Amicus Curiae Brief — In Re Grand Jury

Supreme Court briefNov 22, 2022

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Text

No. 21-1397

IN THE

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IN RE GRAND JURY

On Writ Of Certiorari

To The United States Court Of Appeals

For The Ninth Circuit

BRIEF FOR SILICON VALLEY TAX

DIRECTORS GROUP AS AMICUS CURIAE

SUPPORTING PETITIONER

JONATHAN C. BOND

Counsel of Record

SANFORD W. STARK

SAUL MEZEI

LUCAS C. TOWNSEND

VLADIMIR J. SEMENDYAI

GIBSON, DUNN & CRUTCHER LLP

1050 Connecticut Ave., N.W.

Washington, D.C. 20036

(202) 955-8500

JBond@gibsondunn.com

Counsel for Amicus Curiae

QUESTION PRESENTED

Whether an attorney-client communication that

seeks or provides legal advice loses its privileged character if a court later concludes that the communication’s primary purpose was to seek or provide nonlegal business advice.

TABLE OF CONTENTS

Page

INTEREST OF AMICUS CURIAE ....................... 1

SUMMARY OF ARGUMENT ............................... 3

ARGUMENT .......................................................... 5

I. The Problems Inherent In The Ninth

Circuit’s Primary-Purpose Test Are

Well Illustrated In The Tax Context .......... 5

II. The Court Should Reject Calls To

Dilute Privilege Protections In The

Tax Context ............................................... 18

CONCLUSION ..................................................... 29

iii

TABLE OF AUTHORITIES

Page(s)

Cases

Boechler, P.C. v. Commissioner,

142 S. Ct. 1493 (2022) ................................. 20, 21

CIC Servs., LLC v. IRS,

141 S. Ct. 1582 (2021) ....................................... 20

Cohen v. United States,

650 F.3d 717 (D.C. Cir. 2011) ........................... 20

Colton v. United States,

306 F.2d 633 (2d Cir. 1962),

cert. denied, 371 U.S. 951 (1963)........................ 9

Commissioner v. First Sec. Bank of Utah,

N.A., 405 U.S. 394 (1972) ................................. 15

Couch v. United States,

409 U.S. 322 (1973) ........................................... 22

County of Erie, In re,

473 F.3d 413 (2d Cir. 2007) ................................ 9

Eaton Corp. & Subsidiaries v.

Commissioner,

47 F.4th 434 (6th Cir. 2022) ............................. 15

Grand Jury Subpoena Duces Tecum Dated

Sept. 15, 1983, In re,

731 F.2d 1032 (2d Cir. 1984) .............................. 9

Jam v. Int’l Fin. Corp.,

139 S. Ct. 759 (2019) ......................................... 21

Kellogg Brown & Root, Inc., In re,

756 F.3d 754 (D.C. Cir. 2014),

cert. denied, 574 U.S. 1122 (2015).... 6, 7, 8, 13, 26

Mann Constr., Inc. v. United States,

27 F.4th 1138 (6th Cir. 2022) ........................... 20

Mayo Found. for Med. Educ. & Research

v. United States, 562 U.S. 44 (2011)........... 19, 20

Mohawk Indus., Inc. v. Carpenter,

558 U.S. 100 (2009) ......................................... 6, 7

United States v. Arthur Young & Co.,

465 U.S. 805 (1984) ........................................... 22

United States v. Brockamp,

519 U.S. 347 (1997) ........................................... 20

United States v. Frederick,

182 F.3d 496 (7th Cir. 1999),

cert. denied, 528 U.S. 1154 (2000)............... 7, 22

United States v. Janis,

428 U.S. 433 (1976) ........................................... 27

United States v. Jicarilla Apache Nation,

564 U.S. 162 (2011) ............................................. 7

United States v. Kovel,

296 F.2d 918 (2d Cir. 1961) ................................ 9

United States v. Sanmina Corp.,

968 F.3d 1107 (9th Cir. 2020) ....................... 9, 12

Upjohn Co. v. United States,

449 U.S. 383 (1981) ................. 6, 7, 17, 18, 26, 27

Welch v. Helvering,

290 U.S. 111 (1933) ........................................... 27

Statutes

Administrative Procedure Act,

5 U.S.C. §§ 551 et seq., 701 et seq. .................... 20

Inflation Reduction Act of 2022,

Pub. L. No. 117-169, 136 Stat. 1818 ................. 28

Pub. L. No. 93-595, 88 Stat. 1926 (1975) ............... 21

26 U.S.C. § 482 ....................................................... 14

26 U.S.C. § 6662 ..................................................... 28

26 U.S.C. § 6861 ..................................................... 27

26 U.S.C. § 7421 ..................................................... 20

26 U.S.C. § 7525 ................... 3, 10, 11, 16, 21, 22, 23

26 U.S.C. § 7602 ..................................................... 27

26 U.S.C. § 7609 ..................................................... 27

31 U.S.C. § 330 ....................................................... 10

Regulations

26 C.F.R. § 1.482-1 ................................................. 14

26 C.F.R. § 1.6664-4 ............................................... 28

Rules

Fed. R. Evid. 501 .......................................... 6, 21, 22

Other Authorities

Jerald David August, Attorney-Client

Privilege and Work-Product Doctrine

in Federal Tax Matters,

10 Bus. Entities 4 (July/Aug. 2008) ................. 12

Paul L. Caron, Tax Myopia, or Mamas Don’t

Let Your Babies Grow Up to Be Tax

Lawyers, 13 Va. Tax. Rev. 517 (1994) .............. 19

Stephanie Hoffer et al.,

The Death of Tax Court Exceptionalism,

99 Minn. L. Rev. 221 (2014).............................. 19

William W. Horton, A Transactional

Lawyer’s Perspective on the AttorneyClient Privilege: A Jeremiad for Upjohn,

61 Bus. Law. 95 (2005) ..................................... 11

Internal Revenue Service, Department of

the Treasury, Internal Revenue Service

Data Book, 2021 (May 2022),

https://www.irs.gov/pub/irs-pdf/p55b.pdf ......... 28

Bruce Kayle, The Tax Adviser’s Privilege in

Transactional Matters: A Synopsis and

a Suggestion, 54 Tax Law. 509 (2001)................ 6

1 McCormick on Evidence

(Robert P. Mosteller et al. eds.,

8th ed. 2022 update) ........................................... 6

William H. Volz et al., An Attorney-Client

Privilege for Embattled Tax

Practitioners: A Legislative Response

to Uncertain Legal Counsel,

38 Hofstra L. Rev. 213 (2009) ................. 6, 28, 29

IN THE

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No. 21-1397

IN RE GRAND JURY

On Writ Of Certiorari

To The United States Court Of Appeals

For The Ninth Circuit

BRIEF FOR SILICON VALLEY TAX

DIRECTORS GROUP AS AMICUS CURIAE

SUPPORTING PETITIONER

INTEREST OF AMICUS CURIAE*

The Silicon Valley Tax Directors Group (SVTDG)

