Terms & Conditions Related to Tax Services
Effective January 1, 2020
In the course of delivering services relating to tax return preparation, tax consulting, and assistance in tax controversy matters, HoganTaylor LLP (“we” or “us”) applies customary practices intended to provide these services in a cost-effective manner. This document describes certain of these customary practices, as well as other standard terms, conditions, and limitations relating to our provision of tax services. Except to the extent we expressly agree in a written instrument signed by our authorized representative that specifically refers to an engagement covered by an Arrangement Letter, all services that we provide to any client or third party (“you”) relating to tax return preparation, tax consultation and advice, representation in any tax controversy matter, or any other Federal, state, local, or foreign tax matter, are subject to the following terms, conditions, and limitations (these “Terms”). References to the “Arrangement Letter” mean the letter or other document describing the scope of our services and the associated fee arrangement in which these Terms are incorporated. References to the “Code” mean the Internal Revenue Code of 1986, as amended.
1. TERMS REGARDING TAX RETURN PREPARATION
1.1 Scope of Return Preparation Services. Our services in preparing your tax returns are limited to tax return preparation, and our preparation of a return should not be viewed as assurance that any particular reported position is correct. If we become aware of a return position for which we believe a penalty under the Code is likely to apply, we will bring that position to your attention. If you would like us to advise you concerning any specific matter on your tax return, please contact us to discuss expanding the scope of our services. Any Tax Advice rendered in connection with the preparation of any tax return is subject to the provisions described under “Terms Regarding Tax Advice” below.
1.2 Reliance on Information. We will not investigate or verify any facts underlying the transactions reported on your tax return, but we will rely on the financial statements or other financial information that you provide us. If the actual facts are different from the facts represented to or understood by us, or if there are other facts of which we are not aware, the reporting of the transactions could be materially different than that reported on the returns prepared by us.
1.3 Our and Your Respective Responsibility for Accuracy. We will exercise due professional care and judgment to include all required information in your tax returns. The Code provides that by signing your returns, you are verifying that they are true, correct and complete. Accordingly, you should review each tax return carefully before signing it, and bring any questionable items or omissions to our attention.
1.4 Jurisdictions for Returns. We will prepare tax returns for those Federal, state, local, and foreign jurisdictions requested by you in writing. We will advise you if we believe, based on the information that you provide us, that a tax return should be filed in any other jurisdiction, but we will not prepare any such tax return without your approval of the expansion of our scope of services.
1.5 Level of Assurance and Return Disclosures. The Code prohibits tax preparers from signing any tax return known to report any position (i) that is not supported by “substantial authority” unless certain disclosures are made concerning the position or (ii) attributable to certain “tax shelters” that the preparer does not reasonably believe is more likely than not correct. Because of the limited scope of analysis in evaluating a reporting position, a conclusion that disclosure is not required to enable us to sign a return may not be sufficient to avoid the application of tax penalties under the Code. If you wish to report a position without disclosure on the return, or if you are concerned about the potential application of tax penalties, please contact us to discuss expanding the scope of our services to include rendering tax advice that may address your concerns.
1.6 Disclosure of Reportable Transactions. The Code and certain state laws require that you disclose on your tax return certain “reportable transactions” or “listed transactions.” There are significant financial penalties for failure to disclose these transactions, and these penalties may apply even if the transaction does not lead to an understatement of tax. Our tax return preparation services do not include any investigation to evaluate whether there are any reportable transactions that are required to be disclosed on your returns, but we will advise you if we conclude that any such disclosure is required. If you would like us to specifically review any potentially “reportable transaction” or “listed transaction,” please contact us to discuss expanding the scope of our services.
1.7 Disclosure of Specific Position. Without disclosure in the return itself of the specified position taken on a given issue, we must have a reasonable belief that it is more likely than not that the position will be held to be the correct position upon examination by taxing authorities. If we do not have the reasonable basis for the position, and in such a case the position must be formally disclosed on Form 8275 or 8275-R, which form would be filed as part of the return. If we do not believe there is a reasonable basis for the position, either the position cannot be taken or we cannot sign the return. In order for us to make these determinations, we must rely on the accuracy and completeness of the relevant information you provide to us, and, in the event we and/or you are assessed penalties due to our reliance on inaccurate, incomplete, or misleading information you supplied to us (with or without your knowledge or intent), you will indemnify us, defend us, and hold us harmless as to the penalties.
