Tax practice standards for the new millennium.

Tax practice has never been more challenging than it is today. Tax advisers face increasing competition, complexity and threat of suit, creating a need for familiarity with the various sets of legal and professional standards applicable to tax practice. This article examines several such standards and the AICPA's recent decision to make its Statements on Responsibilities in Tax Practice enforceable.

Modern tax practice is characterized by multifaceted challenges at the local, state, Federal and international levels, as CPAs engage in complex tax planning and compliance for businesses and individuals. CPA tax practitioners must regularly confront globalization, value billing, increased liability premiums and claims, technical complexity, dysfunctional tax authorities and an increasingly competitive marketplace. Tax practitioners also face numerous regulations and professional tax practice standards, as well as the possibility of tax penalties. These realities require practitioners and their firms to be thoroughly acquainted with the legal, technical and professional standards that may affect their practices, service to clients and ability to operate profitably in the new millennium.

Tax issues represent a large proportion of liability premiums and claims for CPAs. According to recent insurance data, "[c]laims arising from the tax practice of CPAs insured under the AICPA Professional Liability Insurance Program constitute over 55% of total claims made ... Within the tax area, engagements for individuals account for 59% of total tax claims, while those for C-Corps and S-Corps account for 25% and 12%, respectively."(1) In addition to both a more competitive market and the threat of lawsuits, increased regulation within the profession and from external taxing authorities also affects practitioners' ability to operate successfully.

This article reviews the standards that affect CPAs in tax practice, including Sec. 6694 and other penalty provisions, Circular 230,(2) the AICPA Code of Professional Conduct (CPC) and related Rules of Professional Conduct (RPCs), and the AICPA Tax Division's Statements on Responsibilities in Tax Practice (SRTPs).(3) It examines judicial and legislative efforts to enforce the SRTPs, along with a recent decision by the AICPA Council to permit the Tax Executive Committee to become a standard-setting body and initiate the process to make the SRTPs enforceable (see also Tax Practice Management, "SRTPs to Become Enforceable" p. 188, this issue). Finally, it considers the implications for AICPA members and other CPAs of making the SRTPs enforceable.

Sec. 6694 Preparer Penalties

Tax practitioners must comply with several sets of tax practice standards as they interact with government agencies, clients and others. Sec. 6694 codifies the "realistic possibility" standard for signing and nonsigning return preparers. Using language from the SRTPs and American Bar Association (ABA) Opinion 85-352,(4) Sec. 6694 and Regs. Sec. 1.6694-2(a) impose a $250 penalty on a preparer for understating tax liability on a return or refund claim if he "knew or reasonably should have known" that the tax position lacked a realistic possibility of being sustained on its merits. Regs. Sec. 1.6694-2(b)(1) provides that a position is considered to have a realistic possibility of being sustained on its merits if a reasonable and well-informed analysis by one knowledgeable in tax law would lead him to conclude that it has approximately a one in three (or greater) likelihood of being sustained on its merits. In making this determination, the possibility that the position will not be challenged by the Service (e.g., because the taxpayer's return may not be audited or because the issue may not be raised on audit) is not to be taken into account.

Substantial Authority

The authorities used to determine whether a tax practitioner has met the realistic possibility standard are the same as those used by Regs. Sec. 1.6662-4(d)(3) (iii) in determining whether a taxpayer has substantial authority to take an undisclosed return position and avoid the Sec. 6662(b)(2) substantial understatement penalty. These authorities generally include court cases, regulations, revenue rulings, notices and other sources issued by Treasury; the regulation does not permit use of secondary sources (e.g., treatises or articles) as authority, although the taxpayer may use the underlying primary sources cited in articles or treatises. Regs. Sec. 1.6662-4(d)(3)(ii) outlines the type of analysis used to determine whether substantial authority exists for taxpayers; Regs. Sec. 1.6694-2(b)(1) directs that this process also be used by preparers in determining whether the realistic possibility standard has been met.

