MICHAEL C. WORSHAM, Plaintiff,
U.S. DEPARTMENT OF THE TREASURY, Defendant.
ELLEN LIPTON HOLLANDER UNITED STATES DISTRICT JUDGE
Michael C. Worsham, plaintiff,  filed suit under the Freedom of Information Act (“FOIA”), 5 U.S.C. § 552, the Paperwork Reduction Act (“PRA”), 44 U.S.C. §§ 3501 et seq., and the Declaratory Judgment Act, 28 U.S.C. § 2201, seeking to compel the United States Department of the Treasury (the “Treasury”), defendant, and the Internal Revenue Service (“IRS”), which is a bureau of the Treasury, to disclose and release certain agency records, and seeking declaratory and other relief. In his Amended Complaint (ECF 14), which is the operative pleading, plaintiff asserts four counts.
Count 1 arises under the FOIA, and seeks the release of certain information regarding a document published on the IRS’s website entitled “The Truth About Frivolous Tax Arguments.” Count 2, which also arises in part under the FOIA, seeks the release of information regarding backup withholding that the IRS directed Worsham’s financial institution to impose against Worsham beginning in March 2009, and asserts that the backup withholding against Worsham is unlawful. Count 3 asserts that three forms published by the IRS (Form 1040, Form W-9, and Form 4564) do not comply with the PRA, and seeks, inter alia, a declaration that Worsham cannot be penalized for failing to file those forms unless the IRS brings them into compliance with the PRA. Count 4 seeks a declaration that the federal income tax is unconstitutional as administered because it is a non-apportioned direct tax.
After suit was filed, Worsham filed a “Petition[ ] to Quash Two IRS Summons” (“Petition to Quash”) (ECF 28), which does not pertain directly to any of the causes of action he asserted in his complaint. Rather, the Petition to Quash arises under 26 U.S.C. § 7609(b)(2)(A), and seeks to quash administrative summonses issued by the IRS to two banking institutions with which Worsham holds accounts, seeking examination, pursuant to 26 U.S.C. § 7602(a)(2), of banking records concerning Worsham for certain specified time periods.
Six motions are currently pending. Worsham has filed a “Motion for Partial Summary Judgment for Count 3 Under the Paperwork Reduction Act”) (“PRA Motion”) (ECF 16) and a “Motion to Produce Documents Responsive to FOIA Claims” (“FOIA Production Motion”) (ECF 41). The Treasury has filed a partial motion to dismiss, seeking dismissal of Counts 3 and 4 for lack of subject matter jurisdiction and dismissal of Counts 1 and 2, in part, for failure to state a claim upon which relief can be granted (“Motion to Dismiss”) (ECF 19 & 20). Subsequently, the Treasury filed a partial motion for summary judgment as to Counts 1 and 2 (“FOIA MSJ”) (ECF 42 & 43), and Worsham filed a cross-motion for summary judgment as to those counts (“FOIA Cross-MSJ”) (ECF 46). Finally, the Treasury has filed a motion to deny the Petition to Quash and for summary enforcement of the summonses to Worsham’s financial institutions (“Quash Motion”) (ECF 31 & 32).
The motions have been fully briefed,  and no hearing is necessary to resolve them. See Local Rule 105.6. For the reasons that follow, I will grant the Treasury’s Motion to Dismiss as to Counts 3 and 4; deny, as moot, Worsham’s PRA Motion; deny, as moot, Worsham’s FOIA Production Motion; grant in part and deny in part the Petition to Quash and the Quash Motion; and grant the FOIA MSJ in part and deny the FOIA Cross-MSJ in part, and otherwise hold those motions sub curia. In particular, I will grant the FOIA MSJ and deny the FOIA Cross-MSJ with respect to the FOIA claims in Count 2, and I will dismiss the non-FOIA claims in Count 2 for lack of subject matter jurisdiction; with respect to Count 1, I will hold the FOIA MSJ and FOIA Cross-MSJ sub curia, pending further submissions.
