"You've got a friend in me": TEI's practice of filing amicus briefs.

• Author: Fahey, Mary L.

Introduction

I understand that I am an unusual speaker for this session. Normally, the luncheon speaker is a judge, or IRS official, or someone of a similar lofty position. Last spring, Tax Executives Institute became embroiled in a controversial case involving the potential release of advance pricing agreements under the Freedom of Information Act. We filed an amicus brief in a case brought by the Bureau of National Affairs after the government had announced it was conceding that the APAs were subject to release and redaction under section 6110 of the Internal Revenue Code. Not surprisingly, the BNA case garnered a lot of publicity. After all, when one picks a fight with the press, it is good to remember that the opponent buys its ink by the barrel. I suspect that it was the intense nature of this controversy that led Robin Greenhouse and the Court Procedure Committee to invite me to discuss how an organization such as TEI determines to file an amicus brief in a given case.

TEI's Selection of Cases

TEI is a voluntary, nonprofit association of corporate tax executives who are responsible for managing the tax affairs of their companies. The Institute was organized in New York in 1944 and has more than 5,000 members who represent nearly 3,000 of the leading corporations in the United States and Canada, as well as a recently formed chapter in Europe. Most of the companies that employ TEI members are part of the IRS's Coordinated Examination Program (CEP). Because our membership rules bar individuals engaged in a public tax practice, most of the people in this room are ineligible to join.

TEI's current policy on the filing of amicus briefs was adopted by our Board of Directors in 1991. The policy requires that we be "judicious" in selecting cases in which to file briefs, noting that the persuasive value of a particular amicus brief is limited compared with the value of representations made to executive or legislative agencies. The policy also requires that the brief must bring a new or unique perspective to the issue before the court. Institute procedures thus prohibit the filing of "me, too" briefs and tracks the Supreme Court's rules for the filing of amicus briefs.(2) Finally, the positions taken in the brief must be crafted not to pit one segment of our diverse membership against another.

The vast majority of TEI's amicus briefs are filed in the Supreme Court of the United States and historically most have involved state tax issues. For example, in 1998 the Institute filed briefs both on the petition for certiorari and on the merits in the South Central Bell case, where the Court ultimately found Alabama's franchise tax unconstitutional as it applied to out-of-state corporations(3) More recently, we filed briefs in the Hunt-Wesson case, which questions the constitutionality of California's interest-offset rule.(4)

Two notable exceptions to filing briefs in state tax cases are Newark Morning Ledger(5) and INDOPCO.(6) Indeed, we were the only party to file an amicus brief in the INDOPCO case, though, given the result and the aftermath of that case, I am not sure how widely we should let that fact be known.(7)

In the past decade, there have been only four exceptions to TEI's general policy of filing briefs only in the Supreme Court. The issues in these four cases fall into two categories: (1)the attorney-client privilege in the corporate context, and (2) the confidentiality of tax return information under section 6103. It is these exceptional cases that I will discuss in more detail today.

Attorney-Client Privilege Issues

The most recent case to attract TEI's attention was United States v. Frederick, which was decided last year by the Seventh Circuit(8) That case involved the scope of the attorney-client privilege in the context of documents prepared by an attorney in connection with the preparation of tax returns and an IRS examination of those returns. (Mr. Frederick was the attorney.) One interesting aspect of this case is the characterization of Mr. Frederick as an attorney-accountant. It has been the focus of much of the commentary on this case, with particular emphasis on the effect of the decision on the multi-disciplinary practice debate. In fact, however, Mr. Frederick is not an accountant. He did assist in the preparation of the taxpayers' tax returns, so he may be more properly characterized as a return preparer. Another interesting point is the opinion's discussion of new section 7525 of the Code, relating to the so-called tax practitioner privilege. It was not at issue in the case and the idea of commenting on a statute that does not apply seems odd under the normal case or controversy rules.

The Seventh Circuit's discussion of the scope of the attorney-client privilege and the related work-product doctrine raised two issues of concern to TEI. First, the court held that so-called dual-purpose documents are not, by definition, privileged because they are used in preparing a taxpayer's return. Second, the court totally misconstrued, or at least greatly oversimplified, the IRS examination process. For these reasons, the Institute filed an amicus brief in support of Mr. Frederick and the taxpayers' petition for rehearing.

The documents at issue in Frederick included draft tax returns, workpapers, and correspondence. The Seventh Circuit held that "a dual-purpose document -- a document prepared for use in preparing tax returns and for use in litigation -- is not privileged." The conclusion seems to flow from the unfounded premise that all information developed by an attorney involved in tax return preparation work is scrivener's work and intended for ultimate disclosure to the IRS. In TEI's view, this was erroneous.

For example, consider an attorney who opines on the tax consequences of a proposed transaction. There may well be several ways in which the transaction can be structured, each generating a different set of tax consequences. Because of...