WILLIAM MARK SCOTT v. NJ HEALTH CARE FACILITIES FINANCING AUTHORITY

NOT FOR PUBLICATION WITHOUT THE
                               APPROVAL OF THE APPELLATE DIVISION
        This opinion shall not "constitute precedent or be binding upon any court ." Although it is posted on the
     internet, this opinion is binding only on the parties in the case and its use in other cases is limited. R. 1:36-3.




                                                        SUPERIOR COURT OF NEW JERSEY
                                                        APPELLATE DIVISION
                                                        DOCKET NO. A-4242-18T2

WILLIAM MARK SCOTT,

          Appellant,

v.

NJ HEALTH CARE FACILITIES
FINANCING AUTHORITY,

          Respondent,

and

DEBORAH HEART AND
LUNG CENTER,

     Intervenor-Respondent.
______________________________

                   Argued September 29, 2020 – Decided January 13, 2021

                   Before Judges Gooden Brown and DeAlmeida.

                   On appeal from the New Jersey Government Records
                   Council, GRC Complaint No. 2015-256.

                   William Mark Scott, appellant, argued the cause pro se.
            Alison Keating, Deputy Attorney General argued the
            cause for respondent New Jersey Health Care Facilities
            Financing Authority (Gurbir S. Grewal, Attorney
            General, attorney; Donna Arons, Assistant Attorney
            General, of counsel; Alison Keating, Deputy Attorney
            General, on the brief).

            Robert A. Mintz argued the cause for intervenor-
            respondent Deborah Heart and Lung Center (McCarter
            & English, LLP, attorneys; Robert A. Mintz of counsel
            and on the brief; James A. Kellar, on the brief).

            Gurbir S. Grewal, Attorney General, attorney for
            respondent Government Records Council (Debra A.
            Allen, Deputy Attorney General, on the statement in
            lieu of brief).

PER CURIAM

      Appellant William Mark Scott appeals from the April 30, 2019 final

agency decision of respondent Government Records Council (GRC) denying his

request under the Open Public Records Act (OPRA),  N.J.S.A. 47:1A-1 to -13,

for the production of federal tax return information of respondent Deborah Heart

and Lung Center (Deborah) in the possession of respondent New Jersey Health

Care Facilities Financing Authority (HCFFA). We affirm.

                                       I.

      The following facts are derived from the record. In 1993, HCFFA, a

public authority, issued tax-exempt conduit bonds (the Bonds) for the benefit of

Deborah, a non-profit hospital. The proceeds of the Bonds were loaned to

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Deborah, which used the funds to refinance an earlier issue of bonds and to pay

for additions and renovations to its hospital facilities. The Bonds were payable

solely from payments made by Deborah to HCFFA under a loan agreement.

Deborah subsequently initiated a total return swap transaction to reduce its

interest obligation on the Bonds. HCFFA was not a party to that secondary

market transaction.

      In 2010, the Internal Revenue Service (IRS) initiated an examination of

the total return swap transaction and the impact, if any, it had on the federal tax

treatment of interest on the Bonds. During the examination, HCFFA provided

the IRS with copies of documents relating to the issuance of the Bonds. In

addition, HCFFA became aware of the total return swap transaction, and

solicited documents from Deborah related to that transaction, which it forwarded

to the IRS. Because HCFFA was not a party to the total return swap transaction,

all of the documents it provided to the IRS concerning the transaction came from

Deborah. The IRS, Deborah, and HCFFA eventually executed a settlement

agreement that brought the examination to a conclusion.

      On July 30, 2015, Scott filed an OPRA request with the custodian of

records for HCFFA for "[a]ll correspondence (including information document

requests) and agreements between [HCFFA] and the [IRS] concerning an IRS


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                                        3
examination of, and negotiation or settlement of the examination dispute relating

to" the Bonds.

      On August 4, 2015, the HCFFA custodian of records denied Scott's

request pursuant to  N.J.S.A. 47:1A-9(a), which prohibits the disclosure of

documents that are confidential under any other statute.          The custodian

determined that the requested information contained Deborah's federal tax return

information protected from disclosure under 26 U.S.C.A. § 6103 (Section 6103).

      On August 5, 2015, Scott filed a denial of access complaint with the GRC.

