Respondent argues that the section 7525(b) exception applies and that the minutes and notes do not embody privileged communications because

the series of Countryside transactions that are the subject of this litigation ^{52009 U.S. Tax Ct. LEXIS 17">*22} * * * are a "tax shelter" as defined in 6662(d)(2)(c)(iii) * * * and the documents withheld by Petitioners are in connection with the promotion 132 T.C. 347">*350 of the participation of Petitioners' corporate general partners in the transactions.

Petitioners argue that the section 7525(b) exception does not apply because respondent has failed to provide evidence of several elements necessary to that provision's application: viz, (1) the promotion of (2) a corporation's participation in (3) any tax shelter, and, in the case of the notes, (4) a written communication. Petitioners argue that respondent's failure to provide evidence that all the elements of section 7525(b) have been satisfied renders the provision inapplicable.

We agree with petitioner that, for the FATP privilege not to apply because of the application of the section 7525(b) exception, respondent must produce evidence that all the elements of the exception are satisfied. Cf. 492 F.3d 806">United States v. BDO Seidman, L.L.P., supra at 821 ("[P]roponent of the tax practitioner privilege must establish each element".).

The elements of the section 7525(b)2009 U.S. Tax Ct. LEXIS 17">*23 exception are not free of interpretative difficulties. See, e.g., 492 F.3d 806">id. at 822-828 ("Scope of the Tax Shelter Exception"); Valero Energy Corp. v. United States, No. 06 C 6730, 2008 U.S. Dist. LEXIS 105609">2008 U.S. Dist. LEXIS 105609 (N.D. Ill., Aug. 26, 2008) (corrected memorandum opinion and order) ("'Promotion' of tax shelter"). In no report have we addressed section 7525(b). In this report, we need go no further than to consider the elements of "promotion" and "written communication". We shall start with the latter. We shall in each case assume that respondent has shown that the other elements necessary for the application of the section 7525(b) exception have been satisfied, but we do so only to isolate the element we are considering.

As stated supra, the notes consist of two pages handwritten by Mr. Curtis recording confidential communications regarding tax advice received during a meeting with, among others, Mr. Egan. Respondent's argument that the notes are a written communication is succinct: "Written notes of oral communications are 'written communications' under any 132 T.C. 347">*351 plausible construction." Petitioners' response is also succinct; i.e., the plain meaning of "written communications" requires some transmission 2009 U.S. Tax Ct. LEXIS 17">*24 of written material from one person to another. Petitioners state, and respondent does not contradict them, that Mr. Curtis did not share his notes with any other person.

We have examined the notes, and they are just that, notes; they are neither a verbatim record of an oral communication nor anything resembling that. They appear to be nothing more than the holographic record of the salient points of a discussion. We conclude that information was communicated to and perhaps by Mr. Curtis, but not, in this case, in writing. The Court of Appeals for the Seventh Circuit said in 492 F.3d 806">United States v. BDO Seidman, L.L.P., supra at 827: "Because the [section 7525(b)] exception is limited to written communications, oral communications between a tax practitioner and the corporate agent remain within the general rule of privilege." Although the Court of Appeals was not addressing the question we address here concerning notes of an oral communication, we think the distinction that court drew is relevant to the question we face. The notes were not communicated to anyone. Therefore, they do not constitute a written communication that can satisfy that element of the section 7525(b) exception. The FATP 2009 U.S. Tax Ct. LEXIS 17">*25 privilege accorded to the notes is not subject to the exception in section 7525(b).

Respondent argues: "The * * * facts show that Mr. Egan was promoting the Countryside transactions." In support of that claim, respondent alleges, among other things, that Mr. Egan played a "substantial role in structuring Countryside and similar transactions" and "was involved in organizing, structuring and assisting with respect to tax shelter transactions known as basis swaps for Winn-controlled partnerships and corporations." ⁶ Petitioners respond: "Mr. Egan, a longstanding tax advisor to Petitioners and to other members of the Winn Organization, performed precisely the kind of one-on-one tax advice and counseling that is the antithesis of a 'promotional' relationship."

132 T.C. 347">*352 Petitioners support their claim with respect to Mr. Egan's relationship to what we shall call "the Winn organization" with excerpts from his deposition taken by respondent in these cases. In those excerpts, Mr. Egan testifies to the following. 2009 U.S. Tax Ct. LEXIS 17">*26 He began his relationship with the Winn organization in 1982, when he was a second-year staff accountant at an accounting firm asked to review a tax return. He is now a tax partner at PricewaterhouseCoopers (PWC) servicing the Winn organization account. He prepares tax returns for the Winn organization entities, the Winn family trusts, Mr. Winn himself, his family members, and corporate general partners (generally S corporations). Presently, 70 percent of his work for the Winn organization involves tax compliance (i.e., return preparation), with the balance encompassing tax planning, answering questions, and responding to notices and inquiries from Federal and State tax officials. The Winn organization is billed pursuant to engagement letters at a fixed fee for tax compliance work; for all other work, the organization is billed by the hour (hours expended times a rate, pursuant to a schedule provided to the organization). Winn organization personnel consult him with respect to the tax implications of the organization's real estate transactions. He provides tax advice with respect to both contemplated and completed transactions. He has telephone conversations with Winn organization 2009 U.S. Tax Ct. LEXIS 17">*27 personnel once or twice weekly and meets with them once or twice monthly. He provided tax advice on various alternatives that Winn organization personnel considered in connection with the partnership redemptions and associated transactions that are under review in these consolidated cases. He had previously made similar recommendations to the Winn organization in connection with similar transactions. Advising clients with respect to the tax aspects of partnership redemptions is a regular part of his practice, and he has been providing advice to clients (including the Winn organization) on that subject for his entire career. In formulating the advice here under examination, he applied knowledge as to the tax consequences of partnership redemptions that he believes are well known among partnership tax professionals. In formulating that advice, he did not rely on any generic prototypes, descriptive materials, or files maintained by PWC. He had recourse to tax specialists in the PWC national office in Washington, D.C., 132 T.C. 347">*353 who help him understand complex provisions of the Internal Revenue Code and associated regulations, but he received from them no descriptive materials regarding the tax 2009 U.S. Tax Ct. LEXIS 17">*28 structure in issue here.

