 F.3d 1161 (11th Cir. 1996) ("the statutory definition of 'return information' confines it to information that has passed through the IRS") in support of its argument.
The argument is meritless. "Return information" is defined by § 6103(b)(2) to include information with respect to a return including" whether the taxpayer's return was, is being, or will be examined or subject to other investigation or processing, or any other data . . . furnished to, or collected by the Secretary [of the Treasury of which the IRS is a part] . . . ." 26 U.S.C. § 6103(b)(2)(A) (emphasis added). If information relative to whether a tax return "will be examined" by the IRS is return information, certainly the return itself which in due course will be received and examined by the IRS is covered by § 6103.
Moreover, as a matter of logic, a document designed to provide tax return information to the IRS does not lose its Status as a tax return merely because the document physically passes through the hands of another agency before being received by the IRS. Otherwise, passage through an intermediary agency such as the U.S. Postal Service would render a tax return unprotected by § 6103. It is the intended destination, not the physical route, of the document that is controlling. Indeed, the IRS shares information with a number of other agencies pursuant to statute. See. e.g., 26 U.S.C. § 6103 (f) (Congressional committees), 6103(j) (the Census Bureau), 6103(1)(6) (local child support agencies) and 6103(m)(4) (federal student loan creditors); see also Bator v. Department of the Treasury, Internal Revenue Service, No. CV-N-87-559 ECR, 1988 WL 150699, *2 (D. Nev. Dec. 16, 1988) (determining that the IRS' provision of return information to another agency in accordance with normal practice and a standing agreement did not violate § 6103). As discussed in greater detail below, both § 432 of the Social Security Act and 26 U.S.C. § 6103 (1) specifically authorize the IRS and the SSA to share return information. Under these statutes, the sharing of information does not alter the otherwise confidential nature of return information. Nothing in these statutes or in logic suggests the confidentiality of "return information" turns on whether it is provided to authorized agencies before or after receipt by the IRS.
Plaintiffs' reliance on Stokwitz v. United States, supra, and Ryan v. United States, supra, is misplaced. In Stokwitz, Navy investigators searched the office of the plaintiff who was employed as a civilian attorney by the Navy. The investigators seized copies of his federal tax returns, the originals of which had been filed with the IRS. The returns were then disclosed to various Navy employees. The plaintiff brought suit for wrongful disclosure of his tax returns in which he asserted a violation of § 6103. The Ninth Circuit rejected the plaintiffs claim, determining that § 6103 did not apply because the disclosure was not made by government officers and employees who obtained returns and return information as a result of a filing with the IRS. Stokwitz, 831 F.2d. at 897. The court held that § 6103 does not protect return information from every potential risk of disclosure, but instead focuses on those disclosure "arising from the filing of the taxpayer's return with the IRS." Id. at 895-96. The information in Stokwitz was obtained as a result of a Navy investigation, not a filing with IRS compelled by law. Id. at 893-94.
Ryan, supra, relied upon Stokwitz in holding that the plaintiff had no cause of action against the government under § 6103 for release to the public of confidential tax information by the prosecutor in a criminal case against the plaintiff See Ryan, 74 F.3d at 1163. The court found that the information was collected by the U.S. Attorney's Office prosecuting the case and was not information obtained by the Secretary of the Treasury in furtherance of tax law obligations. Id.
Although there is broad language in Stokwitz and Ryan emphasizing the fact that the released information did not come from or pass through the custody of the IRS, the rationale of the decisions was based on the fact that the disclosures had no significant nexus to the power of the IRS to collect tax information — power which § 6103 was intended to address. The information disclosed was not "information the taxpayer files under compulsion and the threat of criminal penalties" attached to non-compliance with tax laws administered by the IRS. Stokwitz, 831 F.2d at 895. Nor was there a "nexus between the data or information obtained and the furtherance of obligations controlled by the tax laws." Ryan, 74 F.3d at 1163. Rather, the disclosures in those cases were independent of and coincidental to the IRS' collection authority.
In the instant case, the W-2 and W-3 forms from which information is sought by Plaintiff is collected pursuant to the authority granted to the IRS to collect taxes. In exercise of that authority, the IRS has entered into a compact with the SSA jointly to receive the tax returns. That the returns pass through the SSA before reaching the IRS does not gainsay the fact that the information is filed "under compulsion and the threat of criminal penalties" related to IRS' administration of tax laws. Nor does it negate the "nexus between the data or information obtained and the furtherance of obligations controlled by the tax laws." Accordingly, the information from the W-2 and W-3 forms constitutes return information despite the fact they are first submitted to the SSA.
