The National Association of State Treasurers adopted a resolution last week that urges the Treasury to exempt unqualified tax-exempt bond opinions from the scope of proposed changes to Circular 230 because their inclusion would disrupt the market.
The NAST warned in the resolution that if unqualified bond opinions are included under Circular 230, attorneys would be required to disclose the same kind of information as required in tax shelter opinions. That requirement would increase the cost of bond opinions and increase the time needed by financial analysts to review an investment, the resolution stated. The resolution was approved at the NASTs annual convention in Norfolk on May 29. Circular 230 is a tax shelter rule that applies to attorneys and other professionals who practice before the Internal Revenue Service. Violators of the rule can be censured, suspended or disbarred from practicing before the IRS.
Treasury has exempted tax-exempt bond opinions from Circular 230 since the rules creation in 1984. But on Dec. 29, Treasury quietly proposed changes that would drop the exemption.
Mislabeling tax-exempt bonds will distort the perception of their important functions, set a bad precedent and add burdens that will negatively affect the ability of state and local governments to finance vital public programs and infrastructure projects, the resolution said.
The final regulations are expected to be published sometime this summer.