In pertinent part, section 7525(b) provides that there is no FATP privilege with respect to any "written communication * * * in connection with the promotion of * * * [corporate participation] in any tax shelter". (Emphasis added.) The term "promotion" is not defined in section 7525(b). A commonly used dictionary contains alternative meanings, including "Encouragement of the progress, growth, or acceptance of something; furtherance" and "Advertising; publicity". The American Heritage Dictionary of the English Language 1403 (4th ed. 2000). The verb "promote" is alternatively defined to mean "To urge the adoption of" and "To attempt to sell or popularize by advertising or publicity". Id. Other courts considering the meaning of the term "promotion" in section 7525(b) have reached different answers. Compare United States v. Textron Inc., 507 F. Supp. 2d 138">507 F. Supp. 2d 138, 507 F. Supp. 2d 138">148 (D.R.I. 2007) (the term applies to the peddling of prepackaged tax shelters) with Valero Energy Corp. v. United States, No. 06 C 6730, 2008 U.S. Dist. LEXIS 105609">2008 U.S. Dist. LEXIS 105609 (N.D. Ill., Aug. 26, 2008) (corrected memorandum opinion and order) (the term applies "to a person who organizes or assists in organizing a tax shelter"). There appears to 2009 U.S. Tax Ct. LEXIS 17">*29 be sufficient ambiguity in the meaning of the term that we are justified in looking to legislative history. ⁷

Section 7525 was added to the Code by the Internal Revenue Service Restructuring and Reform Act of 1998, Pub. L. 105-206, sec. 3411(a), 112 Stat. 750. Section 7525(b), as enacted in 1998, was added in conference between the House of Representatives and the Senate on the Senate's amendment to H.R. 2676, 105th Cong., 2d Sess. (1998), which was enacted as Pub. L. 105-206. The conferees defined a tax shelter as "any partnership, entity, plan, or arrangement a significant purpose of which is the avoidance or evasion of income tax." H. Conf. 2009 U.S. Tax Ct. LEXIS 17">*30 Rept. 105-599, at 269 (1998), 1998-3 C.B. 747, 1023. They added: "The Conferees do not understand 132 T.C. 347">*354 the promotion of tax shelters to be part of the routine relationship between a tax practitioner and a client. Accordingly, the Conferees do not anticipate that the tax shelter limitation will adversely affect such routine relationships." Id.

We are satisfied, in view of excerpts from respondent's deposition of Mr. Egan, the truth of which respondent does not question, that Mr. Egan has had a long, close relationship with the Winn organization, preparing returns, assisting with tax planning when asked, answering questions when asked, and responding to notices and inquiries from Federal and State tax officials. His advice with respect to the partnership redemptions and associated transactions under review in these cases was furnished (as was similar advice with respect to similar transactions) as part of a long-standing, ongoing, and, hence, routine relationship with the Winn organization. Mr. Egan provided tax advice to the Winn organization when requested to do so, and his advice here followed the same regular course of procedure as did his other tax advice, including tax advice related 2009 U.S. Tax Ct. LEXIS 17">*31 to partnership redemptions. His employer, PWC, had no stake in the outcome of the transactions under review in this case other than in the continued retention of the Winn organization as a client. It did not receive a fixed fee or a fee based on a percentage of some claimed tax saving. It was paid by the hour pursuant to a rate schedule for Mr. Egan's time in rendering his advice, just as it was for the other services outside of return preparation that he rendered to the Winn organization.

Respondent has focused on Mr. Egan as "promoting the Countryside transactions." We read the conferees' statements quoted above as distinguishing tax advice given in the course of a relationship such as that between Mr. Egan and the Winn organization from the "promotion" of a client's participation in a tax shelter. There may be a point at which an FATP's actions cross the line, and will no longer be encompassed within the routine relationship between an FATP and his client and will amount to tax shelter promotion. Respondent has, however, failed to show us that Mr. Egan's communications with the Winn organization with respect to the partnership redemptions and associated transactions before us crossed 2009 U.S. Tax Ct. LEXIS 17">*32 that line. He rendered advice when asked for it; 132 T.C. 347">*355 he counseled within his field of expertise; his tenure as an adviser to the Winn organization was long; and he retained no stake in his advice beyond his employer's right to bill hourly for his time. Respondent has failed to show us that he crossed the line from trusted adviser to promoter. ^{82009 U.S. Tax Ct. LEXIS 17">*33}

Because Mr. Egan was not a promoter with respect to the Countryside transactions, communications between Mr. Egan and the Winn organization, including the minutes at issue in motion No. 2, remain privileged.

On the premises stated, we will deny the motions.

An appropriate order will be issued in docket No. 3162-05.