Circular 230: An Overview

First Published in the: Journal of Tax Practice and Procedure

D. Brager*, C. Cobb, K. Dellinger and W. Quealy, Jr.

The written advice and best practice standards added to the Circular 230 regulations have generated considerable comment since they were first proposed at the end of 2003. In the meantime, the Office of Professional Responsibility (OPR) has virtually doubled in size during 2004 and 2005, and OPR management has indicated that the Office intends to increase enforcement through disciplinary actions against practitioners subject to Circular 230 in other areas of required compliance under the Circular. The purpose of this article is two-fold. The first is to review the new written advice and best practice standards. The second is to look at Circular 230 more generally and review some of the practice standards on which the OPR appears to have focused.

Circular 230 Best Practice, Tax Shelter Opinions and Other Written Advice Standards
Background

In December 2003, the Treasury issued proposed changes to the Circular 230 regulations (which govern the conduct of those who represent taxpayers before the IRS) that provided for the establishment of “best practices” by representatives and their firms, or employer, and provided specific requirements and standards for the issuance of “tax shelter opinions.”

Not surprisingly, there was a great outcry among tax professionals (and attorneys, in particular) about overreach on the part of the IRS and the possibility that tax advisor/client relationships would be seriously, adversely impacted. An enormous volume of commentary was received at the IRS with respect to the proposals.

So, in December 2004, the Treasury revised the Circular 230 changes and issued “final” regulations that took effect June 20, 2005 (180 days after their December release).

Again, not surprisingly, there was perhaps an even greater outcry among tax professionals (and attorneys, in particular) about overreach on the part of the IRS and the possibility that tax advisor/client relationships would be seriously, adversely impacted. An enormous volume of commentary was received at the IRS with respect to the proposals and is still pouring in.

The Treasury responded by making certain additions and revisions to the proposals and, despite requests from countless tax professionals and organizations to delay the effective date of the new standards, the Circular 230 provisions went into effect as scheduled.

Read Circular 230: An Overview [PDF]