Practitioners who determine that the Sec. 6694(a) realistic possibility standard is satisfied may recommend a return position and/or sign a return without specifically disclosing the position. A return position that does not meet the realistic possibility standard, but which is not frivolous (defined by Regs. Sec. 1.6694-2(c)(2) as "patently improper"), may not result in a preparer penalty if adequately disclosed. Generally, under Regs. Sec. 1.6694-2(c)(3)(i), disclosure on the return in accordance with an annual revenue procedure or on a properly completed and filed Form 8275, Disclosure Statement, or 8375-R, Regulation Disclosure Statement, as appropriate, is adequate. The rules for both signing and nonsigning preparers should be scrutinized for adherence to detail for both disclosed and nondisclosed return positions.

Reasonable Cause Exception

Regs. Sec. 1.6694-2(d) provides that the Sec. 6694(a) penalty does not apply if the understatement was due to reasonable cause and the preparer acted in good faith. Reasonable cause is discussed in Regs. Sec. 1.6694-2(d)(1)-(5) and involves an examination of the preparer's normal office practice; the nature, frequency and materiality of the errors; the complexity of the issues involved; and whether the issue was uncommon or highly technical. A preparer may also be able to avoid penalties if he relied in good faith on the advice of another preparer, if the preparer had reason to believe that the person rendering the advice was competent. Thus, under Regs. Sec. 1.6694-2(d)(5)(ii), if a preparer who relied on the advice knew or should have known that the person rendering it was not aware of all relevant facts, the reasonable cause exception is not available. Nor is the exception available, under Regs. Sec. 1.6694-2(d)(5)(iii), if the preparer knew or should have known (given the nature of his practice) that, when the advice was given, it was no longer reliable, due to changes in the law. The preparer relying on the advice must also prove that it was actually received.

Willfulness/Recklessness

A $1,000 penalty applies under Sec. 6694(b) if an understatement of tax on a return or refund claim is due to willfulness or a reckless or intentional disregard of the roles or regulations. According to Regs. Sec. 1.6694-3(b), a willful attempt to understate Federal tax liability occurs when a preparer disregards, in an attempt wrongfully to reduce tax liability, information furnished by the taxpayer or others. Regs. Sec. 1.66943-(c)(1) stresses that a preparer has intentionally or recklessly disregarded a role or regulation if he takes a position on a return or refund claim contrary thereto and he knows of, or is reckless in not knowing of, that rule or regulation. According to Regs. Sec. 1.6694-3(c)(3), a return position contrary to a notice or revenue ruling, but that meets the realistic possibility standard, is not reckless or intentional disregard. For both signing and nonsigning preparers, Regs. Sec. 1.6694-3(c)(2) and (e) provide that disclosure of a nonfrivolous position contrary to a rule or regulation is not intentional or reckless disregard. A return position contrary to a regulation must represent a good faith challenge to its validity, according to Regs. Sec. 1.6694-3(c)(2). Regs. Sec. 1.6694-3(h) provides that the government bears the burden of proving a willful attempt to understate tax liability; the preparer has the burden of proving whether there was intentional or reckless disregard. There is no reasonable cause exception to the Sec. 6694(b) penalty.

Sec. 6662 Taxpayer Penalties

Preparers also face challenges in determining the connection between the Sec. 6694 practitioner penalties and the Sec. 6662 taxpayer penalties. Sec. 6662(a) imposes a 20% accuracy-related penalty for understatements due to negligence; disregard of rules or regulations; substantial understatement of income tax; substantial valuation misstatement; substantial overstatement of pension liabilities; or substantial understatement of gift or estate tax valuation. The primary taxpayer penalties for income taxes result from negligence, disregard and substantial understatements due to lack of substantial authority.

Regs. Sec. 1.6662-3(b)(1) defines "negligence" comprehensively as any failure to make a reasonable attempt to comply with the internal revenue laws or to exercise ordinary and reasonable care in the preparation of a return. It also includes any taxpayer failure to keep adequate books and records or to substantiate items properly. Regs. Sec. 1.6662-3(b)(1) states that a return position that satisfies the reasonable basis standard is not attributable to negligence.

