Case 2:15-cv-00102-RSM Document 187 Filed 01/17/20 Page 1 of 41

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UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT SEATTLE

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CASE NO. C15-102RSM

UNITED STATES OF AMERICA,
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ORDER FOLLOWING COURT’S IN
CAMERA REVIEW

Petitioner,
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v.
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MICROSOFT CORPORATION, et al.,
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Respondents.
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I.

INTRODUCTION

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Following Microsoft’s Brief Regarding Privileged Documents Still in Dispute (Dkt.

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#140), the Court ordered in camera review of certain documents. Dkt. #185. Having reviewed

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the documents at issue, the Court rules as follows.

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II.

BACKGROUND

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The government is conducting an examination of Microsoft Corporation’s (“Microsoft”)

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federal income tax liabilities for the taxable years 2004 to 2006. Dkt. #146 at ¶ 3. A primary

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focus of the examination relates to cost sharing arrangements transferring ownership of

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intellectual property between Microsoft’s foreign and domestic subsidiaries. Such transfers must

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satisfy an “arm’s length standard,” requiring that trade between related affiliates to be “upon the

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comparable terms and prices that those items would trade among unrelated parties.” Dkt. #140
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at 8. The government believes that Microsoft’s cost sharing arrangements did not satisfy the

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arm’s length standard and impermissibly shifted revenue out of the United States, both decreasing

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Microsoft’s federal income tax liabilities and obtaining more favorable foreign tax treatment.

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Microsoft maintains that certain documents responsive to the government’s summonses are

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privileged or protected from disclosure.

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Consideration of the documents requires a general understanding of cost sharing

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arrangements and the Americas cost sharing arrangement. Prior to the events at issue, Microsoft

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had a foreign subsidiary conducting manufacturing operations in Puerto Rico. See generally Dkt.

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#146-7; Dkt. #143 at ¶ 16. The operation manufactured software CDs, licensing the software

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from U.S. entities and returning royalty payments. Whether these pricing of the agreements

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satisfied the arm’s length standard was often subject to IRS challenge. Dkt. #143 at ¶ 8.

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Nevertheless, the structure afforded Microsoft favorable tax credits under tax code provisions

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allowing “Puerto Rican affiliates to produce goods and sell the goods back to their U.S.

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parents”—an incentive for U.S. companies to locate manufacturing operations in Puerto Rico.

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Id. at ¶ 16. But the credit was being eliminated from the tax code and Microsoft appeared poised

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to shutter its Puerto Rico operations. Dkt. #146-7 (internal planning document concluding that

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while there were some negative consequences, Microsoft would save more than $5 million

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annually by outsourcing production of software CDs).

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Aware of the impending loss of favorable tax treatment, KPMG LLP (“KPMG”), an

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accounting firm, recommended that “Microsoft should explore US deferral opportunities taking

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advantage of the existing manufacturing operations in Puerto Rico.”

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Representing that continuing operations in Puerto Rico would require “[f]ew operational

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changes” and would provide Microsoft with “expertise in deferral strategies for the US market,”

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KPMG presented Microsoft with several options for restructuring its Puerto Rico operations to
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Dkt. #146-8 at 3.

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maintain some tax benefit. Id. KPMG also represented that it was the right firm to guide

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Microsoft through the process as it had “significant experience . . . in the migration of [expiring

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tax credit benefits] to new deferral structures” and had “successfully negotiated significant tax

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holidays for U.S. companies with the Puerto Rican government.” Id. at 18.

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Central to Microsoft’s options was the use of a cost sharing arrangement. The cost

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sharing arrangement would allow Microsoft’s Puerto Rican affiliate to co-fund the development

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of intellectual property and thereby acquire an ownership interest in that intellectual property.

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Dkt. #143 at ¶ 18. The affiliate could then manufacture software CDs to sell back to Microsoft’s

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distributors in the Americas. Because some of the intellectual property had already been

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developed, the Puerto Rican affiliate would need to make a “buy-in payment” to retroactively

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fund a portion of the development. Id. The transactions would be subject to the arm’s length

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standard, presenting a balancing act between entering an arrangement that a third party would

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enter and significantly disrupting or complicating Microsoft’s operations.

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Microsoft was interested and retained KPMG to provide “tax consulting services” for a

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“feasibility phase” which included “modeling the anticipated benefits of the [Intangible Holding

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Company (“IHCo”)] over a ten-year period.” Dkt. #146-13 at 1–2. The feasibility phase was “to

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allow [Microsoft] to develop the information necessary to decide whether moving forward with

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an IHCo structure at this time is an advisable business decision.” Id. at 2.

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Ultimately Microsoft did enter into cost sharing arrangements through technology

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licensing agreements. Because those cost sharing arrangements were required by law to be arm’s

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length transactions, the design and implementation details are a central focus of the government’s

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examination. The government expresses skepticism that a third party would be likely to enter

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into the agreements, thereby satisfying the arm’s length standard, because the agreements

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contained several unique provisions. Dkt. #146 at ¶¶ 18–20. While many of the terms changed
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before and afterward the agreements were to have been formed, they remained favorable for

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Microsoft’s income tax liability. Id. at ¶¶ 9–11. The government believes that the transactions

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were “designed and implemented for the purpose of avoiding tax.” Id. at ¶ 20.1

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Microsoft maintains that nothing was abnormal about its actions. Microsoft argues that

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transfer pricing disputes with the government were prevalent and, “[r]ecognizing the inevitability

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of an [Internal Revenue Service (“IRS”)] challenge, Microsoft was determined to be adequately

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prepared to defend these cost sharing arrangements.” Dkt. #140 at 6; see also Dkt. #143 at ¶ 23.

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To this end, and because of the complexity of facts relevant to corporate international tax,

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Microsoft employed KPMG “to help the lawyers provide legal advice” and to give its own tax

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advice. Dkt. #140 at 1; Dkt. #143 at ¶¶ 7, 10. Mr. Boyle, then Microsoft’s Corporate Vice

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President and Tax Counsel, maintains that the materials at issue were prepared for his use and

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that they were “prepared in anticipation of an administrative dispute or litigation with the IRS

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over the Puerto Rican cost sharing arrangement, the pricing of the software sales to Microsoft,

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and other issues expected to be in dispute relating to those transactions.” Dkt. #143 at ¶ 23.

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III.

DISCUSSION

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Pursuant to the internal revenue code, the Court previously granted the government’s

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petition to enforce designated summonses issued to Microsoft and KPMG. Dkt. #107. Microsoft

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continued to withhold 174 documents,2 claiming work product protection, attorney-client

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privilege, and the federally authorized tax practitioner privilege set forth in 26 U.S.C. § 7525.

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The government expresses further skepticism on the basis that the agreements effectively netted
the Puerto Rican entity $30 billion for the “routine” reproduction of CDs containing software and
did not otherwise have a significant impact on Microsoft’s operations. Dkt. #146 at ¶¶ 15–20.

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Of those, 169 documents remain at issue. The Court previously ordered that Microsoft need
not produce four documents identified as: MSTP9010845–MSTP9010924, MSTP9009093–
MSTP9009106,
MSTP9009065–MSTP9009078,
and
MSTP9009051–MSTP9009064.
Additionally, Microsoft voluntarily produced MSTP9001377–MSTP9001399.
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As the party asserting that the documents are protected, Microsoft bears the burden of proving

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that the protections and privileges asserted apply. Weil v. Inv./Indicators, Research & Mgmt.,

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Inc., 647 F.2d 18, 25 (9th Cir. 1981). Microsoft has not fully carried its burden here.

