®
tax notes
Tax Court Amends Privilege and
Discovery Rules
By Andrew R. Roberson and
Robin Greenhouse
Andrew R. Roberson, in
Chicago, and Robin Greenhouse, in Washington, are partners with McDermott Will &
Emery, where they practice federal tax controversy and litigation.
Andrew R. Roberson
In this article, Roberson and
Greenhouse discuss the recent
amendments to the Tax Court’s
rules adopting the ‘‘substantial
need and undue hardship’’
exception to the work product
doctrine and limiting the discoverability of draft expert witness
reports
and
some
communications
between
counsel and expert witnesses.
reports and certain communications between counsel and expert witnesses.3 These changes continue
the Tax Court’s recent efforts to further align its
rules with the Federal Rules of Civil Procedure
(FRCP). However, before discussing these changes,
a brief overview of the Tax Court and its rules is
helpful to provide context.
Overview of the Tax Court and Its Rules
The Tax Court is an Article I court that provides
taxpayers with the ability to dispute a tax deficiency
determination by the IRS before paying the disputed amount.4 The court’s jurisdiction extends to
some disputes involving transferee liability, worker
classification status, partnership items, innocent
spouse relief, collection actions, whistleblower
awards, interest abatement, administrative and litigation costs, and specific declaratory judgment actions. The ability to contest the IRS’s determination
in a prepayment forum is a significant factor for
most taxpayers and sometimes is the only option
available, depending on the amount of the asserted
tax deficiency and the taxpayer’s financial situation.
Robin Greenhouse
Copyright 2012 Andrew R. Roberson and
Robin Greenhouse.
All rights reserved.
Introduction
On July 6, 2012, the Tax Court adopted amendments to its Rules of Practice and Procedure (rules).1
The amendments were announced in proposed
form on December 28, 2011; the final amendments
reflect consideration of comments received from the
IRS, the American Bar Association Section of Taxation, and the State Bar of Texas Section of Taxation.2
This article focuses on the amendments to Rule
70, which adopt the substantial need and undue
hardship exception to the work product privilege
and limit the discoverability of draft expert witness
1
See Tax Court release (July 6, 2012), Doc 2012-14486, 2012
TNT 133-51. Two weeks earlier, the Tax Court had announced a
uniform method of citing pages in its memorandum opinions.
See Tax Court release (June 26, 2012), available at http://www.
ustaxcourt.gov/press/062612.pdf.
2
See Tax Court release (Mar. 6, 2012), available at http://
www.ustaxcourt.gov/press/030612.pdf.
TAX NOTES, September 24, 2012
3
Other changes included:
• changing the number of copies filed, font requirements,
and return of papers (Rule 23);
• deleting Rule 175 as obsolete;
• making e-filing mandatory for most represented parties
(Rule 26);
• substituting the term ‘‘genuine dispute’’ for the term
‘‘genuine issue’’ as the summary judgment standard
(Rule 121);
• clarifying that Rule 155 also applies to dispositive
orders (Rule 155);
• enlarging the period for a tax matters partner to notify
other partners of the filing of a petition (Rule 241);
• increasing privacy protections for filings in whistleblower actions (Rule 345);
• conforming amendments for number of copies (rules
241, 274, and 301), the redesignation of Rule 70(b)(2)
(rules 71 and 74), and the recognition of unsworn
written declarations (rules 20, 33, 57, 143, 173, 231, 232,
271, and 281); and
• creating new Form 18 for unsworn declarations under
penalty of perjury.
4
The Tax Court was established as an executive branch
agency in 1924 as the Board of Tax Appeals (Revenue Act of
1924, ch. 234, section 900(k)). Its name was changed to the Tax
Court of the United States in 1942, and its members became
judges (Revenue Act of 1942, ch. 619, section 504(a)). Its name
was changed to the United States Tax Court in 1969, when it also
became a legislative court under Article I of the Constitution.
Freytag v. Commissioner, 501 U.S. 868, 887 (1991).