consists of tax-focused representatives from more

than 100 leading technology and other companies that

together employ more than 4 million workers worldwide, with market capitalizations collectively exceeding $9 trillion. Since its inception in 1981, SVTDG’s

purpose has been to promote sound, long-term tax policies that support innovation and the global competitiveness of the U.S. technology industry.

* Pursuant to this Court’s Rule 37.6, no counsel for a party authored this brief in whole or in part, and no person or entity other

than amicus or its counsel made a monetary contribution to this

brief’s preparation. All parties have consented to the filing of

this brief.

SVTDG’s members would be harmed by the Ninth

Circuit’s nebulous and unpredictable standard for

determining—often years after the fact—whether a communication with legal counsel that is made for more

than one purpose is protected from disclosure by the

attorney-client privilege. Sound, fully informed legal

advice is essential for companies to ensure their compliance with applicable legal obligations—including the

tax laws. Securing such advice depends on robust consultation with legal counsel, without fear that attorneyclient communications will later be disclosed.

The Ninth Circuit’s flawed “primary-purpose test”

threatens to chill full and frank communications with

counsel by subjecting those communications to an indeterminate, post hoc assessment of whether “legal” or

non-legal, “business” concerns were the principal driver.

Pet. App. 2a. That threat looms large in the tax context. Tax issues—including legal questions regarding

the proper interpretation and application of tax statutes, Treasury Department regulations, case law, Internal Revenue Service (IRS) guidance, and other authorities to actual or contemplated transactions or

other activities—are often inextricably intertwined

with business concerns. Companies frequently rely on

their external and internal tax advisers—who often are

attorneys—to help them understand the tax consequences of particular courses of action. Those tax consequences directly affect a business’s bottom line. The

intractability of disentangling overlapping tax and business purposes of a single communication, and of further

speculating how a court in future litigation might weigh

those multiple purposes’ comparative importance, will

hinder candid communications and make the daily task

of helping the companies that SVTDG represents to develop sound tax strategies much more difficult for the

lawyers and other tax professionals who advise them.

SUMMARY OF ARGUMENT

I. The Ninth Circuit’s misguided standard for determining whether attorney-client communications

made both to provide (or seek) legal advice and for

other purposes (so-called “dual-purpose” communications) is deeply flawed. Contrary to the court of appeals’ and the government’s suggestions, the problems

created by the Ninth Circuit’s “primary-purpose test”

(Pet. App. 2a) and the harmful effects that test will

foment are vividly illustrated in the tax context.

As in many other areas, in the tax context legal

advice is often interwoven with consultation on related business issues. Tax advice typically is legal advice. Tax counsel regularly advise on the meaning

and application of statutes, regulations, case law, and

other authorities regarding the likely tax treatment of

a completed or proposed transaction or activity. Nonlawyer tax practitioners frequently also provide “tax

advice” that is subject to the same privilege principles:

Congress has provided by statute that “the same common law protections” that apply to attorney-client

communications also apply (with certain exceptions)

to communications “[w]ith respect to tax advice” between clients and “federally authorized tax practitioner[s].” 26 U.S.C. § 7525(a)(1). Those tax practitioners include certified public accountants and other

non-lawyer professionals who are authorized to practice before the IRS and who advise clients on taxrelated and other aspects of their businesses.

At the same time, tax advice often also encompasses

business advice. Business decisions drive tax outcomes,

and the tax consequences of a particular transaction often bear directly on a business’s bottom line. Lawyers

and non-lawyer tax practitioners alike are often called

upon to advise businesses on issues that concern tax and

non-tax issues. In many contexts, advice regarding tax

issues and other aspects of a business’s activities are

interdependent, or even inseparable.

The overlap between legal advice concerning the

interpretation and application of tax laws, on the one

hand, and consultation on interrelated, non-tax issues, on the other, will likely lead in the tax context to

all of the ill effects of the Ninth Circuit’s test that petitioner has identified more broadly. That approach

improperly excludes from the privilege many communications made to obtain or provide legal advice, which

will in turn chill candid communications between clients and practitioners. And the immense difficulty of

predicting with confidence how a future court might

apply the Ninth Circuit’s test in litigation years later,

and how that court would independently divine a communication’s one primary purpose, deprives clients

and tax practitioners of certainty in the present about

whether particular communications are privileged.

That lack of certainty in turn will further deter full

and frank communications among clients and counsel.

II. The Ninth Circuit and the government have

hinted without elaboration that a different, less protective test for dual-purpose-communication privilege should apply in the tax context than in other

areas. That approach has nothing to commend it.

This Court and others have rightly been wary of taxexceptionalism arguments in recent years. And far

from cutting back on the privilege’s scope in the tax

context, Congress has expanded the privilege’s application beyond communications with attorneys to cover

a broader range of professionals who provide advice

regarding application of the tax laws to particular circumstances. None of the proffered rationales for a

special tax-disfavoring rule has merit.

ARGUMENT

The Ninth Circuit’s primary-purpose test for determining whether dual-purpose attorney-client communications are privileged is unworkable. Despite acknowledging that test’s shortcomings in other areas, both the

court of appeals and the government have suggested

that the primary-purpose test poses fewer problems in

the tax context. Pet. App. 11a & n.5; Br. in Opp. 14-16.

And each has hinted—and the government may contend

at the merits stage—that a tax-specific standard for applying the attorney-client privilege to dual-purpose communications is appropriate, with contours and limitations to be named later. Both suggestions are unsound.

