Proctor & Gamble Co. v. United States

[Editor’s Note: The company’s name is spelled “Procter” with an “e.” The title of the district court opinion incorrectly spells the company’s name as “Proctor.”] Procter & Gamble Co. (P&G) (plaintiff) claimed over a billion dollars in charitable-contribution tax deductions and credits related to artwork it had donated to the Cincinnati Museum of Art and the National Underground Railroad Freedom Center. The Internal Revenue Service (IRS) (defendant) audited P&G’s tax returns and determined that the corporation was not entitled to the claimed deductions and credits. The IRS then issued a notice of deficiency, assessing additional taxes, which P&G disputed but paid. It then filed suit in civil court seeking a refund of the assessed taxes. During the discovery phase of this suit, P&G requested that the IRS disclose the documents related to its appraisal of the fair market value of the donated artworks, including any documents generated by the IRS’s internal Art Advisory Panel (the panel), a body comprised of approximately 25 art experts who voluntarily assessed the fair market value of artworks referenced in taxpayer returns. Access to the documents was to be limited by a protective order. The IRS refused to disclose the panel’s notes and documents, citing executive privilege, also referred to as deliberative-process privilege. P&G then filed a motion to compel production, arguing that executive privilege did not apply to the relevant documents. The IRS maintained that the privilege applied to the panel’s documents because disclosure of the panel’s notes would harm its effective operation by discouraging art-world experts from joining the panel. The district court considered whether the executive privilege applied to shield the IRS from producing the panel notes on P&G’s case.