Washburn v. State Tax Assessor

STATE OF MAINE SUPERIOR COURT

CUMBERLAND, ss. CIVIL ACTION

DOCKET NO: CV-101-521

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RICHARD WASHBURN,

Plaintiff,

STATE OF MAINE

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STATE TAX ASSESSOR r'H '"

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On September 22,2010, plaintiff Richard Washburn requested that the

State Tax Assessor produce six types of documents for inspection pursuant to

Maine's Freedom of Access Act (FOAA), 5 M.R.S. §§ 401-411 (2009). Three

documents are now at issue.

Two documents are described as Sales Tax Reference Manuals, known

informally as the "Blue Book," last revised in 1989, and its predecessor the "Black

Book." They are comprised of "numerous non-public excerpts largely relating to

application of Maine's sales and/ or use tax laws to specific taxpayers and their

fact scenarios." (DeL's Brief at 3.) The excerpts are "frequently of the type

generated in direct response to a matter involving a specific taxpayer." (DeL's

Brief at 4.) Staff members at Maine Revenue Services use the Manuals as informal

references. (Def.' s Brief at 4.)

The third document is a one-page memorandum from 1975 that makes

reference to "breathing equipment" or similar words. The Assessor concedes that

Maine Revenue Services no longer has any understanding of the details or

original purpose of the memo. However, the Assessor argues that, from the way

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the memo is worded, "it appears that [it] may have been generated in response to

a particular set of facts relating to a specific taxpayer." (Def.'s Brief at 4-5.)

The Assessor and Maine Revenue Services denied Mr. Washburn's FOAA

request for the above three documents. Citing Maine's Confidentiality of Tax

Records statute, 36 M.R.S. § 191, the Assessor determined that the records, in

their entirety, were designated confidential by statute and therefore not "public

records" that could be divulged under FOAA. See 1 M.R.S. § 402(2)(A) (2010)

(excepting records designated confidential by statute from FOAA's definition of

public records). Mr. Washburn appeztls to this court for a de novo trial of the

issue. 1. M.R.S. ~ 409(1) (2010).

DISCUSSION

Maine's FOAA, like the federal Freedom of Information Act (FOIA),I "is

intended to address the public's right to hold the government accountable."

Blethe1l Me. Newspnpers, IIIC. v. State, 2005 ME 56, err 31, 871 A.2d 523, 533. It is an

essential tool that allows the citizenry to remain informed about "what its

government is up to" and determine whether public officials are upholding their

civic responsibilities. Id. err 32, 871 A.2d at 533. To this end, FOAA gives "every

person ... the right to inspect and copy any public record during the regular

business hours of the agency or official having custody of the public record

within a reasonable period of time after making a request," except as otherwise

provided by statute. 1 M.R.S. § 408(1) (2010).

FOAA is to be "liberally construed and applied to promote its underlying

purposes and policies," and exceptions to disclosure are to be strictly construed.

1 M.R.S. ~ 401 (2009); Citizel/S COI/Ill/I/lls. Co, 2007 ME 114, err 9, 931 A.2d at 505-06.

I 5 USc. § 552 (2006).

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An agency mLlst show "just and proper cause" if it denies a FOAA request for

public records. TOIunof Burlington v. Hasp. Admin. Dist. No. 1, 2001 ME 59, ~113,

769 A.2d 857, 861. Public records are defined to include any writing "that is in

the possession or custody of an agency or public official ... [that] has been

received or prepared f(ir use in connection with the transaction of public or

governmental business or contains information relating to the transaction of

public or governmental business," with certain delineated exceptions. 1 M.R.S.

§ 402(3) (2010). "Records that have been design<:lted confidential by statute" are

not "public records." 1 M.R.S. § 402(3)(A) (2010).

Maine Revenue Services is unquestionably a public agency, and the three

documents at issue were admittedly prepared for use in administering the state's

sales and use tax provisions. While they meet the basic definition of public

documents, the Assessor argues that they are in fact not public because they have

been designated confidential by 36 M.RS. § 191. Section 191 states:

It is unlawful for any person who ... has been permitted to

recei ve or view any ... report, return or other information

provided pursuant to [Title 36, Taxation,] to divulge or make

known in any manner any information set forth in any of those

documents or obtained from examination or inspection ... of the

premises or property of any taxpayer. 2 .