I. Subject Matter Jurisdiction: Counts 3 and 4
As noted, the Treasury challenges the Court’s subject matter jurisdiction regarding Count 3 (the PRA claim) and Count 4 (the challenge to the constitutionality of the federal income tax). Because “a court that lacks jurisdiction has no power to adjudicate and dispose of a claim on the merits, ” S. Walk at Broadlands Homeowner’s Ass’n, Inc. v. OpenBand at Broadlands, LLC, 713 F.3d 175, 187 (4th Cir. 2013), the jurisdictional issue is necessarily antecedent to any consideration of the merits. However, to put the jurisdictional issues in perspective, I begin by providing some detail regarding the nature of the two counts at issue, starting with Count 3.
A. Paperwork Reduction Act
Enacted in 1980, the “PRA was passed in an effort to reduce the burden that administrative agencies place upon the public by requesting information.” United States v. Gross, 626 F.3d 289, 295 (6th Cir. 2010) (citing Dole v. United Steelworkers of Am., 494 U.S. 26, 32 (1990)). To that end, the PRA requires a federal agency that intends to conduct or “sponsor” a “collection of information” to conduct an internal evaluation of the need for the collection of information at issue and the burdens it will impose, see 44 U.S.C. §§ 3506(c), 3507(a)(1)(A); to solicit public comment on the proposed collection, id. § 3507(a)(1)(B); and to submit its proposed form for collection of information to the Office of Management and Budget (“OMB”), which must review the proposal and, if it approves it, provide a “control number” for the collection, which must be “displayed upon the collection of information, ” i.e., on the form or other document that is used to collect the information. Id. § 3507(a)(2)-(3).
The PRA provides a protection for the public against agency collection of information that does not comply with the statute. It is codified in § 3512:
(a) Notwithstanding any other provision of law, no person shall be subject to any penalty for failing to comply with a collection of information that is subject to this subchapter if—
(1) the collection of information does not display a valid control number assigned by the Director [of OMB] in accordance with this subchapter; or
(2) the agency fails to inform the person who is to respond to the collection of information that such person is not required to respond to the collection of information unless it displays a valid control number.
(b) The protection provided by this section may be raised in the form of a complete defense, bar, or otherwise at any time during the agency administrative process or judicial action applicable thereto.
Worsham contends that IRS Forms 1040, W-9, and 4564 constitute agency “collection[s] of information” under the PRA, but that the IRS has not submitted these forms to OMB for periodic approval as required by the PRA, and either has not obtained OMB control numbers for the forms or has not affixed currently valid control numbers to them. Form 1040 is the “United States Individual Income Tax Return, ” readily familiar to virtually every person of working age in the United States. Form W-9 is the “Request for Taxpayer Identification Number and Certification, ” another ubiquitous IRS form, which is used by payors who must report payments to the IRS in order to acquire from their payees information regarding each payee’s identity and TIN. Form 4564 is likely less familiar to the average taxpayer. It is the form for an “Information Document Request, ” which may be issued by the IRS to a taxpayer to request the production of documents specified by the requesting IRS agent.
In his amended complaint, Worsham claims that, within a week after service of his original complaint on the government, an IRS agent sent him an IRS Form 4564 seeking production of “25 different categories of documents.” Amended Complaint ¶ 22. Worsham alleges that he should not be required to respond to the Form 4654 request, id. ¶ 35, nor should he be required to complete and provide a Form 1040 unless and until the forms are brought into compliance with the PRA. With respect to Form W-9, Worsham alleges that, “[a]s an attorney handling settlements, ” he is often requested (or his clients are requested) to “complete a Form W-9 as a condition of completing and paying a settlement.” Id. ¶ 57. He claims that neither he nor his clients should be required to complete Form W-9s until the form is brought into compliance with the PRA.