The flaws in the Ninth Circuit’s primary-purpose test

and the practical difficulties it poses are poignantly

illustrated in the context of tax advice. And nothing

about legal advice in the tax context warrants a

watered-down privilege rule applicable to tax only.

THE PROBLEMS INHERENT IN THE NINTH

CIRCUIT’S PRIMARY-PURPOSE TEST ARE WELL

ILLUSTRATED IN THE TAX CONTEXT

As petitioner explains (Br. 24-28), the Ninth Circuit’s “primary-purpose test” for determining whether

dual-purpose communications are privileged (Pet. App.

6a) invites an array of conceptual and practical problems that the D.C. Circuit’s sound approach to the issue

avoids. Those problems can be seen in stark relief in the

tax context, in which the privilege issues in this case

arise, where communications motivated by both “legal

and business concerns” (id. at 2a) are ubiquitous, and

disentangling and ranking multiple motives is all but

impossible. The harms that flow from the primarypurpose test’s flaws would be acutely felt by tax professionals and the clients they serve if the Ninth Circuit’s

standard were to become the law.

A. Federal Rule of Evidence 501 directs federal

courts to follow the “common law—as interpreted

by United States courts in the light of reason and

experience”—in assessing claims of privilege. Fed. R.

Evid. 501. The light shed by “reason and experience”

(ibid.) counsels decisively against the Ninth Circuit’s

rule.

At issue in this case is “[t]he attorney-client privilege,” which is “the ‘oldest of the privileges for confidential communications known to the common law.’”

In re Kellogg Brown & Root, Inc., 756 F.3d 754, 757

(D.C. Cir. 2014) (quoting Upjohn Co. v. United States,

449 U.S. 383, 389 (1981)), cert. denied, 574 U.S. 1122

(2015); see Mohawk Indus., Inc. v. Carpenter, 558 U.S.

100, 108 (2009). The privilege was recognized in England by the 16th century, and its roots run to Roman

law. See Bruce Kayle, The Tax Adviser’s Privilege in

Transactional Matters: A Synopsis and a Suggestion,

54 Tax Law. 509, 510 (2001); William H. Volz et al.,

An Attorney-Client Privilege for Embattled Tax Practitioners: A Legislative Response to Uncertain Legal

Counsel, 38 Hofstra L. Rev. 213, 216-217 (2009) (Volz);

1 McCormick on Evidence § 87(a) (Robert P. Mosteller

et al. eds., 8th ed. 2022 update). As this Court has

recognized, the privilege promotes values of paramount importance: “By assuring confidentiality, the

privilege encourages clients to make ‘full and frank’

disclosures to their attorneys, who are then better

able to provide candid advice and effective representation.” Mohawk Indus., 558 U.S. at 108. Encouraging candid disclosure and advice, “in turn, serves

‘broader public interests in the observance of law and

administration of justice.’” Ibid. (quoting Upjohn,

449 U.S. at 389).

The attorney-client privilege’s basic contours are

by now well settled. At its core, “the privilege applies

to a confidential communication between attorney

and client if that communication was made for the

purpose of obtaining or providing legal advice to the

client.” Kellogg Brown & Root, 756 F.3d at 757. The

question here is how that privilege applies to communications made for multiple purposes—where legal

advice is sought or obtained that serves both legal

objectives as well as non-legal, business-focused

aims.

The simplest answer to that question, posited by

then-Judge Kavanaugh for the D.C. Circuit in Kellogg

Brown & Root, is also the correct one. “Sensibly and

properly applied, the test boils down to whether obtaining or providing legal advice was one of the significant purposes of the attorney-client communication.” 756 F.3d at 760. Although courts have floated

various formulations of the inquiry, “it is clearer,

more precise, and more predictable to articulate the

test as follows: Was obtaining or providing legal advice a primary purpose of the communication, meaning one of the significant purposes of the communication?” Ibid. There are often multiple motives for one

missive, and disentangling them is unnecessary once

a court finds that seeking or giving legal advice was

among them. That simple inquiry settles the question in cases like this, where seeking legal advice was

a significant purpose.

The Ninth Circuit here did not adopt the D.C.

Circuit’s sensible approach. See Pet. App. 11a. But

it also declined to adopt what it described as the Seventh Circuit’s bright-line rule that “a dual-purpose

document * * * is not privileged,” full stop. Id. at 5a

n.2 (quoting United States v. Frederick, 182 F.3d 496,

501 (7th Cir. 1999), cert. denied, 528 U.S. 1154

(2000)). And for good reason: A rule that strips the

privilege from any communications made to seek or

supply legal advice that also serve an additional,

non-legal purpose would profoundly chill attorneyclient communications and severely undermine the

purposes of the privilege. Even the government here

does not appear to defend that unsound approach

and has sought to portray the Seventh Circuit’s rule

as more limited. Br. in Opp. 13-14 (suggesting that

the Seventh Circuit’s statements in Frederick “were

specific to ‘accountants’ worksheets’ prepared by an

attorney” (citation omitted)).

Instead, the Ninth Circuit adopted a “primarypurpose test,” Pet. App. 6a (emphasis added), which

turns on which of multiple motives for a communication principally prompted the speaker to speak. Id.

at 6a-10a. That which-purpose-predominated framework is deeply fraught. As then-Judge Kavanaugh

aptly observed, “[a]fter all, trying to find the one primary purpose for a communication motivated by two

sometimes overlapping purposes (one legal and one

business, for example) can be an inherently impossible task.” Kellogg Brown & Root, 756 F.3d at 759. “It

is often not useful or even feasible to try to determine

whether the purpose was A or B when the purpose

was A and B.” Ibid. (emphases added).

As petitioner explains (Br. 24-28), the problems

with the primary-purpose test are manifold. The test

is unworkable in application because it calls for isolating and then weighing multiple purposes behind a single communication, even though those purposes are

often closely intertwined. The indeterminacy and intractability of that inquiry makes it prohibitively difficult for attorneys and clients in the present to pre-

dict how a court might classify a particular communication in litigation years in the future. Clients and

their tax counsel thus will lack certainty as to whether

many communications will ultimately be deemed privileged. That uncertainty, in turn, threatens to chill

full and frank attorney-client consultation—the opposite of what the privilege exists to encourage.

