Opinion
Case No. 99-4170-SAC
January 24, 2002
David G. Pflum, [COR LD NTX] [PRO SE], St. Marys, KS, for plaintiff
Stuart D. Gibson, [COR LD NTC], U.S. Department of Justice, Tax Division, Washington, DC
REPORT AND RECOMMENDATION
This action, filed by the plaintiff pro se, seeks damages for wrongful disclosure of plaintiff's tax return information by the IRS in violation of 26 U.S.C. § 6103.
On April 3, 2000, defendant filed a Motion for Judgment on the Pleadings (Doc. 12). Defendant seeks judgment as a matter of law pertaining to the alleged wrongful disclosures set forth within ¶ 16-19 of plaintiff's complaint. The motion for judgment on the pleadings has been referred to the undersigned United States Magistrate Judge for report and recommendation.
¶ 16-19 of the plaintiff's complaint allege:
16. As noted above Pflum filed a petition to quash the IRS summonses served within the District of Kansas. See Pflum v. United States, Case No. 99-4093-SAC (D. Kansas). On or about June 10, 1999, United State filed a motion for summary denial of the petition. Attached as Exhibit 1 to the United States' motion is the Declaration of Schmidt. At paragraph 3 of Schmidt's declaration he made the following unauthorized disclosures of return information: `. . . financial statements provided by the Collection Division indicate that Mr. Pflum has earned near six-figure annual income during the years under investigation, 1994-1996. IRS records reflect that Mr. Pflum did not file federal income tax returns for those years.' Schmidt's declaration also explicitly states that the investigation against Pflum is criminal in nature.
17. United States' memorandum referenced in paragraph 16 also makes several unauthorized disclosures of the nature of the investigation against Pflum. For example, at page 3, paragraph 2, of the memorandum counsel for United States discloses return information as follows: `The IRS is conducting an investigation to determine the petitioner's possible criminal responsibility in connection with his 1994-1998 federal income tax liability.'
18. Pflum also filed a petition to quash the IRS summonses served within the District of Nevada. See Pflum v. United States, Case No. CV-N-99-339-HDM(PHA) (D.Nevada). On or about June 10, 1999, United State filed a motion for summary denial of the petition. Attached as Exhibit 1 to the United States' motion is the Declaration of Schmidt. At paragraph 3 of Schmidt's declaration he made the following unauthorized disclosures of return information: financial statements provided by the Collection Division indicate that Mr. Pflum has earned near six-figure annual income during the years under investigation, 1994-1996. IRS records reflect that Mr. Pflum did not file federal income tax returns for those years.' Schmidt's declaration also explicitly states that the investigation against Pflum is criminal in nature.
19. United States' memorandum referenced in paragraph 16 also makes several unauthorized disclosures of the nature of the investigation against Pflum. For example, at page 3, paragraph 2, of the memorandum counsel for United States discloses return information as follows: `The IRS is conducting an investigation to determine the petitioner's possible criminal responsibility in connection with his 1994-1998 federal income tax liability' (Doc. 1).
The response filed by the plaintiff (Doc. 20) and defendant's reply (Doc. 21) have been reviewed. 1. Standard of Review for Motion for Judgment on the Pleading
Plaintiffs' surreply was not considered because this district does not permit a surreply without leave of court. See Harnett v. Parris, 925 F. Supp. 1496, 1500 (D. Kan. 1996).
A motion for judgment on the pleadings under Fed.R.Civ.P. 12(c) is governed by the same standards as a motion to dismiss under Fed.R.Civ.P. 12(b)(6). Mock v. T.G.Y. Stores Co., 971 F.2d 522, 528 (10th Cir. 1992); Bushnell Corp. v. ITT Corp., 973 F. Supp. 1276, 1280 (D. Kan. 1997). In reviewing a Rule 12(c) motion, the court assumes the truth of the plaintiff's "well-pleaded factual allegations" in the complaint and draws all reasonable inferences in plaintiff's favor. Shaw v. Valdez, 819 F.2d 965, 968 (10th Cir. 1987). The issue is not whether the plaintiff ultimately will prevail, but whether the plaintiff is entitled to offer evidence to support his claims. Scheuer v. Rhodes, 416 U.S. 232, 236 (1974), overruled on other grounds, Davis v. Scherer, 468 U.S. 183 (1984); Adidas America, Inc. v. Nat'l Collegiate Athletic Ass'n., 64 F. Supp.2d 1097, 1101 (D. Kan. 1999). Thus, the court may dismiss a case for failure to state a claim only if "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957); Schoultz v. Monfort of Colorado, Inc., 754 F.2d 318, 321 (10th Cir. 1985).
