The Supreme Court declined to hear Textrons appeal in a key tax case, letting stand a lower court decision that allows the Internal Revenue Service to demand legal and tax work papers from companies.
The company had appealed a ruling by the First Circuit Court in the case (see
Supreme Court nominee Elena Kagan filed a brief as solicitor general in the case (see
Tax law partner John Barrie, an attorney at international law firm Bryan Cave LLP said the ruling creates a mess in terms of the protection of documents and materials subject to litigation. Despite the issue coming up in a tax case, the case has broader ramifications beyond tax work papers, he believes.
This ruling potentially exposes the strategic thinking of a company and its counselrelated to the assessment of a litigation whether tax-related or not, he said. If you know theres only a 60-percent chance youll win a case, you dont want opposing counsel to know that too. Its like being told in advance that the pitchers throwing a curve ball that will break inside to the right.
Barrie believes that corporate taxpayers need to be more careful what they put in writing if it is not specifically or solely for the purpose of preparing for trial or in anticipation of a trial because it could be subject to discovery. That could cause internal tension, with outside independent accountants wanting documentation in order to approve the amount of a client company's tax reserves.
Well likely see skirmishes over how much information must be disclosed to a company's independent accounting firm versus the desire to minimize potentially public disclosure exposure, he said.