He argued that the HCFFA custodian provided an insufficient explanation for

the denial of his public records request. In addition, he argued that Section 6103

is not applicable to the records he requested because an IRS publication states

that HCFFA is treated as the taxpayer for purposes of the examination of the

Bonds. Thus, Scott argued, all correspondence between the IRS and HCFFA

related to the examination, including documents obtained from Deborah, are the

tax records of HCFFA, not of Deborah. Scott argued that Section 6103 does not

prohibit HCFFA from disclosing its own tax records.

      In addition, Scott argued that even if the requested records contain

Deborah's federal tax return information, Section 6103 does not prohibit

production of those records by HCFFA. According to Scott, Section 6103


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prohibits disclosure of tax return information by three categories of persons,

none of which is applicable to HCFFA and its employees.

      Before the GRC, the HCFFA custodian compiled a list of records

responsive to Scott's request and the basis for denying their production . Those

records include legal documents related to the issuance of the Bonds, rebate

reports, detailed responses to IRS inquiries, a certificate of non-arbitrage and

other tax matters, lease agreements, the total return swap letter agreement and

tender offer, redemption notices, IRS extension letters, and various

confirmations, certificates, and letters relating to the total return swap

transaction. HCFFA argued that despite it being considered the taxpayer by the

IRS during the examination, the records Scott seeks are the de facto tax records

of Deborah due to the conduit nature of the Bonds and role the authority played

in the examination. In addition, HCFFA argued that the definition of tax return

information in Section 6103 is broad and the prohibition on disclosure applies

to it and its employees. Deborah moved to intervene before the GRC, seeking

to make arguments that substantively parallel those of HCFFA.

      On April 30, 2019, the GRC issued its final agency decision upholding

HCFFA's denial of Scott's records request. As an initial matter, the GRC granted

Deborah's motion to intervene. On Scott's substantive claims, the GRC found


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                                       5
that the HCFFA custodian provided a sufficient response to his request by citing

the statutory basis for the denial of access. In addition, the GRC concluded that

the HCFFA custodian did not unlawfully deny Scott access to the records he

requested because those records contained Deborah's tax return information

within the meaning of Section 6103, which applied to HCFFA and its

employees. Thus, the GRC concluded, production of those records was properly

denied under  N.J.S.A. 47:1A-9(a).

      This appeal follows. Scott raises the following arguments.

            POINT I

            A DE NOVO STANDARD OF REVIEW APPLIES.

            POINT II

            THE GOVERNMENT RECORD[S] COUN[CIL'S]
            DETERMINATION IS PROFOUNDLY WRONG.

            POINT III

            COPIES OF RECORDS SENT TO THE I.R.S. ARE
            NOT RETURNS OR RETURN INFORMATION.

            POINT IV

            THE CUSTODIAN MAY DISCLOSE RECORDS THE
            AUTHORITY RECEIVED FROM THE I.R.S.




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            POINT V

            DISCLOSURE IS NOT SUBJECT TO A QUALIFIED
            PRIVILEGE.

                                        II.

      Our review of an administrative agency's final decision is limited.

Kadonsky v. Lee,  452 N.J. Super. 198, 201-02 (App. Div. 2017) (citing In re

Stallworth,  208 N.J. 182, 194 (2011)).        "We will not reverse an agency's

judgment unless we find the decision to be 'arbitrary, capricious, or

unreasonable, or [] not supported by substantial credible evidence in the record

as a whole.'" Id. at 202 (quoting Stallworth,  208 N.J. at 194). However,

"determinations about the applicability of OPRA and its exemptions are legal

conclusions" subject to de novo review. In re N.J. Firemen's Ass'n,  230 N.J.
 258, 273-74 (2017) (citing O'Shea v. Twp. of W. Milford,  410 N.J. Super. 371,

379 (App. Div. 2009); Asbury Park Press v. Cty. of Monmouth,  406 N.J. Super.
 1, 6 (App. Div. 2009), aff'd o.b.,  201 N.J. 5 (2010)). "As always, our primary

'objective [in] statutory interpretation is to discern and effectuate the inten t of

the Legislature.'" Id. at 274 (quoting Murray v. Plainfield Rescue Squad,  210 N.J. 581, 592 (2012)).

