IRS Circular 230 Compliance Disclaimer

As explained below, under recent IRS rules, Lowrey, Powell & Stevens is now required to include a disclaimer with its emails and other written communications that provide tax advice, unless the advice is in the form of a formal opinion that complies with the requirements of IRS Circular 230.

On June 21, 2005, regulations issued by the Treasury Department amending Circular 230 became effective. Circular 230 sets forth rules that govern the conduct of tax professionals, such as lawyers and accountants, that practice before the IRS. The new rules set forth in Circular 230 are intended to combat the proliferation of abusive tax shelters; however, the rules are much broader in scope and have an impact on the advice rendered by our firm on a wide range of tax matters.

Circular 230 sets forth requirements for certain types of written advice provided by a tax practitioner to a client. Pursuant to Circular 230, written communications (including e-mails, letters and memos) that contain U.S. federal income or estate tax advice generally will need to include a full discussion of all relevant facts as well as an evaluation of all of the significant federal tax issues, whether the client has requested such advice or not. However, a written communication generally will be exempt from such requirements provided it expressly states that it is not intended or written to be used, and that it cannot be used, for the purpose of avoiding penalties imposed under the Internal Revenue Code (the "Disclosure Language").

In order to comply with the requirements of Circular 230, Lowrey, Powell & Stevens has adopted a policy of generally including the Disclosure Language in all written communications (including e-mails) sent by us. As a result, you may see the Disclosure Language in e-mails and written correspondence from us that do not discuss any tax issues.

The inclusion of the Disclosure Language in no way indicated that tax-related penalties would, or could, be asserted.

In those cases where a client does not want written advice to state that it cannot be used for the purpose of avoiding tax-related penalties, we will generally need to provide formal opinions that comply with the standards of Circular 230. Additionally, with respect to certain types of transactions, the Disclosure Language will not exempt written tax advice from the Circular 230 requirements. Unfortunately, we and other tax practitioners anticipate that complying with Circular 230 in providing such tax advice may substantially increase costs to clients.

Since this requirement is new, we will monitor developments in this area and revise our compliance efforts accordingly.