Circular 230 is the set of regulations governing practice before the IRS. Recently proposed changes have been issued and there is a public hearing scheduled on December 7th regarding the changes. Practitioners will cheer most of these changes. The biggest change is the elimination of the “covered opinion” rules in 10.35 which have been confusing and difficult to apply and have led to the now ubiquitous “Circular 230 disclaimers” at the bottom of emails. When CPAs and attorneys email each other, this can lead to a ridiculous cascading set of Circular 230 disclaimers. The IRS has now told us we can stop cutting down trees to make enough paper for the disclaimers.
Section 10.37 has been revised to list the standards required for written advice in a tax matter. The revision eliminates the requirement that a practitioner not take into account the possibility of a settlement and so it is now permissible to take into account a “hazards of litigation” analysis but still maintains the requirement that a practitioner cannot take into account the likelihood of an audit. The revision also maintains the heightened standard of review for “tax shelters.”
Proposed Section 10.37 also has more flexibility concerning the form of the written advice. Under the current 10.37 there had to be a complete description of relevant facts (including assumptions and representations), the application of the law to the fact and the conclusion. Now it is left to the practitioner to determine the scope of the written advice. This proposal was in response to concerns over the expense of written tax opinions.
There are a number of other proposals, including in the disciplinary area. One of these is an expedited suspension procedure for practitioners who have neglected their own tax filing obligations. These provide for expedited suspension for failure to file four of the last five years of annual returns (such as income tax returns) or five of seven periods of an non-annual return (such as Form 941).
The expedited suspension, however, does not apply to nonpayment because it is possible that the non-payment was due to circumstances beyond the practitioner’s control.
There is also a clarification that the Office if Professional Responsibility (OPR) has exclusive responsibility over matters related to practitioner discipline.
In summary, these proposals reflect a greater flexibility and common sense in the approach to written advice and other matters of practice before the IRS.