IRS Failure to Process FOIA Request Generates Attorney Fees Award

IRS Failure to Process FOIA Request Generates Attorney Fees Award

  • February 28, 2024

Leslie Book, Tax Notes

The catastrophic failure of FTX , the infamous and bankrupt cryptocurrency exchange and hedge fund, has generated allegations of lax governmental oversight and too-cozy relations between it and regulators and legislators. While the IRS has not been the main target of ire, Protect the Public’s Trust v. IRS, No. 23-cv-340 (D.D.C. 2024), a Freedom of Information Act case, shows that there is interest in former IRS executives’ relationship with FTX.

Protect the Public’s Trust v. IRS raises an interesting and novel issue: Can a party get attorney fees even if a FOIA request turns up no responsive records?

At first blush, it seems improbable, but this case paints a less than flattering view of the IRS, which essentially failed to even look for any FTX/IRS documents until it was sued in federal court. While the search came up empty, Protect the People’s Trust (PPT) filed a motion seeking attorney fees on the basis that the IRS’s eventual decision to search for documents amounted to it substantially prevailing in the suit.

In December of 2022, PPT sent a FOIA request for documents relating to alleged meetings between then-IRS Commissioner Charles Rettig and high-level executives at the FTX. The IRS declined to search for any such documents and quickly sent a letter stating that the “request is overly broad in nature and we are unable to process [it] as it does not meet the requirements of the FOIA or the applicable agency regulations.” The letter said that it would close the request unless PPT revised it to “not be unreasonably burdensome on the agency.”

PPT responded within a few weeks, stating that the IRS letter failed to describe why its request was overly broad and otherwise failed to meet FOIA’s legal requirements.

The IRS quickly responded, but basically repeated its earlier position without much elaboration, stating that the request was deficient because “‘communications with a limited set of named FTX executives’ . . . is not a subject matter and instead defines the types of documents” sought rather than a “subject matter . . . regarding these communications.”

PPT then quickly replied, stating that the IRS was intentionally withholding records in IRS custody, explaining why the request was not burdensome, complex, or confusing, and then describing why it was in the public interest to expose “the level of influence between [Commissioner] Rettig and this disgraced company [FTX] and its founder.”

The IRS responded within weeks, but basically doubled down, stating that it was issuing its final response. It attached its previous denial to process the request, stating that the request was not perfected and did not comply with the appropriate FOIA regulations.

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