As relief with respect to Count 3, Worsham seeks an order making four declaratory rulings, as follows, id. at 8-9:
3A. … declaring the Defendant’s actions to be a violation of the PRA;
3B. … declaring that Forms 4564, 1040 and W-9 do not comply with the PRA;
3C. … declaring that for Forms 4564, 1040 and W-9 the IRS must apply every 3 years for a valid OMB Control number or for an extension of a current number;
3D. … declaring that Worsham should not have to respond to, and can not be penalized for failing to respond to or use, Forms 4564, 1040 and/or W-9 unless and until the Forms and IRS fully complies with all of the PRA, including but not limited to, obtaining and maintaining a currently valid OMB Control Number.
B. Constitutionality of the Federal Income Tax
Count 4 asserts a constitutional challenge to the federal income tax. The United States Constitution, Article I, § 8 grants Congress the “Power To lay and collect Taxes, Duties, Imposts and Excises, ” and the “Uniformity Clause” of that section provides that “all Duties, Imposts and Excises shall be uniform throughout the United States.” “Imposts, ” “Duties, ” and “Excises, ” in the sense discussed in the Uniformity Clause, are all varieties of so-called “indirect” taxes, in contrast to “direct taxes, ” which are discussed in Sections 2 and 3 of Article I. See, e.g., United States v. West Virginia, 339 F.3d 212, 215 (4th Cir. 2003) (“‘The Uniformity Clause [governing duties, imposts, and excises] conditions Congress’ power to impose indirect taxes.’”) (Citations omitted) (alteration in original).
Article I, § 2, Cl. 3 of the Constitution provides that “direct Taxes shall be apportioned among the several States” according to population as determined by the decennial census. And, Article I, § 9, Cl. 4 states: “No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census . . . .” Taken together, these provisions require “that any ‘direct Tax’ must be apportioned so that each State pays in proportion to its population.” Nat’l Fed’n of Indep. Bus. v. Sebelius, ____ U.S.___, 132 S.Ct. 2566, 2598 (2012) (“NFIB”) (opinion of Roberts, C.J., speaking for the Court in Section III-C of his opinion).
Thus, as the Supreme Court explained in the watershed case of Pollock v. Farmers’ Loan & Trust Co., 158 U.S. 601, 617-18 (1895), “the constitution divided federal taxation into two great classes, —the class of direct taxes, and the class of duties, imposts, and excises, —and prescribed two rules which qualified the grant of power as to each class.” The Court added, id. at 618: “[T]o lay direct taxes without apportionment was forbidden. The power to lay duties, imposts, and excises was subject to the qualification that the imposition must be uniform throughout the United States.” In other words, Congress “must impose direct taxes by the rule of apportionment, and indirect taxes by the rule of uniformity.” The License Tax Cases, 72 U.S. (5 Wall.) 462, 471 (1866).
What qualifies as a “direct tax” has been a subject of debate. As Chief Justice Roberts recently observed in NFIB, a “narrow view of what a direct tax might be persisted for a century” after the Constitution was ratified. NFIB, 132 S.Ct. at 2598. Under that narrow understanding, “only two forms of taxation were direct: capitations, ” i.e., per-person taxes, “also known as a ‘head tax’ or a ‘poll tax’”; and “land taxes, ” i.e., “‘taxes on real estate.’” Id. (citations omitted). However, in its 1895 decision in Pollock, the Court “expanded [its] interpretation” of direct taxes “to include taxes on personal property and income from personal property, in the course of striking down aspects of the federal income tax.” Id.