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A. Work Product Protection

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Microsoft asserts work product protection over 170 of the 174 documents at issue. The

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work product doctrine protects documents and tangible things from discovery if they are prepared

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in anticipation of litigation by a party, or a party’s representative. FED. R. CIV. P. 26(b)(3). Work

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product protection prevents “exploitation of a party’s efforts in preparing for litigation.”

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Holmgren v. State Farm Mut. Auto. Ins. Co., 976 F.2d 573, 576 (9th Cir. 1992) (quoting Admiral

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Ins. Co. v. United States District Court, 881 F.2d 1486, 1494 (9th Cir. 1989)). The court first

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considers whether the documents were created or obtained “in anticipation of litigation or for

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trial.” See United States v. Richey, 632 F.3d 559, 567 (9th Cir. 2011) (quoting In re Grand Jury

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Subpoena, Mark Torf/Torf Envtl. Mgmt. (Torf), 357 F.3d 900, 907 (9th Cir. 2004)). Secondarily,

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the court considers whether the documents were created or obtained “by or for another party or

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by or for that other party’s representative.” Id.

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With documents serving dual purposes—for instance, supporting both litigation

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preparation and the ordinary conduct of business—the court must further consider whether the

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documents were created “because of” litigation. Id. at 567–68. That is, “taking into account the

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facts surrounding their creation, their litigation purpose so permeates any non-litigation purpose

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that the two purposes cannot be discretely separated from the factual nexus as a whole.” Torf,

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357 F.3d at 910.

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Upon the Court’s review, Microsoft does not establish that any of the documents at issue

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here are protected by the work product doctrine. Most salient, the Court concludes that even if

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the documents were created in anticipation of litigation, they all serve dual business and litigation
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purposes. If dual purpose documents “only [] reflect the logistics or mechanics of implementing

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business concepts,” they are likely to “have been created in essentially similar form irrespective

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of the litigation.” United States v. ChevronTexaco, 241 F. Supp. 2d 1065, 1084 (N.D. Cal. 2002).

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Microsoft, deciding to pursue these complex transactions, certainly would have considered the

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tax consequences of the transactions and whether they complied with applicable tax provisions.

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Indeed, the considerations appear entirely intertwined with Microsoft and KPMG structuring the

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transactions to create the smallest tax liability possible. Absent the concurrent business decision

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to explore the transactions, Microsoft would not have had any reason to anticipate litigation.

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Here, Microsoft anticipated litigation because it was electing to take an aggressive tax

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strategy that it knew was likely to be challenged by the government.

From the Court’s

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perspective, there is a significant difference between planning to act in a legally defensible

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manner and in defending against an existing legal dispute. The record provides no indication

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that Microsoft would have faced its anticipated legal challenges if Microsoft had not made the

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decision to pursue the transactions. Fidelity Intern. Currency Advisor A Fund, L.L.C. v. United

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States, 2008 WL 4809032 at *13 (D. Mass. April 18, 2008) (“The mere fact that the taxpayer is

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taking an aggressive position, and that the IRS might therefore litigate the issue, is not enough”

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to establish work product.”). Even presuming an operational need for the transactions, Microsoft

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has not provided any reason it could not have planned the transactions in such an unfavorable

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manner that it was effectively insulated from a tax challenge. Microsoft’s documents were not

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created in anticipation of litigation. Rather, Microsoft anticipated litigation because of the

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documents it created.

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Microsoft’s arguments to the contrary are further undercut by the relationship between

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the parties and the actions of the parties. Microsoft indicates that it “hired the best available legal

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and tax advisors.” Dkt. #143 at ¶ 20. This included Baker & McKenzie, “a well known
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international law firm that had successfully tried many of the leading transfer pricing cases,” for

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“tax planning and litigation of [] tax cases and transfer pricing disputes.” Id. Microsoft also

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engaged KPMG “to assist with tax advice.” Id.; Dkt. #144 at ¶ 20 (noting that Mr. “Boyle, a

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lawyer, made plain that he was hiring KPMG to also help Microsoft prepare its defense to the

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IRS’s challenge”). But Microsoft gives no indication that KPMG would represent it in the

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anticipated litigation or that its apparent litigation counsel—Baker & McKenzie—directed

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KPMG to create any documents necessary to an eventual litigation defense or for use at trial.

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Torf, 357 F.3d at 907 (focusing on fact consultant was hired by attorney representing the party).

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Rather, Microsoft represents that it was Mr. Boyle who directed KPMG to prepare

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materials “in anticipation of an administrative dispute or litigation with the IRS over the Puerto

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Rican cost sharing arrangement, the pricing of the software sales to Microsoft, and other issues

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expected to be in dispute relating to those transactions.” Dkt. #143 at ¶ 23. That being the case,

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the Court finds it odd that Microsoft did not protect many of the records it ostensibly created for

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this very litigation. Dkt. #145 at 23 (noting that “the United States has discovered through this

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proceeding that the records of several custodians, including [Mr.] Boyle himself, cannot be

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located”); Dkt. #146 at ¶ 25. Microsoft, wholly anticipating this dispute would have acted

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prudently in carefully maintaining the documents it created in anticipation of the dispute.

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Lastly, the Court notes that Microsoft claims “by 2004, [it] was well aware of the IRS

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challenging numerous companies’ transfer pricing . . . . [and] knew with certainty that

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Microsoft’s transfer pricing would be under attack by the IRS.” Dkt. #143 at ¶ 15. Nevertheless,

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Microsoft claimed work product protection for at least 16 documents that were created before

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2004. Dkt. #141 at 22–24. Microsoft has not provided any other support for affording these

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documents work product protection.

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B. Attorney-Client Privilege

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“The attorney-client privilege protects confidential disclosures made by a client to an

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attorney in order to obtain legal advice . . . as well as an attorney’s advice in response to such

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disclosures.” Branch v. Umphenour, 936 F.3d 994, 1005–06 (9th Cir. 2019) (citations omitted)

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(omission in original). However, if a client seeks non-legal advice, for instance business advice,

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the privilege does not apply. Richey, 632 F.3d at 566. Where communications serve dual legal

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and business purposes, the court considers whether the “primary purpose” of a communication

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was related to legal advice. Phillips v. C.R. Bard, Inc., 290 F.R.D. 615, 628–29 (D. Nev. 2013)

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(noting trend of limiting Torf’s “because of” standard to the work product context).3 “Because

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it impedes full and free discovery of the truth, the attorney-client privilege is strictly construed.”

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United States v. Martin, 278 F.3d 988, 999 (9th Cir. 2002) (quoting Weil v. Inv./Indicators,

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Research & Mgmt., Inc., 647 F.2d 18, 24 (9th Cir. 1981)).

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Microsoft maintains that eight of the documents at issue are protected by attorney-client

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privilege. For all eight, Microsoft maintains that the legal advice is from its in-house attorneys.