B. Those fundamental problems with the Ninth

Circuit’s primary-purpose test would proliferate in

cases involving tax-related legal advice if this Court

were to adopt that approach. Contrary to the court of

appeals’ and the government’s suggestions, Pet. App.

11a & n.5; Br. in Opp. 15-16, the tax-advice setting

puts the indeterminacy and unpredictability of the

Ninth Circuit’s approach in sharp relief.

1. As lower courts, including the Ninth Circuit,

have recognized, “[t]ax advice rendered by an attorney

is legal advice within the ambit of the privilege.”

United States v. Sanmina Corp., 968 F.3d 1107, 1118

n.4 (9th Cir. 2020) (emphasis added) (quoting In re

Grand Jury Subpoena Duces Tecum Dated Sept. 15,

1983, 731 F.2d 1032, 1037 (2d Cir. 1984)); see, e.g.,

Colton v. United States, 306 F.2d 633, 637 (2d Cir.

1962) (“There can, of course, be no question that the

giving of tax advice * * * [is] basically [a] matte[r] sufficiently within the professional competence of an attorney to make [it] prima facie subject to the attorneyclient privilege.” (citing United States v. Kovel,

296 F.2d 918 (2d Cir. 1961) (Friendly, J.))), cert. denied, 371 U.S. 951 (1963). A lawyer’s communications

with a client regarding the proper application of tax

statutes, regulations, case law, IRS guidance, and

other authorities to actual or contemplated transactions or other activities is quintessential “legal advice.” In re County of Erie, 473 F.3d 413, 419 (2d Cir.

2007) (“Fundamentally, legal advice involves the interpretation and application of legal principles to

guide future conduct or to assess past conduct.”).

That is true not only of a lawyer’s analysis of the

effect of particular transactions or other activities on

the client’s ultimate tax liability, but also of whether

particular activities must be reported to the government and, if so, how they should be characterized under the law. Just as a securities lawyer’s advice to a

corporate client regarding what filings and disclosures may be necessary in light of a new factual development is privileged, so too is a lawyer’s advice regarding what a taxpayer-client needs to report and

how to do so properly. Tax-related legal advice provided by a lawyer lies in the heartland of communications protected by the privilege.

The same is true of “tax advice” provided by many

non-lawyer tax professionals, to whom Congress has

extended “the same common law protections of confidentiality ” that apply to attorneys (with limited exceptions). 26 U.S.C. § 7525(a)(1). Section 7525, enacted

in 1998, provides that, “[w]ith respect to tax advice,

the same common law protections of confidentiality

which apply to a communication between a taxpayer

and an attorney shall also apply to a communication

between a taxpayer and any federally authorized tax

practitioner to the extent the communication would be

considered a privileged communication if it were between a taxpayer and an attorney.” Ibid.; see id.

§ 7525(a)(3) (defining a “‘federally authorized tax practitioner’” as “any individual who is authorized under

Federal law to practice before the Internal Revenue

Service if such practice is subject to Federal regulation

under [31 U.S.C. § 330],” and defining “‘tax advice’” as

“advice given by an individual with respect to a matter

which is within the scope of the individual’s authority

to practice” under such authorization).

Section 7525’s extension of the privilege is subject

to notable limits. The privilege that provision confers

on client communications with federally authorized tax

practitioners may be asserted only in a “noncriminal

tax matter before the [IRS]” or a “noncriminal tax proceeding” in federal court. 26 U.S.C. § 7525(a)(2). And

it does not apply to certain “written communication[s]”

concerning “tax shelter[s].” Id. § 7525(b). But apart

from those specified limitations, Section 7525 puts

covered non-lawyer tax professionals providing “tax

advice” on the same privilege footing as lawyers

providing legal advice by expressly incorporating traditional, “common law” privilege principles. Id.

§ 7525(a)(1).

2. At the same time, as in many other areas where

clients seek privileged advice, both the substance of

tax-related legal advice and the client’s reasons for

seeking it often overlap with other, non-legal considerations relating to a client’s business. Because tax

liabilities and benefits are linked to a client’s business

and typically bear directly on the client’s bottom line,

advice regarding those liabilities and benefits is also

business advice. And just as “corporate lawyers

(whether internal or external) are called on by their

clients to advise them of the legal risks and consequences of various courses of action and the ways in

which various corporate goals may be achieved within

the legal framework,” William W. Horton, A Transactional Lawyer’s Perspective on the Attorney-Client

Privilege: A Jeremiad for Upjohn, 61 Bus. Law. 95,

104 (2005), lawyers and non-lawyer tax practitioners

likewise often advise on tax issues that bear on a client’s business strategy and decisions.

“Since the introduction of the federal income tax

in 1913, taxpayers have frequently sought the advice

of attorneys to counsel them on tax matters * * * in

limitless contexts” where tax and business considerations overlap. Jerald David August, Attorney-Client

Privilege and Work-Product Doctrine in Federal Tax

Matters, 10 Bus. Entities 4, 4 (July/Aug. 2008). Those

contexts “rang[e] from determining the most advantageous way to organize a new business from an income

tax standpoint” and “planning for the acquisition or

sale of a company,” to “structuring distributions to

owners of an enterprise.” Ibid. Practitioners advising

on such matters often fill a “dual role,” ibid., providing

advice on tax and business aspects simultaneously.

That is true of many tax lawyers, and it may be especially evident for many non-lawyer tax practitioners

covered by Section 7525, such as certified public accountants, whose expertise and responsibilities frequently encompass advising on both tax and non-tax

business issues.

3. The inevitable overlap of tax and business issues means that many situations will arise in which

the Ninth Circuit’s primary-purpose test will create

problems for professionals providing tax-related legal

advice. As the Ninth Circuit itself has recognized,

“communications [that] might have more than one

purpose” are “especially” prevalent “‘in the tax law

context, where an attorney’s advice may integrally involve both legal and non-legal analyses.’” Pet. App. 4a

(quoting Sanmina, 968 F.3d at 1118). Occasions

where courts must determine whether a dual-purpose

communication is privileged are thus ubiquitous in

the tax context.

