There has been extensive discussion about the risk CPAs face when assisting clients with filing Beneficial Ownership Interest (BOI) Reports under the Corporate Transparency Act (CTA), particularly concerning unauthorized practice of law provisions in various states. However, there has been little guidance from enforcement entities on what actions are permissible for CPAs and EAs in this area. This week, the New Jersey Supreme Court’s Committee on the Unauthorized Practice of Law issued a letter to the New Jersey Society of CPAs, providing some much-needed guidance.

This guidance is only discussing New Jersey law, regulations and case law. While it seems likely that other states will use similar logic to address the issue, that cannot be assured, and non-attorneys should continue to keep track of developments in their own state.

Most states have some form of unauthorized practice of law statute that restricts certain actions to only attorneys authorized to practice in the state.  In some cases, these laws come not only with civil penalties, but also with potential criminal sanctions.

The letter provides the following question posed to it by the NJCPA:

The Supreme Court Committee on the Unauthorized Practice of Law considered your inquiry. On behalf of the New Jersey Society of Certified Public Accountants, you asked whether your members are permitted to file “beneficial owner information” reports (BOI Reports) under the Corporate Transparency Act.[1]

The letter states that two issues must be resolved to determine if CPAs are allowed in New Jersey to file BOI Reports.

To respond to this inquiry, the Committee first determines whether providing guidance to clients and/or filing the reports on behalf of clients is, in fact, the practice of law. If the Committee decides that it is the practice of law, it must then determine whether it is in the public interest to permit nonlawyers to engage in the activity or whether the public needs to be protected from the activity. In re Opinion No. 26 of the Committee on the Unauthorized Practice of Law, 139 NJ. 323, 327 (1995).[2]

Turning first to the issue of whether preparing BOI reports represents the practice of law, the Committee determines that it is under New Jersey’s definition of the practice of law.

The New Jersey Supreme Court has adopted a functional definition of the practice of law. “The practice of law in New Jersey is not limited to litigation. . . . One is engaged in the practice of law whenever legal knowledge, training, skill, and ability are required.” In re Jackman, 165 N.J. 580, 586 (2000). The Committee finds that filing beneficial owner information reports is the practice of law, as it entails applying the terms of a dense statute to a set of potentially complicated facts.[3]

But, as the Committee notes, the mere fact this is the practice of law does not mean that only attorneys would be authorized to assist entities in filing this form.  Rather the Committee now turns to the question of whether the public needs protection and whether that protection can be provided by some means other than restricting the performing of the service to attorneys authorized to practice in New Jersey.

The Committee now turns to whether the public needs protection from nonlawyers who may offer these services to businesses. While the Court has the power to prohibit a nonlawyer from engaging in conduct that is the practice of law, it exercises this power only when doing so is in the public interest. In re Opinion No. 26 of the Committee on the Unauthorized Practice of Law, 139 NJ. 323,340 (1995). “The question of what constitutes the unauthorized practice of law involves more than an academic analysis of the function of lawyers, more than a determination of what they are uniquely qualified to do. It also involves a determination of whether non-lawyers should be allowed, in the public interest, to engage in activities that may constitute the practice of law.” Id. at 327. Incidental use of legal knowledge in the course of providing a nonlegal service does not transform the service into the practice of law. Cf. Auerbach v. Wood, 142 NJ. Eq. 484, 485-86 (E. & A. 1948) (nonlawyer industrial relations and personnel management specialist not engaging in unauthorized practice of law when advising company on policy issues).[4]

The Committee references a prior case determining if New Jersey CPAs could prepare and file New Jersey Inheritance Tax Returns, a case involving the New Jersey Society of CPAs.

