Section of Taxation Publications

VOL. 63
NO. 1
FALL 2009

Contents | TTL Home


Note: The following is an excerpt from the introduction to the article as published in The Tax Lawyer. Author citations have been omitted for brevity. Tax Section members may read the article in its entirety in Adobe Acrobat format.

Loyalty Divided: Duties to Clients and Duties to Others—the Civil Liability of Tax Attorneys Made Possible by the Acceptance of a Duty to the System

David J. Moraine*

I. Introduction

The practice of tax law is changing. The confluence of regulation by nonattorneys, an evolving academic concept of a duty owed to the so-called system, and developments in the substantive law designed to increase accountability of lawyers to persons other than clients disproportionately impact tax lawyers because of the nature of the tax lawyer’s practice. While all lawyers are subject to ethical constraints promulgated by the profession, which serve to limit the duty to advocate for a client using any means necessary, tax lawyers are additionally confronted with regulation by laymen through standards of practice promulgated by nonlawyers...

The cornerstone of the attorney–client relationship, the duty of loyalty, is of such prominence that it overshadows all actions of an attorney, even to the extent that the attorney is prohibited from assuming a representation if it might reasonably come into conflict with his own personal interests. The duty of loyalty applies in federal tax representation, and some commentators have noted that the tax lawyer is obligated to argue for his client and “not to act as a reformer inside the courtroom.” Nevertheless, developments in ethical discourse and changes in substantive law have caused tax lawyers to consider factors extrinsic to the interests of their clients while representing those clients, causing their duty of loyalty to become diluted by a duty owed “to the system.”

Tax lawyers, in a system of self-reporting, are where the rubber meets the road in the administration of a federal income tax. Consider that because the system is self-reporting, information revealed by a taxpayer through the return process will ultimately dictate the government’s analysis of the positions taken on such return...

Tax lawyers’ formal responsibility to their clients is immense, yet their informal responsibility to the “system” and to third party nonclients has, during the past 40 years, taken on an increasingly important role in defining the role of the tax lawyer in the American system of justice. Such change reflects a broad public policy choice in the tax administration system toward more transparency and accountability, and is consistent with attempts to make the administration of the federal tax system more efficient. Such efficiency, however, comes at the expense of client rights and may have long-term effects that demonstrate a departure from the adversary system in the context of federal tax representation. Ultimately, whether those consequences are desired is a normative public policy decision.

*Marchand & Moraine, L.L.P.


Published by the
American Bar Association Section of Taxation
in Collaboration with the
Georgetown University Law Center


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