Under the rules in Circular 230, which govern tax practice before the IRS, tax practitioners must meet minimum standards of conduct with respect to written tax advice, and those who do not are subject to disciplinary action, including suspension or disbarment.

Sections 10.35 and 10.37 of Circular 230 contain comprehensive rules for written tax advice. Practitioners have been complaining about the detailed rules in Section 10.35 on covered opinions since they were issued in 2004. According to practitioners, the rules are overly broad, difficult to apply, and do not necessarily produce higher quality tax advice. Practitioners have also complained that the rules unduly interfere with their client relationships and are not an ethical standard that everyone, including clients, can easily understand. Some practitioners have also opined that these rules (1) may reduce, rather than enhance, tax compliance due to the perception that a covered opinion takes more time to produce and is more expensive for the client than other tax advice; and (2) increase the likelihood that practitioners will provide oral advice to their clients when written advice is more appropriate because the covered opinion rules do not govern oral advice.

Another concern the IRS said it has been hearing from practitioners is about the unrestrained use of disclaimers on nearly every practitioner communication, regardless of whether the communication contains tax advice. Practitioners have said this practice discourages compliance with the ethical requirements because some practitioners have concluded that, if they include a disclaimer, they are free to disregard the standards in Circular 230 regarding written tax advice. The disclaimers also lead to confusion for clients because clients often do not understand why the disclaimer is present and its consequences. In addition, practitioners have complained that the disclaimer's widespread overuse causes clients to ignore the disclaimers altogether, and may render their use in some circumstances irrelevant.

As a result of these continuing complaints, the IRS has issued proposed regulations (REG-138367-06 (9/17/12)) that would eliminate the covered opinion rules in Section 10.35, expand the requirements for written advice under Section 10.37, and withdraw the proposed regulations in Section 10.39 governing requirements for state or local bond opinions. The proposed regulations would also broaden the scope of the procedures to ensure compliance (i.e., Section 10.36) by requiring that a practitioner with principal authority for overseeing a firm's federal tax practice take reasonable steps to ensure the firm has adequate procedures in place for purposes of complying with Circular 230. The proposed regulations would clarify that practitioners must exercise competence when engaged in practice before the IRS and that the prohibition on a practitioner endorsing or otherwise negotiating any check issued to a taxpayer with respect to a federal tax liability applies to government payments made by any means, electronic or otherwise. In addition, the proposed regulations would expand the categories of violations subject to the expedited proceedings in Section 10.82 to include failures to comply with a practitioner's personal tax filing obligations that demonstrate a pattern of willful disreputable conduct and also clarify the Office of Professional Responsibility's scope of responsibility.