## TEKE ATTORNEY GENERAL OF -2KAS

Honorable John L. Hill Opinion No. M-150 Secretary of,State Office of the Secretary Re: ,Whethera corporatepurpose of State Austin, Texas 78711 clauseproviding for the preparation of federaland state income tax returns or providing for assistance in the preparatfon of federal and state Income tax returns constitutes a purpose of practicing the law Dear Mr. Hill: and/or accounting.
You have requested our opinion as to whether a corporate purpose clauseproviding for thepreparation of federal and state income tax returns, or providing for assistance in the preparation of federal and state income tax returns constitutes a purpose of practicing the law and/or accounting. Attorney General's Opinion Ko: p-5086 states that '.
. . 'the service rendered by a layman
. . . in advising and asslsting the public generally inpreparing Income tax returns
. . .I is in violation of the practice of law act." Article 430a, Section 2, Vernon's Penal Code, 1933, on which the above:, opinionwas based, was repealed in 1949, and at present there is no Texas statutorydefinition of "thepractice of law." Article 320a-1, Section 3, Vernon's Annotsked Civil Statutes (StateBar Act) provides that ".
. .all persons not members of the State Bar are hereby prohibited frompracticing law In this State." Article 4la,V.C.'S.,Section 10(c),provides in part"'as follows: L

the "Provided,however, that no corporationmay hereafter be created~for the purpose of engaging in the practice of public accountancywithin this state after the effective date of this Act. No corporate charters or corporatepermits shallbe renewed one (1)year after the effective date of this Act." The words "public accountancy" were formerly limited by statutorydefinition inArticle kla, Section 2(a),Vernonl,s -6g4-Honorable John 

### L. Hill,Page 2, (M-150)

Civil Statutes, 1945, to Instances in which a person held himself out as a public accountant. Since the amending of the above statute, there, has been no definitionoft"accountancy" in the Texas statutes.'Dowever, the current. Article 4la does not purport to prohibit the practice of accounting except in instanceswhere a person indicates thathe Is ,anaccountant or auditor, or that he has ~expert knowledge in accounting or auditing. Article &la, Section 8(g), V.C.S. Since no such ,factsas the,aboveare before us, we cannot say that the purpose clause in question constitutesa purpose of practicing accounting.
.-,, While Texas courts have thepower to defdne "thepractice. of law", Southern Traffic Bureau-v.Thompson,"‘:'232 S.W-.26 742, 

### 748 (Tex. Civ. ADD. 

### 1930.error ref. n.r.e.1. the-v have not yet done so in regard-to-thepreparation of'federal or state income tax returns. There being at this time no.state income tax, our considerationof the caseswill necessarily involve federal income tax or other type tax returns. The courts of oth,erstateshave indicated that the preparation of federal income tax returnsmay or may,not conetitute the practice of law, depending on the facts in each case. See 9 ALP 2d 797, 

### 805. The Supreme Judicial Court of Massachusetts has held that thepreparation of simplereturns In which the income consistedmainly of salaries or wages 'I.
. . though it had to be.done with some considerationof the law, did not lie whollv within the field of the nractice of law." Lowell Bar Association v. Loeb, 52 B.E.2d 27, 

### 34~, 315Mass; 

### ‘176(19431. The court refused to uphold the injunction against the above activity, thoughalmost none of the employees of the companywere either lawyers or accountants. The court limited its decision as follows:

"Moreover,we do not decide at this time whether considering,or advisingupon, questd?ons of law only so far as they are incidental to the preparation for another of an income tax returnmay constitute thepractice of law where the return is more complicated thanwere those in the case before us9 and the questions of law as well as of accounting are correspondinglymore~difficult and Important." 273 P. 2d 

### 619, 623,126Cal. App. forpreparing defeniant's it by an accountant for compensation income tax returns, the Appellate Department, Superior Court of Los Angeles County, California, 

### -6%Honorable John L. Hill, page 3 (M-150)

held that an .accountantcould ".
. .prepare'federal Income tax returns, exceptperhaps in those instanceswhere substantial questions of law arisewhich may competently:bedetermined only by a lawyer." The followingquotation is taken from the case of Gardner it2-&%% 48 N.W.2d 788, 797-798, 234 Minn. 468 (1951-h

a layman had engaged in unauthorizedpractice of .' law in giving certain advice on matters affecting federal income taxes:

"When an accountant or other laymanwho is employed to prepare an income tax return is faced with difficult or doubtful questions of the interpretation or application of statutes,administrative regulations and rulings, court decisions,or general law, it is his duty to leave the determinationof such questions to a lawyer."
In the case of People ex. rel. Illinois State Bar Ass'n. v. Schafer, 87 N.E. 2d 773, ‘( ‘(6; 404 Ill 43 (1949) 'th

- 9 e court stated:
"It would be difficult, if not Impossible, to lay down a formula or definitionof what constitutes the practice of law. 'Practicinglaw' has been defined as 'Practicingas an attorney or counselor at law, according to the laws and customs of our courts, is the giving of advice or rendition of any sort of serviceby any person, firm or corporationwhen the giving of such advice or rendition of such service requires the use of any degree of legal knowledge or skill"'. The court in 111 N.W.28 ‘543-546, 142 Neb. 645 (1961), Neb. State Bar AssIn v. Butterfield, stated that "lpracticing.l~

. . . is generally defined as the giving of advice or rendstion of any sort of serviceby a person, firm, or corporationwhen the giving of such advice or rendition of such servicerequires the use of an degree or legal knowledge or skill." (EmphasisSupplied Y This casewas a proceeding to secure the reinstatement of an attorney to the practice of law after the termination of a suspensionorder issued by that court in a disciplinaryaction. The court further stated: -6g6-. .

Honorable John L. Hill,~page 4, (M-150)

"The respondentadmits thathe prepared deeds, mortgages, releases and Income tax returns during the period of his suspension

. . . . It seems clear to us that the doing of suchwork is within the province of a lawyer to do fiic 7. It is properly Identified as the practice of-law;whether or not it might under some circumstancesbe properlyperformed by others not admitted to the bar." The giving of any opinion including an interpretation or the construction of a tax statuteor involving the decisions thereunder,necessarily Includes the practice of law. Re New York County LawyersAssIn., 209, (1946), 9 ALR 26 r 273 App. Div. 524, 78 Nys 27

. A corporation or bank or trust company Is thus not permitted toprepare and fileprotest or claim for refund of estate or inheritance taxes, or conferwith tax authorities concerning the same,unless such is basedpurely on mathematical or clerical errors in tax returns. Frazee v. Citizens Fidelity Rank & Trust Co., 393 S.W. 2d 77b (Ky. 1965

. Fhink there is some analogy between the preparation Jf We, federal estate tax returns and federal income tax returns, The effect of a clauseproviding for general,unlimited assistance in thepreparation of returns is substantiallythe same as that of a clauseprovlding for generalunlimitedpreparation of returns, forneither clausepurports to prevent the corporation frompreparing all kinds of income tax re-. turns for any person or entity. It Is our opinion thatmany Income tax returnspresent such complex legal problems that the mere preparation of those returns necessitates the practice of law. The corporatepurpose clause now in question is broad enough to cover the preparation of all kinds of income tax returns, regardless of the complexityand the number of legal questions arising in suchpreparation. The purpose clause is required to be "fully stated". Business CorporationAct, Article 3.02, sub div.A(3l* It involves the granting of theprivilege of incorporaton, which is a franchise. 14 Tex. Jur. 2d 140, Corporations,Sec. 18. In cases of doubt, the grant of such a franchisemust be strictly construedand resolved in favor of the state or public. 25 Tex.



### -697-Honorable John L. Hill, page 5, (M-150)

Jur. 2d 605; Franchises, Sec. 7; Eastern Texas;ElectricCo. v. Woods, 230 S.W. 498 (Tex. Clv.App. 1921, error~dism.). Indulging such construction,we hold that such a broad, unlimitedpurpose clause is defectiveand not free from doubt and the samewould necessarily include thepractice of,law.
SUMMARY ------- A broad and unlimited corporatepurpose clauseproviding for the preparation of federal and state income tax returns, or providing for a3sistance in the preparation of federal and state income tax returns would necessarily include thepractice of law.. trulyyours,

C. MARTIN General of Texas Prepared by C. Fielding Early Assistant Attorney General APPROVED: OPINION COMMITTEE Hawthorne Phillips, Chairman Kerns Taylor, Co-Chairman W. V. Geppert John Grace John Banks Sam Kelley A. J. Carubbi, Jr. Staff Legal Assistant

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