Fin 48 - Fredrikson & Byron PA

opinions are normally applied to a limited set of assumed facts that the lawyer accepts as
reasonable and assumes to be true before the transaction is implemented. In essence, the
opinion is premised on facts that assume away most of the uncertainty that accompanies
disputed fact-finding and characterizations of the transaction after it has occurred and
become subject to audit. It is a wholly distinct proposition, however, to render a MLTN
opinion regarding the merits of the enterprise’s tax position after the transaction has been
performed, often over a period of several years, and the position has become contested
and “uncertain.” The FASB ignored the context in which MLTN tax opinions
traditionally have been given and why that standard cannot be applied with any similar
confidence to a completed transaction.
FIN 48 compounds the uncertainty and burden of applying its MLTN standard by
imposing a continuing obligation upon the enterprise to recognize and de-recognize
disputed tax positions based upon the relevant facts as they become known over time to
management. Under FIN 48, the enterprise must recognize or de-recognize the tax
treatment of any previously-reported position as of the reporting date for the period in
which its understanding of the facts warrants a change in its calculus of whether the
position is MLTN to be sustained. In so stating, however, the FASB ignores the Form 8-
K disclosure obligations of public companies to report promptly any event that may
materially affect the enterprise’s financial condition, including tax controversies.
FIN 48 also ignores the reality that a tax audit and any resulting litigation can
endure for five to ten years or longer and involve the study of tens of thousands of
documents and the debriefing or examination of numerous witnesses. Management may
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