USE OF RETURN INFORMATION BY THE SSA FOR NON-TAX PURPOSES
Secondly, Plaintiff argues that the SSA's possession and use of the documents are for purposes that are entirely independent of the IRS' tax calculation and collection function ( e.g., calculation of disability and retirement benefits and under a pilot program verification of immigration/work status) and therefore the documents should not be classified as tax returns containing "return information." More specifically, Plaintiff contends the information within the requested documents are not related to a tax return or the determination of tax liability.
There is logical force to Plaintiff's argument. If, instead of the existing compact between the IRS and the SSA, the SSA required employers to submit employee identification and wage information on SSA sponsored forms with no involvement by the IRS, the information would not constitute "return information" under § 6103, since it would not be received by the Secretary of the Treasury and would serve no tax collection function. Nonetheless, however logical this argument may be, resolution of this issue must turn on the language of statute and Congress' intent.
Pursuant to § 6103(b)(2), "return information" is defined as:
(A) a taxpayer's identity, the nature, source, or amount of his income, payments, receipts, deductions, exemptions, credits, assets, liabilities, net worth, tax liability, tax withheld, deficiencies, overassessments, or tax payments, whether the taxpayer's return was, is being, or will be examined or subject to other investigation or processing, or any other data received by, recorded by, prepared by, furnished to, or collected by the Secretary [of the IRS] with respect to a return or with respect to the determination of the existence, or possible existence, of liability (or amount thereof) of any person under this title for any tax, penalty, interest, fine, forfeiture, or other imposition, or offense, and
(B) any part of any written determination or any background file document relating to such written determination (as such terms are defined in section 6110(b)) which is not open to public inspection under section 6110.26 U.S.C. § 6103(b)(2).
There is no serious dispute that the W-2 and W-3 forms forwarded through the SSA to the IRS are "tax returns" under § 6103. Apart from financial information used to calculate and verify wages, deduction and hence tax liability, the W-2 and W-3 forms include necessary identifying information such as social security numbers and employee names. The identifying information contained in the W-2 and W-3 forms literally constitutes "return information." Social security numbers constitute information regarding a "taxpayer's identity" under § 6103(b)(2), and § 6103(b)(6) defines "taxpayer identity" to include taxpayer's "identifying number." Importantly, the social security number on a W-2 or W-3 identifies a particular taxpayer and stated social security number associated with that return.
The issue is whether the authorized use of certain "return information" for non-tax purpose by the SSA removes that information from the purview of "return information" covered by § 6103. As noted above, Congress authorized the SSA and the IRS to share return information under § 432 of the Social Security Act. Section 6103 of the Internal Revenue Code also authorizes disclosure by the IRS of "returns and return information for purposes other than tax administration" to other agencies, including the SSA, without losing the general cloak of confidentiality under § 6103. See 26 U.S.C. § 6103(1) (emphasis added). Thus, Congress specifically intended the information be treated as "return information" even when shared with the SSA for other non-tax purposes. Other provisions substantiate that intent. Section 6103(1)(7)(A), for instance, provides that the Commissioner of Social Security shall, upon written request, disclose to various agencies return information" obtained as a result of sharing tax return information with the IRS under § 6103(1)(5). Section 6103(1)(7)(C) places certain restrictions on the SSA's disclosure of such " return information." Section 6103(1)(8)(A) provides that the SSA "shall disclose directly to officers and employees of a State or local child support enforcement agency ' return information' from returns with respect to social security account numbers, net earnings from self-employment , wages , and payments of retirement income which have been disclosed to the SSA . . . "pursuant to its compact with the IRS under § 6103(1)(5). 26 U.S.C. § 6103(1)(8)(A) (emphasis added). In short, Congress contemplated that "return information" shared with the SSA pursuant to the § 432 of Social Security Act and § ¶ 103(1) of the Internal Revenue Code retained its status as confidential "return information" under § 6103 subject only to certain specified exceptions. To hold that the IRS' sharing of information with the SSA negates the protection otherwise offered by § 6103 would vitiate Congress' purpose of maintaining the confidentiality of tax return information while permitting specific limited disclosure of such information to other agencies.
