817 F.3d 953
6th Cir.2016Background
- From 2010–2012, IRS used "Be On the Lookout" (BOLO) criteria to flag applications for 501(c) status that contained political indicia (e.g., "Tea Party", positions on taxes/debt), routing them to specialists and subjecting them to long delays and extensive requests for information.
- The Treasury Inspector General (IG) found the criteria inappropriate, processing delays (avg. ~574 days vs. 121-day goal), and demands for "unnecessary information," which impeded organizations’ operations and fundraising.
- Plaintiffs (including NorCal Tea Party Patriots) sued the IRS under the Privacy Act, the First and Fifth Amendments, and 26 U.S.C. § 6103/§ 7431, and sought class certification; they requested discovery including IRS internal BOLO lists and spreadsheets.
- The district court ordered production, reasoning § 6103(h)(4)(B) allowed disclosure where treatment reflected on a return was directly related to resolution of an issue; the IRS moved for reconsideration and then petitioned this court for mandamus.
- The IRS argued applicant names/identifying information are confidential “return information” under § 6103 and thus nondisclosable; the government sought mandamus to prevent enforcement of the district court’s discovery orders.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether § 6103(h)(4)(B) authorizes disclosure of applicant names on BOLO lists | § 6103(h)(4)(B) permits disclosure where treatment reflected on a return is directly related to the case; this supports production | Names on BOLO lists are return information and nondisclosable; § 6103(h)(4)(B) protects taxpayer privacy | § 6103(h)(4)(B) authorizes disclosure only of items "reflected on [a] return." The district court erred to the extent it applied (B) to application-derived names. |
| Whether applicant names/IDs are “return information” under § 6103(b)(2)(A) and § 6103(b)(6) | Applicant identities are relevant data and fall within § 6103(b)(2)(A) such that disclosure is barred absent an exception | Applicant names are not a taxpayer "identity" as defined in § 6103(b)(6) because applicants file applications, not "returns"; therefore they are not § 6103 return information | Applicant names, addresses, and TINs on tax-exempt applications are not “return information” under § 6103(b)(2)(A) as limited by § 6103(b)(6); IRS may not hide BOLO lists by invoking § 6103 broadly. |
| Whether § 6104 requires public inspection of granted tax‑exempt applications | Successful tax‑exempt applications and supporting papers are required by § 6104(a)(1)(A) to be open to public inspection | IRS relied on § 6103 privacy protections but acknowledged that approved applicants’ names are public | § 6104 makes names/identifying info of approved 501(c) applicants public; IRS conceded approved-applicant names are public. |
| Whether mandamus is appropriate to prevent disclosure | Plaintiffs rely on district court discovery orders to identify class and pursue claims; disclosure is necessary for class discovery | Mandamus necessary because district court misapplied § 6103 and threatened statutory privacy protections; no adequate alternative relief | Mandamus denied: although district court misapplied § 6103(h)(4)(B), IRS failed to show a clear and indisputable right to relief; discovery orders must be followed and IRS must comply without redactions and without further delay. |
Key Cases Cited
- Cheney v. U.S. Dist. Court, 542 U.S. 367 (2004) (mandamus is an extraordinary remedy for clear abuses of judicial power)
- Dep’t of Homeland Sec. v. MacLean, 135 S. Ct. 913 (2015) (interpretive principle that Congress’s distinct word choices are purposeful)
- In re United States, 669 F.3d 1333 (Fed. Cir. 2012) (interpretation of § 6103(h)(4) limiting disclosure to items reflected on returns)
- Ryan v. Bureau of Alcohol, Tobacco & Firearms, 715 F.2d 644 (D.C. Cir. 1983) (distinguishing information returns and application materials for § 6103 purposes)
- Landmark Legal Found. v. IRS, 267 F.3d 1132 (D.C. Cir. 2001) (contrasting view that applicant names are return information; court here finds that reasoning unpersuasive)