Amendments to Circular 230 to Remove “Covered Opinion” Rules

By Benson S. Goldstein, J.D.

The IRS Office of Professional Responsi bility (OPR) should expect a busy year in 2013. One of its major activities for the year will likely involve issuing final regulations amending Circular 230, Regulations Governing Practice Before the Internal Revenue Service (31 C.F.R. Part 10). These modifications were proposed in REG-138367-06 in September 2012.

When issued in final form in 2013, these Circular 230 amendments are likely to have an important impact on CPAs and other tax representatives. This column provides a general overview of some of the major provisions of REG-138367-06. For further background, CPAs are encouraged to review the AICPA’s comment letter on the proposed regulations submitted to the IRS in November 2012.

Major provisions of the proposed regulations include written advice, disclaimers, the general standard of competence, and expedited suspension procedures.

Written Advice

REG-138367-06 eliminates the complicated “covered opinion” rules in current Circular 230, Section 10.35, and expands the written-advice requirements of Section 10.37. Since the IRS’s adoption of Section 10.35 in 2004, tax professionals have found the rules difficult and costly to comply with, without necessarily improving the quality of tax advice.

The proposed regulations eliminate the existing covered-opinion rules and replace them with proposed Section 10.37, which establishes basic principles for all practitioners when rendering tax advice. Proposed Section 10.37 would establish one standard for all written tax advice by providing that practitioners must (1) base all written advice on reasonable factual and legal assumptions; (2) exercise reasonable reliance; and (3) consider all relevant facts the practitioner knows or should know.

Similar to current Circular 230 standards, the proposed regulations continue the requirement that when evaluating a federal tax matter, a practitioner should not take into account the possibility that an issue or a tax return will not be audited. However, proposed Section 10.37 permits a practitioner to take into account the possibility that an issue will be resolved through settlement “if raised when giving written advice evaluating a Federal tax matter” (Preamble, Explanation of Provisions, 1.B.).

Proposed Section 10.37(b) incorporates certain reliance concepts of current Circular 230, Sections 10.22 and 10.35(d). This proposed provision states that a practitioner may rely on the advice of another practitioner only if the reliance on the advice is “reasonable and . . . in good faith considering all the facts and circumstances.”


The complexity of the covered-opinion provisions of current Section 10.35 has resulted in an “unrestrained use” of disclaimers on nearly all communication from tax professionals regardless of whether the practitioner is actually providing tax advice. The classic example is the overuse of these disclaimers in emails sent to clients or third parties by tax practitioners. This overuse appears to have initially confused clients but appears subsequently to have caused them to “benignly” ignore the disclaimers outright. When the IRS announces final Circular 230 regulations later this year, practitioners can expect to see these disclaimers eliminated from emails and other writings.

General Standard of Competence

REG-138367-06 revises Section 10.35 to establish a general standard that a practitioner must exercise competence when engaged in practice before the IRS. Proposed Section 10.35 defines competent practice as requiring “the knowledge, skill, thoroughness, and preparation necessary for the matter for which the practitioner is engaged.”

Expedited Suspension Procedures

Under Circular 230, Section 10.82, OPR may institute a proceeding for “expedited suspension” of a practitioner. REG-138367-06 extends the expedited-suspension proceedings to cover practitioners who have willfully failed to comply with their federal tax filing obligations. OPR may exercise the expedited suspension procedures when a practitioner willfully and in violation of federal law fails to “make” (1) an annual federal tax return during four of five tax years immediately before institution of the expedited proceeding; or (2) a return required more frequently than annually during five of seven tax periods immediately before institution of the expedited proceeding. However, the proposed regulations do not authorize use of the expedited suspension proceedings against practitioners solely because they have a federal tax liability.

The preamble to REG-138367-06 emphasizes the seriousness with which Treasury and the IRS regard a failure to “make a return.” The preamble states,

Practitioners engaging in this repeated pattern of non-filing demonstrate a high level of disregard for the Federal tax system and a level of willfulness sufficient for practitioner sanction under Circular 230. . . . [T]he proposed rule is appropriate because practitioners demonstrating this high level of disregard for the Federal tax system are unfit to represent others who are making a good faith attempt to comply with their own Federal tax obligations.

The AICPA will keep the membership informed of the details of these amendments to Circular 230 when the IRS finalizes them this year.


Benson Goldstein is senior technical manager (taxation) with the AICPA in Washington, D.C., and is staff liaison to the AICPA IRS Practice and Procedures Committee. For more information about this column, contact Mr. Goldstein at


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