## Facts

- [Editor’s Note: The company’s name is correctly spelled “Procter & Gamble,” but the district court caption uses “Proctor.”]
- Procter & Gamble Co. (P&G) claimed more than $1 billion in charitable-contribution deductions and related tax benefits based on artworks it donated to the Cincinnati Museum of Art and the National Underground Railroad Freedom Center.
- The Internal Revenue Service (IRS) audited P&G’s returns and determined P&G was not entitled to the claimed deductions and credits.
- The IRS issued a notice of deficiency assessing additional taxes; P&G disputed the assessment but paid the amount demanded.
- P&G filed a civil action against the United States seeking a refund of the taxes it paid.
- During discovery, P&G sought documents tied to the IRS’s valuation of the donated artworks, including materials generated by the IRS’s internal Art Advisory Panel (a group of about 25 volunteer art specialists that assists the IRS with fair-market-value reviews for art reported on taxpayer returns).
- P&G proposed limiting access to the requested materials through a protective order.
- The IRS refused to produce the panel’s notes and related materials, asserting executive privilege in the form of the deliberative-process privilege and arguing that disclosure would impair the panel’s effectiveness by discouraging participation.
- P&G moved to compel production, arguing the privilege did not cover (or should not block production of) the requested panel documents in this refund case.

## Issues

1. Whether the IRS may withhold the Art Advisory Panel’s notes and related valuation materials under the deliberative-process (executive) privilege in discovery in a tax-refund suit.
2. Whether, given the protective order and the taxpayer’s need for the materials, any qualified privilege is overcome such that production must be ordered.

## Decision

- The court ruled that the IRS’s deliberative-process privilege claim did not justify withholding the Art Advisory Panel materials requested by P&G in this litigation.
- The court granted P&G’s motion to compel and ordered production of the disputed panel documents, with disclosure limited under a protective order.

## Legal Principles

- The deliberative-process privilege is a qualified executive privilege that can protect certain predecisional, deliberative internal government communications tied to agency decisionmaking.
- The government bears the burden to show the privilege applies to the specific materials and to support the need for confidentiality with more than generalized concerns.
- Even when the privilege applies, courts may require disclosure when the requesting party shows a strong need for the materials in light of the issues in dispute, and when other safeguards (such as a protective order) reduce the risk from disclosure.
- Discovery rulings in refund litigation may require production of internal valuation-related materials when those materials bear directly on the government’s assessment and the taxpayer’s ability to test that assessment.

## Conclusion

In this Southern District of Ohio discovery dispute arising from P&G’s tax-refund action over large charitable deductions for donated art, the court rejected the IRS’s attempt to withhold Art Advisory Panel notes and related valuation documents under the deliberative-process privilege and compelled production subject to a protective order.


Proctor & Gamble Co. v. United States, 2009 WL 5219726 (2009)