IRS implements sweeping changes to Circular 230: key points for practitioners

by DLA Piper

Final Circular 230 regulations issued by the Internal Revenue Service on June 9 are now in effect, implementing sweeping changes to the governing practice standards for attorneys and other practitioners practicing before the IRS. 1

In large part, the IRS has adopted the proposed regulations (REG-138367-06) published on September 17, 2012.  See 31 CFR Part 10, available here.

Those who practice before the IRS and are governed by Circular 230 are required to be familiar with it and its requirements.  Practice before the IRS “comprehends all matters connected with a presentation to the [IRS] . . . relating to a taxpayer’s rights, privileges, or liabilities under laws or regulations administered by the [IRS].  Such presentations include, but are not limited to, preparing documents; filing documents; corresponding and communicating with the [IRS]; rendering written advice with respect to any entity, transaction, plan or arrangement . . . and representing a client at conferences, hearings, and meetings.”

Among the most significant changes to Circular 230 are the following:

  1. The “covered opinion” rules in section 10.35 have been eliminated and replaced by more practical, flexible, reason-based requirements for written advice in section 10.37.   Among the consequences of the changes is that the Circular 230 disclaimer that now appears at the bottom of many emails and on memos can and should be eliminated.2
  2. Additional requirements are imposed on those who have principal authority and responsibility for overseeing a firm’s tax practice (“firm managers”) to ensure that the firm maintains adequate compliance procedures to ensure that members, associates, and employees are complying with Circular 230’s requirements, including those that relate to personal tax filing and payment obligations.

A reason-based standard for written advice replaces the “covered opinion” rules

In place of the rigid and often frustrating requirements of the “covered opinion” rules, the IRS has implemented a robust, yet flexible, reason-based standard for written advice in section 10.37. 

The new regulations do not explicitly define the term “written advice” other than to indicate that such advice addresses “federal tax matters,” a term defined quite broadly to include both “any provision of law impacting a person’s obligations under the internal revenue laws and regulations . . . or [a]ny other law or regulation administered by the [IRS].” 

Specifically excluded from the definition of written advice are certain continuing education presentations and government submissions on matters of general policy.  Specifically not excluded from the definition are “presentations marketing or promoting transactions.”  Also possibly included in the term “written advice” might be advice provided in connection with Reports of Foreign Bank Accounts FinCEN 114 (FBARs), because, although FBARs are required by Title 31 as opposed to Title 26, the authority to enforce certain provisions relating to FBARs has been redelegated to the IRS.

In order to satisfy the new requirements, practitioners must, among other things:

(i) Base the written advice on reasonable factual and legal assumptions (including assumptions as to future events)

(ii) Reasonably consider all relevant facts and circumstances that the practitioner knows or reasonably should know

(iii) Use reasonable efforts to identify and ascertain the facts relevant to written advice on each federal tax matter

(iv) Not rely upon representations, statements, findings or agreements (including projections, financial forecasts, or appraisals) of the taxpayer or any other person if reliance on them would be unreasonable

(v) Relate applicable law and authorities to facts and

(vi) Not, in evaluating a federal tax matter, take into account the possibility that a tax return will not be audited or that a matter will not be raised on audit.

When reviewing practitioner compliance with section 10.37, the IRS will apply a “reasonable practitioner standard,” taking into account “all facts and circumstances” of the representation or engagement, including, but not limited to, “the scope of the engagement and the type and specificity of the advice sought by the client.” 

Accordingly, a request by a client for a quick e-mail response should not be expected to be evaluated the same way as a memo regarding a complex transaction.  With regard to “an opinion the practitioner knows or has reason to know will be used or referred to by a person other than the practitioner . . . in promoting, marketing, or recommending to one or more taxpayers a partnership or other entity, investment plan or arrangement a significant purpose of which is the avoidance or evasion of any tax imposed by the Internal Revenue Code,” the IRS will explicitly take into account the “additional risk caused by the practitioner’s lack of knowledge of the taxpayer’s particular circumstances.”

Tax practice managers must ensure firm and practitioner compliance with Circular 230

In section 10.36, the new regulations impose rigorous oversight responsibilities on those individuals with “principal authority and responsibility for overseeing a firm’s practice governed by [Circular 230]” to oversee Circular 230 compliance by “all members, associates and employees.”  The draft regulations required the establishment of procedures to ensure compliance, and the final regulations specifically provide that the tax practice managers not only must ensure that the firm has adequate procedures in place but must ensure that those procedures are properly followed. 

The “Summary of Comments and Explanation of Revisions” that accompany the new regulations specifically notes that “[o]ne commenter was concerned that section 10.36 imposes a duty on firm management to ensure that members of the firm are compliant with their own tax obligations.  Treasury and the IRS recognize that personal filing and payment obligations are an individual responsibility, and there are limitations on a firm’s responsibility for the compliance of any member, associate, or employee with their personal tax obligations.  But, Treasury and the IRS believe that firm management should not ignore the noncompliance with these obligations by any practitioner associated with the firm when such noncompliance is known or should be known to the firm.” 

Although Circular 230 expressly applies only to those who “practice before the [IRS],” both the language in new regulations and in the “Summary of Comments and Explanation of Revisions” suggest that the IRS is, at a minimum, encouraging firm management to oversee the tax compliance not just of its partners who practice before the IRS but of all of its “members, associates and employees.”  In the absence of a firm designating responsibility for oversight to particular persons, the IRS may identify such person or persons. 

Sweeping changes, dramatic impact

In addition to the above changes, which are likely to have the most dramatic impact on practice, other changes to Circular 230 include the addition of an explicit requirement that each practitioner be competent to practice in connection with each matter for which he or she has been engaged, the addition of expedited suspension procedures for certain practitioners who repeatedly fail to comply with their own tax filing obligations, and clarification that the Office of Professional Responsibility has exclusive jurisdiction within the IRS for matters related to practitioner discipline. 

The changes to Circular 230 are sweeping.  For those whose practice relates to the Internal Revenue Code, it is imperative to read and become familiar with these new regulations.  It is reasonable to expect that questions will arise as you make yourself familiar with the new regulations. 

1 In what could be viewed as a complementary action, on June 10, the IRS announced adoption of the Taxpayer Bill of Rights, which it has described as “a cornerstone document to provide the nation’s taxpayers with a better understanding of their rights.” See it here.

2 “Treasury and the IRS expect that these amendments will eliminate the use of a Circular 230 disclaimer in e-mail and other writings.”


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© DLA Piper | Attorney Advertising

Written by:

DLA Piper

DLA Piper on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.