AICPA finalizes new standards on tax positions.

• Author: Holets, David J.

On May 18, 2023, the AICPA Tax Executive Committee unanimously approved revisions to the AICPA's Statements on Standards for Tax Services (SSTSs). These revisions, the most significant updates since 2009, will be effective Jan. 1,2024. The SSTSs are enforceable standards that apply to all AICPA members providing tax services. Certain states also incorporate the SSTSs as part of their professional rules of conduct for CPAs.

One revision to the SSTSs relates to tax positions. Prior to revision, SSTS No. 1, Tax Return Positions, was the only standard that addressed AICPA member responsibilities when recommending tax return positions, or preparing or signing tax returns filed with any taxing authority. Subsequent to revision, the previous standard has been split into two sections: Section 1.1, Advising on Tax Positions, of SSTS No. 1, General Standards for Members Providing Tax Services, and Section 2.1, Tax Return Positions, of SSTS No. 2, Standards for Members Providing Tax Compliance Services, Including Tax Return Positions. This column examines the general requirements of each standard and explains the reason for splitting the standard across two sections.

General requirements under SSTS Sections 1.1 and 2.1

The standards included in the revised SSTSs Sections 1.1 and 2.1 are heavily based on the prior SSTS No. 1, Tax Return Positions. This discussion focuses on the revised standards, which generally apply to all members providing tax services included in Section 1.1. Differences specific to the preparation of tax returns included in Section 2.1 are separately addressed following the general discussion.

Definition of 'tax position'

"Tax position" is a term that can have multiple definitions. To minimize uncertainty, the SSTSs establish a definition for purposes of the standards. Section 1.1, Paragraph 4, defines a tax position as "a conclusion reached" by a member "when applicable tax law, regulations, case law, or other regulatory or recognized guidance is applied to a particular transaction, a specific set of facts and circumstances, or a controversy."

This general definition can be divided into three components. First, the conclusion reached in a tax position must be applied to a specific set of facts and circumstances. This serves to limit the standard's reach to situations in which a member is working with a taxpayer in relation to a specific matter. This can apply both to members in public practice preparing a tax return for a client and members working in industry preparing a tax return on behalf of their employer.

Members should also note that although the SSTSs are generally intended to apply to advising a client/employer regarding a particular tax position, the standard also more broadly applies to advice provided in other circumstances. For example, members preparing marketing materials for services related to a particular tax position should ensure they apply the standards in Sections 1.1 and 2.1 to the extent they are providing examples of which tax positions a taxpayer may take in a particular factual...