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See Chandola v. Seattle Housing Authority, Case No. C13-557RSM, 2014 WL 4685351, at *3

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(W.D. Wash. Sept. 19, 2014) (noting necessity for increased scrutiny “where in-house counsel is

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involved, as they often act in both a legal and non-legal business capacity” and requiring a “clear

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showing that the speaker made the communication for the purpose of obtaining or providing legal

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advice”). Two of the documents are responsive to the Designated Summons. See Dkt. #141 at

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8. The six remaining documents are responsive to Related Summonses 2 and 3. See Dkt. #141

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at 22–27. Having reviewed the documents at issue, the Court has concluded as follows:

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See also Dolby Labs. Licensing Corp. v. Adobe Inc., 402 F. Supp. 3d 855 (N.D. Cal. 2019); In
re Premera Blue Cross Customer Data Sec. Breach Litig., 329 F.R.D. 656 (D. Or. 2019).
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Document
Number 13

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Designated Summons
IDR IE-2209 (MSFT Documents)4
Bates Range:
Privileged?
PMSTP0000027–PMSTP0000028
Partially Privileged

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Document 13 is an email string between Mike Boyle and Steve Ballmer and is not

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primarily seeking, providing, or relaying legal advice. However, the emails sent on

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February 11 and 12, 2005, are primarily seeking, providing, or relaying legal advice.

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Those privileged communications may be redacted from the string of otherwise non-

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privileged communications. See Panattoni Const., Inc. v. Travelers Prop. Cas. Co. of

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Am., Case No. C11-1195RSM, 2012 WL 6567141, at *2 (W.D. Wash. Dec. 14, 2012)

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(requiring redaction of privileged communication from email string).

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Document
Number 25

Bates Range:
PMSTP0000015–PMSTP0000016

Privileged?
Yes

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Document 25 is an email string discussing legal issues and primarily seeking,

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providing, or relaying legal advice.

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Referenced documents are identified in Microsoft’s privilege log for IDR IE-2209. See Dkt.
#141 at 8.

ORDER – 9

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Document
Number 43

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Related Summonses 2 & 35
Bates Range:
Privileged?
MSTP9011488–MSTP9011490
No

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Document 43 is an email string discussing the legal structure of several Microsoft
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entities. To the extent the communications are seeking, providing, or relaying legal
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advice, they serve primarily a business purpose. Further, there is indication that the
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information was to be shared instead of maintained confidentially.
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Document
Number 607

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Bates Range:
MSTP9001268–MSTP9001280

Privileged?
No

Document 607 is an email attaching slides for a presentation. Microsoft fails to

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establish what, if any, information reflects “legal advice rendered by Kevin Fay.”

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Further, and to the extent the documents are seeking, providing, or relaying legal

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advice, they primarily serve a business purpose.

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Document
Number 736

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Bates Range:
MSTP9000904–MSTP9000916

Privileged?
No

Document 736 is an email attaching slides for a presentation that appear identical to

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those of Document 607 and are not privileged for the same reasons. Additionally, the

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email conveying the slides represent the slides as “[t]he numbers we showed to

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Johncon,” further indicating that the document served a primarily business purpose.

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Referenced documents are identified in Microsoft’s privilege log for Related Summonses 2
& 3. See Dkt. #141 at 22–27.
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Document
Number 870

Bates Range:
MSTP9013961–MSTP9013963

Privileged?
No

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Document 870 is an email string that Microsoft asserts is privileged because if reflects

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“legal advice from Brad DelMatto (Microsoft) regarding Puerto Rico tax grant.” Dkt.

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#141 at 26. Microsoft fails to establish what, if any, information reflects “legal advice

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from Brad DelMatto.” To the extent the documents are seeking, providing, or relaying

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legal advice, they primarily serve a business purpose. Further, the document indicates

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that the information may have been shared with third parties or not maintained

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confidentiality.

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Document
Number 881

Bates Range:
MSTP9014965–MSTP9015024

Privileged?
Partially Privileged

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Document 881 contains two planning documents, a reorganization “step plan” and a

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“Step Plan and Illustrative Flow of Funds.” Following review, the Court finds that

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MSTP9014965-MSTP9015022 is privileged as its primarily purpose is seeking,

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providing, or relaying legal advice.

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MSTP9015024, a native 28 page excel file, are not privileged as, to the extent they are

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seeking, providing, or relaying legal advice, they primarily serve a business purpose.

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ORDER – 11

The Court finds that MSTP9015023 and

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Document
Number 882

Bates Range:
MSTP9007983–MSTP9007995

Privileged?
No

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Document 882 is an email attaching two draft agreements, one reflecting a modification

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by a Joseph Tyrrell, PricewaterhouseCoopers LLP accountant—a non-attorney third

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party. Microsoft does not establish what, if any, information in the email is seeking,

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providing, or relaying legal advice. To the extent the documents are seeking, providing,

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or relaying legal advice, they primarily serve a business purpose.

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C. Tax Practitioner-Client Privilege

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The crux of this case is the applicability of the federally authorized tax practitioner

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(“FATP”) privilege, which Microsoft claims for 164 of 174 documents. That privilege applies

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to the communication of tax advice between a taxpayer and a “federally authorized tax

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practitioner to the extent the communication would be considered privileged communication if

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it were between a taxpayer and an attorney.” 26 U.S.C. § 7525(a)(1). But section 7525 does not

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suggest “that nonlawyer practitioners are entitled to privilege when they are doing other than

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lawyers’ work.” United States v. McEligot, No. 14-CV-05383-JST, 2015 WL 1535695, at *5

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(N.D. Cal. Apr. 6, 2015) (quoting United States v. Frederick, 182 F.3d 496, 502 (7th Cir.1999)).

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Equivalently, communications made primarily to assist in implementing a business transaction

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are not protected by the tax practitioner privilege. See ChevronTexaco Corp., 241 F. Supp. 2d at

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1076–78 (treating FATP privilege congruently with the attorney-client privilege). Rather, and

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as with the attorney-client privilege, the primary purpose of the communication must be the

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provision of tax/legal advice.

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The Court’s conclusions as to the documents identified in Microsoft’s privilege logs are

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set forth in Attachments A-D of this order. In general, where the Court has determined that a
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document is privileged pursuant to section 7525, the Court has concluded that the document’s

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primary purpose was to seek, provide, or relay tax/legal advice of a FATP. In general, where the

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Court has determined a document is not privileged pursuant to section 7525, the Court has

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concluded that to the extent the document seeks, provides, or relays tax/legal advice of a FATP,

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that is not the document’s primary purpose. The Court includes further or additional explanation

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where appropriate.

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The Court’s consideration is inherently messy. See Valero Energy Corp. v. United States,

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569 F.3d 626, 630 (7th Cir. 2009) (“Admittedly, the line between a lawyer’s work and that of an

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accountant can be blurry, especially when it involves a large corporation like Valero seeking

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advice from a broad-based accounting firm like Arthur Anderson.”).

The parties’ broad

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arguments are often of little help in the consideration of individual documents. Likewise, the

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limited record before the Court makes it difficult to place each individual record—spanning

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several years—in its proper context. But the Court also remains mindful that “it is nevertheless

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the burden of the withholding party to demonstrate that the ‘primary purpose’ was the rendering

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of legal advice on a document-by-document basis.” Phillips, 290 F.R.D. 615, 631 (D. Nev. 2013)

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(citing In re Vioxx Prod. Liab. Litig., 501 F. Supp. 2d 789, 801 (E.D. La. 2007)). The Court

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accordingly notes several considerations that have guided its analysis.

