Citizen Awareness Project v. Internal Revenue Service

The Citizens Awareness Project, Inc. (CAP) (plaintiff) filed Form 1024 with the Internal Revenue Service (IRS) (defendant) to apply for recognition as a tax-exempt organization. As with any applying organization, if CAP’s application were to be approved, its Form 1024 would become part of the public record. However, the form remained confidential before approval. While CAP’s application was pending, ProPublica, a media outlet, requested CAP’s Form 1024, along with the forms of dozens of other organizations. An IRS agent fulfilled ProPublica’s request and unlawfully sent CAP’s and others’ forms to ProPublica. ProPublica used the cache of documents to publish a series of articles titled “Buying Your Vote: Dark Money and Big Data” that implied that CAP was under intense IRS scrutiny. As a result of these articles, Charles Smith, CAP’s outside counsel, spent substantial time engaging with the media as part of an attempt to mitigate the potential reputational harm to CAP. Smith billed that time to CAP. CAP sued the IRS under § 7431(a)(1) of the Internal Revenue Code, seeking actual damages caused by the IRS’s unlawful disclosure of CAP’s Form 1024. Additionally, CAP sought to include in the calculation of actual damages the fees Smith charged for his media engagements. The IRS conceded that the disclosure was unlawful but contested the inclusion of Smith’s fees in the calculation of actual damages. The IRS filed for summary judgment.