Overview
In our prior newsletter we highlighted In re Grand Jury1, a troubling decision issued by the US Court of Appeals for the Ninth Circuit involving dual-purpose communications in the attorney-privilege context. We noted that the decision required clarification, hopefully in the form of a rehearing en banc, as it represented an unwarranted departure from the overwhelming weight of authority that views legal advice involving tax matters as privileged. Moreover, it raised serious concerns for tax practitioners and clients because of the Circuit Court's conclusion that tax advice provided by an attorney is the equivalent of unprotected business advice—in other words, that tax advice is generally not legal advice. We also noted that the decision represented an unwelcome and unwarranted departure from the overwhelming weight of authority and created uncertainty by failing to recognize the clear-cut distinction between tax advice related to tax return reporting and legal tax advice regarding the interpretation of case law and tax statutes, regulations, and other authoritative guidance.
On January 27, 2022, the Ninth Circuit appropriately amended its opinion.2 The court removed its reference to "normal tax advice." In particular, the court changed the language in footnote 5 which had stated that "[w]e are aware, for example, that normal tax advice—even coming from lawyers—is generally not privileged, and courts should be careful to not accidentally create an accountant’s privilege where none is supposed to exist," to "[w]e are aware, for example, that normal tax return preparation assistance —even coming from lawyers—is generally not privileged, and courts should be careful to not accidentally create an accountant’s privilege where none is supposed to exist."3
The change from "normal tax advice" to the narrower "normal tax return preparation" is more in line with prior precedent which recognizes the significant difference between tax advice related to tax return accuracy and legal tax advice regarding the interpretation of cases, statutes and regulations.
Endnotes
1 13 F.4th 710 (9th Cir. 2021)
2 In re Grand Jury, Nos. 21-55085, 21-55145, 2021 U.S. App. LEXIS 39178 (9th Cir. Jan. 27, 2022)
3 Id. at *14 (emphasis added)
