Comments Regarding Proposed Amendments to the Regulations
Governing Practice Before the Internal Revenue Service
(Title 31, Code of Federal Regulations, Subtitle A, Part 10)
April 23, 2001

Section 10.29  Conflicting Interests.

With two exceptions, the Section applauds the substance of section 10.29, as proposed. Our first substantive concern is with the requirement that waivers of potential conflicts of interest under section 10.29(a)(2) must be in writing. This requirement does not appear in Model Rule 1.7(a) of the A.B.A. Model Rules of Professional Conduct and may lead to a substantial degree of inadvertent non-compliance. The Section also notes that this written consent requirement only appears to apply to potential conflicts of interest between multiple parties who are represented by the practitioner. By its terms, proposed section 10.29(c) does not require a written consent in cases in which the potential conflict is between the interests of the represented party and the practitioner’s own interests. The Section recommends that this provision be amended to permit a written or oral waiver of a potential conflict of interest.

Our second concern is with the use in the Proposed Amendment of the term "potential conflict of interest" in section 10.29(a). This term is not defined and, conceivably, may be substantially more inclusive than the term "conflicting interests" which appears in the current version of section 10.29 and in the preamble to the Proposed Amendments. By contrast, Model Rule 1.7(a) of the A.B.A. Model Rules of Professional Conduct, which proposed section 10.29(a) resembles in some respects, does not require an attorney to secure informed consent unless the representation of a client will be "directly adverse" to another client. The Section submits that this is the appropriate standard for determining whether conflicting interests are significant enough to require a waiver of the conflict.

Proposed section 10.29(c) implies that a "potential conflict" may exist if the representation of a party may be "materially limited" by the practitioner’s own interest. However, it is unclear whether the term "potential conflict" in section 10.29(c) is intended to be the equivalent of a "potential conflict of interest" for purposes of section 10.29(a). Section 10.29(a) of the Proposed Amendments should be clarified to expressly provide that a "potential conflict of interest" exists for purposes of section 10.29(a) only where a practitioner’s representation of one party may be materially limited by the interests of another represented party. Even in this case, however, the formulation used in Model Rule 1.7(a) may be preferable. Certainly, situations may arise in which the competing economic interests of one represented party may be materially impacted by the outcome of the practitioner’s representation before the Internal Revenue Service of another represented party. Such circumstances do not require the practitioner to secure the informed consent of both parties under Model Rule 1.7(a). However, even if clarified as set forth above, the broader term "potential conflict of interest" may not be so limited. Consequently, the Section recommends that the term "potential conflict of interest" in section 10.29(a) should either be changed to "conflicting interests" as defined in Model Rule 1.7(a) or, alternatively, defined or otherwise limited to refer only to situations in which the objectives of the practitioner’s representation of one party before the Internal Revenue Service would be directly adverse to the interests of the other party. Such a change would obviate the need for any clarification of the meaning of the phrase "potential conflict" in section 10.29(c).