No, not J. W. Howe’s seldom-sung fourth verse, from that November morning in 1861, when Julia sprang out of bed to write those famous words, lest she fall back asleep and forget them.

Rather, today we have an echo of my blogpost “Advance and Retreat”, 6/26/13. And it brings back Eaton Corporation and Subsidiaries, Docket No. 5576-12, filed 4/6/15, before STJ Daniel A. (“Yuda”) Guy, who is “sifting out the hearts of men before his judgment seat”, as Julia put it.

The sifting here involves whether Eaton and the gang relied reasonably and in good faith on the advice its platoon of tax advisers bestowed upon them. But in order to sift, it is necessary to know what such advice might have been.

Eaton and the gang claims it’s all client-attorney privileged, per Section 7525.

IRS, of course, demands discovery. STJ Yuda requires an in camera read-through, and demands of Eaton and the gang, in Julia’s words “Oh, be swift, my soul, to answer him! be jubilant, my feet.”

Eaton does, but how jubilant any portion of Eaton and the gang will be after reading Judge Yuda’s order remains to be seen.

STJ Yuda notes that the “material prepared in contemplation of litigation” privilege is a tent big enough to shelter Eaton, the gang and the advisers from “the morning dews and damps” the IRS seeks to inflict upon them.

“Considering all of the circumstances, we conclude that petitioner subjectively believed that litigation with the IRS regarding the appropriate TPM [Transfer Pricing Methodology] for its Puerto Rico operations was a real possibility at the time it requested and negotiated the APA [Advance Pricing Agreement; see Order, at pp. 2-3, and my blogpost abovecited for more]. Simply put, by early 2002 the parties had only recently settled a fairly long-running dispute regarding petitioner’s TPM for the taxable years 1994 to 1997. In that environment, although petitioner likely hoped that the APA process would prove effective and produce a lasting agreement, we understand how petitioner and its legal advisors remained concerned that the APA process could fail and that litigation with the IRS was likely to follow. As outlined above, the APA process is complex, it presents many pitfalls, and even an executed APA is subject to cancelation or revocation on various grounds. Although the APA process requires and is dependent upon the parties’ candor and cooperation, we believe that it would have been objectively reasonable for both parties to engage in the APA process while at the same time honing their arguments and strengthening their respective positions should litigation occur. On this record, we conclude that the documents under review that petitioner identified as work product were prepared because of the prospect of litigation and are otherwise protected from discovery.” Order, at p. 5.

And of course Section 7525(a)(3)(A) covers all us Circular 230 types as if we were attorneys.

So Eaton and the gang don’t have to tell IRS nuttin’, right?

Wrong!

Now comes the sifting.

“The documents under review show that petitioner relied heavily on its outside attorneys and tax practitioners in preparing its APA request and in the negotiations that led to the execution of the APA in April 2004. Recognizing that a reasonable cause/good faith defense under section 6664(c) is dependent upon a review of all the pertinent facts and circumstances, petitioner’s reliance on the reasonable cause/good faith defense in this case, and the averments in the petition related thereto, call into question a number of factual issues including (but not limited to) petitioner’s knowledge and understanding of the pertinent legal authorities governing APAs and the application of those legal authorities to the relevant facts, whether petitioner provided its attorneys and tax practitioners with accurate information and all of the facts material to its APA request and the negotiations related thereto, and whether petitioner abided by the advice that it received from its attorneys and tax practitioners. Petitioner’s communications with its attorneys and tax practitioners may be the only probative evidence of the state of mind or knowledge of the persons who acted on its behalf and those communications may tend to show, among other material facts, whether those persons in fact considered the APAs to be binding and valid in accordance with the provisions of Rev. Proc. 96-53, supra.

“In sum, petitioner’s reasonable cause/good faith defense puts into contention the subjective intent and state of mind of those who acted for petitioner and petitioner’s good-faith efforts to comply with the tax law. Assuming as we do at this time that petitioner persists in this defense, it would be unfair to deprive respondent of knowledge of the legal and tax advice that petitioner received in the course of requesting and negotiating the APA, and petitioner will forfeit the privilege to withhold the documents under review.” Order, at p. 10.

Hand it over, gang. Or take the risk on the penalties.