1591
(C) Tax Analysts 2012. All rights reserved. Tax Analysts does not claim copyright in any public domain or third party content.
TAX PRACTICE
COMMENTARY / TAX PRACTICE
Under section 7453, the Tax Court is governed by
the FRE. Its proceedings are conducted in accordance with the rules of evidence applicable to
trials without a jury before the U.S. District Court
for the District of Columbia, and therefore it applies
the case law of the D.C. Circuit.7 However, under
the authority granted in section 7453, the Tax Court
has adopted its own rules8 and does not follow the
FRCP. The court gives weight to the FRCP when
there is no applicable rule.9 The Tax Court has
characterized itself as being bound by evidentiary,
but not procedural, rules in the FRCP.10
Absent an agreement by the parties regarding
appellate venue, Tax Court decisions are appealable
to the U.S. court of appeals for the circuit in which
the taxpayer’s legal residence or, in the case of a
corporation, principal place of business or office is
located when the petition is filed.11 If no principal
place of business or office exists when the petition is
filed, appellate venue lies with the Court of Appeals
for the District of Columbia.12 The Tax Court is a
national court and therefore needs to maintain
consistency in its opinions. However, it will defer to
clear rulings on issues of law made by the court of
appeals in the circuit in which an appeal would
lie.13 Thus, although courts of appeals’ opinions
5
FRCP Rule 1; 28 U.S.C. section 2503(b).
FRE Rule 101.
7
Rule 143(a).
8
The current version of the rules took effective January 1,
1974, and notes to the original rules are found at 60 T.C.
1057-1175 (1973). The rules have been amended several times
over the years, with notes explaining each change published in
the Tax Court report following the change.
9
See Brannon’s of Shawnee Inc. v. Commissioner, 69 T.C. 999,
1001 (1978); Rule 1(a).
10
See McKenzie v. Commissioner, 59 T.C. 139, 142-144 (1972),
aff’d without published opinion, 486 F.2d 1401 (5th Cir. 1973);
Bennett v. Commissioner, T.C. Memo. 1997-505, Doc 97-30741, 97
TNT 218-31.
11
Section 7482(b); Rule 190(c).
12
Section 7482(b) (flush language).
13
Golsen v. Commissioner, 54 T.C. 742 (1970), aff’d on another
issue, 445 F.2d 985 (10th Cir. 1971).
6
1592
from other circuits are often relied on and may be
persuasive authorities, they are not binding on the
Tax Court.
Amendments to Work Product Protection
The work product doctrine ‘‘shelters the mental
processes of the attorney, providing a privileged
area within which he can analyze and prepare his
client’s case.’’14 The doctrine essentially shields
communications and other materials prepared in
anticipation of litigation. The work product doctrine protects the attorney’s patterns of investigation, determination of relevant facts, preparation of
legal theories, planning of strategy, and recording of
mental impressions.15 It also applies to information
and materials prepared by a party’s representative
other than an attorney or gathered by an agent
acting under an attorney’s direction.16
Although the work product doctrine is distinct
from the attorney-client privilege, the two can overlap. The existence of both privileges for the same
documents can therefore be important if one privilege is waived but the other remains intact.17 The
work product doctrine protects a broader range of
materials, many of which are outside the confidential communications between attorney and client
covered by the attorney-client privilege (for example, research memoranda, factual investigations,
or notes from in-house strategy meetings).18
In Hickman v. Taylor, the Supreme Court acknowledged that the work product privilege is not absolute but found that the party seeking the production
of fact-based work product materials could not
overcome the privilege because the party failed to
make ‘‘any showing of necessity or any indication
14
United States v. Noble, 422 U.S. 225, 238 (1975).
In re Grand Jury Subpoena, 622 F.2d 933, 935 (6th Cir. 1980).
16
Diversified Indus. Inc. v. Meredith, 572 F.2d 596, 603 (8th Cir.
1977).