2. TERMS REGARDING TAX ADVICE
2.1 Limitations on Oral and Email Communication. We may discuss with you our reviews regarding the tax treatment of certain items. We may also provide you with tax information in the body of an email. Any advice or information delivered orally or in the body of an email (as opposed to a memorandum delivered as an email attachment) will be based upon limited tax research and a limited discussion and analysis of the underlying facts. Additional research or a more complete review of the facts could affect our analysis and conclusions. Because of these limitations and the related risks, it may not be appropriate to proceed with any transaction solely on the basis of any oral or email communication, and we will not be liable for any loss, cost, or expense resulting from your decision to rely on any oral or email communication. The limitation in this paragraph will not apply to an item of written tax advice that is delivered to you as a document attached to an email.
2.2 Facts and Assumptions. Our investigation to confirm or verify any facts described in any letter, memorandum, or opinion addressing the application of tax laws to a particular situation (“Tax Advice”) will be limited to the investigation described in the body of the Tax Advice, and we will rely on the assumptions and representations described in the Tax Advice. Any change in or addition to these facts, assumptions, or representations could materially and adversely affect our analysis and conclusions. If you for any reason believe that any facts, assumptions, or representations in any Tax Advice are incorrect or incomplete, you must notify us immediately to discuss the impact on our analysis and conclusions. You should not rely upon any item of Tax Advice that is based on facts, assumptions, or representations that you believe to be incorrect or incomplete.
2.3 Applicable Law. Unless expressly stated in our Tax Advice, our analysis and conclusions will relate solely to Federal income tax consequences under the Code as of the date of our Tax Advice. If you would like us to address tax consequences to you under any other applicable tax law, please contact us to discuss expanding the scope of our services.
2.4 Issues Addressed. Each item of Tax Advice will be limited to advice concerning the tax issues described in the Tax Advice, and it may not consider all of the issues that may arise in connection within the transaction. Except as expressly stated in an item of Tax Advice, our advice is not an endorsement of any particular transaction structure, nor is it a recommendation that any addressee proceed with the transaction structure described in the Tax Advice.
2.5 Reportable Transactions. The Code and certain state laws require that you disclose on your tax return certain “reportable transactions” or “listed transactions.” There are significant financial penalties for failure to disclose these transactions, and these penalties may apply even if the transaction does not lead to an understatement of tax. Except as expressly provided in the Tax Advice, we will not review any transaction to determine whether it is a “reportable transaction” or a “listed transaction.” If you would like us to review any transaction to determine whether it is a “reportable transaction” or “listed transaction,” please contact us to discuss expanding the scope of our services.
2.6 No Guarantee. Our Tax Advice will be based upon our interpretation of applicable law and regulations, and certain case and ruling authority as of the date of the Tax Advice. Some of these matters will not be free from doubt, and our analysis and conclusions will not be binding on the IRS, any state, local, or foreign tax authority, or any court. Our analysis and conclusions will be based upon our professional judgment, and will not be a guarantee of the ultimate tax consequences of the transactions described in the Tax Advice. If you would like greater certainty regarding the tax treatment of any particular transaction, please contact us to discuss the possibility of obtaining a ruling from the appropriate tax authority.
2.7 Reliance and Distribution. Each item of Tax Advice is rendered only for the benefit of the named addressee(s), and does not address the tax consequences to any other person or entity that is not an addressee. No person or entity other than the named addressee(s) may rely on the Tax Advice. To avoid confusion regarding matters of reliance, our Tax Advice may not be delivered to any other party unless you advise the recipient of these limitations on reliance. Unless expressly provided in an item of Tax Advice, but subject to the limitation in the preceding sentence, you are free to share the Tax Advice with any third party. You may deliver a copy of any Tax Advice to the IRS or any state, local, or foreign tax authority for the purpose of demonstrating good faith and reliance on the analysis and conclusions expressed therein. You should be aware that the delivery of any item of Tax Advice to a third party may act as a waiver of any otherwise available claim of privilege. Before delivering an item of Tax Advice to a third party, we recommend that you consult with legal counsel to assess the matters relating to claims of privilege.
