Problems of the Federal Tax Bar
Copyright 1934 & 1935, CCH INCORPORATED. All Rights Reserved. Article originally appeared at 12 Tax Mag. 466 (1934). Reprinted by permission of Tax Magazine.
Problems of the Federal Tax Bar
By Robert H. Jackson, Assistant General Counsel of the U.S. Treasury Department.
Address before the Tax Conference held at the American Bar Association Meeting in Milwaukee, Wisconsin, on Tuesday, August 28, 1934.
The American Bar Association's Committee on Taxation wisely has called those lawyers engaged in tax practice to meet and consider their common problems. In addition to difficulties which vex the general profession, tax practice presents some of its own. Need for a clearing house for the exchange of views, and a voice to speak for the tax bar is so apparent that I hope you may perfect at least a preliminary organization and perhaps a section for the purpose.
If you choose to so organize, we invite you to go at once to work on behalf of the tax bar. The Treasury Department is considering complete revision of regulations governing enrollment and disbarment. It would welcome creation of a representative professional group whose criticisms and suggestions it could weight and consider. We therefore invite you to name a committee to take up at once consideration of a new code to govern the Treasury Bar and at once to demonstrate the usefulness of collective effort as a measure of self interest and also one of public service.
Announcement is being made today of the appointment by Secretary Morgenthau, of a new Committee on Enrollment and Disbarment. It will consist of Mr. Walter Wheeler Cook, Mr. Irwin Gilruth and Mr. Lawrence Becker. Mr. Cook has a unique position with the profession as the guide, philosopher and friend of the many lawyers who have come under his influence as an instructor. Mr. Gilruth brings to the committee the viewpoint of the active practitioner, and Judge Becker, a former judge in Indiana, a former Solicitor for the Treasury, and more recently the prosecutor of disciplinary cases before the Enrollment Board, brings an intimate knowledge of the problems of the department. The high character of this hoard should be taken by tax practitioners as notice from Secretary Morgenthau that disciplinary matters will have vigorous, but judicious, treatment, that accused members of the tax bar must stand on the merits of their conduct, not on the influence of their friends.
At this somewhat experimental meeting it would be well to consider our professional problems with a perspective that covers years, rather than this day alone. I can be more helpful by raising questions than in attempting answers. To that end I offer a number of inquiries that sooner or later will have to be answered. The answers may be of consequence to you in your professional life.
Shall There Be a Federal Departmental Bar or Will Each Department Continue to Maintain Separate Enrollment and Practice Rules?
The present policy is so chaotic, confusing and costly from the viewpoint of the government and so vexatious and burdensome to practitioners that I cannot give it a long expectancy of life, in spite of the well known inertia of the Federal machine.
The Department of State, the Department of Justice, the Department of Agriculture have no regulations governing enrollment and no restrictions upon those who may practice before them. The Treasury Department has elaborate regulations governing enrollment, conduct and disbarment, admits lawyers, accountants and agents to practice and maintains an Enrollment Committee and a prosecuting officer to present complaints. Enrollment with the Treasury Department permits practice in the Department only, and does not authorize an appearance before the Board of Tax Appeals, so that two enrollments are required to conduct a case before the Bureau and before the Board of Tax Appeals.
The Board of Tax Appeals has a separate enrollment system and admits both lawyers and certified public accountants to its practice. It does not maintain any disciplinary organization.
In spite of close relationship between bureau practice and board practice, there is no coordination between the two enrollments, an attorney may be disbarred before one and still practice before the other, nor are the investigations made by one department available to the other.
The Department of the Interior has rather comprehensive regulations governing the recognition of agents and attorneys. It maintains no special committee on enrollment and disbarment but charges may be preferred by the Secretary and heard before a subordinate designated for the purpose, who returns the record with findings of fact and recommendations to the Secretary for action.
The Federal Trade Commission has rules of practice and procedure but no regulations governing admission to practice. Attorneys appear without formal recognition unless their qualifications to practice are questioned.
The Department of Commerce has an elaborate code governing admission to practice before the Patent Office.
The United States Veterans' Administration has regulations governing recognition and disbarment of attorneys and agents. Charges of misconduct are preferred by the Administrator and final action is apparently taken by the Administrator himself.
The Interstate Commerce Commission has rules governing admission to practice of both attorneys and agents. It has set up no machinery for enforcement and the rules themselves are rather general in character. It is significant, however, that there exists an "Association of Practitioners before the Interstate Commerce Commission” with headquarters in Washington, which claims some 1500 practitioners and which has adopted a code of ethics that is more detailed and imposes higher standards upon its members than does the code of ethics of the American Bar Association. It may be that detailed rules and enforcement machinery are not found necessary because the profession itself is organized and vigilant. I am not informed whether there is a relationship between the two, but it is safe to say that generally, the more the profession is regulated from within, the less regulation it needs from without.
