Recent ESI Changes on Discovery and Privilege May Broadly Affect Tax Controversies (Electronically Stored Information‪)‬

Introduction Recent developments in the courts' approach to discovery of electronically stored information (ESI) and the inadvertent waiver of privilege have important implications for taxpayers in litigation with the Internal Revenue Service and potentially in the context of administrative proceedings before the Examination Division (Exam) and Appeals. In recent years, courts and practitioners have recognized the unique challenges that ESI presents in the context of discovery in civil litigation. This recognition led to the development of guidance by a group known as the Sedona Conference, with the publication of the first version of The Sedona Principles Addressing Electronic Document Production in January 2004. In 2006, amendments to the Federal Rules of Civil Procedure addressed some of the practical problems associated with ESI, and in 2007, the Court of Federal Claims promulgated a set of conforming amendments to its rules. Currently, there are several proposed ESI-related amendments to the Rules of the Tax Court. This article summarizes the recent rules changes related to ESI and considers the implications for taxpayer controversies with the IRS.