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The Court was not greatly influenced by the government’s argument—supported by

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several contemporaneous documents—that KPMG itself represented that it “was not providing

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legal advice to Microsoft.”

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characterization to attribute to the general limitations KPMG placed on its advice. KPMG’s

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consideration of the complex transactions from the tax perspective obviously did not obviate the

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need for Microsoft to consider the transactions from additional legal perspectives. The Court has

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ORDER – 13

Dkt. #145 at 18 (citing to instances).

This is too broad a

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not placed undue weight on KPMG’s admonition that Microsoft should pursue the advice of

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additional specialists.

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But the Court also is not persuaded by Microsoft’s conclusory argument, supported only

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by counsel’s declaration, that KPMG provided only tax advice, “not business or non-legal

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advice.” Dkt. #140 at 19 (citing Dkt. # 141 at ¶¶ 13–14); Dolby Labs. Licensing Corp. v. Adobe

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Inc., 402 F. Supp. 3d 855, 866 (N.D. Cal. 2019) (“A vague declaration that states only that the

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document ‘reflects’ an attorney’s advice is insufficient to demonstrate that the document should

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be found privileged.”) (quoting Hynix Semiconductor Inc. v. Rambus Inc., No. 00-cv-20905-

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RMW, 2008 WL 350641, at *3 (N.D. Cal. Feb. 2, 2008)). The nature of the advice was no doubt

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constantly shifting. ChevronTexaco, 241 F. Supp. 2d at 1069 (noting that counsel provided legal

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advice, assisted with implementation, and addressed legal issues that arose during

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implementation). The Court’s consideration required more nuance as numerous legal, tax,

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accounting, and business issues likely arose during Microsoft’s and KPMG’s extended

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consideration of the complex transactions.6 Dkt. #140 at 28.

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KPMG of course needed details of Microsoft’s operations to provide competent advice.

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But this does not mean that that every fact disclosed to KPMG was in furtherance of obtaining

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legal advice or that all advice primarily served a legal purpose. Dkt. #140 at 13 (Microsoft

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highlighting KPMG’s need for factual detail “[t]o advise on all of these complex tax issues”).

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Nor does it mean that all “business” documents lacked any legal analysis or were not premised

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The possible exception is for documents conveying the advice of Joseph Tyrrell, an accountant
for PriceWaterhouseCoopers LLP. The Government argues that Mr. Tyrrell was retained to
provide “accounting or financial services and not privileged advice.” Dkt. #145 at 12 n.6. On
reply, Microsoft does not contest this characterization and makes no particularized showing as
to Mr. Tyrrell’s status. On this concession and in accord with the record, the Court finds that any
advice provided by Mr. Tyrrell is not protected by the FATP privilege. Further, to the extent any
of the advice was privileged, it primarily served a business purpose.
ORDER – 14

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on legal advice. Dkt. #145 at 13 (government indicating it seeks “documents addressing

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transactional implementation, business advice, accounting advice, contract drafting and pricing

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documents, and business structuring recommendations”). The Court’s consideration was not so

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mechanical. Valero, 569 F.3d at 631 (legal analysis included “part and parcel with accounting

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advice” is not entitled to privilege).

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The Court therefore found it necessary to broadly consider the history of the project.

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Certainly, the Court agrees with Microsoft that “[t]he fact that tax issues have commercial

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consequences does not make them any less legal issues.” Dkt. #140 at 20 (citing Schaeffler v.

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United States, 806 F.3d 34, 41 (2nd Cir. 2015) (tax issue was “a legal problem albeit with

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commercial consequences” and the fact that large sums of money were at stake “does not render

11

those legal issues ‘commercial’”)). But similarly, Microsoft cannot expand its privileges and

12

protections merely because it has pursued business transactions requiring ongoing and complex

13

tax, legal, and business advice. Phillips, 290 F.R.D. at 630–31 (noting that highly regulated

14

industries cannot claim that all communications with counsel are privileged because of tangential

15

legal concerns). With little guidance outside of the extremes, the Court’s consideration of

16

individual documents sought to apply principles consistently throughout the course of these

17

complex and ever evolving transactions.

18

D. Tax Shelter Exception

19

Irrespective of whether individual documents are protected by the FATP privilege, the

20

government argues that the privilege does not apply here as the activities fall within the tax shelter

21

exception to the FATP privilege. By statute, the FATP privilege does not apply to written

22

communications “in connection with the promotion of the direct or indirect participation of the

23

person in any tax shelter (as defined in section 6662(d)(2)(C)(ii)).” 26 U.S.C. § 7525(b). In turn,

24

a “tax shelter” is defined to include any partnership, entity, plan, or arrangement “if a significant
ORDER – 15

 Case 2:15-cv-00102-RSM Document 187 Filed 01/17/20 Page 16 of 41

1

purpose of such partnership, entity, plan, or arrangement is the avoidance or evasion of Federal

2

income tax.” 26 U.S.C. § 6662(d)(2)(C)(ii).

3

Following the Court’s review, the Court finds itself unable to escape the conclusion that

4

a significant purpose, if not the sole purpose, of Microsoft’s transactions was to avoid or evade

5

federal income tax. The government argues persuasively that the transactions served a primary

6

purpose of shifting taxable revenue out of the United States. Microsoft has not advanced any

7

other business purpose driving the transactions and one does not materialize from the record.

8

The only explanation Microsoft attempts is that it entered the cost sharing arrangements to

9

replace annual disputes over its licensing and royalty scheme. But this is not a reason for why

10

Microsoft needed or wanted this arrangement for business purposes. Instead, Microsoft noted

11

favorably that the transaction “should NOT have much impact on how we serve customers” and

12

that, while operational expenses were expected to increase by “$50 million over 10 years,” it

13

would result in “tax savings of nearly $5 billion over 10 years.” PMSTP0000028. With no real

14

impact on how customers were served, the tax savings appears to have driven the decision-

15

making process.

16

transactions was necessary restructuring rather than attempt to “avoid paying taxes”).

Valero, 569 F.3d at 629 (expressing skepticism that “rigamarole” of

17

The Court is further left to conclude, after reviewing the records in camera, that all the

18

documents created by KPMG “promoted” the transactions. Other than the unadorned testimony

19

of Mr. Weaver and Mr. Boyle, Microsoft and the record provide no indication that the plans for

20

the transactions originated with Microsoft. Even where testimony is sparse on particulars, the

21

Court does not set it aside lightly. But the record before the Court leads to the conclusion that

22

KPMG originated and drove the structuring of the transactions and that but for its promotion,

23

Microsoft may not have pursued the same or similar transactions. Thereafter, and in furtherance

24

of the transactions, KPMG continued to address possible roadblocks and continued to tweak the
ORDER – 16

 Case 2:15-cv-00102-RSM Document 187 Filed 01/17/20 Page 17 of 41

1

transactions to maximize—as far as possible—the revenue shifted while minimizing any

2

operational effects of the restructuring. KPMG’s advice did not, as Microsoft argues, “merely

3

inform a company about such schemes, assess such plans in a neutral fashion, or evaluate the soft

4

spots in tax shelters that [Microsoft] has used in the past.” Dkt. #177-1 at 10 (quoting Valero,

