Accountants Fight to Expand Confidentiality Privileges

By Melody Petersen N. Y. Times News Service | THE JOURNAL RECORD, April 14, 1998 | Go to article overview

Accountants Fight to Expand Confidentiality Privileges


Melody Petersen N. Y. Times News Service, THE JOURNAL RECORD


Accountants are using the public's frustration with the Internal Revenue Service to push legislation that would give them the same privileges that lawyers have in keeping tax advice confidential.

The measure, which sailed past the Senate Finance Committee late last month as part of the broad IRS overhaul bill and has already overwhelmingly passed the House, would give tax accountants a clear boost in their battle for business with tax lawyers.

Only lawyers can currently keep communications with their tax clients out of the hands of IRS auditors. The privilege has helped give lawyers an advantage over accountants, for example, when it comes to providing advice on complicated tax strategies that result in large refunds but could be challenged by the IRS. Some lawyers say, however, that the measure does far more. They say it moves the accounting firms closer to being able to practice corporate law -- a business that accountants have furiously plunged into in Europe and elsewhere, but are forbidden to pursue in the United States because of legal ethics rules. "This is a further whittling down of the wall between the practice of law and the practice of accounting," said Lawrence Hill, a tax lawyer at Brown & Wood, a New York law firm. "We are a step closer to the European system." Hill said that the bill could be called "the Accountants' Equal Employment Act." Accountants, who have recently gained a powerful voice in Washington by greatly stepping up their lobbying and political donations, say the measure will help taxpayers who want sophisticated tax planning advice far more than it will benefit their own practices. The accountants say that the bill would give taxpayers more protection from overzealous IRS auditors. "The beneficiaries are the taxpayers," said Leslie Brorsen, managing director of government relations at Ernst & Young."That's what is at the heart of this." Robert E. Harrison, a tax partner at Richard A. Eisner & Co., a New York accounting firm, agreed. He is both an accountant and a lawyer, and he said that people who had hired him at Eisner have withheld sensitive information from him at times -- something his clients did not do at the law firm where he worked previously. Clients "are reluctant to give us all the facts," he said, "because the IRS could subpoena us and ask for our work papers." Harrison said that he had asked at least one of his clients to hire a lawyer, who then hired him, just to keep papers confidential in a tax case that had become a possible criminal matter. …

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