In In re Application of New Jersey Society of CPAs, 102 N.J. 231, 241-42 (1986), the Court held that preparation and filing of a New Jersey Inheritance Tax Return is the practice of law but a licensed certified public accountant may engage in this activity if the client has been notified that review of the return by a lawyer would be advisable. Id. at 241-42. The Court stated that this requirement of notification was “essential for the protection of members of the public who might otherwise be willing to rely entirely on the skill of the accountant to protect their interest.” Id. at 242.[5]

One key feature to note is that the New Jersey Supreme Court allowed CPAs (and, as noted in a footnote to the letter, Enrolled Agents) to prepare and file such returns if the client was notified that the review of the return by a lawyer would be advisable.

The New Jersey Supreme Court noted that any limitation on the practice of law must deal with the overlap of professional disciplines (for instance, it’s possible some activities may involve the specialized training of more than one discipline).

The Court also stated that “in cases involving an overlap of professional disciplines we must try to avoid arbitrary classifications and focus instead on the public’s realistic need for protection and regulation.” Id. at 237. See also New Jersey State Bar Ass’n v. New Jersey Ass’n of Realtor Bds., 93 N.J. 470, 475-76 (1983) (licensed real estate brokers and salespersons may craft contracts for the sale of residential real estate, a task that is the practice of law, provided certain conditions, including an attorney-review clause in the contract, are met).[6]

Finally, the Committee points to a previous opinion of the Committee regarding whether nonlawyers could draft corporate documents.

The Committee previously considered whether it is in the public interest to permit nonlawyers such as accountants to draft corporate documents or whether the public needs to be protected. UPL Opinion 4 7 (2011 ). “Relevant factors include the likelihood of any demonstrable harm to the members of the public who employ the services of the alleged unauthorized practitioners, the cost savings accruing to those members of the public, the voluntary nature of the decision to accept legal services from a person other than a lawyer, and the extent of the service recipient’s knowledge of the risks involved in proceeding without a lawyer.” Michels, New Jersey Attorney Ethics, Section 39:4, p. 1006 (Gann 2023). The Committee also considered whether the public can be protected by something less than a complete prohibition on nonlawyers undertaking these tasks. It decided that “accountants who are licensed (i.e., certified public accountants) may advise clients as to the appropriate contents of certificates [ of incorporation] provided the licensed accountants inform their clients that assistance of counsel in the drafting of such documents is advisable.”[7]

The Committee concludes that the necessity of an attorney handling the preparation and filing of a BOI report depends on the complexity of the filing and related matters.

With regard to beneficial owner information reports under the Corporate Transparency Act, the Committee finds that the public needs protection, given the complexity of some matters and the significant civil and criminal penalties for noncompliance with the Act. Complex filings require a lawyer’s judgment, training, and expertise - the analysis may be tricky and the risk of penalties, if the analysis is faulty, is greater.[8]

However, the Committee notes that complex filings should be the exception, not the norm. For the typical, less complex filings, the specialized knowledge of an attorney is not required to determine the information to be reported on the form.

While the public needs protection in complex matters, however, most filings will be straightforward. For example, all matters where there is a single owner of a limited liability company will be simple - that single owner is the beneficial owner of the entity for purposes of the Act. In such cases, one does not need to be a lawyer to determine the necessary information to include in a beneficial owner information report.[9]

The Committee notes that there would be a (potentially considerable) cost savings if an entity did need to hire an attorney to file the report, but the fact that the Act is new it means that information on the other considerations is not yet available.

Corporate entities that have straightforward filings would have a cost savings if they do not need to hire a lawyer to file the report. The remaining factors to consider whether corporate entities are aware of the risks of using a nonlawyer for the services and voluntarily forego a lawyer for this task - are not known since the Act is so new.[10]

With all of that as a background the Committee determines a licensed CPA (and, the letter later implies, an Enrolled Agent) may prepare these forms, subject to certain conditions in the state of New Jersey.