While there is little case law on this question, the district court's decision in Thompson Publishing Group, Inc. v. Health Care Financing Administration, No. 92-2431 LFO, 1994 WL 116141 (D.D.C. Mar. 15, 1994), supports the conclusion that § 6103 applies. In Thompson Publishing, the plaintiff requested under the FOIA that the defendant Health Care Financing Administration ("HCFA") provide certain lists of employers who had received Medicare Secondary Payer mailings. The information requested originated from W-3 forms filed with the IRS and subsequently provided to the SSA. The SSA then created lists of employers who had submitted at least one Form W-2 for a Medicare beneficiary or spouse of a beneficiary and who had at least 20 employees. The lists included names, addresses, employers' tax identification numbers and the total number of employees. The SSA provided this list to the HCFA, who mailed Medicare secondary payer questionnaires to the listed employers. The plaintiff sought from the HCFA certain of these mailing lists. Confronted by the plaintiffs FOIA request for this information, the HCFA argued, that the information was "return information" protected by § 6103. The court agreed, holding, inter alia, that the terms "return" and "return information" were broadly defined by § 6103 and "appear[ed] to cover the requested information." Thompson Publishing, 1994 WL 116141, at *2. The Thompson Publishing court also concluded that Congress specifically authorized the disclosure of information by the IRS to the SSA and by the SSA to the HCFA and limited the scope of that disclosure under § 6103(1)(12).Id. at *2-3. That authorization evinced Congress' intent that the information, though shared with the SSA and the HCFA, remained return information protected by § 6103. Id. at *2. As noted above, the same is true here as the IRS' disclosure of "return information" to the SSA is specifically authorized by § 6103(1)(5)(A) and is limited by §§ 6103(1)(7)(A) and (C) and § 6103(1)(8).
THE HASKELL AMENDMENT
As noted above, Plaintiff has requested records reflecting inquiries to the SSA by Rel's Foods, Inc. and Mart Plaza about their employees' social security numbers, as well as, records reflecting the SSA's response to such inquiries. Plaintiff has also requested no-match letters prepared by the SSA using "return information." A no-match letter is created where the SSA finds a discrepancy between its own records of social security account numbers and the social security numbers reported on W-2 and W-3 forms. Blevins Decl. ¶ 9. The correspondence sought by Plaintiff thus derives from and contains "return information" appearing on W-2 and W-3 forms. At oral argument, counsel for Plaintiff confirmed that they sought from the requested records specific employee identifying information: names and/or social security numbers. That Plaintiff seeks records containing "return information" rather than the W-2 or W-3 forms themselves does not negate the confidentiality of such documents under § 6103. See Church of Scientology, 484 U.S. at 14-16; Long v. Internal Revenue Service, 891 F.2d 222, 223-24 (9th Cir. 1989) (determining that check sheets containing information from tax returns constitutes "return information").
At argument, Plaintiff's counsel offered to accept as an alternative redacted versions of the requested records with names and social security numbers deleted. But deleting the employees' names or social security numbers would not change the fact that the requested records are derived from specific return information filed by individual taxpayers. While what has been referred to as the Haskell Amendment excludes "data in a form which cannot be associated with, or otherwise identify, directly or indirectly, a particular taxpayer," 26 U.S.C. § 6103(b)(2), the Supreme Court has held that exemption applies only to information that has been "reformulated" into e.g., a "'statistical study or some other composite product.'" Church of Scientology, 484 U.S. at 13, quoting, 792 F.2d 153, 160 (D.C. Cir. 1986). "Mere deletion of the taxpayer's name of other identifying data is not enough, since that would render the reformulation requirement entirely duplicative of the nonidentification requirement." Id. (quotation omitted). "Return information remains such even when it does not identify a particular taxpayer." Id. at 15.
To fall within the Haskell Amendment there must be some reformulation, not mere restatement or transfer of individualized information onto another form. In Long, supra, the Ninth Circuit held that summarization of individual return information on check sheets used by the IRS to compile statistical tabulations was not "in a form that constitutes a reformulated data base of the sort that is eligible for disclosure under the Haskell Amendment." Long, 891 F.2d at 224. In Thompson Publishing,supra, the court noted that the employer lists requested which were also derived and compiled from individualized return information were "not so different in form from the tax return information that it should be released." Thompson Publishing, 1994 WL 116141, at *2. The records requested in the instant case do not entail substantial reformulation such as a "statistical study or composite product." They involve no aggregation or composite data. Instead, the records at issue are individualized and based directly upon "return information" specific to particular returns. As such, they do not fall under the Haskell Amendment and are thus exempted from disclosure under FOIA Exemption 3.
Plaintiff did not request any documents in the possession of the SSA such as a report showing the aggregate numbers of no match letters sent to a particular employer within a given year. If such a record exists, it would present a closer question under the Haskell Amendment.
CONCLUSION
Summary judgment is appropriate in this case. The SSA has submitted competent declarations describing the communications between the SSA and employers concerning social security numbers and the fact that any records regarding discrepancies would be derived from the W-2 and W-3 forms filed with the SSA pursuant to its compact with the IRS. The evidence establishes that the records sought constitute tax return information confidential under 26 U.S.C. § 6103 and thus exempt from disclosure under Exemption 3, 5 U.S.C. § 522(b)(3).Because the Court finds that the documents at issue at exempt from disclosure under Exemption 3, the Court need not address exempting the documents under Exemption 6.
The Court GRANTS the SSA's motion for summary judgment (Docket No. 14).