Under the D.C. Circuit’s sensible approach, determining whether the attorney-client privilege applies to

such dual-purpose communications is straightforward.

So long as “obtaining or providing legal advice was one

of the significant purposes of the attorney-client communication,” the privilege applies. Kellogg Brown &

Root, 756 F.3d at 760 (emphasis added). That inquiry

is comparatively easy for courts to apply. A court

should have relatively little difficulty ascertaining

whether at least one significant purpose of the communication was to obtain or provide legal advice that concerns tax matters. Once the court identifies that purpose, the inquiry ends, and the existence of one or more

additional, overlapping, non-tax-advice purposes is irrelevant. The outcome of that analysis also should be

predictable for participants in that communication at

the time it is made. The client and the tax practitioner

each should know whether seeking or providing taxrelated legal advice is at least one significant purpose

of the communication, even if other purposes also exist.

Under the Ninth Circuit’s primary-purpose test,

by contrast, the inquiry concerning dual-purpose communications involving both tax and non-tax issues

will frequently be prohibitively difficult. For example:



Suppose that, following the enactment of a new

investment-tax-credit regime, a company’s CEO

asks the company’s in-house tax practitioner

who knows the business well—whether a tax

attorney, or a certified public accountant or

other tax professional to whom Section 7525 extends the privilege—to conduct a cost-benefit

analysis that identifies potential ways in

which the company can maximize its available

tax credits while minimizing any disruptive effects on the current business. Performing that

analysis requires the tax practitioner to inter-

pret and apply the pertinent statutes, regulations, case law, and IRS guidance relating to

the new tax-credit regime—quintessential legal advice covered by the traditional commonlaw privilege that applies to lawyers and

(through Section 7525) federally authorized

tax practitioners alike. But the tax practitioner must also integrate that tax-related legal advice with non-legal, business considerations.



Suppose that, following the enactment of a new

law increasing certain corporate taxes, the

CEO asks the same tax practitioner to identify

a menu of potential mitigating measures that

the company might take in response to the new

law and to assess the likely effects of each of

those measures on the business and whether

any is worth pursuing given the associated

costs and risks. Once again, the tax practitioner must interpret and apply the internalrevenue laws, regulations, case law, and IRS

guidance to determine what mitigating

measures exist and how each would affect the

company’s tax liability—the heartland of privileged communications. But the practitioner

must synthesize that tax-related legal analysis

with an evaluation of other potential business

consequences.



Suppose that a client asks a tax practitioner

for advice regarding controlled transactions

subject to potential IRS income adjustments

and additional tax under 26 U.S.C. § 482 and

its implementing regulations. See 26 C.F.R.

§ 1.482-1 et seq. Section 482 and the regula-

tions address the tax treatment of certain

transfers of assets or the provision of services

by one entity to another entity that is under

common control, such as between affiliates

within a single multinational enterprise. See,

e.g., Commissioner v. First Sec. Bank of Utah,

N.A., 405 U.S. 394, 400 (1972). The governing

standard generally requires that the “transfer

price” in the controlled transaction must “reflect a counterfactual arm’s-length transaction

‘with an uncontrolled taxpayer.’” Eaton Corp.

& Subsidiaries v. Commissioner, 47 F.4th 434,

437 (6th Cir. 2022) (citation omitted). The tax

practitioner advising on such transactions must

construe and apply the pertinent legal authorities to advise the client on the effects of different aspects of the contemplated transactions—

classic privileged material. But such advice often also requires and may depend on a detailed

analysis of the transactions from a business

perspective—which may entail extensive client communications and advice concerning

how each subsidiary will operate, where personnel and facilities of each would or should be

located, and how the transactions fit into or affect the broader enterprise.



Suppose that a client considering a joint venture consults outside tax counsel with extensive experience handling such complex partnership transactions regarding the best method

for allocating income, deductions, gains, or

losses with respect to contributed property for

tax purposes and how to best leverage that tax

advice to negotiate the best business terms

with the joint venture counterparty. Here,

likewise, the tax practitioner must engage in

garden-variety application of legal authorities

to particular circumstances—advice covered

by the privilege. But that advice would be interwoven with business and strategic considerations.

Dual-purpose communications would arise in

each of those instances. The request from the client is

made in significant part to obtain legal advice: the

practitioner’s assessment of how the tax laws and

other authorities apply to particular circumstances.

And the response from the tax practitioner—whether

an attorney or other professional covered by Section

7525—includes such legal advice. But the client’s request also simultaneously seeks, and the tax practitioner’s communications would include, advice concerning non-legal, business considerations that are intertwined with the tax-related legal issues.

Under the D.C. Circuit’s significant-purpose approach, those overlapping purposes pose no problem.

The client and tax practitioner in each scenario will

know that seeking and providing tax-related legal advice was at least one significant purpose of their communications. They thus can have certainty that their

communications will be protected from disclosure, unless the privilege cannot be asserted for other, independent reasons. See, e.g., 26 U.S.C. § 7525(a)(2)

(privilege for tax advice provided by non-lawyer tax

practitioner cannot be asserted in criminal matters).

The Ninth Circuit’s approach, in contrast, deprives client and counsel alike of necessary certainty.

That approach requires a court, likely long after the

fact, to attempt to isolate the tax-related legal purposes from non-legal, business purposes—and then to

weigh them to determine which single purpose predominated. As the scenarios discussed above illustrate, the artificial exercise of disentangling and then

somehow comparing those multiple purposes may be

practically impossible. Worse still, neither the client

nor the tax practitioner can reliably know at the time

of a particular communication how a reviewing court

applying the Ninth Circuit’s approach would view

that communication years later. The resulting uncertainty puts clients and tax practitioners to an untenable choice of either forgoing full and frank consultation or running a risk that the communication will be

subject to compelled disclosure.