5

569 F.3d at 629) (quotation marks omitted).

6

The obvious protest—and the one that both Microsoft and KPMG raise—is that any

7

adverse ruling by the Court will destroy the FATP privilege. First, Microsoft argues that the

8

transactions at issue were not tax shelters because they were just ordinary and accepted tax

9

structuring. Id. at 8–9; Dkt. #160 at 2. After all, “virtually any taxpayer who seeks tax advice

10

from an accounting firm is looking for ways to minimize his taxes or for assurance that he is

11

complying with the tax law.” Doe v. KPMG, L.L.P., 325 F. Supp. 2d 746 (N.D. Tex. 2004)

12

(quotation marks omitted). But the tax shelter exception turns, at least partly, on the purpose for

13

the transaction. See 26 U.S.C. § 6662(d)(2)(C)(ii). A tax structure may be a permissible method

14

to achieve a legitimate business purpose in one context and an impermissible tax shelter in

15

another. Valero, 569 F.3d at 632 (noting that “[o]nly plans and arrangements with a significant—

16

as opposed to an ancillary—goal of avoiding or evading taxes count” as tax shelters). The

17

Court’s reading is true to the statutory language and does not eliminate the privilege.

18

The Court also is not convinced that its common sense reading of “promotion” conflicts

19

with the statutory privilege. Microsoft relies on Tax Court opinions to argue that Congress did

20

not intend to implicate the “routine relationship between a tax practitioner and a client.” Dkt.

21

#177-1 at 9–10 (citing Countryside Ltd. P’ship v. Comm’r, 132 T.C. 347, 352 (2009); 106 Ltd.

22

v. Comm’r, 136 TC 67, 80 (2011)). From this, Microsoft puts great emphasis on the Tax Court’s

23

conclusion in Countryside that a “FATP was not a promoter, because he ‘rendered advice when

24

asked for it; he counseled within his field of expertise; his tenure as an adviser to the [client] was
ORDER – 17

 Case 2:15-cv-00102-RSM Document 187 Filed 01/17/20 Page 18 of 41

1

long; and he retained no stake in his advice beyond his employer’s right to bill hourly for his

2

time.” Dkt. #177-1 at 10–11 (quoting Countryside, 132 T.C. at 354–55). But each case will

3

necessarily turn on its own facts. The Court does not read Countryside as setting forth a static

4

test, but as listing relevant considerations for that case. The existence of a routine relationship

5

between a FATP and a taxpayer is certainly a relevant consideration but should not extend the

6

privilege into the impermissible promotion of tax shelters.

7

In this regard, the Court finds the reasoning of the Seventh Circuit Court of Appeals in

8

United States v. BDO Seidman, LLP instructive. 492 F.3d 806, 822 (7th Cir. 2007). There the

9

court noted the similarities between the crime-fraud exception to the attorney-client privilege and

10

the tax shelter exception to the tax practitioner privilege. Id. In the crime-fraud context, the

11

Supreme Court has indicated that the need for privilege falls away “where the desired advice

12

refers not to prior wrongdoing, but to future wrongdoing.” Id. (quoting United States v. Zolin,

13

491 U.S. 554, 563 (1989) (emphasis in original)) (quotation marks and citation omitted).

14

Similarly, the Seventh Circuit viewed the tax shelter exception as vitiating the FATP privilege

15

once the privilege no longer served the goals of assuring full disclosure to counsel and

16

compliance with the law.7 Id.

17

This reasoning guides the Court’s determination that KPMG strayed into promotion of a

18

tax shelter. As noted previously, the transactions did not appear necessary to satisfy Microsoft’s

19
20
21
22
23
24

7

Notably, in this regard, this is not an area that Microsoft was required to explore. Consistent
with the attorney-client privilege, the FATP privilege’s “purpose is to encourage full and frank
communication between [FATPs] and their clients and thereby promote broader public interests
in the observance of law and administration of justice.” Upjohn Co. v. United States, 449 U.S.
383, 389 (1981). Microsoft was not forced to take this position because of its business needs,
but rather was strategically positioning itself for a dispute it sought out. KPMG and Microsoft
created the legal issue of their own accord and should not gain greater protection merely because
they chose to pursue a legally precarious transaction.

ORDER – 18

 Case 2:15-cv-00102-RSM Document 187 Filed 01/17/20 Page 19 of 41

1

operational needs.8 KPMG did far more than flesh out or tweak Microsoft’s preliminary plans

2

where its expertise reasonably permitted it to do so. KPMG worked to make the transaction fit

3

both Microsoft’s existing operations and the relevant tax laws—a task that appeared, at times, to

4

create internal strife.9 But it did so only to promote Microsoft’s avoidance of tax liability and

5

the Court concludes that all of KPMG’s written communications were “in connection with

6

promotion” of a tax shelter. 26 U.S.C. § 7525(b).

7

The Court finds that this outcome also serves the public interest. “Our system of federal

8

taxation relies on self-reporting and the taxpayer’s forthright disclosure of information.” Valero,

9

569 F.3d at 633. “The practical problems confronting the IRS in discovering under-reporting of

10

corporate taxes, which is likely endemic, are serious.” United States v. Textron Inc. and

11

Subsidiaries, 577 F.3d 21, 31 (1st Cir. 2009). “The government’s power to compel disclosure of

12

relevant information is the flip side of” of self-reporting. Valero, 569 F.3d at 633. While

13

Congress has provided for certain communications to be treated as privileged, the privilege is not

14

absolute. Where, as here, a FATP’s advice strays from compliance and consequences to

15

promotion of tax shelters, the privilege falls away.

16

Lastly, the Court acknowledges that the record before the Court is limited. The Court’s

17

conclusions should not be overstated and is in no manner a consideration of the final merits of

18

this tax dispute. Id. at 634 (noting limited scope of opinion as the government was merely

19

seeking information and not yet lodging accusations). The record that is before the Court,

20
21
22
23
24

8

See MSTP9007983-MSTP9007995 (Microsoft identifying an after-the-fact business purpose
for the transaction but still expressing concern over whether arm’s length parties would enter into
such an agreement).

9

See ESI0023474 (KPMG struggling internally to identify good faith legal arguments and
agreeing that its advice to Microsoft was supportable).

ORDER – 19

 Case 2:15-cv-00102-RSM Document 187 Filed 01/17/20 Page 20 of 41

1

however, leads to the conclusion that the government should be afforded additional information

2

as to the nature of the transactions at issue.
IV.

3
4
5
6
7
8
9

CONCLUSION

Having reviewed the relevant briefing, the documents provided for in camera review, and
the remainder of the record, the Court hereby finds and ORDERS:
1. Microsoft Corporation shall provide the documents still in dispute in accordance with the
Court’s Order within seven (7) days.
2. This matter is now CLOSED.
DATED this 17th day of January 2020.

10

A

11

RICARDO S. MARTINEZ
CHIEF UNITED STATES DISTRICT JUDGE

12
13
14
15
16
17
18
19
20
21
22
23
24
ORDER – 20

 Case 2:15-cv-00102-RSM Document 187 Filed 01/17/20 Page 21 of 41

Attachment A
Designated Summons*
IDR IE-2209 (MSFT Documents)
Doc. Number

Bates Range

Privileged under § 7525?

