## Facts

- Citizen Awareness Project, Inc. (CAP) filed IRS Form 1024 seeking recognition as a tax-exempt organization under I.R.C. § 501(c)(4).
- If approved, CAP’s Form 1024 would become publicly available, but the application remained confidential while pending.
- During the time CAP’s application was still pending, ProPublica requested “publicly available” Forms 1024 for dozens of organizations, including CAP.
- Because the IRS was in the midst of shifting responsibility for media requests from its Cincinnati office to Washington, D.C., the ProPublica request was misrouted to Cincinnati amid internal confusion.
- Sophia Brown, a Cincinnati tax examining technician who had not previously handled a media request of this kind or scope, responded to the request and sent CAP’s still-confidential Form 1024 along with other materials.
- ProPublica used the documents to publish a series of articles titled “Buying Your Vote: Dark Money and Big Data,” which CAP alleged suggested CAP was under intense IRS scrutiny.
- CAP asserted reputational harm from the publicity and claimed it incurred expenses responding to the media coverage.
- CAP’s outside counsel, Charles Smith, spent significant time communicating with the media in an effort to reduce reputational harm and billed CAP for that work.
- CAP sued the IRS under I.R.C. § 7431(a)(1), seeking actual damages caused by the unauthorized disclosure and also seeking punitive damages.
- The IRS conceded the disclosure was unlawful but moved for summary judgment disputing CAP’s claimed damages, including whether Smith’s media-related fees could be treated as “actual damages,” and arguing punitive damages were unavailable on the record presented.

## Issues

1. Whether CAP produced sufficient evidence to pursue “actual damages” under I.R.C. § 7431(c)(1)(B) beyond statutory damages, including out-of-pocket expenses tied to counsel’s media response.
2. Whether CAP’s claimed damages were supported by non-speculative proof that they were sustained “as a result of” the IRS’s unauthorized disclosure (i.e., causation and reasonable connection to the disclosure).
3. Whether CAP could recover punitive damages under I.R.C. § 7431(c)(1)(B)(ii) by showing the disclosure was willful or the result of gross negligence.

## Decision

- The court granted the IRS’s motion for summary judgment in part and denied it in part.
- The court held CAP could proceed to a bench trial on a limited claim for actual damages, finding CAP had shown a potential claim for actual damages of up to $4,819.78, with the exact amount to be determined at trial.
- The court rejected most of CAP’s broader damages theories on the summary-judgment record because they lacked adequate evidentiary support or were too far removed from the disclosure.
- The court granted summary judgment to the IRS on CAP’s punitive-damages claim, ruling punitive damages failed as a matter of law because the record did not support a finding of willfulness or gross negligence.

## Legal Principles

- I.R.C. § 6103 generally makes tax “returns” and “return information” confidential; unauthorized disclosure can give rise to civil liability under I.R.C. § 7431.
- Under I.R.C. § 7431(c), recoverable damages include the greater of statutory damages (generally $1,000 per unauthorized disclosure) or actual damages sustained as a result of the disclosure; punitive damages are available only for a willful disclosure or one resulting from gross negligence.
- “Actual damages” under § 7431(c)(1)(B) require proof that losses were caused by the unauthorized disclosure and are not based on speculation; the plaintiff must show a concrete link between the disclosure and the claimed loss.
- Out-of-pocket expenses incurred in response to an unauthorized disclosure may qualify as actual damages when the expense is reasonably connected to addressing harm from the disclosure, but the plaintiff must still prove causation and amount.
- Punitive damages under § 7431 require evidence supporting willfulness or gross negligence; evidence showing confusion, mistake, or ordinary negligence is insufficient.
- On summary judgment, once the moving party shows an absence of evidence on an essential element (such as damages or punitive intent), the nonmovant must come forward with specific facts showing a triable dispute.

## Conclusion

The District of Colorado held that the IRS’s disclosure of CAP’s pending, confidential Form 1024 to ProPublica was unlawful (as conceded), but sharply limited CAP’s recoverable damages on summary judgment: CAP could try to prove actual damages only up to $4,819.78 at a bench trial, while punitive damages were eliminated because the record did not support a finding that the disclosure was willful or grossly negligent.


Citizen Awareness Project v. Internal Revenue Service, 2015 U.S. Dist. LEXIS 59355 (2015)