The reasonable basis standard is outlined in Regs. Sec. 1.6662-(b)(3) and is considered a relatively high standard of tax reporting (i.e., significantly higher than "not frivolous"). The standard will not be met by a return position that is merely an arguable or colorable claim. A return position may also have a reasonable basis if it is based on one or more of the authorities used to determine substantial authority under Sec. 6662. Disregard of regulations or rules is defined by Regs. Sec. 1.6662-3(b)(2) as careless, reckless or intentional disregard of the Code, temporary or final regulations, revenue notices and rulings. A taxpayer who takes a return position contrary to a notice or revenue ruling must comply with the Sec. 6694(a) preparer realistic possibility standard to avoid triggering a Sec. 6662(b)(1) penalty for disregard of rules or regulations. However, Sec. 6662(d)(2)(A) states that the substantial understatement penalty will apply if there is no substantial authority and the understatement exceeds the greater of (1) 10% of the tax required to be shown on the return or (2) $5,000 (for individuals) or $10,000 (for corporations). Regs. Sec. 1.6662-4(d)(3)(ii) and (iii) list the possible authorities and the type of analysis used to determine whether substantial authority exists.

It can be confusing to wade through the different return standards applicable to preparers and taxpayers. Generally, the "not frivolous" standard (used with disclosure by preparers to avoid a Sec. 6694 penalty) may involve less than an estimated 10-15% chance of success and is recognized as the lowest tax return standard. It is followed by the reasonable basis standard of Regs. Sec. 1.6662-3(b)(3), which is based on a less-than-33% chance of success (and may be as little as 10-15%). According to Regs. Sec. 1.6662-4(d)(2), a return position satisfies the realistic possibility standard if it has a 33% or greater chance of success. Return positions supported by substantial authority may be taken even if the chance of success is estimated at less than 50%.(5) The highest standard, "the more likely than not" standard applicable under Regs. Sec. 1.6662-4(g)(1)(i)(B) to tax shelters, must have a greater-than-50% chance of success.(6)

Taxpayers and tax advisers should also consider the effects of disclosure of a return position and the reasonable cause exception to a Sec. 6694 preparer penalty or a Sec. 6662 taxpayer penalty. While disclosure alone will not avoid the negligence portion of a Sec. 6662 penalty, meeting the reasonable basis standard (with disclosure) will. According to Regs. Sec. 1.6662-3(c)(2), disclosure should ensure that a taxpayer is not subject to a Sec. 6662(b)(1) disregard penalty or a Sec. 6662(b)(2) substantial understatement penalty; thus, Secs. 6662 and 6694 should be scrutinized to ensure compliance.

Reasonable cause may also relieve a taxpayer of a Sec. 6662 penalty. According to Regs. Sec. 1.6664-4(b)(1), reasonable cause may depend on the extent of the taxpayer's effort to assess his proper tax liability. The primary factor used to determine if the reasonable cause and good faith standard is met is whether there was an honest misunderstanding of law or fact that is reasonable in light of the taxpayer's experience, education and knowledge. A taxpayer's isolated computational error, for example, would not negate the reasonable cause exception. Reliance on the advice of a professional tax preparer or an information return, however, will meet the reasonable cause exception only if the reliance was reasonable and the taxpayer acted in good faith.(7)

Other Penalties

Tax practitioners and clients may also be subject to penalties under other Code provisions. Sec. 6695, for example, penalizes a tax preparer $50 for each failure to (1) furnish a client a copy of his return or refund claim, (2) sign a return or (3) retain a copy. Sec. 6700 imposes penalties for the promotion of abusive tax shelters; a Sec. 6701 penalty may be imposed for aiding and abetting in the understatement of tax liability. Preparers may be penalized as promoters, aiders or abettors.(8) Circular 230 Section 10.34(a)(2) requires that a practitioner advising a client to take a position on a return, or preparing or signing a return, must inform the client of penalties reasonably likely to apply to the client for the position advised, prepared or reported. In addition, CPA tax practitioners must be aware of the Code's numerous criminal penalties and sanctions (e.g., Secs. 7201-7216), as well as pertinent criminal provisions under U.S. Code, Title 18.(9)

