Work Product Immunity for Attorney-Created Tax Accrual Workpapers?: The Aftermath of United States v. Textron

Abstract

United States v. Textron, Inc. has been a high-profile case involving the applicability of work product immunity to attorney-prepared documents known as "tax accrual workpapers." The Textron decision is worthy of careful analysis because it is the first decision at the Court of Appeals level to consider work product immunity for attorney-created tax accrual workpapers. The U.S. District Court ruled that work product immunity applied to the tax accrual workpapers, the First Circuit Court of Appeals ruled that work product immunity did not apply, and on May 24, 2010, the United States Supreme Court denied the certiorari petition in the case. Accordingly, the Textron decision is final, and it is appropriate to review the scope of work product immunity as it may apply to tax accrual workpapers. The denial of certiorari means that the lower federal courts must decide, without the benefit of Supreme Court guidance in Textron, whether work product immunity applies to attorney- prepared tax accrual workpapers.I conclude that attorney-prepared tax accrual workpapers technically do not and, as a matter of policy, should not qualify for protection as work product because of (1) the significant role of tax accrual workpapers in financial accounting and federal income tax reporting and (2) the specific statutory authority of section 7602 empowering the Internal Revenue Service (IRS) to collect information from taxpayers. I propose that courts embrace a doctrine of "tax exceptionalism" for purposes of work product immunity cases, and this doctrine acknowledges the unique public policy considerations that support effective tax administration. Permitting discovery of tax accrual workpapers raises significant fairness issues, but discovery of these workpapers is consistent with extant caselaw regarding work product immunity as well as with the purposes underlying work product immunity.