IRS PROPOSES RULES FOR TAX ADVICE, COVERED OPINIONS

Washington, D.C. -- The Internal Revenue Service has proposed new regulations in Reg-138367-06 governing practice before the agency, including written tax advice and "covered opinions" by practitioners, which would amend Circular 230 by eliminating the complex rules governing covered opinions in Section 10.35 of the Tax Code. In addition, they would expand the requirements for written advice under Section 10.37. The proposed regulations also broaden the scope of the procedures to ensure compliance under Section 10.36 by requiring that a practitioner with principal authority for overseeing a firm's federal tax practice take reasonable steps to ensure the firm has adequate procedures in place for purposes of complying with Circular 230.

The proposed regulations clarify that practitioners must exercise competence when engaged in practice before the IRS and that the prohibition on a practitioner endorsing or otherwise negotiating any check issued to a taxpayer with respect to a federal tax liability applies to government payments made by any means, electronic or otherwise. The proposed regs also expand the categories of violations subject to the expedited proceedings in Section 10.82 to include failures to comply with a practitioner's personal tax filing obligations that demonstrate a pattern of willful disreputable conduct.

The proposed regs would streamline the existing rules for written tax advice by applying one standard for all written tax advice under a proposed Sec. 10.37, which would provide that the practitioner must base all written advice on reasonable factual and legal assumptions, exercise reasonable reliance, and consider all relevant facts. The proposed removal of Section 10.35 would eliminate the requirement that practitioners fully describe the relevant facts (including the factual and legal assumptions relied upon) and the application of the law to the facts in the written advice itself, and the use of Circular 230 disclaimers in documents and transmissions, including e-mails.

Comments on the proposed regulations must be received by Nov. 16, 2012.

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