TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Friday, December 23, 2011

Tax Accrual Workpapers and Textron

Lindsey Sullivan (J.D. 2011, Northwestern), Note, Tax Accrual Workpapers and Textron: Is Litigation Strategy No Longer Protected?, 105 Nw. U. L. Rev. 919 (2011).

This Note argues that Textron allowed policy considerations to affect the outcome of the case without directly analyzing the competing objectives of the privilege. The work-product doctrine, like all privileges, attempts to strike a balance between enforcement and privacy, and the Textron decision was guided by the court’s desire to balance effective tax law enforcement by the IRS against the need for privacy to conduct detailed legal analysis of tax filings by corporate entities. Regardless of which objective one finds more important, the majority properly brought the policy discussion into the opinion. The majority failed, however, to explicitly balance these two objectives and to set out a framework for lower courts to follow.

Part I takes a detailed look at tax accrual workpapers and explains the difficulty in applying the work-product doctrine to these documents. Part II discusses the history, background, and theoretical underpinning of the work-product doctrine, highlighting the circuit split related to the phrase “in anticipation of litigation.” Part III discusses the Textron holding in depth and, using the language and theories from the preceding sections, explains how the Textron court erred. Finally, Part IV argues that while the doctrine was applied incorrectly, the eventual outcome in Textron may have been correct in light of the policy considerations and practical concerns underlying the doctrine.

The Note concludes by arguing that, despite the alarm it has raised, Textron did not drastically change the work-product doctrine. Courts and litigants will be able to limit Textron’s impact by recognizing that the workproduct doctrine requires an explicit balancing between enforcement and privacy. Thus, happily, corporate counsel everywhere can relax their state of disbelief.

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