Professor Ventry Comments on Circuit Court Opinion in Tax Notes
Professor Dennis J. Ventry, Jr. commented on the First Circuit's much-anticipated decision in United States v. Textron (No. 07-2631) for an article appearing in the January 26 issue of Tax Notes. A sharply divided panel majority affirmed the district court's determination that Textron's tax accrual workpapers are protected under the work product doctrine. These workpapers support a corporate taxpayer's reserve for deferred or contingent tax liabilities and for related representations in the taxpayer's audited financial statements.
Both the majority and dissenting opinions noted Ventry's recent article on the case, "Protecting Abusive Tax Avoidance," which the government relied on in brief and at oral argument. In fact, the dissenting opinion stated that the article made "scholarly mince meat of [the taxpayer's] position."
The Tax Notes news story quotes Ventry as taking the majority to task for its broad interpretation of litigation. "The court displays its total lack of understanding of dispute resolution in the tax context," Ventry said. By finding that all tax disputes qualify as litigation, it glosses over the fact that many tax dispute mechanisms-such as negotiations over proposed adjustments to a taxpayer's return position, conferences with the IRS audit-team manager, and accelerated issue resolution procedures-are nonadversarial.
"One of the biggest failures noted by Ventry," the article continued, "was the lack of review of the actual documents at issue by either the district or circuit court. ‘An inquiry into why a document was created requires a temporal analysis,' he said. ‘The court must revisit the moment the document was created to scrutinize its purpose.' Instead, the courts punted on that review."
"Ventry posited that one group unlikely to welcome the opinion would be lawmakers on Capitol Hill. ‘Congress will be interested in learning that the decision just made its anti-shelter job much harder.'"
Professor Ventry is an expert in tax policy, and has written widely on the subject. His special interests include family taxation, legal ethics and professional standards, tax history, tax compliance and administration, and public finance.
Tax Notes is the flagship publication of Tax Analysts, the leading publisher of tax information worldwide.