IRS fails to get rid of Hunter Biden lawsuit over leaked tax returns

Hunter Biden’s lawsuit over the public disclosure of his tax return information will move forward after a federal judge finds that the IRS might be liable for the actions of two whistleblowers’ lawyers.

As Law&Crime previously reported, Biden sued the IRS in September 2023, alleging that two agents, Gary Shapley and Joseph Ziegler, “completely disregarded their confidentiality obligations” and engaged in a “campaign to publicly smear” Biden through “unauthorized” disclosures of tax return information to media outlets, resulting in an “assault” on his privacy rights.

President Joe Biden’s son argued that Shapley and Ziegler directed their lawyers to publicly share Biden’s tax information, and were therefore subject to laws against disclosure.

The federal agency filed a motion to dismiss in February, arguing that Biden failed to show the agency’s alleged lack of “safeguards” to prevent two whistleblowers and their attorneys from disclosing his “confidential tax return information” in media interviews caused him to suffer “actual damages.” Lawyers for the IRS also argued that sovereign immunity protects the IRS against lawsuits over disclosures made by nonemployees of the federal government — in this case, lawyers for Shapley and Ziegler.

On Friday, U.S. District Judge Rudolph Contreras, a Barack Obama appointee, said that Biden’s unlawful disclosure claim can stand, finding that “the lawyers’ actions can be imputed to the IRS employees — and therefore the United States — under general principles of agency law.”

Historically, Congress “intended taxpayers’ return information to be broadly protected from disclosure to prevent abuse by Executive officers and politicization of the voluntary assessment system,” Contreras wrote. “The evolution of these statutes additionally demonstrates that Congress specifically decided that civil liability for federal employees’ unlawful activity should lie against the federal government and not against the employees themselves.”

The judge also denied a motion to intervene filed on behalf of Shapley and Ziegler themselves, who argued that their alleged actions were legal under whistleblower protection laws and that Biden’s confidential return information was already in the public domain. The intervention request was opposed by both Biden and the IRS.

“The Court agrees with the parties that the IRS agents do not have a legally protected interest in the outcome of this litigation,” Contreras wrote. The judge said that Shapley and Ziegler were not, as they argued, “the real subject” of Biden’s lawsuit.

“The real subject of this controversy is the United States’s liability under 26 U.S.C. § 7431(a)(1), and resolution of that dispute will have no direct impact on the intervenors’ legally protected financial or property interests,” the judge wrote.

It wasn’t all bad news for the IRS: Contreras handed a victory to the agency by granting its request to dismiss Biden’s privacy claim, finding that Biden hadn’t properly pled actual damages, and his claim wasn’t within the Privacy Act’s waiver of sovereign immunity.

Read the judge’s ruling here.

Law&Crime’s Matt Naham contributed to this story.

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