New York Court of Appeals Adopts Registration Standards for In-House Counsel

The New York Court of Appeals has recently approved registration standards for in-house counsel who are not admitted to the bar in the State of New York. The new rules are codified at 22 NYCRR Part 522, and went into effect on April 20, 2011.

The new rules define in-house counsel as “an attorney who is employed full time in this State by a non-governmental corporation, partnership, association, or other legal entity, including its subsidiaries and organizational affiliates, that is not engaged in the practice of law or the rendering of legal services outside such organization.”

In-house counsel may apply for New York registration as long as the attorney is licensed and in good standing in another state that “would similarly permit an attorney admitted to practice in this State to register as an in-house counsel.” This precludes the admission of attorneys solely licensed in Hawaii, Mississippi, Montana, Texas and West Virginia. See New York State Bar Association, “Joint Report – Proposed Rules for Licensing of In-house Counsel,” pg. 4, fn. 8: Nov. 2010.

Under the new Rules, in-house counsel will have to pay the biennial $375 registration fee applicable to New York admitted attorneys, meet New York’s continuing legal education (CLE) requirements, and be subject to New York’s attorney disciplinary rules.

The Rules also clarify restrictions on the allowed scope of practice of in-house attorneys. In-house counsel will not be permitted to provide legal services to the general public, appear before agencies or other tribunals, engage in any activity where pro hac vice admission would be required if engaged in by an attorney not licensed in New York, or hold oneself out as an attorney licensed to practice in New York, “except on the employer’s letterhead with a limiting designation.”

Prior to adoption of the new Rules, New York was one of the few states without a licensing requirement for in-house counsel. Nonetheless, a general consensus had prevailed that the practice was authorized under the New York ethics rules and case law. In New York State Bar Association Ethics Opinion 835 (12/24/09), the Committee on Professional Ethics specifically found that multijurisidictional law practice by corporate counsel was not governed by a provision of the New York Rules of Professional Conduct, and thus outside the jurisdiction of the Ethics committee. The Committee did note, however, that case law suggests that lawyers not admitted to practice in New York but admitted and in good standing in another U.S. jurisdiction are not engaging in the unauthorized practice of law when performing “incidental and innocuous” legal work in New York. Ethics Opinion 835, citing El Gemayel v. Seaman, 72 N.Y.2d 701, 707 (1988); accord Spivak v. Sachs, 16 N.Y.2d 163, 168 (1965).

Attorneys acting as in-house counsel before April 20, 2011 will have 90 days to register, and attorneys that become in-house counsel after April 20, 2011 will have 30 days from the commencement of employment to register under the new requirements. Failure to register and comply with the requirements will be deemed professional misconduct.

For more information, please contact Matthew Kertz, Esq. at (973) 230-2087 or Celia S. Bosco, Esq. at (973) 535-7130.

 

New Voluntary IRS Program May Aid Taxpayers with Undisclosed Foreign Accounts

Author: Jodi C. Lipka

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Owing to the success of a similar program in 2009, the Internal Revenue Service (“IRS”) created a second voluntary disclosure initiative to allow U.S. taxpayers with undisclosed offshore accounts from 2003 through 2010, to become current with their taxes. The new program, called the 2011 Offshore Voluntary Disclosure Initiative (“OVDI”), differs from the 2009 program in that it carries higher monetary penalties, specifically an “offshore penalty” with a cap at 25% of the highest year’s aggregate account value during the period of voluntary disclosure.

New Voluntary IRS Program May Aid Taxpayers with Undisclosed Foreign Accounts

Owing to the success of a similar program in 2009, the Internal Revenue Service (“IRS”) created a second voluntary disclosure initiative to allow U.S. taxpayers with undisclosed offshore accounts[1] from 2003 through 2010, to become current with their taxes. The new program, called the 2011 Offshore Voluntary Disclosure Initiative (“OVDI”), differs from the 2009 program in that it carries higher monetary penalties, specifically an “offshore penalty” with a cap at 25% of the highest year’s aggregate account value during the period of voluntary disclosure. This “offshore penalty” will be assessed in addition to applicable accuracy and delinquency penalties and the payment of any taxes and interest due on the income earned by the offshore account. Even with the steeper 25% penalty, the benefits of utilizing the OVDI, including the avoidance of fraud and foreign information return penalties and criminal prosecution, may outweigh the monetary costs for the right taxpayer.

In order to qualify for the OVDI, a taxpayer must file certain documentation with the IRS before August 31, 2011. Compliance with the program includes the submission of previously filed income tax returns (originals and amended) for the tax years covered by the voluntary disclosure, the completion and submission of amended income tax returns containing schedules detailing the previously unreported income for those years at issue, and the completion and submission of a Form TD F 90-22.1 used to report offshore interests for calendar years 2003-2010. Additionally, taxpayers seeking to utilize the OVDI must be cooperative and provide information on all of their offshore financial accounts, institutions, and facilitators. Lastly, taxpayers must agree, in writing, to an extension of the statute of limitations for the assessment of taxes and penalties by the IRS.

As noted above, the additional “offshore penalty” assessed under the OVDI are capped at 25% of the highest year’s aggregate value of the offshore accounts during the period of voluntary disclosure. This penalty may be reduced in cases where the aggregate offshore account balance in each year was less than $75,000 (reduced to 12.5%); where the taxpayer did not open the account, had minimal contact with the account, did not withdraw money in excess of $1,000 from the account in any year (except to transfer of the funds into a U.S. account), and can demonstrate that only account earnings have escaped taxation in the U.S. (reduced to 5%); or where a taxpayer making a voluntary disclosure would owe less money in penalties if the OVDI was not utilized (reduced to the maximum amount imposed under existing statutes).

If you believe that you are eligible to participate in the OVDI for 2011, please do not hesitate to contact our offices to schedule a consultation to discuss participation in the program. While the current OVDI offers a valuable opportunity for taxpayers to become current in their taxes, its implications, including state tax impact, should be carefully considered before any decision to participate is made.

For more information please contact Jodi C. Lipka.

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[1] Please note that despite the use of the word “accounts” throughout this article, the program covers disclosure for both foreign bank accounts and interests in foreign entities.

 

Jisha V. Dymond Named to Lawline.com Faculty

Firm Associate Jisha V. Dymond has been named to the faculty at online continuing legal education service Lawline.com. Lawline.com is a leading provider of online CLE courses for attorneys across the country. Ms. Dymond’s first CLE program, “The Basics of Lobbying and Campaign Finance” will be available at the end of April.

Click here to visit Lawline.com and click here to view Ms. Dymond’s information featured in the Lawline.com faculty section.