Additional Explanation

Disclose?

4

PMSTP0000036-

Partially Privileged

To the extent the document is seeking,

Partially

PMSTP0000058

providing, or relaying tax/legal advice from a
FATP, it primarily serves a business purpose.
However, the page bates stamped
PMSTP0000046 is privileged, as it is primarily
seeking, providing, or relaying tax/legal advice
from a FATP, and may be redacted.

13

PMSTP0000027-

Not Privileged

PMSTP0000028
16

PMSTP0000029-

from a FATP was involved.
Not Privileged

PMSTP0000037
18

PMSTP0000017PMSTP0000025

Microsoft does not establish what, if any, advice Yes

Microsoft does not establish what, if any, advice Yes
from a FATP was involved.

Not Privileged

Microsoft does not establish what, if any, advice Yes
from a FATP was involved.

25

*

Referenced documents are identified in Microsoft’s privilege log for IDR IE-2209. See Dkt. #141 at 8.

ORDER – 21

 Case 2:15-cv-00102-RSM Document 187 Filed 01/17/20 Page 22 of 41

Attachment B
KPMG Central Files Privilege Log†
Doc. Number

Bates Range

Privileged under § 7525?

Additional Explanation

Disclose?

11

Microsoft 0000132–

Privileged.

Tax Shelter Exception Applies

Yes

Not Privileged.

To the extent the document is seeking,

Yes

Microsoft 0000144
13

Microsoft 0000103–
Microsoft 0000126

providing, or relaying tax/legal advice from
a FATP, it primarily serves a business
purpose.

15

Microsoft 0000130–

Privileged.

Tax Shelter Exception Applies

Yes

Privileged.

Tax Shelter Exception Applies

Yes

Privileged.

Tax Shelter Exception Applies

Yes

Privileged.

Tax Shelter Exception Applies

Yes

Privileged.

Tax Shelter Exception Applies

Yes

Microsoft 0000131
24

Microsoft 0000253–
Microsoft 0000255

25

ESI0000181–
ESI0000181_20

26

Microsoft 0001831–
Microsoft 0001850

27

Microsoft 0003928–
Microsoft 0003951

†

Referenced documents are identified in Microsoft’s privilege log for KPMG Central Files. See Dkt. #141 at 10.

ORDER – 22

 Case 2:15-cv-00102-RSM Document 187 Filed 01/17/20 Page 23 of 41

28

Microsoft 0000128–

Privileged.

Tax Shelter Exception Applies

Yes

Privileged.

Tax Shelter Exception Applies

Yes

Microsoft 0000129
29

ESI0000191–
ESI0000191_22

ORDER – 23

 Case 2:15-cv-00102-RSM Document 187 Filed 01/17/20 Page 24 of 41

Attachment C
KPMG Personal Files Privilege Log‡
Doc. Number

Bates Range

Privileged under § 7525?

Additional Explanation

Disclose?

141

ESI0102078-

Privileged

Tax Shelter Exception Applies

Yes

ESI0102078_4
242

ESI0075521

Not Privileged

Yes

243

ESI0075522-

Not Privileged

Yes

Not Privileged

Yes

ESI0075522_35
285

ESI0071771ESI0071771_2

303

ESI0076042-

Privileged

Tax Shelter Exception Applies

Yes

Privileged

Tax Shelter Exception Applies

Yes

ESI0076042_3
311

ESI0073078ESI0073078_4

434

ESI0075679

Privileged

Tax Shelter Exception Applies

Yes

435

ESI0075680-

Privileged

Tax Shelter Exception Applies

Yes

Privileged

Tax Shelter Exception Applies

Yes

ESI0075680_7
436

ESI0022547ESI0022547_8

‡

Referenced documents are identified in Microsoft’s privilege log for KPMG Personal Files. See Dkt. #141 at 12–20.

ORDER – 24

 Case 2:15-cv-00102-RSM Document 187 Filed 01/17/20 Page 25 of 41

437

ESI0022548-

Privileged

Tax Shelter Exception Applies

Yes

Privileged

Tax Shelter Exception Applies

Yes

Privileged

Tax Shelter Exception Applies

Yes

Privileged

Tax Shelter Exception Applies

Yes

Privileged

Tax Shelter Exception Applies

Yes

Privileged

Tax Shelter Exception Applies

Yes

Privileged

Tax Shelter Exception Applies

Yes

Privileged

Tax Shelter Exception Applies

Yes

ESI0022548_11
451

ESI0022549ESI0022549_12

452

ESI0022550ESI0022550_13

453

ESI0022551ESI0022551_12

461

ESI0023530ESI0023530_11

479

ESI0022552ESI0022552_14

480

ESI0022584ESI0022584_2

501

ESI0073823ESI0073823_2

580

ESI0072383

Privileged

Tax Shelter Exception Applies

Yes

581

ESI0072384-

Privileged

Tax Shelter Exception Applies

Yes

Privileged

Tax Shelter Exception Applies

Yes

ESI0072384_13
582

ESI0072385ESI0072385_2

ORDER – 25

 Case 2:15-cv-00102-RSM Document 187 Filed 01/17/20 Page 26 of 41

583

ESI0072386-

Privileged

Tax Shelter Exception Applies

Yes

Privileged

Tax Shelter Exception Applies

Yes

Privileged

Tax Shelter Exception Applies

Yes

ESI0072386_13
584

ESI0075851ESI0075851_2

585

ESI0075852ESI0075852_13

586

ESI0075853

Privileged

Tax Shelter Exception Applies

Yes

587

ESI0075854-

Privileged

Tax Shelter Exception Applies

Yes

ESI0075854_13
592

ESI0022583

Privileged

Tax Shelter Exception Applies

Yes

671

ESI0072283

Privileged

Tax Shelter Exception Applies

Yes

672

ESI0072284-

Privileged

Tax Shelter Exception Applies

Yes

Privileged

Tax Shelter Exception Applies

Yes

Privileged

Tax Shelter Exception Applies

Yes

ESI0072284_12
680

ESI0022709ESI0022709_2

681

ESI0022710ESI0022710_2

691

ESI0022444

Privileged

Tax Shelter Exception Applies

Yes

694

ESI0022711-

Privileged

Tax Shelter Exception Applies

Yes

ESI0022711_2

ORDER – 26

 Case 2:15-cv-00102-RSM Document 187 Filed 01/17/20 Page 27 of 41

695

ESI0022865-

Privileged

Tax Shelter Exception Applies

Yes

Privileged

Tax Shelter Exception Applies

Yes

Privileged

Tax Shelter Exception Applies

Yes

Privileged

Tax Shelter Exception Applies

Yes

Privileged

Tax Shelter Exception Applies

Yes

Privileged

Tax Shelter Exception Applies

Yes

ESI0022865_2
696

ESI0022866ESI0022866_12

697

ESI0023481ESI0023481_3

700

ESI0023486ESI0023486_3

710

ESI0073098ESI0073098_3

742

ESI0103221ESI0103221_11

743

ESI0103222

Not Privileged

Yes

744

ESI0103223-

Privileged

Tax Shelter Exception Applies

Yes

ESI0103223_11
746

ESI0075770

Privileged

Tax Shelter Exception Applies

Yes

747

ESI0075771-

Privileged

Tax Shelter Exception Applies

Yes

Not Privileged

Li, Lei is not a FATP.

