Motschenbacher & Blattner LLP

Federal legislation and implementing regulations have established substantial penalties for taxpayers who fail to report on a special form tax return items arising from so-called “reportable transactions.” “Reportable transactions” are transactions, events, plans, or other arrangements identified by Congress or the Treasury Department as including elements associated with potentially abusive tax shelters. However, it is well accepted that many legitimate transactions may also include such elements and, therefore, may also be classified as “reportable transactions.”

The “reportable transaction” rules also impose duties upon law firms that provide tax advice or services relating to such “reportable transactions.” Consequently, it is possible that Motschenbacher & Blattner llp may become subject to these rules in connection with advice or services provided to you regarding a legitimate transaction or arrangement. If so, Motschenbacher & Blattner llp will be obliged to notify the Internal Revenue Service that it has provided services in connection with what may be a “reportable transaction.” Motschenbacher & Blattner llp will also be required to maintain a file containing information and documents relating to the transaction or arrangement in question for production to the Internal Revenue Service upon written request. The existence of the attorney-client privilege is no excuse for non-compliance with these rules, although specific items of otherwise disclosable information may be privileged. Prior to taking any steps that may be required under the “reportable transaction” rules, Motschenbacher & Blattner llp will consult with you concerning the possibility that a given transaction or arrangement may be a “reportable transaction” and, as appropriate, coordinate its disclosure and record-maintenance efforts with any taxpayer reporting obligations to which you may be subject. We will also discuss with you, as appropriate, the possible invocation of the attorney-client privilege. Because these consultations and related reporting and record-maintenance activities can sometimes involve a substantial effort by our attorneys and paralegals and because, by law, they are a necessary consequence of assisting you in connection with a transaction or arrangement that includes one or more elements making it a “reportable transaction,” absent special arrangements to the contrary, Motschenbacher & Blattner llp will treat them as an additional component of its engagement by you, for which you agree to compensate Motschenbacher & Blattner llp in accordance with this policy unrelated to any special fee arrangements that may otherwise apply.

Independent from the “reportable transaction” rules, the Department of the Treasury has issued regulations that govern practitioners, including Motschenbacher & Blattner llp attorneys, who provide advice or services to clients in matters that may have federal tax consequences. Congressional legislation enacted in 2004 has confirmed the authority of the Treasury to implement these regulations. One consequence of these regulations is that a practitioner may not provide written advice, including electronic mail messages, upon which a taxpayer may rely for tax penalty protection purposes, unless the practitioner has engaged in a careful review of all potentially relevant facts and has evaluated all of the reasonably applicable tax issues, including judicial doctrines. In addition, under these regulations, certain categories of written advice (so-called “Covered Opinions”), including many opinions intended for penalty protection, must satisfy certain additional requirements. Among other things, Covered Opinions must describe in detail each of the facts and any reasonable assumptions being relied upon, must address every reasonably applicable federal tax issue, including judicial doctrines, and must include, depending upon the circumstances, a variety of mandatory disclosures.

Because of the time, effort, and expense involved in preparing written advice that will satisfy the requirements applicable to Covered Opinions, Motschenbacher & Blattner llp has adopted a policy now becoming common among many accounting and law firms: Motschenbacher & Blattner llp will not undertake the special efforts required to comply with the Covered Opinion rules unless you have expressly requested written advice for the specific purpose of tax penalty protection. For this reason, you may expect to receive written documents, including electronic mail messages, stating that any tax advice or recommendation included in the text of the document is not intended for tax penalty protection and that you may not rely upon it for that purpose. This disclaimer is not intended to limit Motschenbacher & Blattner's obligation to you to provide competent tax advice. Its only purpose is to avoid the necessity of complying with the Covered Opinion rules unless you have specifically requested a Covered Opinion for tax penalty protection purposes.

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