36 M.R.S. § 191 (2010).

The Assessor contends that the Manuals and the 1975 memorandum

contam information that do or could identify specific taxpayers, or were

generated in response to particular taxpayers' scenarios. Citing the United States

Supreme Court's decision in Clil/rch of Scientology ofenlifornin v. Illter/wl Revenl/c

Service addressing the analogous federal statute, the Assessor argues that the

2Section 191 goes on to list numerous, detailed exceptions, none of which are

alleged to apply to this action.

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presence of protected information renders the entire document confidential and

ineligible for redaction. 484 US 9, 18 (1987). Mr. Washburn claims that he only

seeks the legal analyses, interpretations, and conclusions contained in the

documents. He contends that this information is not subject to section 191 and

can be scparated from the material that is so protected.

Section 191 was originally enacted in ] 978 in response to a federal law

prohibiting federal taxpayer return information from being shared with states

that did not adopt "provisions of law which protect the confidcntiality of" that

information. L.D. 2031, Statement of Fact (108th Legis. 1978); Tax Reform Act of

1976 § 1202(a)(1), Pub. L. No. 94-455, 90 Stat. 1520, 1685 (codified at 26 USc.

§ 6103(p)(8) (2006)). Maine's courts have had few opportunities to apply section

191, and both parties support their positions by citing decisions interpreting

section 191's federal analog. The court now turns to this body of law.

Title 26, section 6103 of the United States Codc makes tax returns and

"return information" confidential. 26 USc. § 6103(a) (2006). The term "rcturn

information" is defined as:

a taxpayer's identity, the nature, source, or amount of his income,

... or any other data, received by, recorded by, preparcd by,

furnished to, or collected by the Sccretary with respect to a return

or with respect to the determination of the existencc, or possible

existence, of liability (or the amount thereof) of any pcrson under

this title for any tax. .. . .

26 USc. § 6103(b)(2)(A) (2006). Tn contrast, written detcrminations, defined as

rulings, determination letters, tcchnical advice memoranda, or Chief Counsel

advicc, must be disclosed to the public. 26 USC. § 61l0(a)-(b)(l)(A) (2006).

"[T]he names, addresses, and other idcntifying details of the person to whom the

written determination pertains and of any other person" must be deleted from a

written determination before it is opened to the public. 26 USc. § 61 HJ(c)(l)

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(2006). Finally, J clJuse known JS the "Haskell Amendment" excludes from the

definition of "return information" any "data in J form which cannot be

associJted with, or otherwise identify, directly or indirectly, a particular

taxpayer." 26 U.s.c. § 6103(b)(2) (2006).

The Assessor places great emphasis on the United States Supreme Court's

interpretation ofsection 6103 in Clwrch of Scientology of California v. Tnternal

Revel/lie Service, 484 U.S. 9 (1987). In C!Lurch of Scientology, the petitioner filed a

FOIA request for "k]opies oEall information relating to or containing the names

of" various specific entities or persons "in the form of written record,

correspondence, document, memorandum, form," et cetera. 484 U.s. at 11

(quotations omitted). The IRS denied the request on the grounds that all of the

records were protected returns or contained return information. Td. According to

the IRS, "return information" might "as a practical matter ... include the report

of an audit examination, internal IRS correspondence concerning a taxpayer's

claim, or a notice of deficiency issued by the IRS ...." Td. at 14.

The petitioner argued that the Haskell Amendment in section 6103

removed "from the classificJtion of 'return information' all data which do not

identi fy a particular taxpayer ...." fd. at 14. It would follow that the IRS could

redact from the records all information identifying particular taxpayers and

make those records public. fd. The Court rejected these arguments.

