Attorneys, Accountants Beware: SEC Guidance on Rendering Tax Opinions

By Karen Yip, Lexis Federal Tax Analyst

The U.S. Securities and Exchange Commission ("SEC") has promulgated regulations regarding tax opinions filed in connection with registered offerings of securities.  SEC Staff Legal Bulletin No. 19 [(CF) (Oct 14, 2011)] discusses the requirements for these opinions and provides guidance for how to deal with certain types of issuers, such as foreign entities and non-corporate entities (e.g., limited liability companies and limited partnerships), and certain types of transactions, such as shelf offerings, medium-term note programs and exchange offers. Either legal counsel or an independent public or certified accountant can provide the tax opinion.

In the securities regulations there are long-form tax opinions and short-form tax opinions. [Item 601(b)(8) of Regulation S-K, 17 CFR § 229.601(b)(8).]  A long-form opinion is the full tax opinion filed as an exhibit and summarized in the prospectus.  In the short-form opinion, the tax disclosure in the prospectus serves as the tax opinion, and is filed with the registration statement. In each case, the tax opinion should address and express a conclusion for each material federal tax consequence, and should identify the applicable Code provision, regulation or revenue ruling.

If the attorney or accountant is unable to opine on a material tax consequence, the opinion should state this fact clearly, provide the reason for the inability to opine, and discuss the possible alternatives and risks to investors.  A description of the law is not sufficient. 

This guidance should be followed when filing registration statements since the Division of Corporation Finance of the SEC intends to follow these guidelines when reviewing such filings.

...

Discover the features and benefits of LexisNexis® Tax Center

For quality Tax & Accounting research resources, visit the LexisNexis® Store