Ethics

Dennis Ventry (UC Davis) has published ???Protecting Abusive Tax Avoidance,??? which explores the application of privilege (attorney-client, work product, and tax-practitioner/client) in both the tax and regulatory contexts.

The article provides a detailed discussion of the development of the work product doctrine as well as its modern incarnation. In addition, it examines in detail an important recent case, United States v. Textron, in which the district court awarded blanket work product immunity to a corporate taxpayer???s tax planning materials that propped up a series of nine abusive tax shelter transactions. As I argue in the article, the decision ???expands the work-product doctrine beyond its historical role of protecting the adversarial process, and it swallows the attorney-client privilege, effectively cloaking from discovery not just all legal advice but all advice pertaining to potential litigation, no matter how unlikely. In addition, the decision protects precisely the kind of abusive tax avoidance that Congress and the Treasury Department have fought to root out and punish.??? On appeal in September, the Government relied on the article at several points during oral argument. And more recently, the Government cited the article liberally in its appellate brief in yet another tax work product case, Regions Financial Corp. v. United States (11^th Circuit).

Although I endorse the Government's position in both of the above cases, I acknowledge and explore in the article that a strict application of current work product law can produce harsh results. Indeed, under current law, the taxpayer/regulatee always loses on the threshold question of whether the documents at issue were reasonably prepared in anticipation of litigation (which would justify protection) or, alternatively, were prepared to comply with regulatory requirements (which would justify discovery). As a way to mitigate these harsh results, I offer several alterations to the work product doctrine, including (i) a sliding scale of protection for attorney work product in the regulatory context as well as (ii) a modified form of selective or limited waiver (which could be incorporated into a sliding-scale approach) for documents prepared for regulatory purposes.

Download Ventry_Textron.pdf