Referrals to the IRS Director of Practice (Director), who administers Circular 230 (discussed below), may affect the ability of tax preparers to practice before the IRS. According to Internal Revenue Manual (IRM), Sub-Section (20)622(1)(a) and (b), referrals to the Director are mandatory for Secs. 6695(f), 6700, 6701 and 6694 penalties. IRM, Sub-Sections (20)622(2) and (3), provide that IRs employees must submit written reports to the Director "when there is reason to believe that a practitioner has violated the rules set forth in" Circular 230; referrals are discretionary for violations of Sec. 6695(a)-(e).(10)

Circular 230

CPAs, attorneys, enrolled agents and certain others are governed by Circular 230, which regulates practice before the IRS. "Practice" is defined by Circular 230 Section 10.2(e) as "all matters connected with a presentation to the Internal Revenue Service or any of its officers or employees relating to a client's rights, privileges, or liabilities under the law or regulations administered by the Internal Revenue Service." Representation encompasses correspondence and communications with the Service; the representation of clients at hearings, meetings and conferences; and the preparation and filing of necessary documents. Circular 230, Subpart B, outlines the duties and responsibilities of governed parties (including furnishing information to the Service), as well as requiring in Section 10.21 that the practitioner promptly inform a client if he is not in compliance with the U.S. revenue laws or has made an error in or omission from any return, document, affidavit or other paper he is required to execute. All covered practitioners are required by Circular 230 Sections 10.22 and 10.23 to be diligent and accurate in matters relating to the Service and not unreasonably delay the prompt disposition of any matter before it. Section 10.34 adopts the realistic possibility standard for preparers; a practitioner is subject to sanctions under Circular 230 Section 10.34 if a violation is willful, reckless or the result of gross negligence.

Circular 230 sanctions are quite severe. A practitioner can be issued a letter of reprimand, suspended or disbarred from practice before the Service, depending on the severity of the matter. Once disbarred, a practitioner must wait at least five years before applying again to practice before the Service. Names of practitioners who are suspended or disbarred from practice are published in the Internal Revenue Bulletin and notices are also given to appropriate IRS officers and employees and to interested Federal departments or agencies.(11) Circular 230 Section 10.74 authorizes the Director to give notice by agreement to the proper authorities of the state in which the disbarred or suspended person was licensed to practice as an accountant. Interestingly, the ability to prepare returns may not be affected by the disbarment.(12)

A practitioner who has been disbarred, yet retains his state CPA license, may not be in partnership with one who is suspended or disbarred from practice. Further, Circular 230 Section 10.51(h) defines "disreputable conduct" as knowingly aiding and abetting another person to practice before the Service during a period of suspension, disbarment or ineligibility.(13) IRS disciplinary action may also result in private claims being brought against the practitioner by clients and third parties affected by the misconduct. The failure to comply with professional obligations frequently provides a basis for malpractice and civil liability.(14)

Tax Practice Professional Standards

CPAs are licensed at the state level and regulated by state laws; states may adopt standards for professional ethics and conduct to govern various types of practice within their boundaries.(15) Two of the most important standards for CPAs in tax practice are the AICPA'S CPC and RPCs. These standards are binding on AICPA members and have been incorporated (directly or indirectly) into the laws of some states. The CPC and RPCs outline the standards generally expected of all CPAs.(16) Competence and high professional standards are mandated for CPAs in all areas of their practice. For example, CPC Rule 102 emphasizes that, "in the performance of any professional service, a member shall maintain objectivity and integrity, shall be free of conflicts of interest, and shall not knowingly misrepresent facts or subordinate his or her judgment to others."(17)

