Sunday, September 2, 2012
Brandon Keim (J.D. 2011, Arizona State), Comment, Schedule UTP: An Attempt to Side-Step the Work-Product Doctrine. (United States v. Deloitte LLP, 610 F.3d 129, 2010), 44 Ariz. St. L.J. 343 (2012):
This Comment argues that the recent decision in Deloitte prohibits nationwide implementation of Schedule UTP because the IRS's rulemaking authority is subject to the work-product doctrine, and the Deloitte decision provides work-product protection for the information sought on Schedule UTP. Part II of this Comment provides a summary of the work-product doctrine by briefly discussing Hickman v. Taylor, in which the Supreme Court first recognized the work-product doctrine and discussed its underlying purposes. Part II also discusses Rule 26(b)(3) of the Federal Rules of Civil Procedure, which codifies the work-product doctrine and protects most documents “prepared in anticipation of litigation.” Although it is well established that a taxpayer may assert this privilege in response to an administrative summons, including one issued by the IRS, whether the privilege applies to tax returns remains an open question.
Part III argues that the work-product doctrine applies to tax returns, including Schedule UTP. It shows that the schedule purports to obtain protected work-product under the test most commonly used by courts (the “because of” test) when construing the “prepared in anticipation of litigation” standard. The First Circuit's opinion in Textron seemed to give the IRS considerable authority to obtain tax accrual work papers through Schedule UTP because the court concluded that the work-product doctrine did not protect those work papers from disclosure. But the District of Columbia Circuit's recent decision in Deloitte correctly shows that the work-product privilege protects some of the information that Schedule UTP seeks. Thus, the IRS should consider revising Schedule UTP to take into account the principles espoused in Deloitte.
The IRS should withdraw Schedule UTP because it improperly requires a taxpayer to disclose information protected by the work-product privilege. If the IRS refuses to do so, it should revise its policy of restraint to prohibit claims of waiver based on information supplied on Schedule UTP. Unfortunately, however, the IRS has shown little interest in responding to privilege concerns regarding Schedule UTP, and Congressional involvement may be necessary to protect taxpayers. Part IV thus proposes statutory language that would support the policies underlying the work-product doctrine but that would also enhance the IRS's enforcement efforts.