September 27, 2010
The government has decided not to seek certiorari in the Deloitte case, thus leaving the law in some disarray with respect to the assertion of work-product privilege for tax accrual workpapers. Taxpayers in the First Circuit and the Fifth Circuit will have difficulty asserting the privilege; taxpayers in the D.C. Circuit will be on solid ground. If the IRS contests an assertion of privilege by a taxpayer located in another circuit, the parties will be left to duke it out and try to persuade the court of the relative merits of the Textron and Deloitte approaches.
As noted in our previous post, a government certiorari petition in Deloitte would have had to walk a fine line to avoid contradicting what the government had told the Court only a few months ago in opposing certiorari in Textron. A concern about undermining his credibility with the Court could have played a role in the Solicitor General’s decision not to seek certiorari in Deloitte. More likely, however, the decision was driven by a judgment that, in view of the ongoing initiative to require taxpayers to report their uncertain tax positions on their tax returns, resolving the Deloitte/Textron issue in the discovery context was not sufficiently important to the government to warrant asking the Court to step in. As discussed in this Miller & Chevalier Tax Alert, the IRS has just released its final schedule for reporting UTPs, along with other related announcements. The UTP initiative may well generate its own set of privilege disputes that could implicate the principles of Textron and Deloitte in another context.