CCA 200944047: Sharing a completed tax opinion may destroy privilege

Plain-English summary

This Chief Counsel Advice discusses whether a taxpayer's tax advice remained privileged after opinions were shared with law firms and accountants. The Advice states that the tax advice privilege is co-extensive with the attorney-client privilege, and that communications shared to enable a federally authorized tax practitioner to provide advice may remain protected under the Kovel doctrine. It cautions that sharing a completed opinion with third parties would destroy confidentiality and privilege unless the law firm employed the redacted party to prepare the opinion for legal advice. The taxpayer should establish who viewed the opinion and why.

Ruling snapshot

• Question: Did sharing a tax opinion with law firms and accountants preserve the tax advice privilege?
• Outcome: Advice given
• Key authorities: IRC § 7525; Kovel doctrine; Circular 230; Statement of Procedural Rules § 601.502

Full text (IRS public release)

ID: CCA-102114-08 Number: 200944047
Release Date: 10/30/2009
Office: --------------
UILC: 7602.03-04

From: ------------------------
Sent: Tuesday, October 21, 2008 12:14 PM
To: ----------------------
Cc:
Subject: RE: Privilege Under I.R.C. 7525 ---------

I think it's fine to follow up and ask the taxpayer to establish that the advice came from a federally authorized tax practitioner, but that should easily be shown since just about anyone can be an FATP under Circular 230 and the 601.502 Statement of Procedural Rules.

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------------------------------------------------------------------------------------------------------------------------------------------. The tax advice privilege is co-extensive with the attorney-client privilege; it follows that if the taxpayer can establish that the opinions were shared with law firms and accountants in order to enable the FATP to provide the advice, they may remain protected under the Kovel doctrine. But if, as you indicate, the completed opinion was already provided to the client and then shared with others, the law firm and accountants could not have been employed to enable the FATP to provide advice. Sharing of the completed opinion with third parties would destroy its confidentiality and its privileged status, unless the law firm employed --------- to prepare the opinion that would enable it to provide legal advice to the client. The taxpayer should be required to establish exactly who viewed the opinion and why.