Yes

ESI0075771_13
782

ESI0073099

Microsoft does not establish what, if any, advice
from a FATP is involved.

ORDER – 27

 Case 2:15-cv-00102-RSM Document 187 Filed 01/17/20 Page 28 of 41

846

ESI0075671

Not Privileged

847

ESI0075672-

Not Privileged

ESI0075672_10

Yes
Microsoft does not establish how, if at all, this

Yes

document related to advice it received from a
FATP. Rather, it appears to be a case study for
internal discussion.

875

ESI0023474-

Privileged

Tax Shelter Exception Applies

Yes

Privileged

Tax Shelter Exception Applies

Yes

Privileged

Tax Shelter Exception Applies

Yes

Privileged

Tax Shelter Exception Applies

Yes

Privileged

Tax Shelter Exception Applies

Yes

Privileged

Tax Shelter Exception Applies

Yes

Privileged

Tax Shelter Exception Applies

Yes

Privileged

Tax Shelter Exception Applies

Yes

ESI0023474_2
876

ESI0023475ESI0023475_25

897

ESI0115353ESI0115353_4

898

ESI0115354ESI0115354_28

899

ESI0115355ESI0115355_2

909

ESI0115356ESI0115356_3

910

ESI0115357ESI0115357_30

911

ESI0023562ESI0023562_4

ORDER – 28

 Case 2:15-cv-00102-RSM Document 187 Filed 01/17/20 Page 29 of 41

964

ESI0074922-

Privileged

Tax Shelter Exception Applies

Yes

Privileged

Tax Shelter Exception Applies

Yes

Privileged

Tax Shelter Exception Applies

Yes

ESI0074922_4
974

ESI0016472ESI0016472_5

975

ESI0016473ESI0016473_25

1078

ESI0070901

Privileged

Tax Shelter Exception Applies

Yes

1101

ESI0070733

Privileged

Tax Shelter Exception Applies

Yes

1102

ESI0070734-

Privileged

Tax Shelter Exception Applies

Yes

Privileged

Tax Shelter Exception Applies

Yes

Privileged

Tax Shelter Exception Applies

Yes

Privileged

Tax Shelter Exception Applies

Yes

ESI0070734_14
1103

ESI0070735ESI0070735_11

1104

ESI0070736ESI0070736_25

1193

ESI0023457ESI0023457_3

1326

ESI0101879

Privileged

Tax Shelter Exception Applies

Yes

1327

ESI0101880-

Privileged

Tax Shelter Exception Applies

Yes

Privileged

Tax Shelter Exception Applies

Yes

ESI0101880_2
1328

ESI0077106ESI0077106_13

ORDER – 29

 Case 2:15-cv-00102-RSM Document 187 Filed 01/17/20 Page 30 of 41

1329

ESI0066748

Privileged

Tax Shelter Exception Applies

Yes

1330

ESI0066749-

Privileged

Tax Shelter Exception Applies

Yes

ESI0066749_13
1331

ESI0066750

Privileged

Tax Shelter Exception Applies

Yes

1332

ESI0066751-

Privileged

Tax Shelter Exception Applies

Yes

ESI0066751_19
1337

ESI0023506

Privileged

Tax Shelter Exception Applies

Yes

1338

ESI0023507-

Privileged

Tax Shelter Exception Applies

Yes

Privileged

Tax Shelter Exception Applies

Yes

ESI0023507_2
1339

ESI0023508ESI0023508_3

1352

ESI0023625

Privileged

Tax Shelter Exception Applies

Yes

1353

ESI0023626-

Privileged

Tax Shelter Exception Applies

Yes

ESI0023626_22
1360

ESI0067194

Privileged

Tax Shelter Exception Applies

Yes

1361

ESI0067195-

Privileged

Tax Shelter Exception Applies

Yes

ESI0067195_22
1364

ESI0070655

Privileged

Tax Shelter Exception Applies

Yes

1365

ESI0070656-

Privileged

Tax Shelter Exception Applies

Yes

ESI0070656_22

ORDER – 30

 Case 2:15-cv-00102-RSM Document 187 Filed 01/17/20 Page 31 of 41

1383

ESI0070862

Privileged

Tax Shelter Exception Applies

Yes

1384

ESI0070863-

Privileged

Tax Shelter Exception Applies

Yes

Privileged

Tax Shelter Exception Applies

Yes

ESI0070863_22
1407

ESI0023509ESI0023509_2

1433

ESI0065442

Privileged

Tax Shelter Exception Applies

Yes

1434

ESI0065443-

Privileged

Tax Shelter Exception Applies

Yes

Privileged

Tax Shelter Exception Applies

Yes

ESI0065443_20
1476

ESI0023569ESI0023569_3

1477

ESI0023570

Privileged

Tax Shelter Exception Applies

Yes

1485

ESI0092050-

Privileged

Tax Shelter Exception Applies

Yes

ESI0092050_3
1486

ESI0092051

Privileged

Tax Shelter Exception Applies

Yes

1492

ESI0092047-

Privileged

Tax Shelter Exception Applies

Yes

Privileged

Tax Shelter Exception Applies

Yes

Privileged

Tax Shelter Exception Applies

Yes

ESI0092047_4
1497

ESI0066300ESI0066300_5

1503

ESI0065490ESI0065490_4

ORDER – 31

 Case 2:15-cv-00102-RSM Document 187 Filed 01/17/20 Page 32 of 41

1524

ESI0092092

Privileged

Tax Shelter Exception Applies

Yes

1553

ESI0065557-

Not Privileged

Microsoft does not establish how, if at all, this

Yes

ESI0065557_3

document related to advice it received from a
FATP.

1554

ESI0065558-

Not Privileged

Yes

Not Privileged

Yes

ESI0065558_3
1555

ESI0065559ESI0065559_2

1556

ESI0065560

Not Privileged

Yes

1557

ESI0065561-

Not Privileged

Yes

ESI0065561_22
1558

ESI0065562-

Not Privileged

The government argues that Van Orman’s work

Yes

related to creating a “process narrative” of the

ESI0065562_46

foreign entity’s business and accounting
operation. See Dkt. #145 at 13. Microsoft does
not contest the allegation.
1559

ESI0065563-

Not Privileged

Yes

ESI0065563_39
1613

ESI0070332ESI0070332_3

ORDER – 32

Not Privileged

Appears related to billing as opposed to advice
of a FATP.

