Important notice regarding new treasury and
IRS rules on written federal tax advice (Circular 230)
effective june 2005
This notice outlines recent changes to Treasury and IRS regulations that directly impact Moye White's method of delivery of written Federal tax advice to clients.
The Treasury recently issued changes to Circular 230, effective June 21, 2005, which regulate conduct of tax professionals admitted to practice before the IRS. These changes effect new procedures for tax practitioners to follow when offering written federal tax advice.
The new provisions in Circular 230 regulations concern tax shelter transactions. However, the broad nature of the language noted in the circular modifications also covers advice with regard to legitimate business dealings that are structured in a tax-efficient manner.
The new Circular 230 requirements apply to all written forms of federal tax advice, meaning that they encompass formal legal opinions, as well as information conveyed via draft contracts, email, letters, memos, private offering and other memoranda.
Accordingly, most of the written Federal tax advice that Moye White provides after the effective date (June 21, 2005) will need to comply with the revised Circular 230 requirements as outlined.
Practitioners who fail to comply with these requirements may be suspended or disbarred from practice before the Internal Revenue Service, be subject to public censure or a fine.
The new Circular 230 provisions generally require that written tax advice include a complete, detailed opinion regarding all Federal tax matters that influence a given transaction or state explicitly that it is not a reliance opinion and cannot be relied on for avoidance of penalties provided in the IRC. Written advice contained in an SEC-filed document and written advice relating to a transaction for which a Federal tax return has already been filed are specifically excluded from the new requirements. Preparation of a Circular 230-compliant reliance opinion will require the tax practitioner to provide both detailed documentation and in-depth analysis of facts, assumptions, and Federal tax issues relating to the transaction cited in the opinion.
With limited exceptions, the new Circular 230 regulations give practitioners the opportunity to prepare and include a legend in the written advice that indicates that said advice is in no way intended, and that the taxpayer cannot rely on this advice, in seeking to avoid any penalties resulting from any tax filings or positions taken by said taxpayer in connection with the appropriate transaction.
Accordingly, beginning with the effective date of June 21, 2005, most e-mail messages transmitted by members of Moye White's transactional and tax-related groups will contain a legend (located above the signature line) with accompanying language indicating that any written Federal tax advice contained therein cannot be relied upon by the recipient for the express purpose of penalty avoidance.
A similar legend will accompay all draft transactional documents, client memoranda, and client correspondence. The text of this new legend reads as follows:
IRS Circular 230 disclosure: To ensure compliance with IRS-imposed requirements, we inform you that any U.S. Federal tax advice contained herein is not intended, written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing, or recommending to another party any transaction or matter contained herein.
All private offering memoranda will include a wholely different legend, per Circular 230, that also states that the tax advice was written for the sole purpose of supporting promotion or transaction marketing as described therein, and will urge individual recipients of offering memorandum to seek tax advice based on their particular circumstances from an independent tax advisor.
Legend placement on e-mails and other forms of correspondence should provide our tax advisors the ability to comply with the new Circular 230 requirements in lieu of detailed reliance opinions in situations where said opinion is neither requested or warranted. As a result, we should adhere to Circular 230 requirements in most instances in an efficient manner.
Since every situation is unique, instances may arise wherein a client will specifically request a reliance opinion, without regard to any additional effort or cost involved. We will, of course, be glad to comply with any such request. However, unless a reliane opinion is specifically requested, all written Federal tax advice prepared by Moye White will include the appropriate legends as noted herein.
The information contained in this memo is not intended for the purposes of providing any particular legal advice. We do not advocate resolution of any business decision based on the content of this correspondence.
For specific questions concerning issues address in this memoradum, please contact Scott R. Greiner (303-292-7942) or Edward D. (Ted) White (303-292-7933).