The Ninth Circuit’s primary-purpose test thus

would frustrate the core objectives of the attorneyclient privilege in the tax context. This Court has underscored that the attorney-client privilege’s “purpose” is “‘to encourage clients to make full disclosure

to their attorneys,’” based on the “recogni[tion] that

sound legal advice or advocacy serves public ends and

that such advice or advocacy depends upon the lawyer’s being fully informed by the client.” Upjohn,

449 U.S. at 389 (citation omitted). “[F]ully informed”

legal advice (ibid.) requires correspondingly robust

privilege protection. And “for the attorney-client privilege to be effective, it must be predictable.” United

States v. Jicarilla Apache Nation, 564 U.S. 162, 183

(2011). “An uncertain privilege, or one which purports

to be certain but results in widely varying applications

by the courts, is little better than no privilege at all.”

Upjohn, 449 U.S. at 393. “[I]f the purpose of the

attorney-client privilege is to be served, the attorney

and client must be able to predict with some degree of

certainty whether particular discussions will be protected.” Ibid.

The Ninth Circuit’s “primary-purpose test” (Pet.

App. 2a) flunks these criteria. That approach would

render non-privileged many communications seeking

or providing tax-related legal advice merely because

they are also motivated by additional, non-legal purposes. That regime would make it more challenging for

clients to seek and tax counsel to provide taxrelated legal advice with assurance that their communications will remain confidential. And like the untethered “‘substantial role’” test that this Court rejected

in Upjohn, “[t]he very terms of the test adopted by the

court below suggest the unpredictability of its application,” 449 U.S. at 393, in the tax context as elsewhere.

The uncertainty inherent in the post hoc judicial evaluation called for by the Ninth Circuit—which seeks

to find a message’s one and only primary purpose—

will further chill candid tax-related legal advice.

II. THE COURT SHOULD REJECT CALLS TO DILUTE

PRIVILEGE PROTECTIONS IN THE TAX CONTEXT

Near the end of its opinion, the Ninth Circuit cryptically indicated that a standard more protective of

attorney-client communications might be warranted

in other, non-tax settings. Pet. App. 11a & n.5. At the

petition stage, the government also obliquely gestured

(Br. in Opp. 7-8, 14-16) toward a less-protective privilege standard in the context of tax-related advice

alone. To the extent that either the court of appeals

or the United States has suggested a diluted privilege

rule unique to the tax context, the Court should reject

that suggestion.

A. The Ninth Circuit’s and the government’s noncommittal bid for a uniquely narrow attorney-client

privilege—and conversely a uniquely broad governmental ability to compel disclosure—in the tax context is out of step with the drumbeat of judicial decisions away from so-called “tax exceptionalism.”

Stephanie Hoffer et al., The Death of Tax Court Exceptionalism, 99 Minn. L. Rev. 221, 222 (2014). It may

once have been received wisdom that “tax law is so

different from the rest of the regulatory state” that it

was subject to different governing principles—for example, that “general administrative law doctrines and

principles do not apply” to Treasury’s development of

rules and guidance to implement the Internal Revenue Code. Ibid.; but see ibid. (critiquing this “‘tax myopia’” approach); Paul L. Caron, Tax Myopia, or Mamas Don’t Let Your Babies Grow Up to Be Tax Lawyers, 13 Va. Tax. Rev. 517, 531 (1994) (criticizing the

“myth that tax law is fundamentally different from

other areas of the law”). But more recently, this Court

and others have recognized that courts should not invent special tax-specific rules or interpretive principles that put taxpayers on uniquely different footing

in litigating against the government.

For example, this Court has made clear that

Treasury and the IRS are subject to the same core constraints in interpreting tax laws and promulgating

tax regulations as other federal agencies administering other statutes. The Court in Mayo Foundation for

Medical Education & Research v. United States,

562 U.S. 44 (2011), found no “justification for applying

a less deferential standard of review to Treasury Department regulations than [it] appl[ies] to the rules of

any other agency” and declined “to carve out an ap-

proach to administrative review good for tax law

only.” Id. at 55. This Court and lower courts have

also rejected efforts by the IRS to insulate its regulatory actions from the same modes of judicial review

that courts apply to other agencies. See CIC Servs.,

LLC v. IRS, 141 S. Ct. 1582, 1588-1594 (2021) (rejecting government’s contention that the Anti-Injunction

Act, 26 U.S.C. § 7421(a), foreclosed judicial review of

procedural challenge to an IRS notice); see also Mann

Constr., Inc. v. United States, 27 F.4th 1138, 1142-1148

(6th Cir. 2022) (holding an IRS notice invalid for failure to comply with notice-and-comment provisions of

the Administrative Procedure Act (APA), 5 U.S.C.

§§ 551 et seq., 701 et seq.); Cohen v. United States,

650 F.3d 717, 722-736 (D.C. Cir. 2011) (en banc) (holding that the APA’s judicial-review provisions applied

to permit review of another IRS notice).

More recently, this Court rejected the government’s suggestion that the general presumption that

nonjurisdictional limitations periods are subject to equitable tolling applies differently, and should be easier for the government to overcome, in the tax setting.

Boechler, P.C. v. Commissioner, 142 S. Ct. 1493, 1501

(2022). Invoking this Court’s decision in United States

v. Brockamp, 519 U.S. 347 (1997)—in which the Court

had held that a particular tax deadline was immune

to equitable tolling—the government contended in

Boechler that “the Brockamp Court’s observation that

tax law generally is not amenable to ‘case-specific exceptions reflecting individualized equities’ applie[d]

with particular force” to another tax deadline that was

at issue in Boechler. Gov’t Br. at 43-44, Boechler, supra

(No. 20-1472) (quoting Brockamp, 519 U.S. at 352).

This Court rejected that argument, concluding that

ordinary interpretive principles regarding equitable

tolling applied equally to the tax-law deadline at issue. See Boechler, 142 S. Ct. at 1501 (“[I]t bears emphasis that Brockamp does not control simply because

it also dealt with a statute relating to tax collection.”).

Congress, of course, is free within constitutional

limits to prescribe distinct rules for the tax context,

including those relating to the privileges applicable in

federal court. Congress enacted the Federal Rules of

Evidence, including Rule 501, Pub. L. No. 93-595,

88 Stat. 1926, 1933-1934 (1975), and Congress retains

the prerogative to amend them. But Congress has not

chosen to adopt a more government-friendly test for

attorney-client privilege in the tax context. Instead,

Rule 501 directs federal courts to follow the “common

law—as interpreted by United States courts in the

light of reason and experience”—in discerning the

scope of privileges. Fed. R. Evid. 501. Nothing in that

simple standard relegates tax-related legal advice to

second-class status for privilege purposes.