Yes

 Case 2:15-cv-00102-RSM Document 187 Filed 01/17/20 Page 33 of 41

1614

ESI0070334-

Privileged

Tax Shelter Exception Applies

Yes

Not Privileged

Relates to creation of slides for a presentation to

Yes

ESI0070334_18
1618

ESI0065154-

“release lab operations people”

ESI0065154_2
1621

ESI0023520-

Not Privileged

Yes

Yes

ESI0023520_2
1622

ESI0023521

Not Privileged

1625

ESI0065172-

Not Privileged

Relates to creation of slides for a presentation to

Yes

“release lab operations people”

ESI0065172_3
1626

ESI0065173

Not Privileged

Yes

1627

ESI0065174-

Not Privileged

Yes

ESI0065174_6
1630

ESI0065129-

Privileged

Tax Shelter Exception Applies

Yes

Privileged

Tax Shelter Exception Applies

Yes

Privileged

Tax Shelter Exception Applies

Yes

Privileged

Tax Shelter Exception Applies

Yes

ESI0065129_4
1632

ESI0065131ESI0065131_3

1638

ESI0067817ESI0067817_2

1639

ESI0067818ESI0067818_2

ORDER – 33

 Case 2:15-cv-00102-RSM Document 187 Filed 01/17/20 Page 34 of 41

1641

ESI0065125-

Privileged

Tax Shelter Exception Applies

Yes

Privileged

Tax Shelter Exception Applies

Yes

Privileged

Tax Shelter Exception Applies

Yes

Privileged

Tax Shelter Exception Applies

Yes

ESI0065125_5
1642

ESI0065126ESI0065126_4

1647

ESI0066663ESI0066663_5

1648

ESI0066665ESI0066665_4

1650

ESI0065122

Privileged

Tax Shelter Exception Applies

Yes

1651

ESI0065225-

Privileged

Tax Shelter Exception Applies

Yes

ESI0065225_2
1660

ESI0101619

Privileged

Tax Shelter Exception Applies

Yes

1661

ESI0101620-

Privileged

Tax Shelter Exception Applies

Yes

ESI0101620_16
1676

ESI0066978

Not Privileged

1677

ESI0066979-

Privileged

Yes
Tax Shelter Exception Applies

Yes

ESI0066979_19
1678

ESI0070794

Not Privileged

1679

ESI0070795-

Privileged

ESI0070795_19

ORDER – 34

Yes
Tax Shelter Exception Applies

Yes

 Case 2:15-cv-00102-RSM Document 187 Filed 01/17/20 Page 35 of 41

1775

ESI0070999

Not Privileged

Yes

1776

ESI0023432

Not Privileged

Yes

1779

ESI0023435-

Privileged

Tax Shelter Exception Applies

Yes

Privileged

Tax Shelter Exception Applies

Yes

Privileged

Tax Shelter Exception Applies

Yes

Privileged

Tax Shelter Exception Applies

Yes

ESI0023435_20
1787

ESI0067061ESI0067061_4

1792

ESI0023431ESI0023431_4

1795

ESI0070796ESI0070796_3

ORDER – 35

 Case 2:15-cv-00102-RSM Document 187 Filed 01/17/20 Page 36 of 41

Attachment D
Related Summonses 2 and 3 Privilege Log§
Doc. Number

Bates Range

Privileged under § 7525?

19

MSTP9005207-

Privileged

Additional Explanation

Disclose?
No

MSTP9005208
25

MSTP9003447-

Not Privileged

MSTP9003450

FATP is only copied on the initial email.

Yes

Microsoft does not establish what, if any, advice
from a FATP was involved.

43
52

MSTP9011632-

Not Privileged

MSTP9011641

Unclear who created and received document.

Yes

May be an underlying tax/legal basis, but
Microsoft does not establish what, if any, advice
from a FATP was involved.

56

MSTP90005180MSTP9005200

Not Privileged

Even to the extent any portion of this document

Yes

is privileged, it has previously been disclosed to
the government. See Dkt. #146-50.

§

Referenced documents are identified in Microsoft’s privilege log for Related Summonses 2 & 3. See Dkt. #141 at 22–27.

ORDER – 36

 Case 2:15-cv-00102-RSM Document 187 Filed 01/17/20 Page 37 of 41

57

MSTP9013588-

Partially Privileged

Privileged = MSTP9013589-MSTP9013594.

Partially

MSTP9013621
Not Privileged = MSTP9013588;
MSTP9013595-MSTP9013621.
May be an underlying tax/legal basis, but
primarily serves a business purpose.
65

MSTP9003243-

Not Privileged

MSTP9003255

Microsoft does not establish what, if any, advice Yes
from a FATP was involved.
Much of the document relates to foreign
taxation.
Document appears related to § 6662 reporting.

77

MSTP9011465-

Partially Privileged

MSTP9011486

Privileged = MSTP9011465-MSTP9011469;

Partially

MSTP9011483-MSTP9011486.

Not Privileged = MSTP9011470MSTP9011482.
May be an underlying tax/legal basis, but
Microsoft does not establish what, if any, advice
from a FATP was involved.
83

MSTP9011301MSTP9011321

ORDER – 37

Privileged

No

 Case 2:15-cv-00102-RSM Document 187 Filed 01/17/20 Page 38 of 41

157

MSTP9002194-

Partially Privileged

Privileged = MSTP9002206-MSTP9002212.

Partially

MSTP9002212
Not Privileged = MSTP9002194MSTP9002205. Microsoft does not establish
what, if any, advice from a FATP was involved.
159

MSTP9001769-

Partially Privileged

MSTP9001852

Privileged = MSTP9001807-MSTP9001820;

Partially

MSTP9001846-MSTP9001852.

Not Privileged = MSTP9001769MSTP9001806;
MSTP9001821-MSTP9001845.
Microsoft does not establish what, if any, advice
from a FATP was involved.
Much of the document relates to foreign
taxation.
167
234

MSTP9004694MSTP9004755

ORDER – 38

Not Privileged

Appears to be slides for a “pitch” meeting and
to have been shared with both E&Y and KPMG.

Yes

 Case 2:15-cv-00102-RSM Document 187 Filed 01/17/20 Page 39 of 41

271

MSTP14914988-

Partially Privileged

MSTP1491552

Privileged = MSTP1491539-MSTP1491547;

Partially

MSTP1491550;
MSTP1491552.

Not Privileged = MSTP1491498MSTP1491538;
MSTP1491548-MSTP1491549;
MSTP1491551.
369
382

MSTP9003351-

Not Privileged

MSTP9003403
395

MSTP9008197-

Appears to have been shared externally and

Yes

appears related to foreign taxation.
Privileged

No

Privileged

No

MSTP9008198
496

MSTP9011294MSTP9011300

607
736
792
794
795

ORDER – 39

 Case 2:15-cv-00102-RSM Document 187 Filed 01/17/20 Page 40 of 41

802

MSTP9008023-

Partially Privileged

Privileged = MSTP9008030.

Yes

MSTP9008042
Not Privileged = MSTP9008023MSTP9008029; MSTP9008031-MSTP9008042.
Tax Shelter Exception Applies
818

MSTP9000068-

Privileged

Tax Shelter Exception Applies

Yes

Privileged

To the extent this document is privileged,

Yes

MSTP9000081
845

MSTP9013964MSTP9013965

privilege has been waived by sharing the
document with an outside party
(joseph.p.tyrell@pwc.com), primarily serving a
business purpose.

852

MSTP9009330-

Not Privileged

MSTP9009332

Even to the extent any portion of this document

Yes

is privileged, it has previously been disclosed to
the government. See Dkt. #146-54.

864

MSTP9000009-

Privileged

Tax Shelter Exception Applies

Yes

Privileged

Tax Shelter Exception Applies

Yes

MSTP9000010
866

MSTP9008011MSTP9008012

870
881

ORDER – 40

 Case 2:15-cv-00102-RSM Document 187 Filed 01/17/20 Page 41 of 41

882

MSTP9007983MSTP9007995

ORDER – 41

Not Privileged

Microsoft does not establish what, if any, advice Yes
from a FATP was involved.