The Haskell Amendment removes from the definition of "return

information" any'" data in n forln' that cannot be associated wi th or otherwi se

identify a particulJr taxpayer." Td. at 15 (quoting 26 U.s.c. § 6103(b)(2)). After

reviewing the Amendment's text and legislative history, the Court implicitly

agreed with the Court of Appeals' conclusion that "Congress contemplated 'not

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merely the deletion of an identifying name or symbol on a document that

contains return information, but agency r40mwlation of the return information

into a statistical study or some other composite product ....'" Id. at 13 (quoting

C/JIlrch of Scientology of Cal. v. IRS, 792 F.2d 153, 160 (D.C. Cir. 1986) (en bane)).

The Supreme Court thus held that "as with a return itself, removal of

identification from return information would not deprive it of protection under

§ 6103(b)," and the fRS had fIno duty under the FOIA to undertake such

redaction." !d. at 18.

The Assessor analogizes the documents at issue in this case to those being

sought in Chllrch (~r Scientology, and argues that the presence of information

protected under section 191 makes an entire document confidential and not

subject to redaction. This argument ignores the context of the Church of

Scientology decision. In that case, the records in question were implicitly

composed entirely of "return information." The broad definition of that term in

section 6103(b)(2) includes data that pertains to an individual taxpayer without

identi fying that taxpayer. Church of Scielltolop,y only establishes that "return

information" that does independently identify a specific taxpayer cannot be

deprived of its statutory protection by redacting "return information" that does

identify a specific taxpayer. See First Heights Bank, F.S.B. v. Llni/ed States, 46 Fed.

Cl. 312, 323 (Fed. C1. 2000) ("The Court in C/JIlrch of Scientology did not hold that

the mere presence of any return information within a document renders the

entire document non-discoverable.")

Mindful of the Chllrcll of Scielltology's lesson, Mr. Washburn argues that

the information he seeks is not protected by Maine's confidentiality statute Clt all.

The 1997 case of Ta.\" Allalysts v. [nterJ/al Revl'l/lll' Service illustrates his point. 117

6

r.3d 607 (D.C. Cir. 1997). Tax Analysts dealt with IRS documents known as Field

Service Advice Memoranda (FSAs). 117 F.2d at 608. FSAs provide IRS field

personnel legal guidance on request, "usually with reference to the situation of a

specific taxpayer. Each FSA includes a statement of issues, a conclusions section,

a statement of facts, and a legal analysis section." fd. at 609. Their purpose is to

ensure "that field personnel apply the law correctly and uniformly," and while

they arc not binding they flare held in hIgh regard and are generally followed."

fd. Prior to 1993, summaries of FSAs were regularly distributed in an internal

monthly publication. fd. at 609 n.l.

The petitioner in Tax Analysts filed a FOIA request seeking disclosure of a

number of FSAs. fd. C1t 608. Citing Church of Scientology, the IRS determined that

under section 6103(b) the FSAs were confidential documents in their entirety

because they contained "return information.":1 ld. at 611. Echoing the dispute in

the present case, the Tax Analysts court explained: "Whether [section 6103]

shields not simply part of each FSA but the entire document is the point of

dispute." fd. After examining the text of sections 6103 and 6110, the court

determined that the "[l/egal analyses contained in the FSAs [were] not 'return

information,'" even though the analyses had been prompted by inquiries

regarding speci fie taxpayers. fd. 616. Church o.f Scientology did not apply, and the

IRS was directed to disclose the FSAs after redacting the protected "return

information" contained therein.

It is true that the conclusion in Tax Analysts was driven in part by the

existence of section 6110. Landmark Legal FOl/lld. v. fRS, 267 F.3d 1132, 1138 (D.C.

:; The parties did not dispute that the FSAs in question did in fact relate to

individual taxpayers and contained flat least some 'return information.'" Tax

Analysts, 117 F.3d at 611.

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eir. 2001). Section 611 Dmandates the redaction and disclosure of "written

determinations" and was intended to "provide the exclusive means of public

access" to such documents, displacing FOrA. Fruehauff Corp. v. IRS, 566 F.2d 574,

577 (6th Cir. 1977). The Tax Analysts court found that there was no meaningful

distinction between the information to be disclosed pursuant to section 6110 and

the information being sought in the subject FSAs.~ Tax Analysts, 117 F.3d at 615­

16.