2.8 Level of Assurance for Tax Advice. Many areas of tax law are unclear, and the application of the tax law to any particular facts may be subject to more than one interpretation. Accordingly, the level of assurance for any particular item of Tax Advice will depend on the underlying facts, the clarity of applicable law, regulations, rulings, and court cases, and the extent of factual due diligence and tax research performed. The conclusions in our tax advice will be based on our good faith belief that they meet the level of assurance stated in the Tax Advice. Obtaining Tax Advice at a particular level of assurance may in some cases provide a defense to certain tax penalties, but you should not assume that an item of Tax Advice will offer you protection from penalties except as expressly stated in the Tax Advice.
3. TERMS APPLICABLE TO ALL TAX SERVICE
3.1 Scope of Services. Our services will be limited to the services specifically described in our Arrangement Letter. Services in providing Tax Advice or in preparing a tax return do not include representation in the event of an examination by the IRS or other tax authorities. If you need tax services beyond those specifically described in our Arrangement Letter, these additional services would constitute either a separate engagement or an expansion of an existing engagement at an additional cost. Our agreement to provide services for one engagement does not obligate us to accept any other engagement.
3.2 Your Responsibilities. In order for us to provide effective services, you must cooperate with us and provide us with any information that we request, all on a timely basis. You must cause your employees and contractors to cooperate fully and timely with us. You must designate for us a person authorized to make or obtain all management decisions with respect to our services on a timely basis. We will rely in good faith on all information and management decisions communicated to us by you, your employees, or your contractors, and we will not be responsible for any loss or other obligation arising from our reliance. Any failure to fulfill your responsibilities will be grounds for our suspending or terminating our services.
3.3 Decisions. While we will provide you with advice concerning tax return reporting and the tax consequences of certain transactions, you will retain all authority and responsibility for any decisions based on our advice.
3.4 Independent Contractor. For all tax services that we perform, we will be an independent contractor and not your employee, agent, or partner, and we will determine the method, details and means of performing our services. We assume full and sole responsibility for the payment of all compensation and expenses of our employees and for all of their applicable employee withholdings.
3.6 Financial Statement Information. If you engage HoganTaylor LLP to provide you with audit, review, compilation, or other services, then you authorize us to receive accounting and financial information from HoganTaylor LLP for our use in performing any services under any Arrangement Letter. We will rely on this financial information in the performance of our services.
3.7 Engagement of Other Parties. In performing any tax services, we may engage the services of other domestic tax preparers, including seasonal preparers, independent contractors, or other third-party personnel. Our engagement of any third party does not affect our obligations to you.
3.8 Changes in Law. Subsequent changes to applicable law or regulations, or the issuance of new case or ruling authority, could materially and adversely affect the analysis and conclusions in an item of Tax Advice or a position reported on a tax return. Neither the delivery of any Tax Advice nor the preparation of a tax return is an undertaking on our part to advise you of any changes in law.
3.9 Possibility of Litigation. If the IRS or another Tax authority adopts a position contrary to any analysis or conclusions in our Tax Advice or to any position reported on a tax return, it might be necessary to pursue administrative appeals or litigation. Decisions of whether and how to pursue administrative appeals or litigation may be based on considerations of cost, publicity, and other matters unrelated to the technical merits of a tax position. In some cases, taxpayers elect not to pursue appeals or litigation even though a reported position may ultimately be sustained on appeal or in litigation.
3.10 Disclaimer of Legal and Investment Advice. Our services under the Arrangement Letter and these Terms do not constitute legal or investment advice. We recommend that you retain competent legal counsel and investment advisers.
3.11 Warranty and Limitation. We warrant that our services will be performed with reasonable care in a diligent and competent manner. THIS WARRANTY IS OUR ONLY WARRANTY CONCERNING OUR SERVICES, AND IS MADE EXPRESSLY IN LIEU OF ALL OTHER WARRANTIES AND REPRESENTATIONS, EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTIES OF MERCHANT ABILITY, OR FITNESS FOR A PARTICULAR PURPOSE, OR OTHERWISE, ALLOF WHICH ARE HEREBY DISCLAIMED.
3.12 Documents and Files. Upon your written request, we will return to you all original documents that you provided to us in connection with the performance of our services. We may retain copies of these documents for our files.
