TEKE ATTORNEY GENERAL 

OF -2KAS 

Honorable John L. Hill Opinion No. M-150 

Secretary of,State 

Office of the Secretary Re: ,Whether a corporate purpose 

of State 

Austin, Texas 78711 

clause providing for the preparation 

of federal and 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 clause providing for the preparation 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 in preparing 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:, 

opinion was based, was repealed in 1949, and at present there 

is no Texas statutory definition of "the practice of law." 

Article 320a-1, Section 3, Vernon's Annotsked Civil Statutes 

(State Bar Act) provides that ". . . all persons not members 

of the State Bar are hereby prohibited from practicing law In 

this State." 

Article 4la, V.C.'S., Section 10(c), provides in part"'as 

follows: L 

the 

"Provided, however, that no corporation may 

hereafter be created~for the purpose of engaging in 

the practice of public accountancy within this state 

after the effective date of this Act. No corporate 

charters or corporate permits shall be renewed one 

(1) year after the effective date of this Act." 

The words "public accountancy" were formerly limited by 

statutory definition in Article kla, Section 2(a), Vernonl,s 

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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 definition oft "accountancy" 

in the Texas statutes.' Dowever, the current. Article 4la does 

not purport to prohibit the practice of accounting except in 

instances where a person indicates that he Is ,an accountant 

or auditor, or that he has ~expert knowledge in accounting or 

auditing. Article &la, Section 8(g), V.C.S. Since no such 

,facts as the,above are before us, we cannot say that the purpose clause in question constitutes a purpose of practicing 

accounting. 

.-,, 

While Texas courts have the power to defdne "the practice. 

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-the preparation of'federal or state 

income tax returns. There being at this time no.state income 

tax, our consideration of the cases will necessarily involve 

federal income tax or other type tax returns. 

The courts of oth,er states have indicated that the preparation of federal income tax returns may 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 the preparation of simple returns In 

which the income consisted mainly of salaries or wages 'I. . . 

though it had to be.done with some consideration of 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~, 315 Mass; 

‘176 (19431. The court refused to uphold the injunction 

against the above activity, though almost none of the employees of the company were either lawyers or accountants. The 

court limited its decision as follows: 

"Moreover, we do not decide at this time 

whether considering, or advising upon, questd?ons 

of law only so far as they are incidental to the 

preparation for another of an income tax return may 

constitute the practice of law where the return is 

more complicated than were those in the case before 

us9 and the questions of law as well as of accounting 

are correspondingly more~difficult and Important." 

273 P. 2d 619, 623,126 Cal. App. 

for preparing defeniant's 

it by an accountant for compensation 

income tax returns, the Appellate 

Department, Superior Court of Los Angeles County, California, 

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

held that an .accountant could ". . . prepare' federal Income 

tax returns, except perhaps in those instances where substantial questions of law arise which may competently:be determined only by a lawyer." 

The following quotation 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 unauthorized practice of .' 

law in giving certain advice on matters affecting federal income taxes: 

"When an accountant or other layman who 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 determination of 

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 9 (1949) 'th ecourt 

stated: 

"It would be difficult, if not Impossible, to 

lay down a formula or definition of what constitutes 

the practice of law. 'Practicing law' has been defined as 'Practicing as 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 

service by any person, firm or corporation when 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 service by a person, firm, or corporation when 

the giving of such advice or rendition of such service requires the use of an degree or legal knowledge or skill." 

(Emphasis Supplied Y 

This case was a proceeding to secure the reinstatement 

of an attorney to the practice of law after the termination of 

a suspension order issued by that court in a disciplinary action. 

The court further stated: 

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. . 

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

"The respondent admits that he prepared deeds, 

mortgages, releases and Income tax returns during the 

period of his suspension . . . . It seems clear to 

us that the doing of such work 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 circumstances be properly performed by others 

not admitted to the bar." 

The giving of any opinion including an interpretation 

or the construction of a tax statute or involving the decisions 

thereunder, necessarily Includes the practice of law. Re New 

York County Lawyers AssIn., 

209, (1946), 9 ALR 26 r 

273 App. Div. 524, 78 Nys 27 

. 

A corporation or bank or trust company Is thus not permitted to prepare and file protest or claim for refund of 

estate or inheritance taxes, or confer with tax authorities 

concerning the same, unless such is based purely 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 clause providing for general, unlimited 

assistance in the preparation of returns is substantially the 

same as that of a clause provlding for general unlimited preparation of returns, for neither clause purports to prevent 

the corporation from preparing all kinds of income tax re-. 

turns for any person or entity. It Is our opinion thatmany 

Income tax returns present such complex legal problems that 

the mere preparation of those returns necessitates the practice 

of law. 

The corporate purpose clause now in question is broad 

enough to cover the preparation of all kinds of income tax 

returns, regardless of the complexity and the number of 

legal questions arising in such preparation. 

The purpose clause is required to be "fully stated". 

Business Corporation Act, Article 3.02, sub div. A(3 

involves the granting of the privilege of incorporat l* on, It which 

is a franchise. 14 Tex. Jur. 2d 140, Corporations, Sec. 18. 

In cases of doubt, the grant of such a franchise must be strictly 

construed and resolved in favor of the state or public. 25 Tex. 

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

Jur. 2d 605; Franchises, Sec. 7; Eastern Texas;Electric Co. 

v. Woods, 230 S.W. 498 (Tex. Clv. App. 1921, error~dism.). 

Indulging such construction, we hold that such a broad, 

unlimited purpose clause is defective and not free from doubt 

and the same would necessarily include the practice of,law. 

------- SUMMARY 

A broad and unlimited corporate purpose clause providing 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 the practice of law.. 

truly yours, 

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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