either a C.P.A. or a public accountant.13 Client is defined as one who consults with an accountant to procure accounting services.14

However, because the statute

does not define accounting services, the legislature has left room for judicial interpretation regarding the scope of covered communication. Several statutory exceptions create limitations to the privilege. First, the standard crime-fraud exception eliminates the privilege in any circumstance where an accountant’s services were sought or utilized to perpetuate a crime.15


the privilege is unavailable in litigation that alleges breach of duty between accountant and client.16

Tird, no privilege exists

in civil cases between clients “when a communication is relevant to a matter of common interest.”17 It is important to remember that privilege statutes protect communication, not documents or facts. For example, the privilege may protect an accountant’s email or letter that provides tax advice on future sales transactions, but it won’t shield the facts or transactional documents related to the sale. And, only confidential communication is protected. Te privilege is generally waived through disclosure to third parties. In a case of unintentional disclosure, the privilege can be saved if the “holder” (i.e. client) acted reasonably by implementing both pre-disclosure preventative measures and post-disclosure corrective measures.18

Oklahoma statute

also provides a specific waiver exception for compliance with government requests, whereby communication required by a government regulatory, investigative or enforcement action will not waive the privilege as to nongovernmental entities.19 As a state privilege, it only applies

to investigations by state agencies or in litigation occurring in state court. Commentators speculate state privilege could apply in Federal courts exercising diversity jurisdiction. However, the Northern District of Oklahoma refused to apply Oklahoma’s privilege in a 2016 federal diversity case, noting federal courts do not recognize state-created accountant privilege.20

Federal accountant-client privilege Accountant privilege is not recognized by federal common law.21

In 1998,

Congress provided a limited statutory privilege in the Internal Revenue Code (IRC). According to IRC § 7525, communication regarding tax advice between a taxpayer and a federally authorized tax practitioner (including an accountant) holds the same privilege as exists between client and attorney.22

References 1

Justin Gillis & Clifford Krauss, ExxonMobil Investi- gated for Possible Climate Change Lies by New York Attorney General, New York Times (November 5, 2015), 2

David Hasemyer, Exxon’s Auditor Could Hold Key

Piece of Climate Fraud Investigation, Inside Climate News (March 7, 2017), news/07032017/exxonmobil-climate-change-research- rex-tillerson-ny-attorney-general-pwc 3

Id. 4 Tere

are several important limitations to IRC § 7525. First, it applies only to tax advice, and does not protect communications to an accountant solely for purposes of return preparation.23

to outline, though by statute it includes any advice the authorized tax practitioner provides within his authority.24

A second

significant limitation is that it only applies to noncriminal, federal tax matters: (1) before the Internal Revenue Service or (2) in Federal court by or against the United States.25

Federal investigations of

non-tax matters are not privileged, and the privilege does not apply in state court or in subnational investigations. A third qualification on the tax preparer privilege is that it does not protect communication regarding tax shelters.26

E. Todd Presnell & James A. Beakes, Te Application of Conflict of Laws to Evidentiary Privileges, in Evidentiary Privileges for Corporate Counsel, 161-167 (2008). 5

Id. at 163.

6 Id. at 162-163. 7

Tax advice is difficult

Matter of People of the State of New York v. PriceWa- terhouseCoopers, LLP, Supreme Court of New York, New York County No. 451962/16, 2016 BL 360889 (Sup. Ct. Oct. 26, 2016) 8

Pilar Mata & Melissa J. Smith, Demystifying

Todd Presnell, In-House Counsel Beware: Conflicts of Law May Spoil Your Privileges, 23 In-House Litigator 1, 6 (2009). 9

Accounting-Client Privileges in State Tax Litigation, Tax Analysts (April 4, 2012), www/features.nsf/Articles/C55488CE4BD01FE0852579 D60061414E?OpenDocument 10

Because tax shelter

is broadly defined in IRC § 6662(d), many accountants have inadvertently lost the federal privilege.27 In addition to accountant-client privilege under state and federal law, communications may be separately covered by attorney-client privilege. Te accountant must be hired as an advisor or interpreter for the attorney with the purpose of aiding the attorney’s legal representation of the client.28

Attorney privilege will not

protect communication associated with the provision of accounting services or tax preparation.29

As a form of attorney-client

privilege, it is effective in state or federal court, in criminal or civil matters. Tough some progress has occurred in extending evidentiary privilege to the accounting profession, considerable uncertainty remains. In the words of Supreme Court Justice William Rehnquist, “[a]n uncertain privilege, or one which purports to be certain but results in widely varying application by the courts, is little

better than no privilege at all.” September/October 2018 CPAFOCUS 7

Texas Occ. Code § 901.457(b). 11 Mata & Smith, supra note 9. 12 O.S. § 2502.1(A)(3) 13 Id. at § 2502.1(A)(1) 14 Id. at § 2502.1(A)(2) 15 Id. at § 2502.1(D)(1) 16 Id. at § 2502.1(D)(2) 17 Id. at § 2502.1(D)(3) 18 Id. at § 2502.1(E) 19 Id. at § 2502.1(F)

12 20

Jeter v. Bullseye Energy, Inc., 2016 U.S. Dist. LEXIS 156777, at *10 (N.D. Okla. Aug. 11, 2016). 21

22 23

Couch v. U.S., 409 U.S. 322, 335 (1973). I.R.C. §7525(a)(1)

Jared T. Meier, Understanding the Statutory Tax Prac- titioner Privilege: What is Tax Shelter “Promotion”? 78 Univ. Chi. L. Rev. 671, 678 (2011). 24

25 26

I.R.C. §7525(a)(3)(B). I.R.C. §7525(a)(2). I.R.C. §7525(b).

27 Meier, supra note 23, at 679-680. 28

Seth Kossman, CPAs and Privileged Communica- tions, Te Tax Advisor (October 1, 2013), https://www. html. 29


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