Daily Tax Update - August 29, 2007

THE DAILY TAX UPDATE WILL BE PUBLISHED ON A PERIODIC BASIS UNTIL CONGRESS RETURNS ON SEPTEMBER 4TH

IRS Denied Production of Tax Accrual Workpapers in Summons Enforcement Case (United States v. Textron, Inc.):  The United States District Court for the District of Rhode Island (Judge Torres) issued a 34 page opinion today denying a petition filed by the United States to enforce an IRS summons seeking the production of Textron’s tax accrual workpapers.  The Textron summons enforcement matter was a “test case” brought by the government which sought judicial approval for a controversial new IRS program seeking tax accrual workpapers during the examination of corporate taxpayers.

  • The District Court concluded, as Textron had argued, that the tax accrual workpapers were protected attorney work product.  In reaching this conclusion the Court rejected the government’s arguments that the workpapers were produced “in the ordinary course” of Textron’s business and that disclosure of the workpapers to Textron’s outside auditors resulted in waiver of the protection.  This proceeding has already been the subject of a full page article in the WSJ (when the United States filed the petition) and today’s decision in favor of Textron will undoubtedly be widely reported by the tax and financial press.
  • Please contact Arthur L. Baileyabailey@steptoe.com or J. Walker Johnson  - wjohnson@steptoe.com for additional information concerning this decision.

STEPTOE’S UK AUGUST 2007 TAX LAW UPDATE CAN BE ACCESSED VIA:
http://www.steptoe.com/assets/attachments/3109.pdf

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As provided for in Treasury regulations, advice (if any) relating to federal taxes that is contained in this communication (including attachments) is not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party any plan or arrangement addressed herein.

STEPTOE & JOHNSON LLP - TAX PRACTICE
Steptoe & Johnson LLP has one of the largest and most diverse law firm tax practices in the country. The practice covers the entire spectrum of federal taxation, including representation of businesses before the Congress, Treasury and the national office of the IRS; transactional planning for domestic and multinational corporations; complex audit and controversy work for corporations and other business interests contesting IRS adjustments; litigation before the Tax Court, Court of Federal Claims, district courts, courts of appeals and the Supreme Court. The firm's tax practice also encompasses all aspects of employee benefits (ERISA), executive compensation, tax-exempt organizations and charitable giving. Steptoe has an extensive state and local tax practice, representing an array of business clients on complex sales and use tax, corporate income tax and property tax matters, both advising those clients and handling audits, administrative appeals, and litigation for them. Read more information on Steptoe's tax practice.