SRTPs

The AICPA Tax Division's Tax Executive Committee has adopted and revised the SRTPs since the 1960s. According to the Tax Executive Committee, the SRTPs were considered advisory and educational in nature, and were not intended to establish a code of professional conduct in tax practice separate and apart from the general ethical precepts of the CPC.(18) Thus, the SRTPs did not have the authority, according to the Tax Executive Committee, of Circular 230, the Code, regulations or the CPC. The SRTPs cover the following eight broad areas of tax practice:

1. Tax Return Positions.

2. Answers to Questions on Returns.

3. Certain Procedural Aspects of Preparing Returns.

4. Use of Estimates.

5. Departure from a Position Previously Concluded in an Administrative Hearing or Court Decision.

6. Knowledge of Error: Return Preparation.

7. Knowledge of Error: Administrative Proceedings.

8. Form and Content of Advice to Clients.

Some of the SRTPs closely parallel requirements in current regulations; others diverge from current coverage in the Code or law, because they address topics outside their scope. For example, SRTP No. 2, "Answers to Questions on Returns," does not parallel any IRS regulation. In contrast, SRTP No. 3, "Certain Procedural Aspects of Preparing Returns," is very similar to the Sec. 6694 regulations.

In SRTP No. 1, the AICPA Tax Division outlines its version of the realistic possibility standard codified in Sec. 6694 for an undisclosed return position. Because SRTP No. 1 was enacted before Sec. 6694, it differs somewhat from the statute. SRTP No. 1, [paragraph] .02(a), provides that a CPA should not recommend to a client that a position be taken as to the tax treatment of any item on a return unless he has a good faith belief that the position has a realistic possibility of being sustained administratively or judicially on its merits if challenged.

Under SRTP No. 1, [paragraph] .07, CPAs who follow the realistic possibility standard must believe in good faith that the position is warranted in existing law or can be supported by a good faith argument for an extension, modification, or reversal of existing law. Further, unlike the Sec. 6694 regulations and Circular 230 Section 10.34, [paragraph] .07 permits a CPA to conclude that the realistic possibility standard is met based on treatises and well-reasoned articles, in addition to the authorities listed in the Secs. 6694 and 6662 regulations. Additionally, Interpretation No. 1-1, [paragraph] .06, states that the realistic possibility standard cannot be expressed in terms of percentages. It also notes that the realistic possibility standard is not as stringent as either substantial authority or the more likely than not standards that apply under the Code to substantial understatements of liability by taxpayers.

SRTP Status

Since their original promulgation in the 1960s, the SRTPs have been considered educational and advisory. Despite their advisory status, many of the SRTPs have become virtually enforceable as tax practice standards. For example, the SRTPs are considered part of the customs and responsibilities of the profession; thus, they can be used to determine whether disbarment or suspension is an appropriate sanction for a particular CPA tax practitioner. The Director, who administers Circular 230, has stated that it may be necessary for the IRS to consider appropriate standards contained in the SRTPs(19); they have been cited in at least one Tax Court opinion.(20)

Increasingly, enforcement of the SRTPs at the state level and in liability claims is a very real possibility. Florida, Arizona, Kentucky and several other states have adopted the SRTPs as part of their tax practice standards. Although not specifically adopting the SRTPs, states such as Tennessee and Maryland could be viewed as having done so, based on an interpretation of their rules.(21)

The SRTPs have also been cited in negligence and liability claims against CPA tax practitioners that have subsequently been settled. Even though the SRTPs were previously intended to be only educational and advisory, attorneys have used them to establish minimum acceptable standards for tax practitioners.(22) Further, since the SRTPs are often referred to by plaintiffs' attorneys in prosecuting a tax malpractice action, from a liability standpoint, it is imperative that an accountant be familiar with these statements and follow them when performing tax services.(23) The Tax Division has asserted that the SRTPs have become de facto enforceable standards of professional practice.(24)

In 1992, the AICPA began to explore whether the SRTPs should be enforceable. The Tax Division's former Responsibilities in Tax Practice Committee began investigating whether the SRTPs should become binding on members. The Tax Division undertook to educate its various constituencies while seeking standard-setting authority. A proposal to make the SRTPs enforceable (and to make the Tax Executive Committee a standard-setting body) was approved by the AICPA Board of Directors in the summer of 1999; k was approved by AICPA Council in October 1999. The next steps will be to make minor editorial changes in the existing SRTPs and send them to the AICPA membership as an exposure draft for comment. After reviewing the comments and making necessary changes to the final documents, the revised SRTPs will become enforceable.