Given that most filings are likely to be straightforward, the Committee finds that a licensed CPA can engage in this conduct provided the CPA notifies the client that it may be advisable to consult with a lawyer. The Committee relies on the professionalism of CPAs to ensure that such licensees will recognize when a filing is more complex and it is in the client’s interests for a lawyer to be retained in the matter.[11]

The Committee emphasizes that CPAs (or EAs) should mention that consulting with an attorney may be advisable. It also notes that CPAs should recognize when a filing becomes complex enough to warrant advising the client to consult an attorney. This requirement goes beyond merely suggesting that legal counsel may be helpful; it mandates that CPAs explicitly advise clients when it is in their best interest to retain counsel. This aligns with the AICPA Code of Professional Conduct at ET §0.300.060.04, which requires CPAs to inform clients when a situation exceeds the CPA’s competence. That provision reads:

.04 Competence represents the attainment and maintenance of a level of understanding and knowledge that enables a member to render services with facility and acumen. It also establishes the limitations of a member’s capabilities by dictating that consultation or referral may be required when a professional engagement exceeds the personal competence of a member or a member’s firm. Each member is responsible for assessing his or her own competence of evaluating whether education, experience, and judgment are adequate for the responsibility to be assumed. (emphasis added)[12]

Most state boards of accountancy explicitly require CPAs to comply with the AICPA Code of Conduct or have similar requirements in their own regulations. For example, the Arizona State Board of Accountancy under Arizona Accountancy R4-1-455.A specifically mandates that registrants follow the AICPA Code of Conduct:

A. It is the Board’s policy that the rules governing registrants be consistent with the rules governing the accounting profession generally. Except as otherwise set forth in these regulations, registrants shall conform their conduct to the Code of Professional Conduct, published June 1, 2023 in the AICPA Professional Standards by the American Institute of Certified Public Accountants, 220 Leigh Farm Road, Durham, North Carolina 27707-8110 (www.aicpa.org), available from the AICPA.[13]

The New Jersey Administrative Code at 13:29-3.3 provides a similar rule requiring the CPA to assess their own competence to complete an engagement:

13:29-3.3 COMPETENCE

A licensee or the licensee’s firm shall not undertake any engagement for the performance of professional services which the licensee cannot reasonably expect to complete with due professional competence, including compliance, where applicable, with N.J.A.C.13:29-3.5 and 3.6.[14]

The New Jersey Board also has language very similar to Arizona’s requiring general compliance with the AICPA Code of Conduct at N.J.A.C. 13:29-3.19 by licensees.

The Committee on the Unauthorized Practice of Law notes, as well, that it is possible that many businesses may be able to complete the process without any professional assistance but goes on to limit those providing assistance in New Jersey to attorneys, CPAs and EAs.

While small businesses are now faced with retaining a lawyer or a CPA ( or Enrolled Agent) to submit such reports, the businesses with straightforward filings should be able to do the task themselves, with guidance from FinCEN, the U.S. Chamber of Commerce, and other entities. Corporations may file the forms on their own, but if they hire someone to do it on their behalf, it must be a lawyer or a CPA/Enrolled Agent.[15]

Given the uncertainties surrounding the CTA, the Committee does note that it may need to revise this guidance in the future.

Since the Act is new and circumstances may change, the Committee reserves the right to amend or supplement this response in the future. The consideration of the public interest may be affected by the pending Eleventh Circuit case from Alabama and other court actions that may be filed, in New Jersey or elsewhere, regarding compliance with this new Act. Should those developments or other information that may arise - affect the Committee's analysis, it may reconsider this response.[16]

Although this guidance is specifically for those subject to New Jersey’s unauthorized practice of law provisions, the issues outlined in the letter are likely to be considered in other jurisdictions when similar issues arise regarding the assistance of non-attorneys in the preparation of BOI reports. The major risk for most CPAs or EAs is failing to refer the small number of complex cases and issues to an attorney and not resigning from the engagement when it is clear there are matters beyond their competence and training. Clients have a right to expect that professionals will advise them if additional expertise from those with formal education and licensure outside of accounting and tax is necessary for the preparation of their particular report..