3.13 Work Product. We will deliver to you the items expressly enumerated in the Arrangement Letter. All our work product and files will remain our property, and we retain all copyrights and intellectual property with respect to our work product. We, in our sole discretion, may provide you with access to or copies of our files, but you will be obligated to pay all costs associated with such access or copies.
3.14 Document Production and Testimony. If we are requested or authorized by you, or if we are required by government regulation, subpoena or other legal process, to produce any documents or files , or to make the personnel of HoganTaylor LLP available as witnesses with respect to this engagement, you will, so long as we are not a party to the proceeding in which the information is sought, reimburse us for our professional time and expenses, as well as the fees and expenses of our counsel, incurred in responding to such requests.
3.15 Conflicting Engagements. If we at any time determine in our sole discretion that a conflict of interest exists that prevents us from providing our services in accordance with applicable ethical rules, we will notify you of the conflict and may withdraw from representing you to the extent that such withdrawal is required or permitted by applicable ethical rules.
4. GENERAL BUSINESS TERMS
4.1 Requests for Services. In responding to requests for services made by your officers, managers, employees, or agents, we will presume that all requests have been authorized by your internal procedures. If you wish to limit the individuals who can request services, you must notify us of any limitations in writing.
4.2 Billing. Our fees and expenses will be billed on a regular basis. Each invoice is payable upon receipt of the invoice. If you believe that any invoice is incorrect or if you wish to dispute any invoice, you must notify us in writing within 60 days or your receipt of the invoice. We reserve the right to charge interest on any invoice that is not paid within 30 days of the invoice date.
4.3 Uncontrollable Delays. The time for performance of any of your or our obligations (other than the obligation to pay money due) will be extended for a reasonable time in the event of causes beyond your or our reasonable control, including without limitation acts of God, war, acts of government, fire, flood, strike or labor problems, sabotage, and delays in obtaining labor, materials, equipment, or transportation.
4.4 Suspension of Services. If you fail to pay any invoice when due, we reserve the right to suspend the performance of services until your account is paid in full or you have made other payment arrangements satisfactory to us. Our suspension of services will not affect your obligations to us under the Arrangement Letter or these Terms.
4.5 Termination. You may terminate the Arrangement Letter at any time by written notice to us. Subject to any restrictions imposed by applicable ethical rules, we may terminate the Arrangement Letter at any time upon written notice to you. Termination for any reason will not affect your obligation to pay us for fees and expenses incurred prior to termination or in transferring files to and otherwise cooperating with any successor tax preparer or tax advisor. If you terminate any Arrangement Letter after we have commenced performing services under a fixed fee arrangement, you will be obligated to pay us the entire fixed fee upon termination.
4.6 Survival of Provisions. All provisions of these Terms will survive the termination or cancellation of the Arrangement Letter, except that (i) we will not have any obligation to provide services after termination and (ii) except as provided in paragraphs 3.15 and 4.5, you will not have any obligation to pay us for any services that we perform after termination.
4.7 Entire Agreement; Interpretation. These Terms and the Arrangement Letter represent our entire agreement and understanding concerning the engagement described in the Arrangement Letter, and they supersede all prior and contemporaneous agreements. All Terms and the Arrangement Letter must be construed according to their fair meaning and not strictly for or against any party.
4.8 Amendments, Waivers and Consents. Neither these Terms nor the Arrangement Letter may be amended except by our mutual written agreement. No waiver of any breach of these Terms or the Arrangement Letter will be effective unless the waiver is in writing and signed by the party against whom the waiver will be enforced. No waiver of any one breach will be deemed a waiver of any other or subsequent breach.
4.9 Assignment; No Third Party Beneficiaries. You may not assign the Arrangement Letter or these Terms to any other party without our prior written consent, except that you may assign the Arrangement Letter and these Terms to any party that acquires substantially all of your assets and goodwill. These Terms and the Arrangement Letter will be binding on our and your respective successors and assigns. Except as expressly provided in the Arrangement Letter, there are no third party beneficiaries to the Arrangement Letter or to these Terms.
5. LIABILITY AND DISPUTE RESOLUTION
5.1 Indemnification for Breach. Subject to the provisions of paragraph 5.2, each party will indemnify the other for any loss, liability, or obligation arising out of or relating to a failure to fulfill its obligations under the Arrangement Letter or these Terms.
