A number of Westminster politicians have indicated that they intend to snub the event in Perth at the end of March.
They are increasingly incensed at Scottish Labour leader Johann Lamont's proposals to fully devolve income tax to Holyrood.
The dispute threatens to overshadow Scottish Labour's last conference before the independence referendum in September.
The plans are expected to be unveiled by Labour's devolution commission just ahead of the Perth event. However, MPs say they cannot be seen to attend the conference and endorse proposals they disagree with.
One Labour MP said: "I cannot go and have it look as if I agree with these proposals. I fundamentally do not and there is no way I can pretend that I do."
Another said: "I won't be going because if I was asked I would just come right out and say I oppose these plans".
Opponents warn that such a move would trigger a recalculation of the controversial Barnett formula, which decides how much money the UK Government allocates to Scotland.
They also believe it would inevitably lead to a cut in the number of Scottish MPs at Westminster, which would have the knock-on effect of making it harder to form any future Labour government at Westminster.
Some MPs do support the idea, while others have called for a gradual approach rather than fully devolving power over the levy.
They point out the 2012 Scotland Act gave the Scottish Government the ability to set a Scottish rate of income tax from 2016. They are privately calling for that system to become embedded prior to calls for any further powers.
But others insist voters have to be given a substantial offer on extra powers before September's vote.
The row also threatens to escalate into a power struggle between Scottish Labour and the party leadership.
One MP said the decision was not Ms Lamont's to make, "it is Ed Miliband's."
The dispute was reignited earlier this week when Scottish Labour's former finance spokesman Ken Macintosh warned against the proposals in a submission revealed by The Herald.
Mr Macintosh said that the policy would cut Scotland's long-term revenues and lead the country towards "independence by default".
He also urged fellow Labour MSPs to pull back from the plans.
Scottish Labour's devolution commission - made up of MSPs and MPs and chaired by Ms Lamont - is collecting submissions on how to give Scotland more powers if voters reject independence.
Unveiled for the first time last spring, the proposals to devolve income tax immediately caused a major row within the party.
A number of Scottish MPs are understood to have snubbed last year's Scottish Labour conference because of the row.
At that stage MPs complained they had not been consulted about the policy, with some claiming that Ms Lamont had attempted to 'bounce' them into it.
Final recommendations are due to be presented in Perth.
Labour insists that the devolution commission has received a wide range of views on how to strengthen the Scottish Parliament which it will take into consideration before presenting the final report in March.
The SNP said the only way for Scotland to gain extra powers was a Yes vote on September 18.
l Labour's shadow Welsh Secretary Owen Smith has described a Coalition offer of devolved tax powers as a "trap".
He said the Welsh Government did not want the ability to vary the rate of income tax.