ETHICS COMMITTEE OPINION NO . 16-01
STATE BAR ASSOCIATION OF NORTH DAKOTA
ETHICS COMMITTEE OPINION NO . 16-01
This opinion is advisory only
QUESTION PRESENTED Can a licensed North Dakota lawyer engage in a second occupation of working as an employee for a non-lawyer owned tax firm as a tax preparer that only prepares and files IRS tax returns and the lawyer ’ s employment as a tax preparer does not provide any legal advice ?
OPINION A licensed lawyer is not prevented from being engaged as an employee of a non-lawyer owned tax firm as a tax preparer as long as the lawyer does not provide any legal advice as an employee of the tax firm or share fees with the tax firm for the providing of legal advice .
A licensed lawyer can own a business franchise that , as a franchise owner , involves the lawyer paying franchise fees for the use of the protected franchisor trademark , as long as the franchisor does not provide legal advice or receive any portion of the fees charged by the lawyer for providing legal advice .
APPLICABLE NORTH DAKOTA RULES OF PROFESSIONAL CONDUCT Rule 5.4 - Professional independence of a lawyer . Rule 5.7 - Responsibilities regarding law-related services .
FACTS PRESENTED The requesting attorney wishes to open up his own H & R Block tax office as a franchise owner . The franchise arrangement would involve paying H & R Block for the right to have the office listed on its website , as well as the use of its trademark and use of its copyrighted tax software . At times , clients may need legal representation because of an IRS audit . For those clients , the lawyer would set up a trust account and personally represent the clients before the IRS as an attorney and not as the owner or employee of H & R Block . For example , the attorney opens an H & R Block office in Bismarck . A client from another Bismarck H & R Block office is referred to the attorney because the client has an IRS federal lien letter and needs legal representation . The attorney explains to the client and the other H & R Block office that the lawyer needs to be paid personally by the client and not through H & R Block and that he cannot share with H & R Block or its non-lawyer employees any fees received for legal services . However , if the problem is that the tax return needs to be amended because the figures are wrong , that would not be legal advice but would be tax preparation .
DISCUSSION Under Rule 5.4 ( a ), N . D . R . Prof . Conduct , a lawyer or law firm shall not share legal fees with a non-lawyer . The rule includes several exceptions that are not applicable to the facts presented . Rule 5.4 ( b ) provides that a “ lawyer shall not form a partnership with a non lawyer if any of the activities of the partnership consist of the practice of law .” Rule 5.4 ( c ) provides that a “ lawyer shall not permit a person who recommends , employs , or pays the lawyer to render legal services for another to direct or regulate the lawyer ’ s professional judgment in rendering such legal services .”
Under the facts presented , the lawyer may be sharing tax preparation fees with H & R Block , but he is not proposing to share any legal fees or to allow H & R Block to direct or regulate his professional judgment in rendering legal services . Because the lawyer proposes to bill clients separately for his legal services and explain to his clients that he is not providing legal services through H & R Block , or sharing any fees for legal services with H & R Block or its non lawyer employees , the lawyer is providing the accounting services distinct from his provision of legal services to clients . Therefore , the lawrelated services would be performed by the lawyer individually or through a separate entity , and not through H & R Block .
The lawyer proposes to take reasonable measures to assure that a person obtaining tax preparation services from him knows that the services are not legal services and that the protections of the client-lawyer relationship do not apply . Based on the facts presented , and as long as the above measures are taken , it does not appear that the lawyer ’ s provision of tax related services would be subject to the Rules of Professional Conduct under Rule 5.7 .
Comment 7 to Rule 5.7 , N . D . R . Prof . Conduct , includes accounting and tax return preparation as examples of lawrelated services . The Rules of Professional Conduct do not prohibit lawyers from being engaged in other businesses . However , fees for legal services may not be shared with a non-lawyer , and the lawyer may be subject to the Rules of Professional Conduct with respect to the provision of law-related services , if they are provided “ by the lawyer in circumstances that are not distinct from the lawyer ’ s provision of legal services to clients ,” or if they are provided “ in other circumstances by an entity controlled by the lawyer individually or with others if the lawyer fails to take reasonable measures to assure that a person obtaining the law-related services knows that the services are not legal services and that the protections of the client lawyer relationship do not exist .” N . D . R . Prof . Conduct 5.7
This opinion was drafted by Tim Lervick , and was unanimously approved by the Ethics Committee on the 17th day of February , 2016 .
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