Advisory Opinion: 194

Year Issued: 1997

RPC(s): RPC 1.6. 1.4, 1.0

Subject: Disclosure of Client Information to Treasury Department on IRS Form 8300

Issue:

What is a lawyer’s obligation regarding compliance with the U.S. Treasury Department IRS Form 8300, which requires the disclosure of the identity of a client making cash payments of more than $10,000 to the lawyer, when the client’s identity is confidential client information under RPC 1.6?

Short Answer:

A lawyer is obligated to comply with the requirements of federal law and regulations that IRS Form 8300 be filed under circumstances requiring it. However, the identity of a client paying more than $10,000 to a lawyer may be “information relating to the representation of a client” that is confidential under RPC 1.6(a). In those circumstances, the attorney may not disclose client identifying information except as permitted by RPC 1.6. Refusal to make such disclosure may result in the issuance of a summons to the lawyer, and the lawyer must properly respond to any efforts to enforce the summons.

Discussion:

Section 6050I of the Internal Revenue Code of 1986, as amended, requires that any person who is engaged in a trade or business and who, in the course of such trade or business, receives more than $10,000 in cash in one transaction or in two or more related transactions, must file a return with the U. S. Treasury Department. The return, which is to be made on IRS Form 8300, requires reporting information about the cash transaction, including the name, address, and tax identification number of the person from whom the cash was received.

RPC 1.6(a) sets forth the general rule prohibiting the disclosure of confidential client information:

A lawyer shall not reveal information relating to the representation of a client unless the client gives informed consent, the disclosure is impliedly authorized in order to carry out the representation or the disclosure is permitted by paragraph (b).

Commentary to RPC 1.6 explains that the term “information relating to the representation” should be “interpreted broadly.” RPC 1.6, cmt. [19]. Such information includes, but is not necessarily limited to, “confidences” and “secrets” as defined under the prior version of RPC 1.6(a). Id. “Confidence” refers to “information protected by the attorney-client privilege under applicable law,” while “secret” refers to “other information gained in the professional relationship that the client has requested be held inviolate or the disclosure of which would be embarrassing or would be likely to be detrimental to the client.” Id.

The rule permits disclosure of otherwise confidential client information under limited circumstances, including “to prevent the client from committing a crime,” “to secure legal advice about the lawyer's compliance with” the ethics rules, and “to comply with a court order.” RPC 1.6(b)(2), (4), (6).

RPC 1.4(b) requires the lawyer to “explain a matter to the extent reasonably necessary to permit the client to make informed decisions regarding the representation.” Also, the lawyer must “promptly inform the client of any decision or circumstance with respect to which the client’s informed consent, as defined in Rule 1.0(e), is required” by the ethics rules. RPC 1.4(a)(1). “Informed consent” “denotes the agreement by a person to a proposed course of conduct after the lawyer has communicated adequate information and explanation about the material risks of and reasonably available alternatives to the proposed course of conduct.” RPC 1.0(e).

Where payment information that is required to be reported on IRS Form 8300 is “information relating to the representation of a client” under RPC 1.6(a), the lawyer must not disclose to the Treasury Department, through the filing of IRS Form 8300 or otherwise, any information pertinent to the client’s identity when the client has not given informed consent to the disclosure, unless disclosure is otherwise permitted under RPC 1.6(b). Unlike most jurisdictions, Washington has not adopted the provision of ABA Model Rule 1.6(b)(6) permitting disclosure of otherwise confidential information “to comply with other law.” Under RPC 1.4, the lawyer must inform the client that when the client pays the lawyer more than $10,000 in cash, but does not consent to reporting this information to the IRS, the lawyer will comply with the requirement that IRS Form 8300 be filed as required by law, omitting the identity of the client.

The lawyer must also inform the client that the lawyer may be compelled by court order to identify the client if the identity of the client is not provided in the original Form 8300 return. An assertion by a lawyer of the inability to disclose information on IRS Form 8300 because of the confidentiality requirements of RPC 1.6 may result in the service of a summons upon the lawyer seeking the withheld information pursuant to 26 U.S.C. §7602. An IRS summons is not self-enforcing. United States district courts instead are authorized to enforce a summons upon a proper showing. 26 U.S.C. §§7402(b), 7604, 7609. The lawyer’s advice to the client regarding issuance and enforcement of an IRS summons should include reference to federal cases interpreting the application of the privilege in this context. E.g., U.S. v. Blackman, 72 F.3d 1418, 1424-25 (9th Cir. 1995) (explaining that absent extraordinary circumstances, client identity and the nature of the fee agreement between the lawyer and the client are not protected from disclosure by the attorney-client privilege, and indicating that “[a]ttorneys should inform clients proffering cash in excess of $10,000 for fees that they will normally be obliged to disclose fee-payer identity and the nature of the fee arrangement in filing Form 8300”), cert. denied, 519 U.S. 911 (1996).

If a summons is served upon a lawyer, the lawyer must continue to decline to disclose confidential client information except in compliance with RPC 1.6. If the government then seeks enforcement of the summons through the federal courts, the lawyer must respond properly and litigate fully the issue of disclosure, and raise all nonfrivolous claims that the information is protected from disclosure by lawyer-client privilege or other applicable law. See RPC 1.6, cmt. [13] (also noting that in the event of an adverse ruling on privilege, “the lawyer must consult with the client about the possibility of appeal to the extent required by Rule 1.4”); Blackman, supra. If ordered to disclose by a judge, a lawyer may then do so in compliance with RPC 1.6(b)(6), which permits a lawyer to reveal client confidential information to the extent the lawyer reasonably believes necessary “to comply with a court order.”

The lengths to which a lawyer must go to protect the attorney-client privilege and confidentiality of the client raise the collateral issue of the lawyer’s entitlements to fees and expenses from the client for these efforts. The lawyer’s right to recover fees and expenses in this context is a legal issue on which we express no view, but we note that this may be an appropriate subject for advance negotiation and agreement between the client and lawyer. Nevertheless a lawyer has an ethical obligation to take steps necessary to protect information relating to the representation of a client under RPC 1.6 even if the lawyer will not be compensated for those efforts.

[amended 2009]

Advisory Opinions are provided for the education of the Bar and reflect the opinion of the Committee on Professional Ethics (CPE) or its predecessors. Advisory Opinions are provided pursuant to the authorization granted by the Board of Governors, but are not individually approved by the Board and do not reflect the official position of the Bar association. Laws other than the Washington State Rules of Professional Conduct may apply to the inquiry. The Committee's answer does not include or opine about any other applicable law other than the meaning of the Rules of Professional Conduct.