17
For example, most courts have held that the disclosure of
otherwise privileged material to a taxpayer’s outside auditors
waives the attorney-client privilege but not work product
protection. See, e.g., United States v. Deloitte & Touche LLP USA,
610 F.3d 129, 139 (D.C. Cir. 2010), Doc 2010-14431, 2010 TNT
125-11 (collecting cases and discussing issues). FRE 502,
‘‘Attorney-Client Privilege and Work Product; Limitations on
Waiver,’’ adopted in 2008, contains rules regarding the extent to
which certain inadvertent disclosures can result in the waiver of
the attorney-client privilege and work product protection.
18
In Hickman v. Taylor, 329 U.S. 495, 508 (1947), the Supreme
Court explained that the attorney-client privilege ‘‘does not extend to information which an attorney secures from a witness
while acting for his client in anticipation of litigation, . . . memoranda, briefs, communications and other writings
prepared by counsel for his own use in prosecuting his client’s
case, . . . [or] writings which reflect an attorney’s mental impressions, conclusions, opinions or legal theories.’’ However, it held
that all of these matters were protected by the work product
doctrine. Id. at 509-511.
15
TAX NOTES, September 24, 2012
(C) Tax Analysts 2012. All rights reserved. Tax Analysts does not claim copyright in any public domain or third party content.
The other options for judicial review are refund
actions. The taxpayer must pay the tax deficiency,
then file a refund claim, and when the IRS denies
the claim or six months have elapsed, file suit for a
refund in the U.S. district court where the taxpayer
resides or in the U.S. Court of Federal Claims.
District court proceedings are governed by the
FRCP, and Court of Federal Claims proceedings are
governed by the Rules of the United States Court of
Federal Claims, which incorporate the FRCP to the
extent appropriate for proceedings in that court.5
Both courts are governed by the Federal Rules of
Evidence (FRE).6
COMMENTARY / TAX PRACTICE
Before the recent Tax Court amendments, Rule 70
contained no specific provisions for the disclosure
of otherwise protected work product on a showing
of substantial need and undue hardship. The Tax
Court pointedly did not adopt that exception in the
FRCP, as reflected in the statement in the initial
notes to Rule 70 that ‘‘the ‘work product’ of counsel
and material prepared in anticipation of litigation
or for trial, are generally intended to be outside the
scope of allowable discovery under these Rules,
and therefore the specific provisions for disclosure
of such materials in FRCP [Rule] 26(b)(3) have not
been adopted.’’23 Shortly after adopting Rule 70, the
Tax Court took particular note of the ‘‘negative
recognition’’ given the work product doctrine in its
rules and notes.24 Later, the Tax Court flatly stated
19
Id. at 509.
FRCP Rule 26(b)(3)(B).
21
Upjohn Co. v. United States, 449 U.S. 383, 400-402 (1981).
22
See, e.g., In re Cendant Corp. Sec. Litig., 343 F.3d 658, 663 (3d
Cir. 2003); In re Murphy, 560 F.2d 326, 336 (8th Cir. 1977); but see
Duplan Corp. v. Moulinage et Retorderie de Chavanoz, 509 F.2d 730,
734 (4th Cir. 1974) (opinion work product never discoverable).
For example, the Ninth Circuit has indicated that opinion work
product may be discovered ‘‘when mental impressions are at
issue in a case and the need for the materials is compelling.’’
Holmgren v. State Farm. Mut. Auto. Ins. Co., 976 F.2d 573, 577 (9th
Cir. 1992) (emphasis in original); see also Ratke v. Commissioner,
129 T.C. 45, 53 (2007) (discussing law of the Ninth Circuit).
23
60 T.C. at 1098 (emphasis added).
24
P.T.&L. Const. Co. v. Commissioner, 63 T.C. 404, 408 (1974);
see also Dvorak v. Commissioner, 64 T.C. 846, 850-851 (1975)
(refusing to ‘‘incorporate into this Court’s discovery procedure
the requirements of rule 26(b)(3) of the [FRCP], under which
‘work product’ materials are discoverable if ‘the substantial
equivalent of the materials’ is unavailable’’).
