Jerald David August reports that Treasury has issued final regs replacing the “covered opinion” rules for written tax advice with a more flexible approach that dispenses with the widespread use of banners warning that the recipient of the communication containing tax advice may not rely upon such  communication to avoid penalties.

With the final regs, there is one provision or standard in place for all written tax advice. Under Circular 230, §10.37, tax practitioners must base all written advice on reasonable factual and legal assumptions, exercise reasonable reliance, and consider all relevant facts the practitioner knows or should know. Accordingly, an individual rendering written tax advise must use reasonable efforts to identify and ascertain the facts relevant to written advice on a federal tax matter.

Another change made under the final regs is the removal of the prior requirement that practitioners fully describe the relevant facts and the application of the law to the facts in the written advice itself.

The final regs further eliminate the use of Circular 230 disclaimers in documents and transmissions, including e-mail.

Further, the final regs define a “federal tax matter” as any matter concerning the application or interpretation of (1) a revenue provision as defined in § 6110(i)(1)(B) of the tax code; (2) any provision of law affecting a person’s obligations under the internal revenue laws and regulations, including but not limited to the person’s liability to pay tax or obligation to file returns; or (3) any other law or regulation administered by the Internal Revenue Service.

The prior rule mandating that a practitioner not advise a client based on the likelihood of an audit or that in the event of an audit whether a particular tax issue(s) will be identified by the Service has been retained.  The final regs, however, eliminate the rule which prohibited a practitioner from taking into account the possibility that an issue will be resolved through settlement if raised by the Service when giving written advice evaluating a federal tax matter.

via Treasury and Internal Revenue Service Issue New Final Regulations on the Rendering of Written Tax Advice: The “Banners” on E-Mail Disclaiming Reliance on Tax Advice May Soon Disappear | Federal Taxation Developments Blog.

Posted by Lewis J. Saret, Co-General Editor, Wealth Strategies Journal.