Paul L. Caron

Sunday, March 24, 2013

NY Times: The Ethics of Being a Tax Lawyer

New York Times:  The Ethicist: A Tax Lawyer’s Quandary:

I am a tax lawyer. Is advising wealthy companies of ways to reduce their tax bills through sophisticated legal structures ethically permissible? The structures take advantage of legal loopholes in the tax legislation. NAME WITHHELD, NEW YORK

The ethics of specific professions create unique realms of responsibility. In the same way that a defense attorney is ethically obligated to give his client the best possible defense — even if he’s convinced of the individual’s guilt — your principal responsibilities lie with the company hiring you. You need to do your job to the best of your abilities, within the existing rules. You should, however, voice your moral apprehension about the use of such loopholes to the company you represent.

(Hat Tip: George Yin.)

Update:  Jack Townsend (Houston), Ethicist Question About Tax Professionals Exploiting Loopholes:

[F]or those tax professionals engaging in such transactions that they know violated a known legal duty, their conduct is illegal and unethical.  For those transactions engaging in such transactions where they don't know (perhaps are willfully ignorant) that the conduct is illegal (ultimately most of the bullshit tax shelters are found to be illegal), then at least the ethical issues arise.  These are smart professionals, paid (supposedly) to predict what a court will do with the bullshit tax shelter.  Yet, in the prominent civil cases that swat down bullshit tax shelters, they fail miserably in their predictions.  (Which may suggest that their more-likely-than-not opinions were motivated in significant part by some form of willful ignorance seasoned with greed seasoned further with selling insurance for the taxpayer's risk of civil and criminal penalties.

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" You should, however, voice your moral apprehension about the use of such loopholes to the company you represent."

I've worked with a lot of tax lawyers, and that statement is really really funny.

Posted by: save_the_rustbelt | Mar 24, 2013 4:15:34 PM

I thought the whole point of an actual tax loophole (as opposed to the intended deductions currently being demagogued as "loopholes") is that it's a situation where the law has not yet caught up with the abuse. Everybody involved knows that they are abusing the law and it's only a matter of time before the loophole is closed, perhaps retroactively.

Must a criminal lawyer insist that his client plead guilty after evidence unambiguously proving guilt has been thrown out for whatever reason? Not on this planet. Truth seeking is not a lawyer's job. We can argue whether it should be, but that argument would be purely academic. In court, even in tax audits, it's about winning and losing, not about justice or injustice.

If for some reason the client doesn't realize that laws are being bent, then sure, confirm that fact with the client. I doubt such a situation would arise, but it wouldn't hurt to protect yourself against lawsuits by clients who might later claim to be Polyannas.

The above is my opinion as an outsider. I would prefer a more truth-oriented system, but this is the system as I see it.

Posted by: AMTbuff | Mar 24, 2013 9:12:15 PM

A tax "loophole" is a tax advantage I don't qualify for. If I qualify for it, like the mortgage interest deduction, then it's just good tax planning.

Tax avoidance is legal and ethical. Tax evasion is not.

Posted by: Peter | Mar 25, 2013 6:14:20 AM

If loopholes exist, it is Congress that is unethical and immoral. It is not my job as a tax lawyer, to close the loopholes Congress - our duly elected officials - failed to close.

Posted by: Peter | Mar 25, 2013 6:16:35 AM