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Opinion #53(a) - 10/16/1957 (21-67)

Harmonizes #53

Topic: Intermediary, Free Tax Advice to Employees of Lawyer's Corporate Employer

Digest: Improper for lawyer to give free tax accounting advice to employees of lawyer's corporate employer

Canon: Former Canons 35, 47

QUESTION

Is it ethical for an attorney to render free tax accounting to the employees of a corporation when his fee for services is paid by the corporation?

OPINION

The Committee is of the opinion that the conduct inquired about would be professionally unethical.

This question involves clarification of an earlier opinion [Opinion #53 - 3/31/67 (2-67)] wherein the Committee was asked:

"Is it ethical for an attorney to render free legal advice to employees of a corporation when his fee for services is paid by the corporation?"

In this earlier opinion this Committee held that such conduct would be professionally unethical.  In essence, in its earlier opinion, the Committee concluded that the giving of free legal services to employees by the corporation-employed attorney would violate Canon 35 of the canons of Professional Ethics.  This Canon permits employment of an attorney by a corporation or other association but prohibits specifically the rendering by the employed attorney of legal services to the individual members of the association or employees of the corporation.  The purpose of this Canon is the preservation of the personal relationship which should exist between attorney and client. In addition, such conduct was thought to be a violation of Canon 47 in that such conduct would be aiding the corporate lay agency in the unauthorized practice of the law.

The sole question, therefore, that remains is whether "free tax, accounting" is included in the term "practice of the law".  In cases involving the unauthorized practice of law, courts have recognized that "taxation is a sort of a hybrid of law and accounting and that the accountant must be given latitude in applying his knowledge of law to problems which arise in the establishment of an accounting system, in auditing and in the preparation of tax returns; yet they hold that an accountant must not render services which are inherently legal." (15 Ala. L.R. 517, at pg. 523.)

In 1951 the National Conference of Lawyers and Certified Public Accountants issued a Joint Statement of Principles Relating to Practice in Field of Federal Income Taxation. (See Interprofessional Twilight Zone Between Lawyers and Accountants, 29 Unauthorized Practice News 267 (Fall 1963).  Under these guidelines both the lawyer and the accountant may prepare income tax returns, but essentially, if accounting problems arise, the accountant should handle them. On the other hand if legal questions of interpretation or application occur they should be referred to an attorney.   Thus, under this generally accepted approach, the attorney hired by the corporation would be violating these principles if he provided tax accounting for employees, either by giving them legal advice on these tax matters or by giving them accounting advice which should be reserved to the accounting professional.

Even if the lawyer is also an accountant, our opinion would be the same because of the practical difficulty of drawing a line between the two functions in this particular case.