Opinion ID: 2517270
Heading Depth: 2
Heading Rank: 4

Heading: The Test for Discovering Tax Returns

Text: Today, we reaffirm Alcon's principles and restate its test. We recognize that the concepts of compelling need and least intrusive alternative depend on the specific facts and circumstances of the case at hand, and thus, are essential to the discovery analysis. [6] In addition to these two factors, we add a consideration of relevancy as a basic premise of discovery. We now hold that, because of their confidential nature, tax returns may not be ordered disclosed unless a court finds that they are relevant to the subject of the action and that there is a compelling need for information contained in the returns because the information sought is not otherwise readily obtainable. [7] The burden lies with the party seeking discovery to show relevancy and to demonstrate a compelling need for the specific information contained within the requested documents. In responding to the discovery requests, the party opposing discovery can point to other available sources from which the information can be readily obtained. [8] In considering these factors, a trial court may conduct an in camera examination of the requested returns and the possible alternative sources of information. If a court determines that a compelling need for the returns does exist, the court should focus on the specific information that the party requesting discovery is actually seeking, and limit the permitted discovery to the necessary materialsby, for example, redacting irrelevant informationas opposed to ordering blanket disclosure of the entire returns. Disclosure should be at most no broader than what the party seeks. A court engaging in this analysis should keep in mind Colorado's strong policy in favor of nondisclosure of tax returns. See Alcon, 113 P.3d at 743. Now that we have clarified the appropriate test for evaluating State Farm's motion to compel disclosure of Stone's tax returns, we consider its application to the particular facts in the record before us.