The IRS and the Treasury department have issued five revisions to the new Treasury Department Circular 230 standards regarding written tax advice. These revisions will provide clarification in several areas in order to ensure that the standards for written tax advice apply in a manner consistent with their intent while responding to practitioners' requests.

Three of the five revisions will expand on the definition of "excluded advice" that is not subject to the detailed covered opinion standards of Circular 230. These revisions will apply to:

A. Advice from in-house tax professionals to their employers;

B. Situations in which the advice is provided after the client files the relevant tax return; and,

C. "Negative advice," where an advisor informs a client when a transaction will not provide the purported tax benefit. It should be noted that the advice that is excluded from the covered opinion standards by these revisions will continue to be subject to the general requirements for other written advice.

The revised covered opinion standards also provide a definition of "the principal purpose" of tax avoidance that will exclude transactions claiming tax benefits consistent with the statute and Congressional purpose.

Today's revisions will relax specific requirements for the format of disclosures required for certain written tax advice. These requirements will maintain the expectation that the disclosures will put taxpayers on notice of any limitations regarding their ability to rely upon written advice. The written opinion standards and the changes announced today will apply to written advice rendered after June 20, 2005.

Here are some facts: A practitioner providing a covered opinion is required to make certain disclosures in the beginning of marketed opinions, limited scope opinions and opinions failing to conclude at a confidence level of at least more likely than not. Additionally, certain relationships between the practitioner and a person who may be promoting or marketing a tax shelter must be disclosed.

A practitioner may be required to make one or more disclosures. The collection of this material helps to ensure that taxpayers receiving a tax shelter opinion are informed of any facts or circumstance that might limit the use of the opinion. The collection of this information is mandatory.

More information regarding Circular 320 to follow