Robert W. Wood (Robert W. Wood, P.C., San Francisco) has published Will the IRS Pursue Attorney Fees Post-Banks?, also available on the Tax Analysts web site as Doc 2005-14789, 2005 TNT 133-36.  Here is the Conclusion:

Although the Supreme Court in Banks resolved the split in the circuits, it didn’t answer all extant questions. There will be plenty of plaintiffs going forward who will seek to distinguish Banks. I believe that is true despite the Tax Court’s recent Vincent decision. And there will be plenty of plaintiffs who will be watching carefully to see whether the IRS audits pre-Banks settlements and judgments. Perhaps the most egregious cases will be those from Texas, Michigan, and Alabama, where taxpayers relied on good circuit court authority and even on the IRS’s own statements that it wasn’t examining attorney fees issues in those jurisdictions. There has been no official statement from the IRS whether it will now examine those returns in light of Banks. I suspect some will be examined. For those and other taxpayers, the attorney fee debate is far from over.