The D.C. Circuit Gets It Right in Deloitte

In United States v. Textron Inc., 577 F.3d 21 (1st Cir. 2009), cert. denied, 2010 WL 2025148 (May 24, 2010), the First Circuit held that Textron's tax accrual workpapers—specifically, spreadsheets listing uncertain tax positions, percentage estimates of the hazards of litigation, and tax reserve amounts—were not work product and therefore were not privileged.

When the Supreme Court declined to review Textron, the IRS may have felt that it had finally won the privilege wars. But any declaration of victory was premature.

In a new decision, the D.C. Circuit has revived taxpayers' hopes that they can discuss their tax exposure with counsel, and disclose those discussions to their accountants, without having to produce records of those deliberations to the IRS. See United States v. Deloitte LLP, 2010 WL 2572965 (D.C. Cir. June 29, 2010).