ACC President Says Tax Ruling ‘Eviscerates the Work-Product Doctrine’

Some corporate lawyers are worried about the reach of a recent federal appeals court decision allowing the Internal Revenue Service to access documents analyzing possible tax liabilities.

The en banc ruling by the 1st U.S. Circuit Court of Appeals based in Boston allows the IRS to access tax-accrual documents that considered how much money the defense contractor Textron Inc. should set aside for possible tax liabilities, the Wall Street Journal reports. Often such documents include a lawyer’s calculation of how likely a company will win or lose a future tax dispute with the IRS.

The appeals court said the documents weren’t protected by the work-product doctrine because they weren’t prepared specifically for use in litigation. The documents also lost their attorney-client privilege because they were shown to outside accountants, according to the story.

Frederick Krebs, president of the Association of Corporate Counsel, told the Wall Street Journal that the ruling “eviscerates the work-product doctrine.” Thomas Sabatino, general counsel of Schering-Plough Corp., told the publication that the ruling is likely to worry in-house counsel who don’t want their assessments of possible future legal trouble to be revealed to legal opponents, from product-liability plaintiffs to patent holders.

The Wall Street Journal Law Blog noted the decision in a post last week entitled: “On Work Product and Tax (This is More Interesting Than it Sounds! Really!)”

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