      "The purpose of OPRA is to maximize public knowledge about public

affairs in order to ensure an informed citizenry and to minimize the evils

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inherent in a secluded process." O'Shea,  410 N.J. Super. at 379 (quoting Times

of Trenton Publ'g Corp. v. Lafayette Yard Community Dev. Corp.,  183 N.J. 519,

535 (2005) (internal quotations omitted)). Accordingly, the statute provides that

"government records shall be readily accessible for inspection, copying, or

examination . . . with certain exceptions, for the protection of the public interest

. . . ."  N.J.S.A. 47:1A-1.

      The present appeal turns on the parameters of one of the statutory

exceptions. A "[g]overnment record" includes

             any paper . . . document . . . data processed or image
             processed document, information stored or maintained
             electronically . . . or any copy thereof, that has been
             made, maintained or kept on file in the course of his or
             its official business by any officer . . . agency or
             authority of the State . . . or that has been received in
             the course of his or its official business by such officer
             . . . agency, or authority . . . .

             [N.J.S.A. 47:1A-1.1.]

However,  N.J.S.A. 47:1A-9(a) provides that OPRA "shall not abrogate any

exemption of a public record or government record from public access

heretofore made pursuant to . . . any federal law . . . ."

      Section 6103, a federal law, provides in relevant part that

             (a) . . . Returns and return information shall be
             confidential, and except as authorized by this title –


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            ....

            (2) no officer or employee of any State, any local law
            enforcement agency receiving information under
            section (i)(1)(C) or (7)(A), any local child support
            enforcement agency, or any local agency administering
            a program listed in subsection (l)(7)(D) who had or had
            access to returns or return information under this
            section or section 6104 (c) . . .
            ....

            shall disclose any return or return information obtained
            by him in any manner in connection with his service as
            such an officer or an employee or otherwise under this
            provision of this section.

            [26 U.S.C.A. § 6103(a).]

"Return information" is defined broadly as

            (A) a 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, 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 . . . .

            ....



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            (D) any agreement under section 7121, or any similar
            agreement, and any background information related to
            such an agreement or request for such an agreement.

            [26 U.S.C.A. § 6103(b)(2).]

Section 7121 is titled "Closing agreements" which are defined as "agreement[s]

in writing with any person relating to the liability of such person . . . in respect

of any internal revenue tax for any taxable period." 26 U.S.C.A. § 7121(a).

      Scott disputes that the information he requested falls within the broad

definition of return information under Section 6103, an argument he did not raise

before the GRC.      In addition, he reiterates his argument that: (1) if the

information he requests is return information, it is the return information of

HCFFA, not Deborah; and (2) alternatively, if information he requests is the

return information of Deborah, Section 6103 does not preclude HCFFA from

disclosing that information.

      Having carefully reviewed the record in light of the unequivocal language

of Section 6103, we conclude that Scott's arguments are without merit. We

briefly address his arguments in turn.

      "'[R]eturn information' is defined broadly by the statute to include almost

any information compiled by the IRS in connection with its determination of a

taxpayer's liability." Lehrfeld v. Richardson,  954 F. Supp. 9, 13 (D.D.C. 1996).


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For example, the "broad definition . . . is sufficient to include documents

produced during an initial IRS investigation of an organization seeking tax-

exempt status." Ibid. See also Church of Scientology of Cal. v. IRS,  484 U.S. 9, 14 (1987) ("[A]s a practical matter, 'return information' might include the

report of an audit examination, internal IRS correspondence concerning a

taxpayer's claim, or a notice of deficiency by the IRS . . . ."); Belisle v. Comm'r,

 462 F. Supp. 460, 462 (W.D. Okla. 1978) (holding that IRS investigation results

of a tax-exempt corporation were confidential under Section 6103); Tax

Analysts v. IRS,  53 F. Supp. 2d 449 (D.D.C. 1999) (holding that closing

agreements constitute "return information" not subject to disclosure).