The Supreme Court held in Pollock that a tax on personal property and on rent or other income derived from real or personal property, as imposed by the Income Tax Act of 1894, was a direct tax that was non-apportioned and thus violated the constitutional requirement that “direct taxes shall be apportioned among the several states according to numbers, and negatively that no direct tax shall be laid unless in proportion to the enumeration.” Pollock, 158 U.S. at 621. The Pollock Court reasoned that it would be an “evasion” of the prohibition on non-apportioned direct taxes to hold that “a general unapportioned tax, imposed upon all property owners as a body for or in respect of their property, is not direct, in the meaning of the constitution, because confined to the income therefrom.” Id. at 627. The Court found it “impossible to hold” that the apportionment requirement could “be refined away by forced distinctions between that which gives value to property and the property itself.” Id. at 628. Therefore, the Pollock Court held that “taxes on real estate being indisputably direct taxes, taxes on the rents or income of real estate are equally direct taxes, ” and “that taxes on personal property, or on the income of personal property, are likewise direct taxes.” Id. at 637.
The Sixteenth Amendment, ratified in 1913, overturned Pollock. See NFIB, 132 S.Ct. at 2598 (stating that Pollock’s “result was overturned by the Sixteenth Amendment”). The Sixteenth Amendment provides, in total: “The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration.” The precise import of Worsham’s claim in Count 4 of his complaint is not easy to discern, but its linchpin seems to be that, although the Sixteenth Amendment authorizes non-apportioned “taxes on incomes, from whatever source derived, ” it does not explicitly authorize a non-apportioned direct tax, because the phrase “direct tax” is not contained in the amendment. Thus, Worsham argues that the effect of the Sixteenth Amendment was to abrogate Pollock’s mode of analysis, i.e., the reasoning that, because a property tax was a direct tax, a tax on income derived from property was also a direct tax. As Worsham puts it, the Sixteenth Amendment negated Pollock’s “logic . . . that the source of the income determines whether it is a direct or indirect tax.” Dismiss Opp. at 14. In support of this claim, he cites the following passage from Stanton v. Baltic Mining Co., 240 U.S. 103, 112-13 (1916) (emphasis added):
[T]he provisions of the 16th Amendment conferred no new power of taxation, but simply prohibited the previous complete and plenary power of income taxation possessed by Congress from the beginning from being taken out of the category of indirect taxation to which it inherently belonged, and being placed in the category of direct taxation subject to apportionment by a consideration of the sources from which the income was derived, —that is, by testing the tax not by what it was, a tax on income, but by a mistaken theory deduced from the origin or source of the income taxed.
Worsham seems to reason that the Sixteenth Amendment provides that the source from which income is derived is not determinative of whether a tax on that income is direct or indirect. But, he claims that the Sixteenth Amendment did not create for “income taxes” a new exception from the requirement that all direct taxes must be apportioned (or, for that matter, from the requirement that all indirect taxes must be uniform). Thus, if a so-called “income tax” is “administered” as a non-apportioned direct tax, Dismiss Opp. at 17, which he claims a tax “on a person’s labor” constitutes, id. at 14, such a tax is unconstitutional in his view, notwithstanding the Sixteenth Amendment. Moreover, Worsham claims that the federal circuit courts of appeal are split as to whether, in fact, the federal income tax as now administered is direct or indirect. See Id . at 15-17 (citing and discussing cases).
In his complaint, Worsham asserts that the Treasury and the IRS “administer the federal income tax as a direct tax that is neither apportioned nor uniform.” Amended Complaint ¶ 62.
He also alleges: “There is legal uncertainty whether the federal income tax as administered by the IRS in the Fourth Circuit, including Maryland, can be administered as a non-apportioned direct tax, or alternatively, as an indirect tax without uniformity.” Id. ¶ 65. Thus, he seeks two declaratory rulings from the Court, id. at 9:
4A. … an order declaring the federal income tax as administered by the IRS is a direct non-apportioned income tax.
4B. … an order declaring that a direct non-apportioned income tax is not consistent with the U.S. Supreme Court and Fourth Circuit holdings declaring the type of income tax that may be constitutionally collected.
The Treasury asserts that this Court is barred from reaching the merits of Worsham’s claims in Count 3 and Count ...