[1] Letter from Carol Johnston, Committee Secretary/Counsel for the New Jersey Committee on the Unauthorized Practice of Law to Aiysha Johnson, CEO & Executive Director, New Jersey Society of Certified Public Accountants, UPLC Docket No. 01-202, July 9, 2024, https://www.njcpa.org/docs/default-source/stay-informed/advocacy/01-2024-cpa-inquiry-response.pdf?sfvrsn=7223573a_4 (Retrieved July 12, 2024)

[2] Letter from Carol Johnston, Committee Secretary/Counsel for the New Jersey Committee on the Unauthorized Practice of Law to Aiysha Johnson, CEO & Executive Director, New Jersey Society of Certified Public Accountants, UPLC Docket No. 01-202, July 9, 2024

[3] Letter from Carol Johnston, Committee Secretary/Counsel for the New Jersey Committee on the Unauthorized Practice of Law to Aiysha Johnson, CEO & Executive Director, New Jersey Society of Certified Public Accountants, UPLC Docket No. 01-202, July 9, 2024

[4] Letter from Carol Johnston, Committee Secretary/Counsel for the New Jersey Committee on the Unauthorized Practice of Law to Aiysha Johnson, CEO & Executive Director, New Jersey Society of Certified Public Accountants, UPLC Docket No. 01-202, July 9, 2024

[5] Letter from Carol Johnston, Committee Secretary/Counsel for the New Jersey Committee on the Unauthorized Practice of Law to Aiysha Johnson, CEO & Executive Director, New Jersey Society of Certified Public Accountants, UPLC Docket No. 01-202, July 9, 2024

[6] Letter from Carol Johnston, Committee Secretary/Counsel for the New Jersey Committee on the Unauthorized Practice of Law to Aiysha Johnson, CEO & Executive Director, New Jersey Society of Certified Public Accountants, UPLC Docket No. 01-202, July 9, 2024

[7] Letter from Carol Johnston, Committee Secretary/Counsel for the New Jersey Committee on the Unauthorized Practice of Law to Aiysha Johnson, CEO & Executive Director, New Jersey Society of Certified Public Accountants, UPLC Docket No. 01-202, July 9, 2024

[8] Letter from Carol Johnston, Committee Secretary/Counsel for the New Jersey Committee on the Unauthorized Practice of Law to Aiysha Johnson, CEO & Executive Director, New Jersey Society of Certified Public Accountants, UPLC Docket No. 01-202, July 9, 2024

[9] Letter from Carol Johnston, Committee Secretary/Counsel for the New Jersey Committee on the Unauthorized Practice of Law to Aiysha Johnson, CEO & Executive Director, New Jersey Society of Certified Public Accountants, UPLC Docket No. 01-202, July 9, 2024

[10] Letter from Carol Johnston, Committee Secretary/Counsel for the New Jersey Committee on the Unauthorized Practice of Law to Aiysha Johnson, CEO & Executive Director, New Jersey Society of Certified Public Accountants, UPLC Docket No. 01-202, July 9, 2024

[11] Letter from Carol Johnston, Committee Secretary/Counsel for the New Jersey Committee on the Unauthorized Practice of Law to Aiysha Johnson, CEO & Executive Director, New Jersey Society of Certified Public Accountants, UPLC Docket No. 01-202, July 9, 2024

[12] AICPA Code of Professional Conduct, Effective December 15, 2014, Updated for all official releases through December 2023, ET §0.300.060.04

[13] Arizona Accountancy Rule R-4-1-455.A (retrieved from Board’s website on July 12, 2024)

[14] New Jersey Administrative Code 13:29-3.3 (retrieved from Board’s website on July 12, 2024)

[15] Letter from Carol Johnston, Committee Secretary/Counsel for the New Jersey Committee on the Unauthorized Practice of Law to Aiysha Johnson, CEO & Executive Director, New Jersey Society of Certified Public Accountants, UPLC Docket No. 01-202, July 9, 2024

[16] Letter from Carol Johnston, Committee Secretary/Counsel for the New Jersey Committee on the Unauthorized Practice of Law to Aiysha Johnson, CEO & Executive Director, New Jersey Society of Certified Public Accountants, UPLC Docket No. 01-202, July 9, 2024