It is not true, however, to say that section 6110 directed the- result in that

case. Rather, it was the democratic principles behind section 6110 that governed

the court's analysis. The court reasoned:

[L]egal analyses and conclusions ... cannot be viewed as unique

to a particular taxpayer, or as the IRS puts it, "taxpayer specific."

If the Office of Chief Counsel renders an interpretation of a

certain section in the tax code, whether in an FSA or elsewhere,

that interpretation should apply to all other taxpayers who are, in

material respects, similarly situated. Treating like cases alike is,

we have said, "the most basic principle of jurisprudence." ...

[1']he principle fully applies to those who administer the federal

tax laws.... When Congress amended the tax code in 1976 to

require the IRS to disclose Private Letter Rulings and Technical

Advice Memoranda, ... it did so because "the secrecy

surrounding" these written determinations "has generated

suspicion that the tax laws are not being applied on an

evenhanded basis." ... Regulation, statutes, judicial rulings, and

their interpretation and applicafioll, thus are decidedly not tilxpayer­

specific in any meaningful respect.

Jd. at 614 (citations omitted) (emphasis added). In short, section 6110 does not

remove analysis, interpretation, and application of the tax laws from the

definition of "return information." Rather, Congress mandated public disclosure

of the agency's analysis, interpretation, and application of the tax laws because

~ The court noted that FSAs did not exist in their present form until 1991, fifteen

years after Congress enacted section 6110. Id. at 616. Congress's failure to

mention FSAs in section 6110 could not have evinced any intent to specifically

render them immune from disclosure.

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such information cannot remain confidential in an open society governed by the

even-handed rule of law.

Turning back to the Maine law controlling this case, section 191

unambiguously protects from disclosure all information provided by a taxpayer

through "any report, return or other" means, and all information obtained from

inspecting a taxpayer's property. 36 M.R.S. § 191(1) (2010). As with section 6103

in the federal statute, section 191's embrace is not limited to information that

identifies specific taxpayers. This is not to say that the scope of its protection is

limitless.

Legal analyses in which the Assessor or Maine Revenue Services

interprets Maine's tax laws unambiguously fall outside the realm of information

protected by section 191. Legal analysis is not provided by a taxpayer or

"obtained from examination or inspection" of the taxpayer's property. 36 M.R.5.

§ 191(1) (2010). ft is, rather, the Assessor's or Maine Revenue Services'

explanation of how the law is to be applied, generated ill response to information

obtained from a taxpayer. Where analysis has been formulated to interpret and

apply the law to a hypothetical taxpayer or a class of tilxpayers, no confidentiill

taxpayer information is implicated.' See First Heigllts Bnnk, F.S.B., 46 Fed. Cl. at

323 (section 6103 does not prevent disclosure of information unique to specific to

types of taxpayers because nearly all rRS documents are specific to "groups of

taxpilyer").

Regarding the documents being sought in this Cilse, the 1975

memorandum appears to consist entirely of the sort of non-specific legal anal ysis

5This is consistent with the Superior Court's analysis in Ptnk v. Stnte, 2007 Me.

Super. LEXrS 263 (Nov. 27, 2007) (Mills, J.). At issue in that case were audi t letters

composed entirel y of information obtained from the individual tilxpayers being

audited.

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described in the preceding paragraph. The memorandum's contents discuss how

the Sales ,md Use Tax Division would apply Maine's tax laws to different forms

and components of breathing therapy devices in 1975. While it was clearly

written in response to a particular taxpayer's inquiry, nothing in the analysis

separates that taxpayer from the general class of taxpayers who deal with

breathing therapy devices. The memorandum is formulated as a legal analysis of

a hypothetical situation involving a hypothetical taxpayer, and does not contain

any information protected by section 191.

The Blue Book and Black Book arc largely composed of similarly

formulated, hypothetical analyses addressing whole classes of taxpayers. Unlike

the 1975 memorandum, however, these Reference Manuals clearly do contain

some taxpayer-specific information. Some of the excerpted analyses are not

formulated to address classes of taxpayers, and instead contain detailed

discussions of named, particular taxpayers' factual circumstances. The issue is

whether the Manuals can be made suitable for public disclosure by redacting this

protected information. The court believes that they can.

