Sheppard on Chief Counsel Korb Defends Circular 230 at Columbia Roundtable

Lee A. Sheppard (Contributing Editor, Tax Analysts) has published Korb Won't Give In on Circular 230, also available on the Tax Analysts web site as Doc 2005-20992, 2005 TNT 199-2.  Here is the opening:

"Ain't gonna happen." IRS Chief Counsel Don Korb said that when asked whether he would back down on Circular 230. Korb was in New York, again, to listen to high-end practitioners complain that Circular 230 and other tax shelter rules should not apply to their sophisticated practices.

The occasion was an October 14 roundtable at Columbia University Law School, attended by the cream of the New York corporate tax bar. Since the title of the event was "Narrowing the Tax Gap," Korb talked about the tax gap. The real agenda was whining about the various tax shelter rules and staving off codification of the economic substance doctrine.

Marvin Chirelstein of Columbia University and Lawrence Zelenak of Duke Law School presented a noneconomic loss disallowance proposal as an alternative, arguing that the economic substance doctrine gives judges too much discretion. At one point Chirelstein defended his proposal by arguing that he wanted to prevent practitioners from giving the kind of garbage opinions he had seen for mass-marketed shelters. "Some people would say that Circular 230 is that rule," Korb replied.

After listening to an extended complaining session about Circular 230's legending requirement and other consumer protection features, Korb told his audience: "Take a deep breath and let's get through this, and see what the rules ought to be. Use common sense." On the complaints about the legending, he said, "A lot of this is silly." He encouraged the group to look at the conduct required to incur penalties and wondered aloud why anyone was doing transactions that risked penalties. His larger point was that the shelter rules will evolve and become more focused as more experience is gained, so that the rules will not impede legitimate planning or interfere with lawyer-client relationships.

Vic Fleischer has much more over at Conglomerate.  Here's a taste:

Sheppard makes it sound like the conference was mostly about practitioners complaining about Circular 230. That was only a small part of it. Far more interesting, I thought, were the discussions about Chirelstein & Zelenak's quest to find a perfect (or imperfect) arrow to slay the tax shelter dragon, and Alex Raskolnikov's proposal for a self-adjusting tax penalty.