If anything, Congress has taken the opposite tack

by making privilege protections more broadly applicable in the tax context. Section 7525 extends “the same

common law protections of confidentiality which apply

to a communication between a taxpayer and an attorney” to communications “[w]ith respect to tax advice

* * * between a taxpayer and any federally authorized

tax practitioner,” 26 U.S.C. § 7525(a)(1), who need not

be a lawyer, id. § 7525(a)(3)(A). Section 7525 does not

speak directly to the question presented because Congress expressly incorporated existing attorney-client

privilege law. Cf. Jam v. Int’l Fin. Corp., 139 S. Ct.

759, 769 (2019) (“[W]hen a statute refers to a general

subject, the statute adopts the law on that subject as it

exists whenever a question under the statute arises.”).

But Congress’s decision to expand the applicability of

traditional privilege principles to a broader range of

federally authorized tax practitioners providing “tax

advice,” 26 U.S.C. § 7525(a)(1), is hard to reconcile with

any suggestion that Federal Rule of Evidence 501 silently restricts the scope of the attorney-client privilege

in the tax context to protect fewer communications.

B. None of the rationales that the Ninth Circuit

and the government have identified for applying a

less-protective privilege in the tax context has merit.

1. Both the court of appeals and the government

at the petition stage expressed concern that applying

ordinary attorney-client privilege standards to tax

matters risks “inadvertently creat[ing] an accountantclient privilege.” Br. in Opp. 15 (emphasis added); see

Pet. App. 11a n.5. Both relied on lower-court decisions

that in turn had cited this Court’s decisions in United

States v. Arthur Young & Co., 465 U.S. 805 (1984),

and Couch v. United States, 409 U.S. 322 (1973), as

foreclosing an accountant-client privilege. Pet. App.

11a n.5 (citing Frederick, 182 F.3d at 500); Br. in Opp.

15 (same); see Frederick, 182 F.3d at 500 (citing Arthur Young and Couch). But to the extent the Court’s

statements in Arthur Young and Couch that “no confidential accountant-client privilege exists under federal law” might be thought to exclude tax advice provided by accountants from the shield of privilege, Arthur Young, 465 U.S. at 817 (quoting Couch, 409 U.S.

at 335), those decisions were abrogated by Congress’s

enactment of Section 7525. That provision, as discussed, expressly extends the common-law privilege

to “tax advice” provided by federally authorized tax

practitioners even if those practitioners are not licensed attorneys. 26 U.S.C. § 7525(a)(1).

Whatever weight any concerns of creating an

accountant-client privilege by accident might carry

outside the context of “tax advice” under Section 7525,

they accordingly cannot justify withholding the privilege for tax-related advice that Congress codified in

the Internal Revenue Code. Although courts should

not invent interpretive principles applicable only to

the tax context, see pp. 19-21, supra, Congress is free

enact different rules for the tax setting. And here

Congress has made the judgment that traditional

privilege principles should apply in the tax context to

an even broader array of professionals—non-lawyers

authorized to practice before the IRS—than it does in

other areas. The Court should not skew the scope of

the privilege narrowly based on concerns of upsetting

background rules when Congress has stepped in to

provide expressly that the privilege applies more

broadly in the tax context.

2. The Ninth Circuit and the government relatedly posited that the attorney-client privilege is less

clearly implicated in the tax context because disclosing information on a tax return waives the privilege

with respect to underlying details. Br. in Opp. 15-16;

see Pet. App. 11a n.5. But the fact that a disclosed tax

return, and potentially other supporting documents

that were created for the purpose of being disclosed,

are or become non-privileged has no bearing on the

privileged status of earlier tax-related legal advice.

Attorneys often provide legal advice that affects the

content of future filings with courts or government

agencies, but those future filings do not strip the privilege from the prior legal advice concerning what the

future filings must or should include. The filing of a

complaint in court to commence civil litigation or of a

Form 10-K with the Securities and Exchange Commission does not abrogate the privilege for all prior

attorney-client communications that affected the content of such filings.

The same is true in the tax context. A tax practitioner’s advice about how to structure a transaction in

light of potential tax consequences does not become

non-privileged merely because the client proceeds

with the transaction and reports the transaction or its

tax effects on a tax return. Nor does a client waive the

privilege regarding advice about how to interpret and

apply the laws that govern what must be reported on

a tax return with respect to specific activities by following (or rejecting) that advice and filing a tax return

that includes (or omits) certain data.

The Ninth Circuit initially may have been confused about the difference between privileged taxrelated legal advice and the preparation of a tax return. Its original opinion stated that “normal tax

advice—even coming from lawyers—is generally not

privileged.” 13 F.4th 710, 717 n.5 (9th Cir. 2021) (emphasis altered), amended on denial of rehearing,

23 F.4th 1088 (9th Cir. 2022) (Pet. App. 1a-12a); but cf.

13 F.4th at 714 n.2 (noting that a prior Ninth Circuit

decision had “h[eld] that attorney-client privilege

might apply to legal advice about what to claim on a

tax return, even if it does not apply to the numbers

themselves”). But in denying a petition for rehearing,

the panel amended its opinion by replacing “tax advice” with “tax return preparation assistance.” Pet.

App. 1a (emphasis added); see id. at 11a n.5. Although

that amendment cured the court of appeals’ original

misstatement of the law, neither the court nor the government at the petition stage appears to have appreciated the importance of the distinction between those

two concepts.

A unique, less-protective privilege standard for all

dual-purpose communications in the tax context might

have been warranted if “tax advice” in general were

“not privileged.” 13 F.4th at 717 n.5 (emphasis omitted). But as discussed above, and as the Ninth Circuit’s

correction reflects, that is not true: tax advice from a

lawyer or federally authorized tax practitioner generally is privileged. See pp. 9-11, 24, supra. And although tax returns and certain supporting materials

themselves are non-privileged, it does not follow that

legal advice regarding the tax treatment of the underlying subject matter, or even concerning the application of reporting requirements to the relevant transactions or other activities, is unprotected by the privilege

and Section 7525 as well. Because almost any taxrelated legal advice could ultimately be tied in some way

to a tax return, to conclude otherwise would be to render

non-privileged practically all tax-related advice, in contravention of decades of case law and Section 7525.