      The information Scott seeks was exchanged between HCFFA and the IRS

during an examination of whether the total return swap transaction had an impact

on the tax-exempt status of interest paid pursuant to the Bonds. This information

is "data, received by, recorded by, prepared by, furnished to, or collected by the

Secretary with respect to . . . the determination of the existence, or possible

existence, of liability . . . of any person . . . for any tax," 26 U.S.C.A. § 6103,

and falls within the broad scope of the statute. The same is true for the closing

agreement that the IRS, HCFFA, and Deborah ultimately executed to conclude

the examination, which is protected from disclosure by Section 6103, as is the


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"background information related to such an agreement or request for such an

agreement . . . ." 26 U.S.C.A. § 6103(b)(2)(D). Scott's cabined interpretation

of Section 6103 does not comport with its unequivocal terms or the evident

intention of Congress to provide broad protection to taxpayers who produce

information to the IRS to facilitate that agency's determination of tax liabilities

and to the background information those taxpayers retain after an IRS

examination that resulted in a closing agreement.1

      Nor do we agree with Scott's argument that because HCFFA is considered

the taxpayer by the IRS during its examination of the tax-exempt status of the

Bonds all of the information HCFFA received from Deborah and forwarded to

the IRS is transformed into HCFFA's return information. Because HCFFA was

the entity that issued the Bonds the IRS considered it responsible for obtaining

the necessary information from Deborah, which was a party to the total return

swap transaction, to determine whether the tax-exempt status of the Bonds had


1
   We acknowledge Deborah's argument that we should not consider Scott's
contention that the information he requested is not return information because
he failed to raise that argument before the GRC. See N.J. Div. of Youth &
Family Servs. v. M.C. III,  201 N.J. 328, 339 (2010) ("We have often stated that
issues not raised below will ordinarily not be considered on appeal unless they
are jurisdictional in nature or substantially implicate the public interest.").
Given that the Legislature has recognized the public interest in access to
government records, we address Scott's argument to provide a complete analysis
of whether the information he requests is exempt from disclosure.
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been altered by that transaction. Scott cites no legal authority, and we can find

none, holding that HCFFA's role as a conduit to the IRS for Deborah's return

information converted Deborah's return information into the return information

of HCFFA. There is no evident argument that such an interpretation of Section

6103 would advance the public policy of encouraging the production of

documents containing tax information by entities whose financial transactions

are examined by the IRS. To the contrary, such an interpretation of Section

6103 would impede cooperation among the issuers of government bonds and the

beneficiaries of those instruments during an IRS examination.

      In support of his argument, Scott relies on a IRS publication that states

that "[t]he issuer of the municipal debt is treated as the 'taxpayer' throughout the

examination process." As a threshold matter, the publication appears to apply

to municipal debt. HCFFA is not a municipality, but a State authority. Scott

does not address this discrepancy or cite to legal authority for the proposition

that debt issued by a State authority is considered municipal debt by the IRS.

Even if we were to assume that the Bonds are considered municipal debt for

purposes of the publication, Scott cites to no legal precedent supporting the

notion that the IRS can abrogate the statutory protection afforded to Deborah in




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                                         13 Section 6103 through issuance of a publication that, in effect, transforms

Deborah's tax return information into HCFFA's tax return information.

      Nor would an erosion of the protections afforded by Section 6103 in this

fashion comport with the statute's overall structure. The IRS examination of the

total return swap transaction was directed at Deborah, which participated in the

transaction, and not HCFFA, which was unaware of the transaction until after

the examination commenced. The documents at issue, which were obtained

from Deborah's files, contain Deborah's tax information and the details of its

financial transaction, not the sensitive information of the HCFFA.              The

protections provided by Section 6103 would be considerably weakened if the

IRS could abrogate the statute's confidentiality protections merely by requiring

a third party tangentially related to a financial transaction to collect and forward

information from other taxpayers involved in the transaction. We do not see in

Section 6103 any provision suggesting the confidentiality of a taxpayer's return

information is subject to such ready abrogation by the IRS.

      Finally, we disagree with Scott's strained interpretation of Section 6103's

applicability to HCFFA and its employees. The statute plainly provides that "no

officer or employee of any State . . . shall disclose any . . . return information

obtained by him in any manner in connection with his service as such an officer


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                                        14
or an employee or otherwise under the provisions of this section." 26 U.S.C.A.

§6103(a)(2). To advance his narrow interpretation of Section 6103, Scott relies

on provisions of the statute that apply to officers and employees of local law

enforcement agencies, local child support enforcement agencies, and local

agencies administering certain federal programs.        It is evident that those

provisions do not apply to HCFFA or it employees or comport with the statute's

overall purpose of providing protection to taxpayers.

      To the extent we have not specifically addressed any of Scott's remaining

arguments, we conclude they lack sufficient merit to warrant discussion in a

written opinion. R. 2:11-3(e)(1)(E).

      Affirmed.




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