In the Marketplace

The U.S. Supreme Court has denied Textron's petition for writ of certiorari in Textron Inc. v. United States, U.S., No. 09-750, (cert. denied 5/24/10). The controversial en banc decision by the U.S. Court of Appeals for the First Circuit, as analyzed in the November 2009 issue of this newsletter, held that a corporate taxpayer could not shield from disclosure so-called “tax accrual workpapers.” These documents, typically prepared by in-house tax attorneys, set out in detail sensitive areas of tax liability. In this case, the IRS had sought the tax accrual workpapers as part of an investigation into Textron's alleged use of an illegal “sale-in, lease-out” transaction. The sharply divided First Circuit (3-2) concluded that provisions of the federal securities law, in conjunction with prevailing accounting and auditing standards, made the creation of the tax accrual workpapers inevitable. Because the spreadsheets sought by the IRS were not the kind of documents attorneys typically prepared when faced with the prospect or the reality of litigation, they were not entitled to work product protection.