Making the Tax Executive Committee a standard-setting body and the SRTPs enforceable by the AICPA will produce several direct benefits. Enforcement of its tax practice standards will be a significant statement by the AICPA that it holds its members to high professional standards. "Compliance with professional standards of tax practice reinforces the public's perception of the professionalism that is associated with CPAs, as well as the AICPA. In effect, allowing the AICPA to mandate that its members comply with standards of professional tax practice not only enhances the CPA's image as a tax professional striving to be the best, but also sends a forceful positive statement to the general public and regulatory bodies that the AICPA and its members are serious about insuring that they maintain the highest level of professionalism in tax practice."(25) The Tax Executive Committee further argues that CPAs should be able to avoid malpractice claims by demonstrating their compliance with the SRTPs. As practitioners try to offer value-added services, enforceable tax practice standards would also provide an ethical framework for making the unique tax decisions that are a necessary part of tax practice.

Because they would be readily available, enforceable standards should also help educate CPAs in tax practice about their professional responsibilities, thus reducing substandard tax practice.(26) Enforcing tax practice standards may also help the Tax Executive Committee persuade Congress and Treasury to adopt the SRTPs, reducing the possibility of third party or government regulation that can be intrusive and contrary to the profession's best interest.(27)

The Tax Executive Committee believes that enforceable tax practice standards will positively affect the profession. Effective self-regulation in tax practice requiring that a CPA tax practitioner adhere to the standards of professional service found in the SRTPs ultimately serves the practitioner well, because it forces him to perform at a level to which he is already being held legally accountable. In effect, by virtue of fully complying with reasonable standards of professional practice, CPA tax practitioners can demonstrate that they acted reasonably and with due care, thereby avoiding malpractice liability.(28) Finally, because the SRTPs have been in place as advisory ethical guidelines since the 1960s and are behavioral in nature, they are not likely to create significantly new or undue burdens for tax practitioners,(29) which could arise if technical standards were adopted. Any new SRTPs would be issued only after careful analysis and review. The current SRTPs will have to be revised and the new ones exposed to the membership; this will probably occur later this year.

Conclusion

The SRTPs are already considered enforceable in some jurisdictions. Once the SRTPs become enforceable, the approximately 80% of U.S. CPAs who are AICPA members will be subject to its discipline for SRTP violations. Members of the AICPA or state societies will be subject to AICPA discipline for violating the SRTPs (at either the state or national level), if the violation warrants it. Expulsion (or suspension) from the AICPA and/or state society is one possible consequence of an ethics violation.(30)

The SRTPs' new status will undoubtedly lead to their further direct or indirect adoption as enforceable standards at the state level. The SRTPs will thus become both a de jure and de facto body of tax practice standards to which CPA tax practitioners will be held accountable.

RELATED ARTICLE: EXECUTIVE SUMMARY

* Practitioners and their firms need to be thoroughly acquainted with the legal, technical and professional standards that may affect their practices, service to clients and ability to operate profitably in the new millennium.

* Return preparers face challenges in determining the connection between the Sec. 6694 practitioner penalties and the Sec. 6662 taxpayer penalties.

* As practitioners try to offer value-added services, enforceable tax practice standards would provide an ethical framework for making the unique tax decisions that are a necessary part of tax practice.

(1) See CNA Financial Corporation, Risk Management in a Changing Profession (1998)(hereinafter, "Risk Management"), p. 1-1.

