Stillahn et al. v. S.Crow Collateral Corp. et al.

Holding: The Ninth Circuit affirmed the Tax Court's denial of motions to seal documents containing taxpayer return information because the transactional relationship exception to confidentiality rules applied.
Standard: Section sixty-one zero-three subsection h four C exception
Vote: Unpublished memorandum disposition affirming the lower court.
Practical effect: The decision reinforces the ability of the government to access transactional details in tax administration proceedings when those details are directly related to the resolution of tax issues, even when third parties seek to seal such information.

The Ninth Circuit affirmed the Tax Court's denial of motions to seal documents containing taxpayer return information. The court held that the transactional relationship exception to confidentiality rules applied because the disputed documents directly related to the resolution of tax issues.

Background

S.Crow Collateral Corporation appealed the Tax Court’s denial of its motions to seal documents containing return information in two separate tax proceedings involving taxpayers Stillahn and Harty. S.Crow Collateral Corporation was not a party to the underlying tax proceedings but sought to seal documents it claimed were confidential under the Internal Revenue Code.

The court’s reasoning

The Ninth Circuit determined it had jurisdiction over the denials as final collateral orders. The court analyzed the exception under Section sixty-one zero-three subsection h four C of the Internal Revenue Code, which allows disclosure of return information if it directly relates to a transactional relationship between a party to the proceeding and the taxpayer. The court found that S.Crow Collateral Corporation facilitated the monetized installment sales at issue and that the documents were necessary to assess the validity of interrelated transactions and potential misrepresentations of capital gains. The court concluded that the statutory criteria were met and the Tax Court did not abuse its discretion.

What it means going forward

The decision reinforces the ability of the government to access transactional details in tax administration proceedings when those details are directly related to the resolution of tax issues, even when third parties seek to seal such information.