20
TAX NOTES, September 24, 2012
that ‘‘under the Tax Court Rules, the work product
of counsel is not discoverable.’’25
Over the years, several Tax Court opinions have
chipped away at the absolute protection for work
product reflected in the notes and prior opinions.
These opinions suggested that the privilege resulting from the work product doctrine might be qualified in the Tax Court, as in other courts, allowing it
to be overcome by an appropriate showing of
substantial need and undue hardship. For example,
in Hartz Mountain, the court stated that ‘‘The use of
the word ‘generally’ in the note to Rule 70 strongly
suggests that the scriveners recognized that the
refusal to incorporate FRCP [Rule] 26(b)(3) was
limited to the purview of that rule and did not
constitute a bar to production of all work product.’’26 In Ames the court noted, without any reference to its rules, the accompanying notes or prior
Tax Court precedent that ‘‘The work product privilege is a qualified one that, in some circumstances,
may be overcome by a showing of good cause and
substantial need.’’27 However, because the court
found that the materials at issue were opinion work
product, it did not analyze the substantial need and
undue hardship exception.
In Ratke, the taxpayer argued that the IRS was
required to produce IRS memoranda seeking advice
concerning proposed legal arguments to be made in
the case.28 The issue was whether the memoranda
were work product and, if so, whether they should
nevertheless be disclosed. The court determined
that the memoranda were fact-based and opinion
work product. Thus, it was necessary for the court
to determine whether the substantial need and
undue hardship exception required disclosure of
the privileged materials. The court began by acknowledging the ‘‘negative recognition’’ provided
in the notes and its prior holding in P.T.&L. Construction, but nevertheless it proceeded to examine
the extent of the privilege.29 Citing Hartz Mountain
and Ames, the Tax Court held that ‘‘The privilege
resulting from the work product doctrine is qualified; it may be overcome by an appropriate showing.’’30 After reviewing the memoranda, the court
concluded that: (1) the substantial need and undue
hardship exception did not apply to the fact-based
25
Zaentz v. Commissioner, 73 T.C. 469, 478 (1979).
Hartz Mountain Indus. v. Commissioner, 93 T.C. 521, 529
(1989).
27
Ames v. Commissioner, 112 T.C. 304, 310 (1999), Doc 199919165, 1999 TNT 104-6.
28
Ratke, 129 T.C. at 48-51, Doc 2007-20395, 2007 TNT 173-4.
29
Id. at 50 (in P.T.&L., 63 T.C. 404, the Tax Court sustained
absolute protection for all work product material).
30
Ratke, 129 T.C. at 52.
26
1593
(C) Tax Analysts 2012. All rights reserved. Tax Analysts does not claim copyright in any public domain or third party content.
or claim that denial of such production would
unduly prejudice the preparation of [the party’s]
case or cause him any hardship or injustice.’’19 The
Court’s recognition that an exception might apply
to otherwise protected work product has been specifically incorporated into FRCP Rule 26(b)(3)(A),
which provides that otherwise protected materials
‘‘may be discovered if . . . the party shows that it
has substantial need for the materials to prepare its
case and cannot, without undue hardship, obtain
their substantial equivalent by other means.’’ The
Supreme Court has stated that opinion work product — work product reflecting ‘‘mental impressions,
conclusions, opinions, or legal theories of a party’s
attorney or other representative concerning the
litigation’’20 — is discoverable only on a showing of
more than ‘‘substantial need and undue hardship,’’
a standard sometimes described as between very
high and absolute.21 Thus, discovery of opinion
work product is allowed only in rare and exceptional circumstances, if at all.22
COMMENTARY / TAX PRACTICE
3. Documents and Tangible Things:
A. A party generally may not discover
documents and tangible things that are
prepared in anticipation of litigation or
for trial by or for another party or its
31
Id. at 54. As discussed in supra note 22, the Tax Court
looked to case law of the Ninth Circuit, the circuit to which the
case was appealable. In doing so, it noted that the Supreme
Court has ‘‘declined to decide whether opinion work product is
absolutely protected from discovery.’’ Id. at 53.