2. Disclosing Taxpayer's Tax Return Information 26 U.S.C. § 7431 provides a civil remedy for a violation of 26 U.S.C. § 6103. In order to recover, the plaintiff must demonstrate, by a preponderance of the evidence, each of the following: "(1) the disclosure was unauthorized; (2) the disclosure was made `knowingly or by reason of negligence'; and (3) the disclosure violates section 6103." Fostvedt v. United States, 824 F. Supp. 978, 983 (D. Col. 1993).
The general prohibition against disclosure of tax return information is found at 26 U.S.C. § 6103 (a):
Returns and return information shall be confidential, and except as authorized by this title — (1) 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 services as such an officer or an employee
Plaintiff's complaint alleges the excerpts from the affidavit of Special Agent Schmidt, as set forth within ¶ 16-19 of the complaint, contain disclosure of tax return information. The information disclosed is unmistakably "return information" as defined in § 6103(b), which includes:
"[the] 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, 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 with respect to a return or with respect to the determination of the existence, or possible existence, of liability (or the amount thereof) of any person under this title for any tax, penalty, interest, fine, forfeiture, or other imposition, or offense . . . ."
However, § 6103(a) also authorizes disclosure of confidential information in limited circumstances delineated by statute. Confidential Informant v. United States, 45 Fed. Cl. 556, 558 (Fed.Cl. 2000); see Taylor v. United States, 106 F.3d 833, 836 (8th Cir. 1997) ("The bulk of § 6103 constitutes exceptions to the general rule of non-disclosure"). Subparagraphs (c) through (p) of § 6103 provide the exceptions authorizing disclosure of tax information. Defendant argues the allegations in ¶ 16-19 of the plaintiff's complaint fall squarely within the § 6103(h)(4)(A) exception:
Disclosure in judicial and administrative tax proceedings. — A return or return information may be disclosed in a Federal or State judicial or administrative proceeding pertaining to tax administration, but only — (A) if the taxpayer is a party to the proceeding, or the proceeding arose out of, or in connection with, determining the taxpayer's civil or criminal liability, or the collection of such civil liability, in respect of any tax imposed under this title.
The tax information was disclosed in a judicial proceeding pertaining to tax administration and plaintiff was a party to this proceeding. As is clear from plaintiff's complaint, there can be no question but that the action brought by the plaintiff to quash the IRS summons was a judicial proceeding pertaining to tax administration. See First Western Government Securities, Inc. v. United States, 796 F.2d 356, 360 (10th Cir. 1986) (the term "tax administration" in § 6103(h)(4) is to be interpreted broadly); see also 26 U.S.C. § 6103 (h)(4) (defining "tax administration" to include "assessment, collection, enforcement, [and] litigation under [the internal revenue laws or related statutes]").
Plaintiff, however, argues material issues of fact remain which pertain to the question of whether the subject disclosures were necessary to the proceedings. Plaintiff's arguments and the cases he relies upon, however, primarily address the § 6103(h)(4)(B) exception which permits disclosure only where the return information "is directly related to the resolution of an issue in the proceeding." There is no such requirement within § 6103(h)(4)(A).
The disclosures of which plaintiff complains in § ¶ 16-19 of his complaint were disclosures made by the government in opposition to two proceedings brought by plaintiff to quash IRS summonses. On its face, plaintiff's complaint indicates such disclosures were made in a judicial proceeding brought by the plaintiff which pertained to tax administration. Therefore, defendants' disclosure of the tax information in response to plaintiff's motions to quash were authorized under § 6103(h)(4)(A).
RECOMENDATION
Based upon the foregoing, IT IS RESPECTFULLY RECOMMENDED that the defendant's Motion for Judgment on the Pleadings concerning plaintiff's allegations at ¶ 16-19 of plaintiff's complaint (Doc. 12) be granted.
Any party objecting to the recommended disposition may serve and file written objections within 10 days of service of this Report and Recommendation. Any objection filed must specify the parts of the Report and Recommendation to which objections are made and set forth the basis for such objections. See Fed.R.Civ.P. 72. Failure to timely file objections may constitute a waiver of a party's right to appeal. Thomas v. Arn, 474 U.S. 140 (1985) and Soliz v. Chater, 82 F.3d 373, 375 (10th Cir. 1996).
Copies of this Report and Recommendation shall be mailed to all unrepresented parties and to counsel of record.