Third time's not a charm: en banc first circuit permits IRS to obtain roadmap to 'soft spots' on Textron's returns.
Tax Executive › Vol. 61 Nbr. 5, September 2009
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Third time's not a charm: en banc first circuit permits IRS to obtain roadmap to 'soft spots' on Textron's returns.
For the last several years, Textron, Inc. has been seeking to keep its tax accrual workpapers away from the prying eyes of the IRS. That struggle took a turn for the worse on August 13, 2009, when a divided U.S. Court of Appeals for the First Circuit sitting en banc ruled that Textron's tax accrual workpapers were not protected by the work product privilege. A vigorous dissent effectively dissects the majority's opinion and suggests that it is time for the Supreme Court to intervene. Whether or not Textron's battle may have ended, the war over the disclosure of taxpayers' tax accrual workpapers will surely endure.
Background of the Textron Dispute During an audit of Textron's 1998-2001 tax cycle, the IRS discovered that Textron had engaged in a series of sale-leaseback transactions that the IRS alleged were substantially similar to the so-called SILO transactions that the IRS had "listed" as abusive tax shelters. In accordance with its audit policy, the IRS requested all of Textron's tax accrual workpapers. (1) Among the documents that were responsive to the request were a series of spreadsheets that contained Textron's in-house counsel's lists of return items thought to involve unclear law, "hazards of litigation percentages," and tax reserve...See the full content of this document
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