I finally got around to sending in my comments to the proposed Section 230 regulations on http://www.regulations.gov (see my blogpost “The Rule of Reason – Circular 230 Revisited”, 9/15/12). Comments are due no later than this Friday, 11/16/12, so send them in, guys.

At all events, here are mine:

As to 31 CFR §10.35: I agree that the “cigarette pack” warnings of 10.35(e)(3) and 10.35(e)(4) should be eliminated. These warnings were grafted onto everyone’s e-mail stationery, so that they appear even in a social message to a colleague or client.

However, the required disclosure for a marketed opinion should be retained. The entire deletion of 10.35 in its current form is too extreme. I have written hundreds of marketed opinions; our State’s securities laws treat sales of cooperative and condominium apartments to the public as securities, and the relevant regulations require offering statements to contain a counsel’s tax opinion on deductibility of real estate taxes and mortgage interest by apartment owners.

While it is extremely unlikely that the primary aim of such transactions is evasion or avoidance of tax, the public is entitled to the warnings currently provided for in 10.35(e)(1) and 10.35(e)(2). The language of the current regulation furnishes an excellent template, and should be retained as a guide for practitioners.

The marketed opinion, unlike most opinions, is directed at taxpayers other than the practitioner’s client. Those taxpayers need the warnings of the current regulation. And practitioners need the guidance the current regulations afford to draft the appropriate warnings.

As to 31 CFR §10.82: There is an extreme disconnect between immediate disciplinary action against a practitioner who, in the first instance, fails to file returns required to be filed annually for four of the five preceding years, and in the second instance, one who fails to file returns required more often than annually for five out of seven periods when such returns are required to be filed.

In the first instance, at least four years must elapse before immediate disciplinary action may be commenced. In the second, fewer than two years need elapse in the case of returns required to be filed quarterly, such as Form 941.

Of course, the rule must be different if the returns involved require remittances of trust funds, such as FICA or FUTA withholdings.

But if a practitioner believes an employee to be an independent contractor, and fails to file Forms 941 for 28 months (but files Forms 1099-MISC and provides the later-determined employee with a copy annually), that practitioner is liable to immediate disciplinary action.

The practitioner’s competitor across the street who fails to file Form 1040 for three years is not so liable.

Imposing the proposed penalty in the first instance is Draconian, excessive and unwarranted.

I suggest that non-filing of returns required more often than annually serve as a basis for immediate disciplinary action (a) only if trust funds actually withheld from employees and others and required to be remitted with such returns are not remitted for five out of the previous seven filing periods, and (b) in all other cases, if non-filing persists for ten out of the previous twelve periods.

Such a provision places practitioners on an equal footing, and does not impose a penalty greater than the offense deserves.