For many years, corporate tax officials rarely focused on the potential issue of conflict of interest as it related to hiring outside accountants and tax attorneys in the pursuit of lower real estate assessments. With the passage of the Sarbanes-Oxley Act in 2002, the new rules require that these corporate tax departments ask the right questions and perform appropriate due diligence in determining conflicts of interest.

Advocacy is the bedrock issue in any property tax appeal filed before any administrative board or court. The valuation arguments advanced and the legal theories put forward on behalf of the client all have one element in common: the client must be represented by an advocate committed solely to the client's goal.

The advocate should have only one interest, obtaining the lowest possible property tax assessment for the client. It is the very nature of advocacy and what it mandates that makes the Sarbanes-Oxley Act so relevant to tax appeals.

Drawing the Line

The Securities and Exchange Commission (SEC) understood what the issue of advocacy meant as it relates to the reliance on and credibility of the audit function. In order to protect the independence and credibility of the outside audit firm, the SEC in its detailed explanation of the final Sarbanes-Oxley rules prohibited an accountant from providing expert opinions or other services to an audit client, or a legal representative of an audit client.

These prohibitions covered advocating an audit client's interests in litigation, or regulatory and administrative investigations and proceedings. The SEC's explanation also prohibited an audit firm from providing legal services to the client.

These two rules, when read together, clearly explain what the SEC had in mind. The entire property tax appeal process involves advocacy. From the beginning of outlining a theory of valuation, to the cross examination of the assessing authorities, to arguing the legal theories that support the valuation position, advocacy of a client's position is clearly paramount.

An accounting firm in an audit relationship cannot perform any of these services without violating the Sarbanes-Oxley Act. The SEC recognized that the audit firm's duty requires independence, and independence is inconsistent with advocacy of a client's position.

A lawyer representing a client in a tax appeal must also be free of conflict of interest in order to adequately advocate a client's interest. Adequate due diligence should be performed in hiring lawyers for these tax appeals, yet rarely are critical questions asked that go to the very heart of potential conflicts of interest.

The two most obvious conflict issues are client conflicts and issue conflicts. A client conflict exists when a law firm being considered for retention by a taxpayer already represents a taxing jurisdiction in tax appeals.

An issue conflict arises when a law firm is handling one side of an issue for one client and another client wants to retain the law firm to handle the opposite side of that issue. For example, an issue conflict occurs when a law firm is asked to represent a client who is not deducting intangible enhancements from their portfolio value. Simultaneously, the firm also is representing a client arguing that the deduction of intangible property from their real property value is appropriate.

The American Bar Association's rules of professional conduct outline the conflict issue for lawyers by stating, “a conflict of interest exists if there is a significant risk that a lawyer's action on behalf of one client will materially limit the lawyer's effectiveness in representing another client in a different case.”

What's a Property Owner to Do?

Taxpayers interested in conducting appropriate due diligence when hiring consultants or lawyers for tax appeals should ask the following questions of each candidate:

  • Are you currently retained by any taxing jurisdictions, and if so under what circumstances?

  • Are you involved in advancing any legal theories that could have a negative impact on our interests?

  • Are you involved in advancing any valuation issue that could be construed as against our interests?



During the past few years, there has been an unprecedented focus on the need for corporate and professional integrity. Critical to that process is an understanding of the proper role of advocacy. Arguably the rules that now apply to accountants and the ethical restrictions applicable to lawyers should also be extended to any property tax consultant. In property tax appeals, the Biblical adage rings true: “A man cannot serve two masters.”

John Garippa is the senior partner of the law firm of Garippa Lotz & Giannuario. He also is the president of American Property Tax Counsel.