32
Sterling Trading Opportunities LLC v. Commissioner, T.C.
Memo. 2007-339, Doc 2007-25408, 2007 TNT 221-14.
33
Id. at *6.
1594
representative (including the other
party’s attorney, consultant, surety, indemnitor, insurer, or agent), unless, subject to Rule 70(c)(4),
i. they are otherwise discoverable under Rule 70(b); and
ii. the party shows that it has substantial need for the materials to prepare
its case and cannot, without undue
hardship, obtain their substantial
equivalent by other means.
B. If the Court orders discovery of those
materials, it must protect against disclosure of mental impressions, conclusions,
opinions, or legal theories of a party’s
counsel or other representative concerning the litigation.
The Tax Court acknowledged the negative recognition in its notes regarding the substantial need
and undue hardship exception, but it indicated that
the change was made ‘‘to formalize the Court’s
application of the work product doctrine, set forth
in [FRCP Rule] 26(b)(3).’’ Citing Ratke, the notes
explain that the new language was ‘‘drawn from
rule 26(b)(3)(A) and (B) of the [FRCP] and includes
the exception to the work product privilege provided upon a showing of substantial need for the
materials sought to be discovered.’’
Limitations on Discovery Regarding Experts
In the Tax Court, an expert witness’s report is
treated as his direct testimony, and additional direct
testimony may be allowed ‘‘to clarify or emphasize
matters in the report, to cover matters arising after
the preparation of the report, or otherwise at the
discretion of the Court.’’34 The report must contain
the qualifications of the expert witness and shall
state the witness’s opinion and the facts or data on
which the opinion is based and must ‘‘set forth in
detail the reasons for the conclusion.’’35 The parties
are required to exchange copies of any expert
witness reports expected to be submitted into evidence at trial.
As adopted, the Tax Court’s rules did not contain
a limitation on the discovery of drafts of an expert
witness’s report. In 2010 FRCP Rule 26(b)(4) was
amended to provide that drafts of expert witness
reports and certain pretrial communications between experts and counsel were not subject to
discovery. In the recent amendments to its rules, the
34
Rule 143(g)(2).
Rule 143(g)(1).
35
TAX NOTES, September 24, 2012
(C) Tax Analysts 2012. All rights reserved. Tax Analysts does not claim copyright in any public domain or third party content.
work product; and (2) there was no ‘‘compelling
need’’ for the opinion work product.31
Approximately two months after its opinion in
Ratke, the Tax Court addressed whether documents
containing notes by an individual and his attorney
made during meetings with tax advisers were work
product subject to discovery under the exception.32
The court assumed, without deciding, that the
documents contained fact-based work product. Relying on Ratke, it framed the remaining question as
whether the IRS had substantial need for the information in the documents and the inability to obtain
the substantial equivalent from other sources. The
court accepted the IRS’s claimed substantial need to
show the purpose, structure, parties, and fees for a
transaction that was purportedly entered into for
purely tax avoidance reasons. This acceptance appeared to be based primarily on the taxpayer’s
failure to argue that the IRS lacked a substantial
need for the information in the document, rather
than on an affirmative showing of need by the IRS.
Regarding the inability to obtain the substantial
equivalent, the court found that the IRS’s unsuccessful efforts to obtain information about the meetings — from depositions and interviews of
individuals who purportedly attended the meetings
based on the lapse of time and faded memories —
demonstrated that there was no other way for the
IRS to obtain the information in the documents. It
therefore concluded that the IRS had made an
adequate showing of ‘‘substantial need for the
information contained in the two documents and
the inability to obtain the substantial equivalent
from other sources’’ to overcome the work product
privilege.33
The recent amendment to Rule 70 cleared up any
remaining doubt on the subject, as the Tax Court
officially adopted the application of the work product doctrine set forth in FRCP Rule 26(b)(3). The
amendment added a new paragraph (c)(3) under
Rule 70, which closely tracks FRCP Rule 26(b)(3)(A)
and (B):
COMMENTARY / TAX PRACTICE
proaches to the issues on which they are testifying,
whether or not the expert considered them in
forming the opinions expressed. These discovery
changes therefore do not affect the gatekeeping
functions called for by Daubert v. Merrell Dow Pharmaceuticals Inc., 509 U.S. 579 (1993), and related
cases.’’39 Thus, the opposing party has the opportunity at trial to question the expert witness about the
formulation of his report if there are any ghostwriting concerns.
