Tuesday, September 21, 2021
NY Times: Tax Lawyers At Top Accounting Firms Cycle In And Out Of Top Treasury Posts And Reap Huge Reward For Their Clients And Themselves
New York Times, How Accounting Giants Craft Favorable Tax Rules From Inside Government:
For six years, Audrey Ellis and Adam Feuerstein worked together at PwC, the giant accounting firm, helping the world’s biggest companies avoid taxes.
In mid-2018, one of Mr. Feuerstein’s clients, an influential association of real estate companies, was trying to persuade government officials that its members should qualify for a new federal tax break. Mr. Feuerstein knew just the person to turn to for help. Ms. Ellis had recently joined the Treasury Department, and she was drafting the rules for this very deduction.
That summer, Ms. Ellis met with Mr. Feuerstein and his client’s lobbyists. The next week, the Treasury granted their wish—a decision potentially worth billions of dollars to PwC’s clients.
About a year later, Ms. Ellis returned to PwC, where she was immediately promoted to partner. She and Mr. Feuerstein now work together advising large companies on how to exploit wrinkles in the tax regulations that Ms. Ellis helped write.
Ms. Ellis’s case — detailed in public records and by people with direct knowledge of her work at the Treasury and at PwC — is no outlier.
The largest U.S. accounting firms have perfected a remarkably effective behind-the-scenes system to promote their interests in Washington. Their tax lawyers take senior jobs at the Treasury Department, where they write policies that are frequently favorable to their former corporate clients, often with the expectation that they will soon return to their old employers. The firms welcome them back with loftier titles and higher pay, according to public records reviewed by The New York Times and interviews with current and former government and industry officials.
From their government posts, many of the industry veterans approved loopholes long exploited by their former firms, gave tax breaks to former clients and rolled back efforts to rein in tax shelters—with enormous impact. ...
Even some former industry veterans said they viewed the rapid back-and-forth arrangements as a big part of the reason that tax policy had become so skewed in favor of the wealthy, at the expense of just about everyone else. President Biden and congressional Democrats are now seeking to overhaul parts of the tax code that overwhelmingly benefit the richest Americans. ...
The so-called revolving door, in which people cycle between the public and private sectors, is nothing new. But the ability of the world’s largest accounting firms to embed their top lawyers inside the government’s most important tax-policy jobs has largely escaped public scrutiny.
In the last four presidential administrations, there were at least 35 instances of round trips from big accounting firms through Treasury’s tax policy office, along with the Internal Revenue Service and the Congressional Joint Committee on Taxation, and back to the same firm, according to public records and interviews with government and industry officials.
In at least 16 of those cases, the officials were promoted to partner when they rejoined their old accounting firms. The firms often double the pay of employees upon their return from their government sojourns. Some partners end up earning more than $1 million a year. ...
“Lawyers who come from the private sector need to learn who their new client is, and it’s not their former clients. It’s the American public,” said Stephen Shay, a retired tax partner at Ropes & Gray who served in the Treasury during the Reagan and Obama administrations. “A certain percentage of people never make that switch. It’s really hard to make that switch when you know where you are going back in two years, and it’s to your old clients. The incentives are bad.”
New York Times DealBook, How Tax Giants Write Their Own Rules:
Here’s how it works:
- Executives at the biggest accounting firms encourage their top tax lawyers to do stints at the Treasury.
- While at the Treasury, these legal professionals help write rules — like one that allowed restaurants to claim a tax break intended for manufacturers by claiming they were “manufacturing” cheesecake slices out of whole cheesecakes — that allow their former corporate clients to reduce their tax bills.
- The same professionals, sometimes just months after helping write new rules, are welcomed back to their former employers in more senior positions with higher pay.
By the numbers: During the past four presidential administrations, there have been at least 35 people, including five of the past six heads of the Treasury’s tax policy office, who left jobs at a top accounting firm to take a tax policy position in the government, only to return to their previous employers at a later date. About half of those returning individuals were made partners, a position that can pay as much as $1 million a year
(Hat Tip: Steven Sholk)