The non-privileged status of filed returns and supporting documentation under ordinary privilege principles

certainly does not justify adopting a different, lessprotective privilege regime for all tax-related matters.

The government’s and the Ninth Circuit’s mistakenly crabbed view of what constitutes privileged

tax-related legal advice also may have contributed to

their equally mistaken conjecture that the primarypurpose test will pose fewer practical problems in the

tax context than in other settings. Br. in Opp. 15-16;

Pet. App. 11a. At the petition stage, the government

contrasted “the tax context”—in which it asserted

that a communication’s dual legal and non-legal purposes “may be readily separable”—with that of “a

company’s internal investigation,” which the government conceded “involves the provision of ‘quintessential legal advice’” and in which “segregating multiple

purposes is * * * an ‘inherently impossible task.’”

Br. in Opp. 15-16 (quoting Kellogg Brown & Root,

756 F.3d at 759; brackets and other internal quotation

marks omitted); see Pet. App. 11a (stating that Kellogg

Brown & Root “dealt with the very specific context of

corporate internal investigations, and its reasoning

does not apply with equal force in the tax context”).

The government’s apparent premise that the tax context does not “involv[e] the provision of ‘quintessential legal advice’” (Br. in Opp. 15 (brackets and citation omitted)) is incorrect for the reasons explained

above. The government’s additional, tentative conjecture that legal and non-legal purposes “may” be

easier to disentangle in the tax context than in other

areas (id. at 16 (emphasis added)) is similarly unsound. At a minimum, the government to date has

identified nothing to support that speculation.

The government’s related attempt to cabin the difficulties of the Ninth Circuit’s approach to non-tax

cases, and on that basis to justify a less-protective

privilege rule for tax cases than the government

agrees (Br. in Opp. 16) might be appropriate for internal investigations, is equally untenable. Consider, for

example, a company’s internal investigation that involves a tax issue. Cf. Pet. Br. 30-31 (discussing

Upjohn, 449 U.S. at 394). It is far from clear how the

court of appeals’ primary-purpose test would apply in

that scenario. Would a court be required to ascertain

at the outset not only the primary purpose of a particular communication, but also the primary purpose of

the underlying subject matter, to determine which

privilege rubric applies? That added layer of uncertainty and unpredictability is yet another reason to

reject the Ninth Circuit’s approach.

3. To the extent the government’s parsimonious

view of attorney-client privilege in the tax context reflects a fear that improper tax-related conduct will

otherwise go undetected, that fear also cannot justify

a tax-specific, government-friendly test for privilege.

The government has at its disposal the full arsenal that Congress by statute, Treasury by regulation,

and the courts have seen fit to provide for the enforcement of the tax laws. The IRS wields expansive investigative powers—including summons authority, which

extends not only to taxpayers but also to third parties,

who may possess non-privileged materials reflecting

factual information the IRS seeks. See 26 U.S.C.

§§ 7602, 7609. And the privilege extended to client

communications with non-lawyer federally authorized

tax practitioners under Section 7525 applies only in

certain noncriminal matters and excludes communications regarding tax shelters. Id. § 7525(a)(2), (b). The

IRS also possesses broad collection powers (including

even before completion of the administrative process

when it deems collection at risk, see id. § 6861).

In addition, the IRS enjoys the fundamental advantage associated with the burden of proof in tax

cases. Once the IRS has determined a tax deficiency,

a “presumption of correctness” attaches to that determination, and the taxpayer bears the burden of overcoming that presumption by presenting evidence to

refute the Commissioner’s ruling. Welch v. Helvering,

290 U.S. 111, 115 (1933) (Cardozo, J.); see, e.g., United

States v. Janis, 428 U.S. 433, 440-441 (1976). The IRS

also has the power to assert penalties, and taxpayers

may have significant incentives to disclose information to the IRS or present evidence willingly to

courts (thereby waiving privilege) in order to avoid or

reduce such penalties. See, e.g., 26 U.S.C. § 6662;

26 C.F.R. § 1.6664-4(a).

The IRS has not been shy in deploying those tools.

Since the ratification of the Sixteenth Amendment in

1913, the Commissioner has vigorously enforced the

internal revenue laws, collecting billions of dollars

each year. See, e.g., IRS, Department of the Treasury,

Internal Revenue Service Data Book, 2021, at 59 (May

2022), https://www.irs.gov/pub/irs-pdf/p55b.pdf (reporting that the IRS collected $95.4 billion through its

enforcement efforts in fiscal year 2021). Congress

very recently augmented the IRS’s enforcement resources. Inflation Reduction Act of 2022, Pub. L. No.

117-169, Tit. I, Subtit. A, Pt. 3, § 10301, 136 Stat.

1818, 1831-1833. The government has not identified

any evidence that the tools at its disposal are inadequate absent vitiating the privilege applicable to taxrelated legal advice.

On the other side of the scales, constricting the

scope of the privilege would counterproductively undermine compliance with the Internal Revenue Code.

“[C]andidness between the attorney and client is particularly important in tax practice precisely because

the U.S. tax system is based on self-assessment.” Volz

248. “The Code is notoriously detailed, voluminous,

complex, and prone to change,” and “[t]axpayers with

any type of sophisticated business interests will necessarily need assistance navigating through it.” Ibid.

“Attorneys can help the client fully comply with the

law and fully give their client the benefit of their expertise,” but “only if they are apprised of the client’s

entire situation.” Ibid. “[F]or the tax advisor to aid

the client in fully complying with [the] Code,” the client therefore “must feel comfortable divulging all fi-

nancial information, including transactions simply

considered as remote possibilities.” Ibid. “The candidness stimulated by confidentiality should result in

more legal compliance, not less.” Ibid. Narrowing the

attorney-client privilege—and with it, the scope of the

tax-advice privilege enshrined in Section 7525—

would jeopardize that enhanced compliance with the

tax laws.

CONCLUSION

The judgment of the court of appeals should be reversed.

Respectfully submitted.