Court Refuses to Seal Case Involving Government's Motion to Authorize Disclosure of Tax Returns
"The substantial public interests implicated by questions of the proper scope of Executive power and the statutory limits on access to tax information warrant public disclosure. While this case, and ... this decision, are now unsealed, the underlying Application and its supporting materials will remain under seal, at least while the investigation remains active ...."
From In the Matter of Application for Ex Parte Order to Authorize Disclosure of Tax Returns (N.D.N.Y.), decided yesterday by Judge Lorna Schofield (S.D.N.Y., sitting by designation):
On October 2, 2025, the United States Attorney's Office for the Northern District of New York (the "Government") applied for a court order directing the Internal Revenue Service to disclose tax return information (the "Application"). John A. Sarcone III authorized the Application as Acting United States Attorney for the Northern District of New York ("NDNY"). This request invokes 26 U.S.C. § 6103(i)(1)(A)(i), a statute that permits such disclosure [including disclosure within the Executive Branch] only under narrow, specified conditions. One critical condition is that only certain designated officials are authorized to make the request—the Attorney General, the Deputy Attorney General, the Associate Attorney General, Assistant Attorneys General, United States Attorneys and other officials not relevant here.
The Application is denied because Mr. Sarcone was not lawfully serving as Acting United States Attorney and therefore lacked authority to authorize the Application. [For more details, see this opinion from Judge Schofield, also handed down yesterday, and this story from CBS News (Jacob Rosen). -EV]
The Government's request to seal this matter is also denied. The substantial public interests implicated by questions of the proper scope of Executive power and the statutory limits on access to tax information warrant public disclosure. While this case, and with it, this decision, are now unsealed, the underlying Application and its supporting materials will remain under seal, at least while the investigation remains active, to protect law enforcement interests and the taxpayer's privacy interests, including the confidentiality of the taxpayer's identity and other sensitive information disclosed in the Application….
Requests under § 6103(i)(1) are by their nature ex parte—submitted without notice to the taxpayer or other interested parties—but courts still must decide whether such applications remain under seal. "The common law right of public access to judicial documents is firmly rooted in our nation's history … [but] is not absolute." Courts apply a three-part inquiry to determine whether, and to what extent, matters should remain under seal.
First, courts determine whether the relevant material is a "judicial document," meaning that the document is "relevant to the performance of the judicial function and useful in … a federal court's exercise of power under Article III of the Constitution." If so, courts next determine the weight of the presumption of public access based on "the role of the material at issue in the exercise of Article III judicial power" and the "value of such information to those monitoring the federal courts." Finally, courts balance that presumption against any countervailing interests, including "the danger of impairing law enforcement or judicial efficiency and the privacy interests of those resisting disclosure." …
The authority of Mr. Sarcone as Acting U.S. Attorney is a matter of substantial public interest that justifies unsealing this decision and this proceeding, although the Application itself and its accompanying exhibits will remain under seal.
The Application functions as the operative filing in this matter and therefore qualifies as a judicial document. Public access to judicial documents is "essential" to democratic accountability and public confidence in the judiciary. Meaningful "professional and public monitoring" of the courts depends on access to the materials on which courts rely in exercising their authority. Because the Application is a judicial document, it begins with a strong presumption of public access.
Here, the presumption of public access is particularly strong given the nature of the Application and the issue presented. Whether the taxpayer's information is released for a criminal investigation depends on whether a properly empowered official under § 6103(i)(1) has authorized the Application. That threshold question is resolved by reference to a prior decision holding that Mr. Sarcone was unlawfully serving as Acting U.S. Attorney. Because this ruling concerns whether the Government may pierce the confidentiality of sensitive tax information—and because it implicates compliance with statutory limits on the exercise of U.S. Attorney powers—the value of public access to this decision is substantial. These are strong reasons that support public disclosure of this matter.
Despite the strong presumption of public access, this proceeding also implicates significant countervailing interests. "The ex parte application process … facilitates the important law enforcement interest of allowing the Government to pursue investigations without providing notice to potential or indicted defendants." That interest intensifies when the relevant investigation remains ongoing. Accordingly, courts in this Circuit unseal applications under § 6103(i)(1) after completion of the underlying investigation or trial. Evaluating sealing in the context of an active investigation therefore requires a more tailored approach.
Sealing is also warranted to protect the taxpayer's privacy interests. An application under § 6103(i)(1) typically identifies the taxpayer and describes the return information sought and the investigative basis for obtaining it. Disclosure would therefore reveal that a particular taxpayer is under criminal investigation and could expose sensitive information. Those harms are most acute while the investigation is ongoing but persist even after the investigation concludes—especially if it ends without criminal charges.
Unsealing this proceeding and this decision, while maintaining the Application itself under seal, strikes the appropriate balance. This approach allows public access to information about the safeguards Congress embedded in the [relevant statutes] and the consequences of circumventing them—information of substantial value to those monitoring the federal courts. Simultaneously, this result protects law enforcement interests by preserving the confidentiality of the Application and the investigative details it contains….