IRS Access to Tax Workpapers

Implications of the First Circuit Ruling on Textron

Roy Whitehead, JD, LLM, and Tom Oxner, PhD, CPA

The First Circuit Court of Appeals in United States v. Textron Inc. (577 F.3d 21, 2009) issued a critically important tax decision giving the IRS access to Textron's tax accrual planning workpapers. The case is a major victory for the IRS and, in effect, gives the IRS a seat in the room when tax accrual workpapers are prepared. In Textron, the court held en banc (i.e., by the full court) that the taxpayer could not, in response to an IRS summons, withhold from the IRS its tax accrual work-papers under the work product doctrine. The decision, which reversed the district court, was reached by a narrow margin, with three judges representing the majority and the other two judges writing the dissenting opinion.