Opinion ID: 579497
Heading Depth: 1
Heading Rank: 2

Heading: Production of Tax Returns

Text: 20 At various points in the proceedings, Naas asked Poulos to document his income. Naas made the request so that it could determine whether a community of interest existed between Poulos and Naas so as to make Poulos a dealer under the WFDL. See Wis.Stat. § 135.02 (1989-90); Ziegler Co. v. Rexnord, Inc., 139 Wis.2d 593, 605-06, 407 N.W.2d 873 (1987). Further, Poulos' income was relevant to the amount of his damages after Naas terminated him. In response to repeated requests, Poulos provided his Schedule C income tax reports for the years 1987, 1988 and 1989. He also provided an affidavit supplying income tax information for the same years. In both the state and the federal proceedings, Poulos' attorney repeatedly assured Naas that he would eventually provide Poulos' tax returns, but he never did. Finally, Poulos announced that he simply would not produce his tax returns, on Fifth Amendment grounds. 21 Poulos argued that his tax returns were presumptively privileged and thus shielded from discovery. The district court disagreed, deciding that whether or not the tax returns bore some qualified immunity, Naas had overcome any possible presumption against disclosure. Of course, Poulos had probably already waived any objection to production by failing to object when disclosure was due. Fed.R.Civ.P. 34(b) (The party upon whom the request is served shall serve a written response within 30 days....); Krewson v. Quincy, 120 F.R.D. 6, 7 (D.Mass.1988). But the district court did not reach the issue of waiver, and as we do not need to, we will avoid it as well. 22 Tax returns in the hands of a taxpayer are not privileged. St. Regis Paper Co. v. United States, 368 U.S. 208, 219, 82 S.Ct. 289, 296, 7 L.Ed.2d 240 (1961) (dictum); June v. George C. Peterson Co., 155 F.2d 963, 967 (7th Cir.1946). Nonetheless, a variety of courts, including district courts in this circuit, have also opined that a public policy against unnecessary public disclosure arises from the need, if the tax laws are to function properly, to encourage taxpayers to file complete and accurate returns. Premium Service Corp. v. Sperry & Hutchinson Co., 511 F.2d 225, 229 (9th Cir.1975); see also SEC v. Cymaticolor Corp., 106 F.R.D. 545, 547 (S.D.N.Y.1985); Shaver v. Yacht Outward Bound, 71 F.R.D. 561, 563 (N.D.Ill.1976); Federal Sav. & Loan Ins. Corp. v. Krueger, 55 F.R.D. 512, 514 (N.D.Ill.1972). 23 We express no opinion at this time on the validity or proper formulation of this policy against disclosure. But under any formulation of this qualified immunity, Poulos was properly compelled to produce his tax returns. First, Poulos himself put the level and sources of his income at issue both by claiming to be a dealer under the WFDL and by claiming damages following the termination of his contract with Naas. Krueger, 55 F.R.D. at 514 (production of tax returns may be compelled where litigant puts the amount of his income into issue). Second, there was no reasonable alternative source for the information requested. Cf. Eastern Auto Distributors, Inc. v. Peugeot Motors of America, Inc., 96 F.R.D. 147, 149 (E.D.Va.1982) (plaintiff could disentangle defendant's corporate structure by reference to public records). Poulos' offer to provide the information about his income by way of affidavit does not count as an alternative source--Naas wanted Poulos' tax returns because it needed to dispute Poulos' personal accounting. Shaver, 71 F.R.D. at 564 (It is not enough that he examine the contents of the returns and swear by affidavit to what they contain.). Finally, if we were to recognize some sort of presumption against disclosure, we would certainly leave enforcement of the policy to the discretion of the trial court, Powers v. Chicago Transit Authority, 890 F.2d 1355, 1359 (7th Cir.1989) (decision to compel production of potentially privileged material is committed to discretion of trial court), and there was no abuse of discretion here.