The IRS suggested that the Tax Court provide the
same substantial need and undue hardship exception for protected expert reports and attorneyexpert communications. Ultimately, the court did
not adopt the IRS’s approach.
On September 13, 2012, the Office of Chief Counsel issued Notice CC-2012-016 regarding the rule
amendments. After reiterating its original opposition to Rule 70(c)(4) and ‘‘the potential for undue
attorney influence in the drafting of reports,’’ Chief
Counsel advised attorneys that the rule ‘‘does not
prohibit a party from questioning experts at trial on
the same information and communications that are
protected in discovery. For instance, when appropriate, counsel may cross examine or voir dire an
opposing expert witness in depth on any revisions
the opposing party’s counsel suggested to the offered expert report.’’ This position is inconsistent
with FRCP Rule 26(b)(4)(C), which permits crossexamination regarding alternative analyses, testing
methods, and approaches to issues on which the
expert is testifying, but protects trial preparation
materials. Accordingly, if the IRS is prohibited from
asking for attorney-expert communications in discovery, it cannot ask for that same protected information simply because it is in the context of crossexamination at trial.
Impact of Amendments
The Tax Court’s rule changes are significant, both
for taxpayers considering the appropriate forum in
which to litigate their cases and for taxpayers with
cases already docketed in the Tax Court.
Tax Court precedent and the ability to contest the
IRS’s determination in a prepayment forum are
generally viewed as the most important factors
weighing in favor of litigating a case in the Tax
Court. Some have viewed the absolute protection
afforded all work product materials that was espoused in early Tax Court cases such as P.T.&L.
Construction and Zaentz as a factor weighing in
favor of litigating a case in the Tax Court.40 To the
39
36
Advisory committee’s note to FRCP Rule 26 (2010).
37
Id.
38
Advisory committee note’s to FRCP Rule 26(b)(4) (2010).
Id.
Other reasons that taxpayers may choose the Tax Court as
the forum for judicial review include the specialized expertise of
the judges, the ability to present new theories and seek refunds
40
(Footnote continued on next page.)
TAX NOTES, September 24, 2012
1595
(C) Tax Analysts 2012. All rights reserved. Tax Analysts does not claim copyright in any public domain or third party content.
Tax Court amended Rule 70 to provide the same
discovery protection in its proceedings. Rule
70(c)(4) now provides:
4. Experts:
A. Rule 70(c)(3) protects drafts of any expert
witness report required under Rule 143(g),
regardless of the form in which the draft is
recorded.
B. Rule 70(c)(3) protects communications between a party’s counsel and any witness required to provide a report under Rule 143(g),
regardless of the form of the communications,
except to the extent the communications:
i. relate to compensation for the expert’s study or testimony;
ii. identify facts or data that the party’s
counsel provided and that the expert
considered in forming the opinions to
be expressed; or
iii. identify assumptions that the
party’s counsel provided and that the
expert relied on in forming the opinions to be expressed.
Limiting discovery for draft expert witness reports was intended to counteract ‘‘undesirable effects’’ stemming from courts routinely allowing
discovery of all draft reports.36 These effects included rising costs, impediments to effective communication and interaction between counsel and
experts, and the adoption of strategies by experts to
protect against discovery that interfered with their
work.37 The limitations were also ‘‘designed to
protect counsel’s work product and ensure that
lawyers may interact with retained experts without
fear of exposing those communications to searching
discovery.’’38
In comments on the proposed amendment, the
IRS expressed several concerns with this change.
