With about $80 billion heading into the coffers of the Internal Revenue Service and its adjacent needs, Big Law is beefing up its tax controversy departments with new hires.
“We’re going to have an appropriately resourced IRS and they’ve stated publicly they’re shifting the existing enforcement budget to people making over $400K and corporations and partnerships,” said David Foster, a former Skadden, Arps, Slate, Meagher & Flom partner who made the jump to Kirkland & Ellis earlier this month.
Foster joins attorneys David Blair, David Fischer and Dwight Mersereau, who joined Eversheds Sutherland as partners in its tax practice, as experienced attorneys who have reoriented professionally alongside the IRS.
Notably those concerned about an increase in funding for the IRS are probably not tax lawyers.
Foster and his new Kirkland cohort Richard Husseini both said the agency had been languishing for the last decade. According to one study of Department of the Treasury data, the agency’s enforcement budget declined 24% in the last 10 years, with the overall audit rate dropping almost 60%. Four out of five calls to the agency remain unanswered and 31 million mail correspondences sit in the agency’s backlog.
Add to that an aging workforce and you’ve got a powerful federal agency that was hurting both taxpayers and the attorneys hired on their behalf.
“Even those of us who engage in controversies with the agency for a living prefer a well-resourced IRS to provide adequate services to taxpayers,” Foster said, who spoke to the difficulty of working with the agency in recent years.
But the cash infusion is set to improve customer service, bring in new hires to replace the old ones, and, for better or worse, improve the agency’s enforcement work.
And if the agency’s higher dollar targets stick as they’re expected, firms realize they’ll need skilled professionals to handle the larger tax filings.
“With higher dollar amounts of tax disputes comes increased complexity,” Foster said. Add to that changes to the tax code in recent years, including new rebate opportunities to support the fight against climate change, and a new hiring wave was all but guaranteed.
“Lawyers play an important role in making sure the tax laws are appropriately understood and there’s a lot of room for advisers to make sure laws are interpreted as intended,” Husseini said.
While the service side of tax preparation might improve, and tax rebates might increase as green rebates come to fruition, Foster said changes also come with new opportunities for litigation. Sweeping bills impacting IRS authority still need guidance and rulemaking, and as that process opens up, complaints are sure to follow.
“Whether the Treasury has fully compiled with the Administrative Procedures Act may be an area that’s ripe for challenge,” he warned.
Other notable hires in the tax space include several promotions at Chamberlain, Hrdlicka, White, Williams & Aughtry in its Atlanta and Houston offices last week. Akin Gump Strauss Hauer & Feld scooped up Choate, Hall & Stewart tax attorneys Tim Becker and Wells Miller in October.