At the present time each department goes about enrollment in a different way, some regarding it as a mere formality and others making careful local investigation of applicants. Information of one department is not availed of by any other, and notice of disbarment of a practitioner would only come to another department by accident or by a new complaint. The Departments themselves have made no joint effort to coordinate such policies or activities. There is no established channel for the exchange of information between them.
Each department has the same need to see that those who represent others shall be identified, reliable, and possess a character fitting to a position of trust and a general competency equal to the task assumed. Except for technical qualifications, and no department really tests those, the requirements should not differ as between them.
It is probable that congressional enactment, if default of administrative action continues, will bring about a consolidation of enrollment activities of the several departments. The bar should concern itself with a problem so vital, not in the usual spirit of antagonism, but in a cooperative mood. The present duplication of systems is not economical nor effective. Enforcement of discipline is either omitted entirely, or judgments are rendered by the same officers who prefer the charges. The bar and the government have common grounds for dissatisfaction with the present method of departmental enrollment and should make its improvement a common cause.
Should Enrollment Be Indeterminate or for a Fixed Period?
A permanent enrollment carries names upon its lists long after their possessors are dead or out of practice. Admission to the bar for life in a local jurisdiction is a different matter than in a national jurisdiction. Enrollment for not longer than five years would give better information and control, and would assure a current membership roll. The usual motives to observe approved standards of professional conduct would be strengthened by the prospect of submitting application for renewal of the professional privilege and of having one's standards reviewed.
What Faith and Credit Should the Federal Authority Give to Membership in a State Bar?
Unfortunately mere admission to a state bar is not always a strong assurance of either character or competency. The several states differ widely in requirements for admission. If Federal authority were to seek uniformity, there would be difficulty in reconciling the conflicting standards of the several communities.
Is uniformity of education necessary or desirable, or should each locality judge the equipment necessary to represent it? If one attains standards satisfactory to his own neighbors, should he not be entitled to recognition as their legal representative in Washington?
Tests of character imposed by local law are also variable. The fundamental principles of organization of the bar itself differ in the several commonwealths. We have outstanding examples of an all-inclusive statutory organization with great powers in the bar itself over admission and discipline. Elsewhere bar associations are voluntary groups and membership somewhat on a club basis. The vigor and consistency with which discipline is administered varies in different localities. The most constant and energetic disciplinary effort is made by the bar associations of the larger cities, doubtless because the need is most imperative there. State bar associations are usually without the implements and often without the will to be real governing professional bodies.
There are those who feel that admission to practice before the courts of their state, should be sufficient warrant for recognition by the administrative departments, as it is usually the warrant for admission without further examination to the Federal courts, including the Supreme Court. It might be answered that the lawyers' methods, equipment, duties and responsibilities before the administrative departments of the central government are so different as to require a separate inquiry into his qualifications. Events, however, have already made their own terms with theories. The existing condition is a flock of Federal bars: they threaten to multiply; they are creatures of chance; their requirements result from the individual convictions of the department head who happened at some time to concern himself with the matter. Shall this development be left to evolution, or shall its intelligent direction be assumed? Shall a system be created or a chaos of systems be continued? Shall such a system impose uniform standards? Or no standards? Or minimum tolerable standards? Or adopt as its own the standards it finds in each locality?
What Should Be Done with Respect to the Contingent Fee?
Another problem of government departmental regulation of professional conduct is the contingent fee. This problem is present wherever there is law practice. The universal character of the problem is some evidence that the contingent fee is a necessary concession to claimants who need representation but do not have or do not wish to jeopardize any other asset than the claim involved. That the abuse of the contingent fee is almost as extensive as its use indicates the necessity and delicacy of its regulation.
Few who are familiar with the necessities of humble people would advocate the abolition or prohibition of the contingent fee. It is equally certain that few who have observed the effect of the contingent fee would look with favor upon a law practice or accountancy practice based entirely on contingent fees. The contingent fee when resorted to by the attorney as a means of procuring professional employment or of enlarging his fees, destroys that sense of detachment and professional perspective which is the greatest assurance that a lawyer will present his client's case with fairness. A partner in a claim is no longer a professional representative. The contingent fee has led to the presentation of unjustifiable claims against the government, and it has led to grossly extortionate charges for the performance of purely formal matters. Its advocates can point to just claims that would have been abandoned had not the contingent fee made prosecution possible, and its opponents can point to perjury, extortion and general professional degeneracy as its products.
The bar cannot permanently evade some effort to control the contingent fee. What will the answer be?
What Regulations Will Reach the Lawyer Who Attempts to Use His Political Influence or Personal Relations, or Former Official Position with the Department, to Promote His Business?