"Maine courts can require redaction of records in connection with FOAA

requests.... The degree of' cutting and pasting' required to redact documents

cannot justify bypassing redaction unless it is demonstrated to be truly

impractical or onerous." Blethen Me. Newspapers, [I1C., 2005 ME 56, <Jr9[ 38-39, 871

A.2d at 535 (citing Springfield Tennillnly Ry. Co. v. Dep't ofTmnsp., 2000 ME 126,

<Jr 11 n.4, 754 A.2d 353, 357 n.4) (citation omitted). The court has already disposed

of the argument that the presence of some protected taxpayer information

renders an entire document exempt from disclosure following Church of

SciClitology. The Assessor's remaining arguments on this point, made in reference

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to Blethen and Anastos v. Town of Brunswick, 2011 ME 41, are unpersuasive. Those

cases deal with who]]y different exceptions to FOAA and their respective

analyses are not readily applicable to section 191. See Anastos, 2011 ME 41, <[911­

3, _ A.3d _ (applying 5 M.R.S. § 13119-A, governing proprietary information

submitted to departments or municipalities, to request for a business feasibility

study submitted to Town); Blethell Me. Newspapers, [Ilc., 2005 ME 56, 9Ierr 3-4; 871

A.2d at 525- 526 (interpreting 16 M.R.S. § 614, the Criminal History Record

Information Act, as applied to request for records "pertaining to Attorney

General's investigation of alleged sexual abuse by" priests).

After reviewing the Reference Manuals ill call1em, the court determines

that redacting the taxpayer-specific inform'-1tion contained therein would not be

impractical or onerous. The majority of the excerpted analyses in the Reference

Manuals address groups or types of taxpayers and do not contain any

information protected by section 191. Excerpts that speak to particular, identified

taxpayers and taxpayer situations are relatively few and far between., Tn these

excerpts, the information received from those particul'-1r taxpayers can be

separated from the generally applicable analyses and redacted.

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The entry is:

The court orders the Assessor to provide Mr. Washburn with the 1975

memorandum pursuant to his FOAA request. The Assessor will provide Mr.

Washburn with the so-called Blue Book and Black Book after redacting any

information obtained from a taxpayer through a report, return, or other means,

or from actual examination or inspection of a taxpayer's property. Legal analyses

addressing groups of taxpayers, hypothetical situations, or hypothetical

taxpayers, are not protected information obtained

a

DATE:-¥-Zlf, toll

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prod:1.2b1/prd11 MAINE JUDICIAL INFORMATION SYSTEM 05/02/2011 gmerritt

CUMBERLAND COUNTY SUPERIOR COURT mjxxi013

PAGE A - ATTORNEY BY CASE VIEW

RICHARD WASHBURN VS STATE TAX ASSESSOR

UTN:AOCSsr -2010-0108926 CASE #:PORSC-CV-2010-00521

01 0000007544 BLOCK, JONATHAN

ONE MONUMENT SQUARE PORTLAND ME 04101

F RICHARD WASHBURN PL RTND 10/14/2010

02 0000009150 BOAK, SCOTT W

111 SEWALL STREET 6 STATE HOUSE STATION AUGUSTA ME 04333-0006

F STATE TAX ASSESSOR DEF RTND 11/22/2010

03 0000009331 KULL, ANDREW J

86 MAIN STREET AUBURN ME 04210

T STATE TAX ASSESSOR DEF RTND 11/23/2010

prod: 1. 2b1/prd11 MAINE JUDICIAL INFORMATION SYSTEM 05102/2011 gmerritt

CUMBERLAND COUNTY SUPERIOR COURT mjxxi013

PAGE A - ATTORNEY BY CASE VIEW

RICHARD WASHBURN VS STATE TAX ASSESSOR

UTN:AOCSsr -2010-0108926 CASE #:PORSC-CV-2010-00521

04 0000009860 . ;:,C.;:;.;R; ; ;E; .;AM;;.; ; ; E.;:;.;R;.L.r. . . .: . ;R. ;:. O.=.B.=.E.;:;.;R. ;:. T _

ONE MONUMENT SQUARE PORTLAND ME 04101

F RICHARD WASHBURN PL RTND 10/14/2010