The thrust of those concerns was that foreclosing
the opportunity to explore reports through discovery would prevent parties from identifying whether
any ghostwriting was occurring. However, in the
Tax Court an expert’s report is treated as his direct
testimony and it must convey completely and
clearly the expert’s conclusions because the proponent typically will not be able to ask the expert to
expand on the opinion. Moreover, as the advisory
committee’s note to FRCP Rule 26(b)(4) recognizes,
‘‘Counsel are also free to question expert witnesses
about alternative analyses, testing methods, or ap-
COMMENTARY / TAX PRACTICE
cited Golsen and followed case law of the Second
Circuit in applying the federal common law of
privilege.42 In Bernardo, appealable to the First Circuit, the Tax Court cited section 7453 and followed
D.C. Circuit precedent in determining whether
some documents were protected by the attorneyclient privilege and not subject to disclosure.43 In its
analysis of whether the same documents were protected work product, the court did not cite section
7453 but did rely on D.C. Circuit precedent for the
proper standard to apply in determining whether
the documents were prepared in anticipation of
litigation. The question of which law to apply is
significant in other areas as well — for example, the
high-profile disputes in recent years over the discoverability of tax accrual workpapers.44 In view of
this uncertainty, taxpayers and their advisers must
make sure that they are familiar with case law
under both the D.C. Circuit and the circuit in which
an appeal would normally lie.
The limitation on the discoverability of drafts of
expert reports and communications between experts and counsel should be viewed as a welcome
development for many practitioners. Counsel and
an expert often must work together to make sure
that the expert’s report appropriately addresses the
issues on which the expert is providing his opinion.
The ability to do so without fear of ghostwriting
allegations may promote more precise and helpful
reports. Parties are always free to cross-examine
experts regarding the preparation of reports, which
ultimately might be a more efficient and practical
forum to raise any concerns regarding whether the
expert or counsel drafted the report.
42
Director v. Commissioner, T.C. Memo. 1988-256.
Bernardo v. Commissioner, 104 T.C. 677 (1995), Doc 95-6142,
95 TNT 120-14.
44
Compare United States v. Deloitte & Touche LLP USA, 610 F.3d
129 (D.C. Cir. 2010) with United States v. Textron Inc., 577 F.3d 21
(1st Cir. 2009), Doc 2009-18383, 2009 TNT 155-7.
43
for overpayments not raised during the administrative process,
and the informal discovery and stipulation process, which may
prove less costly than litigation in a refund forum.
41
129 T.C. 45, 52-53 (2007).
1596
TAX NOTES, September 24, 2012
(C) Tax Analysts 2012. All rights reserved. Tax Analysts does not claim copyright in any public domain or third party content.
extent that absolute protection previously existed, it
no longer does. Thus, in cases when fact-based
work product materials contain particularly sensitive information that could dramatically affect the
proceedings, the IRS may be able to obtain this
information if the agency is able to show the
requisite substantial need and undue hardship.
Further, based on the adoption of the same work
product rules as in FRCP Rule 26(b)(3), it appears
that even opinion work product may be subject to
discovery if a party makes a showing beyond the
substantial need and undue hardship test required
for fact-based work product.
The new standard for work product may result in
more litigation in the Tax Court. Parties may now be
able to obtain previously protected materials after
making the requisite showing. And parties may
engage in more disputes over the discoverability of
both fact-based and opinion work product, now
that it is clear no absolute protection exists.
As discussed above, the Tax Court looks to the
case law of the D.C. Circuit to resolve evidentiary
matters, and under the Golsen rule, the Tax Court is
bound to apply the law of the circuit in which an
appeal would normally lie. It is unclear whether the
Tax Court will decide disputes over work product
by looking to the case law of the D.C. Circuit or the
circuit in which an appeal would normally lie. A
few cases on this subject indicate that there is no
clear answer.
In Ratke, the Tax Court discussed opinion work
product precedent from the Ninth Circuit, to which
the case was appealable.41 In an earlier memorandum opinion, the court referenced section 7453 and
Rule 143(a) at the beginning of its analysis of
whether grand jury materials were privileged but