My official life is long enough to make my testimony interested, and not long enough to make it well informed, but your own experience I am confident will confirm the observation that very few cases relatively are helped by political or personal influence. Tactics which indicate a resort to political pressure arouse the resentment of honest officials and put even weak and unfaithful ones on their guard. The country at large does not understand that a former office holder is held in the same esteem in Washington as yesterday's newspaper.
However ineffective claims or appearances of influence may be in obtaining decisions of the government, they are unquestionably persuasive in obtaining business. Taxpayers and even members of the bar sometimes employ as counsel men who once held positions of influence but who are already discredited by their efforts to "cash in" on their friendships or political connections. Aside from a tendency to discredit the service, the "influence lawyer" presents a problem of unfair competition which the bar should aid in suppressing.
What Responsibility Should Regulations Impose Upon the Lawyer Who Presents a Case to a Government Department?
Between practice in a local tribunal, and practice before a department of the central government, there are differences in temptation and in opportunity to mislead. In near-at-home practice one's representations are readily tested by neighborhood knowledge, testimony is subjected to informed and interested cross examination, and a contestant is alert to expose deceit or overstatement. Before the Departments the test of local knowledge is wanting, and the investigations which must serve as its substitute are often casual and feeble. Hearings are usually ex parte and no interested competitor sits ready to expose errors or omissions. The opportunity to mislead by half truths is tempting. Perhaps that is why men cautious in ordinary affairs, seem reckless in their representations to the government, and it may account for the tendency of officialdom to become suspicious and exacting.
The tendency therefore in Federal departments is in the direction of increasing the responsibility of attorneys for the statements which they make or sponsor. Lawyers must assume large responsibilities for the accuracy of letters, briefs and affidavits. No attorney can in all instances verify the information that he must use nor make all statements upon personal knowledge. A lawyer's name upon a document should, however, imply his certification that he does not know of any inaccuracy, falsity or omission, that he has been diligent in searching for all relevant information and that the evidence submitted comes from sources which he believes reliable. If it shall appear that the document is reckless or false, is it too much to place upon the attorney the burden of satisfying the Enrollment Board that he was not a party to the falsity? It is true that this is a reversal of the usual rule of burden of proof but it does not seem to me an unreasonable burden to place upon the bar.
Everyone who advises a taxpayer in the preparation of his tax return must now he named in the return. Responsibility for tax advice will be fixed at the time the return is made. It cannot later be shifted to a lawyer who has obligingly died. This is one step in the direction of fixing the responsibility of those engaged in tax practice for the results of their work.
What Cooperation in Discipline Will a Committee on Enrollment and Disbarment Receive from the Bar?
No Government department desires to be constantly spying upon those it recognizes as attorneys, nor can a spy system be effective.
Those who know best the unethical lawyers are the lawyers themselves. They know by general reputation, and they know specific instances of misconduct.
While I have a school boy's prejudice against a tattle tale, I can see no way discipline can be enforced upon the bar except by the cooperation of the bar itself. It must impart information as to the identity of fellow tax practitioners whose methods warrant investigation. It must call attention lo specific acts that violate professional obligations. If the tax bar regards the fumigation of its household as its own job in which it can involve the aid of the Treasury, the effort to place tax practice upon a higher plane will be successful. If, however, the bar as a whole regards the right to be crooked as a priceless possession to be defended by hostility to all regulation and governance, the inevitable result will be that as a whole it will face a vexatious degree of regulation really needful only for its relatively few rascals.
In regulating the Treasury Bar, which consists not only of lawyers but also of accountants and agents, there will be three purposes in mind.
1. To protect the revenues of the United States against fraud and waste.
2. To protect taxpayers against dishonest or tricky advisors who lead them into trouble and controversy.
3. To protect honorable lawyers who give faithful advice to their clients against the unfair competition of slickers whose stock in trade is fraudulent practice or false claims of influence.
Much of the professional misconduct which disturbs the Treasury should be equally disturbing to the honorable members of the legal profession. Lawyers whose practice has been based upon their ability and character have seen their clients lured away by claims or appearances of political or personal influence. Lawyers who give conservative and upright advice have seen their clients weaned away by soliciting lawyers who claimed to have safe schemes to outwit the Treasury by taking long changes.
Taxation is a problem of great importance today and of increasing importance in the years to come. The Treasury can have substantial aid in the administration of the tax laws from an intelligent, high minded, reliable bar, though it be zealous in the advocacy of taxpayers rights. It can have no greater obstruction than those who by clever devices that border upon fraud or by claims of the use of improper influence, bring tax administration into contempt and disrepute.
In the belief that a more effective organization of the tax bar would be a contribution to good tax administration as well as to the welfare of the profession, I am privileged on behalf of the present administration of the Treasury, to commend the efforts of your committee and invite you to early conference with the new enrollment board as to the regulations best designed to keep both government and taxpayer representation on a creditable professional plane.