(2) Treasury Circular No. 230, Regulations Governing the Practice of Attorneys, Certified Public Accountants, Enrolled Agents, Enrolled Actuaries and Appraisers Before the Internal Revenue Service (hereinafter, "Circular 230").

(3) AICPA Tax Executive Committee, Statements on Responsibilities in Tax Practice (1991 g. Rev.)(hereinafter, "SRTPs").

(4) See Boelter, Tax Penalties and Interest (West Group, 1998) (hereinafter, "Tax Penalties"), [paragraph] 4-6.10, for a discussion of the legislative history.

(5) See Wolfman, Holden and Hams, Standards of Tax Practice (Little, Brown and Company, 5th ed., 1999)(hereinafter, "Standards"), [paragraph] 207.1.1.

(6) See SRTPs, note 3 supra, and SRTP Interpretation No. 1-1 (hereinafter, "Interpretation") for a discussion of the relationship between the various tax return standards; see also Standards, note 5 supra, Chapter 2, "Return Preparation and Advice: Professional Standards." The chances of success for the "not frivolous" and "reasonable basis" standards discussed in Standards have not been incorporated into the regulations. Further, the AICPA disputes the ability to express the realistic possibility standard in terms of percentages, as contained in the Sec. 6694 regulations; see Interpretation, [paragraph] .06.

(7) See Tax Penalties, note 4 supra, [paragraph] 9-6.90, -6.100 and -6.110.

(8) Id., [paragraph] 5-1.40.

(9) See Behrenfield and Ranweiler, Tax Practice Management (AICPA, 1999), [paragraph] 303.4.

(10) For procedures for processing reports to the Director for Secs. 6694 and 6695(f) penalties, see IRM, Sub-SubSection 8(11)32.3.

(11) See Standards, note 5 supra, [paragraph] 105.1.5.4.

(12) Id.

(13) See Circular 230 Section 10.24 (employing disbarred or suspended persons).

(14) See Standards, note 5 supra, [paragraph] 105.1.5.4.

(15) See Causey, Jr., and Causey, Duties and Liabilities of Public Accountants (Accountant's Press, 6th ed., 1999)(hereinafter, "Duties and Liabilities"), pp. 27-29 and 89-91.

(16) See id., pp. 97-99.

(17) See SRTPs, note 3 supra, "Introduction," [paragraph] .05.

(18) Id., [paragraph] .06.

(19) See Gardner and Willey, "The Tax Practitioner's Guide to Circular 230 (Part II)," 26 The Tax Adviser 711 (December 1995), p. 713.

(20) See Est. of Emanuel Trompeter, 111 TC 57 (1998); in a concurring opinion, Judge Swift cited SRTP No. 1, and ABA Opinion 85-352, in discussing reasonableness of a return position.

(21) See D.C. Currents, "Tax Practitioners Face Heightened Litigation and Traps for the Unwary," 27 The Tax Adviser 501 (August 1996). State board have the right and responsibility to enforce ethics rules; see Duties and Liabilities, note 15 supra, pp. 27-29, for a discussion of ethics roles by courts.

(22) See Risk Management, note 1 supra, p. 1-3.

(23) See Spellmire, Baliga and Winiarski, Accountants' Legal Liability Guide (Harcourt Brace Jovanovich, 1993), [paragraph] 5.08; see also Standards, note 5 supra, [paragraph] 104.

(24) See AICPA Tax Executive Committee, The Need for Authority to Promulgate Professional Standards in Tax Practice (1999), p. 1.

(25) Id., p. 2.

(26) Id.

(27) Id., p. 3.

(28) Id.

(29) Id.

(30) See Duties and Liabilities, note 15 supra, p. 98, for a description of the AICPA process for ethics violations; see also CPC Rule 202.

John C. Gardner, Ph.D., CPA Professor of Accountancy College of Business Administration University of Wisconsin--La Crosse La Crosse, WI

Susan L. Willey, J.D. Visiting Professor J. Mack Robinson College of Business Georgia State University Atlanta, GA

William A. Tate, CPA Tate, Lee & Lee, PC. Tuscaloosa, AL