List Maintenance Policies and Procedures for Material Advisors
Practitioners must not delay in their efforts to implement policies and procedures at their firms, consistent with best practices, Circular 230, and applicable Federal and state ethical obligations. (Effective, October 22, 2004, with the enactment of the American Jobs Creation Act of 2004, the IRS may now use injunctions to bring about compliance in this area, including enforcement over Circular 230).
Under Section 6112 of the Internal Revenue Code, as amended by the American Jobs Creation Act of 2004, each ?material advisor? with respect to any reportable transaction must maintain a list identifying each person with respect to whom he or she or it has acted as a material advisor with respect to the transaction. Treasury Regulations further mandate that this list be made available to the IRS upon written request. Section 6708 of the Internal Revenue Code provides that if any person who is required to maintain a list fails to do so within 20 days of a written request, a penalty of $10,000 per day gives into effect. The IRS has issued, Rev. Proc. 2008-20, IRS 1 (5/1/08), giving material advisors a proposed form to assist with list maintenance requirements. See IRS Form 13976. Use of this form is not required, but it is aimed at showing how to meet three criteria: (1) an itemized statement; (2) a detailed description of the transaction; (3) copies of certain documentation.
Under this law, "material advisor" is defined to mean any person (1) who provides material aid, assistance, or advice with respect to organizing, managing, promoting, selling, implementing, insuring, or carrying out any reportable transaction and (2) who directly or indirectly derives gross income in excess of either: $50,000 (in the case of a reportable transaction substantially all of the tax benefits of which are provided to natural persons) or $250,000 (in the case of any other situation), or such other amount as prescribed by regulations. Material Advisors? are to use IRS Form 8918, which replaces IRS Form 8264. A Material Advisor can be an individual, trust, estate, partnership, or corporation.
At the Tufts Law Firm, we stand ready to assist practitioners in their efforts to implement policies and procedures aimed at complying with these list maintenance rules.