5.2 Opportunity to Cure and Liability Limitations. In the event that we fail to meet our obligations under the Arrangement Letter or these Terms, including without limitation paragraph 3.12, you must notify us in writing and provide us with the opportunity to re-perform the services. If the services cannot be reperformed, or if reperformance will not cure the breach, then your remedy will be for us to refund our fees relating to these services up to the amount of your direct damages caused by our failure to meet our obligations. In no event will our liability for any claim, whether in contract, in tort, at law, or in equity, arising out of or relating to our failure to meet our obligations under the Arrangement Letter or these Terms exceed the amount of our fees actually paid to us under the Arrangement Letter. In no event will we be liable for loss of profits or any consequential, indirect, special, exemplary, or punitive damages.
5.3 Time Limitation on Claims. No claim or action by either party, regardless of whether the claim is in contract, in tort, at law or in equity, arising out of or relating to any matter under the Arrangement Letter may be brought by either party (i) more than 24 months after the party first knows or has reason to know that the claim or cause of action has accrued or (ii) more than 60 months following the completion of the services under the Arrangement Letter. This paragraph may shorten, but in no event will it extend, any period of limitation on actions otherwise provided by applicable law.
5.4 Effect on HoganTaylor LLP. The provisions of paragraphs 5.1 and 5.2 will not limit the obligations or liability of HoganTaylor LLP under any separate agreement for the provision of accounting or attest services.
REPORTABLE TRANSACTION DISCLOSURE REQUIREMENTS
During 2003, the Internal Revenue Service adopted final regulations concerning disclosure of “reportable transactions”, a broad array of transactions that is intended to identify abusive tax shelters. These regulations cover many transactions that you might not consider “tax shelters”.
There are six categories of reportable transactions:
- “Listed transactions,” which are “substantially similar” to transactions identified by the IRS;
- Transactions where the tax consequences are subject to confidentiality (a formal confidentiality agreement is not necessary);
- Transactions in which fees are contingent or refundable based on the tax benefits realized;
- Transactions generating losses meeting defined thresholds (as low as $50,000);
- Transactions generating a book-tax difference in excess of $10 million;
- Transactions involving a holding period of 45 days or less and generating a tax credit of $250,000 or more. Of course, each of these categories is subject to technical rules and exceptions. Just because a particular transaction falls into one of these five categories does not necessarily mean that any tax benefits from the transaction will be denied. The categories were designed to apply broadly, and a number of valid business or investment transactions are likely to be subject to the final regulations.
Reportable transactions must be disclosed on IRS Form 8886 and included with your Federal income tax return. A copy of this form must also be filed with the IRS’s Office of Tax Shelter Analysis. The filing of Form 8886 does not necessarily mean that your tax return will be audited, but we do expect that returns reflecting reportable transactions will receive some additional scrutiny by the IRS.
Penalties for Nondisclosure
During 2004, Congress adopted substantial penalties ranging from $10,000 to $200,000 for failure to disclose a reportable transaction on Federal income tax returns. These penalties apply even if there is no understatement of tax. Failure to disclose a reportable transaction will also indefinitely extend the statute of limitations, increase the amount of any accuracy related penalty, and deprive you of certain defenses to the imposition of tax penalties.
The regulations require disclosure of “listed transactions” on or after February 28, 2000, and it is possible that the announcement of a new “listed transaction” by the IRS would require you to disclose a transaction implemented in a prior year.
Reporting by Advisors
The regulations and new legislation require certain professional advisors to file information returns and to maintain certain lists and records related to reportable transactions. There are substantial new penalties for failure to comply with these requirements. HoganTaylor LLP intends to comply with any applicable requirements.
Certain states, notably California, Illinois, Minnesota and New York have adopted similar requirements that may apply to transactions that you might not think have a connection to those states. These states have also adopted large penalties for failure to comply with the disclosure and information reporting requirements.
How We Can Help
We will not evaluate whether a transaction is a reportable transaction in providing tax advice unless you specifically request us to do so. We can evaluate any transaction or perform additional procedures if you would like a higher level of assurance concerning the existence or status of any reportable transactions. If you have questions concerning the application of these rules to a specific transaction, please contact your HT tax advisor.