            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                     clause providing for the preparation
Austin, Texas 78711            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 asslst-
ing 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opinion was based, was repealed in 1949, and at present there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

         "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
the 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 pur-
pose 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,"‘:'232S.W-.26 742,
748 (Tex. Civ. ADD. 1930. error ref. n.r.e.1. the-vhave 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,erstates have indicated that the pre-
paration of federal income tax returns may or may,not coneti-
tute the practice of law, depending on the facts in each case.
See 9 ALP 2d 797, 805. The Supreme Judicial Court of Mass-
achusetts 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 employ-
ees 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.
                         it by an accountant for compensation
for preparing defeniant's 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 .accountantcould ". . . prepare'federal Income
tax returns, except perhaps in those instances where substan-
tial questions of law arise which may competently:be deter-
mined only by a lawyer."
    The following quotation is taken from the case of Gardner
           48 N.W.2d 788, 797-798, 234 Minn. 468 (1951-h
it2-&%%   a layman had engaged in unauthorized practice of .'
law in giving certain advice on matters affecting federal in-
come 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 inter-
    pretation 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
                                                           e court
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 de-
    fined 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 re-
quires the use of an degree or legal knowledge or skill."
(Emphasis SuppliedY
    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., 273 App. Div. 524, 78 Nys 27
209, (1946), 9 ALR 26 r  .
    A corporation or bank or trust company Is thus not per-
mitted 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 mathema-
tical or clerical errors in tax returns. Frazee v. Citizens
Fidelity Rank & Trust Co., 393 S.W. 2d 77b (Ky. 1965 . We,
Fhink there is some analogy between the preparation Jf 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 pre-
paration 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 incorporatl*
                                                     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 pro-
     viding for the preparation of federal and state in-
     come 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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