Circular 230 Conflicts of Interest

By James Emilian, CPA, Washington, DC, and Greg Jamouneau, J.D., Chicago, IL

Editor: Greg A. Fairbanks, J.D., LL.M.

In September 26, 2007, the IRS issued final and proposed regulations (TD 9359) pertaining to Circular 230 (31 CFR Part 10), establishing rules governing standards of practice for those representing clients before the Service. The final and proposed regulations address a number of Circular 230 provisions, but this item focuses on §10.29, which generally prohibits a practitioner from representing a client before the IRS if the representation involves a conflict of interest. The final regulations modify the required client consent provision of §10.29(b). This item highlights the requirements of Circular 230 §10.29 and the new client consent standard and addresses how the new standard may affect practitioners and clients.

Circular 230 §10.29

Under Circular 230 §10.29(a), which is unchanged by the final regulations effective September 26, 2007, a “conflict of interest” exists if:

(1) The representation of one client will be directly adverse to another client; or
(2) There is a significant risk that the representation of one or more clients will be materially limited by the practitioner’s responsibilities to another client, a former client or a third person, or by a personal interest of the practitioner.

Former Circular 230 §10.29(b) provided an exception to the rule under §10.29(a) in situations in which the following three elements are established:

  1. The practitioner reasonably believes that he or she will be able to provide competent and diligent representation to each client;

  2. Such representation is not prohibited by law; and
  3. Each client gives informed consent, confirmed in writing.


The new final regulations do not modify the reasonable belief or prohibition elements listed above but, as discussed in greater detail below, make a slight modification to the requirement that each client give informed consent to the representation. Previously the client consent could be obtained orally and documented by the practitioner in its files. Now, signed written consent waiving a conflict must be obtained from clients.

New Client Consent Provision

Circular 230 §10.29(b)(3) is amended to require a practitioner representing conflicting interests to obtain signed written consent from each affected client. The final regulations allow the required written consent to be made within a reasonable period after the informed consent, but not later than 30 days after the date on which the conflict is known by the practitioner.

The final regulations allow some flexibility in how the practitioner obtains signed written consent from each affected client. The consent may be communicated in a letter from the client to the practitioner provided that the letter contains evidence that the client understands the nature of the conflict sufficiently to give informed consent. Alternatively, the practitioner may draft a letter outlining the conflict, as well as any possible implications of the conflict, and submit the letter to the client for its signature.

As discussed in the preamble to the final Circular 230 regulations, the new client consent provision of Circular 230 §10.29 differs from American Bar Association model rule 1.7, which permits affected clients to provide informed consent verbally if the consent is contemporaneously documented by the practitioner in writing. A verbal consent followed by a confirmatory letter authored by the practitioner will not satisfy Circular 230 §10.29 unless the confirmatory letter is countersigned by the client. Treasury and the IRS believe that the language in the final regulations is appropriate to protect taxpayer interests and is in the best interests of tax administration.

The preamble to the final Circular 230 regulations states that Treasury and the Service do not intend to sanction minor technical violations of Circular 230 §10.29 “when there is little or no injury to a client, the public, or tax administration.” In situations in which a client fails to return a written confirmation to the practitioner, sanctions or monetary penalties will not be imposed on the practitioner provided that he or she made a documented good-faith effort to obtain the client’s signature and promptly withdraws from representation within a reasonable period of time following the client’s failure to return a written confirmation. Practitioners are advised to address potential conflict of interest issues diligently to avoid professional standard concerns.

Practitioners must remember to maintain their written client consents. Circular 230 §10.29(c), which was not amended, requires practitioners to re tain copies of the written consents for at least 36 months from the date of the conclusion of the representation of the affected clients. A practitioner must pro vide written consents to any officer or employee of the Service on request.


While the final regulations did not significantly alter Circular 230 §10.29, there is an increased burden to be aware of regarding how client consent is obtained and evidenced. The change to the client consent provision in Circular 230 §10.29 requires a practitioner to obtain each affected client’s signed written consent within 30 days of when the conflict is discovered by the practitioner. In such situations, practitioners should place a renewed emphasis on appropriately and diligently communicating with clients to ensure that the client is willing and able to give informed written consent in a timely manner.


Greg A. Fairbanks, J.D., LL.M., works for Grant Thornton LLPWashington, DC

Unless otherwise indicated, contributors are members of or associated with Grant Thornton LLP.

If you would like additional information about these items, contact Mr. Fairbanks at (202) 521-1503 or

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