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Changes contained in the recently revised AICPA Code of Professional Conduct force practitioners to rethink the interplay of the AICPA Confidential Client Information Rule and Sec. 7216.
Six years ago new regulations under Sec. 7216 went into effect that reworked how CPAs in tax practice obtain consent from clients to disclose their tax return information (see Regs. Secs. 301.7216-1 through 301.7216-3).'While AICPA Code of Professional Conduct Rule 301, Client Confidential Information, long required CPAs to obtain client consent before disclosing client confidential information (prior to recent amendments to the AICPA code), the Sec. 7216 regulations have much more stringent requirements for how that consent must be obtained, especially for individual taxpayers.
The general thought was that if CPAs were complying with Sec. 7216, they were complying with the AICPA rule. The recently revised AICPA code includes a new Confidential Client Information Rule under Section
1.700.001, which expands the guidance on this topic. Although compliance with Sec. 7216 will generally lead to compliance with the Confidential Client Information Rule, now is an opportune time to examine some of the differences between the standards. Practitioners are encouraged to assess their internal operating practices to determine whether they comply with both rules.
New AICPA Code Rule
1.700.001, Confidential Client Information Rule
Circular 230, Regulations Governing Practice Before the Internal Revenue Service (31 C.RR. Part 10), contains no requirements for maintaining client confidentiality. Nor do the AICPA Statements on Standards for Tax Services contain guidance about client confidentiality. The lack of tax-specific ethical guidance meant that for CPAs in tax practice, the primary ethical guidance on privacy and confidentiality was Rule 301, Confidential Client Information, of the unrevised AICPA code. Rule 301 was also incorporated into the ethics codes of many state CPA societies. The AlCPA's recently revised code includes the same basic rule on client confidentiality, but it greatly expands the interpretations under the rule. The revised AICPA code went into effect on Dec. 15,2014.
Former Rule 301 stated that "a member in public practice shall not disclose any confidential client information without the specific consent of the client," but the rule did not state the method by which consent was to be obtained. However, Rule 391, Ethics Rulings on Responsibilities to Clients, suggests that the consent...