Originally published on Forbes.com.
The drama and excitement of being an accountant when major tax legislation comes out is the theme of a New York Times article by Tiffany Hsu and Julie Creswell – Tax Bill Is Great for Accountants – Unless They Have Holiday Plans. Accountants being cool and exciting doesn’t come up that often, but this is one of those times. Too bad the New York Times had trouble finding actual tax accountants for their story.
Deloitte
The opening paragraph tells us about the fate of Jonathan Traub Managing Principal, Tax Policy Group at Deloitte. You have to understand something. One of my running jokes lately has been referring to the “failing New York Times”. That is always meant ironically as a reference to our President’s characterization. I love the New York Times and always have since Mr. Moroney required our sophomore class at Xavier High School to read parts of it every Sunday.
Remember the headline – “Tax Bill Is Great for Accountants – Unless They Have Holiday Plans”. The fellow in the lead paragraph – Jonathan Traub – seems like a tremendous guy. One problem, notwithstanding that Mr. Traub works for one of the top accounting firms in the country, he is not an accountant and based on his resume has never been one, nor does he even have the most basic qualifications to be one.
That’s why he is a Principal rather than a Partner. To be a partner in a CPA firm, you have to be, you know, a CPA. Mr. Traub has a bachelors in history and a law degree. After graduating from law school he had a series of jobs working on Capitol Hill culminating with Staff Director of Committee on Ways and Means before he moved to Deloitte. Maybe he knows how to do a tax return, but I wouldn’t count on it.
The story about Mr. Traub having his ski vacation interrupted to among other things make podcasts is touching.
It’s Really Not That Tough
Don’t get me wrong, I have lived a similarly soft life, but when I think about a stressful Christmas holiday I tend to think of somebody who is say a company commander in Afghanistan. Captain Joe as I call him has more things to stress him professionally and is separated from his family. When the Christmas dinner is sent up to his post and by some miscalculation, there is not quite enough, it is Captain Joe who will not be having any. Officers eat last. And based on one of my inside sources, I can tell you with a high degree of certainty that Mr. Traub does not just make more money than Captain Joe. Mr. Traub makes more than all the company commanders in the battalion combined.
PWC
Their next example actually is an accountant, although not a tax accountant, Len Combs US Chief Auditor and Leader of Auditing Services of PWC. My word. Those reporters have something on the ball to get the guy on the phone. It is hard for me to conceive of a more prestigious position for a CPA. And in another case of the New York Times catching up with me, they uncover something that my weak journalistic skills has been probing for months with little success.
“People and teams are going to have to figure out what they need to do to make sure we’re serving our clients appropriately during a difficult time,” said Len Combs, the firm’s chief United States auditor.
Because the tax overhaul — the first of its scope in more than three decades — is coming so late in the year, it is setting off a mad dash by public companies. They are required to report the effects of the new law in their financial statements to shareholders in the same quarter that the law becomes enacted, even if the measures themselves go into effect later.
I have written a bit in the last couple of months about the surprising effects that passage of the act will have on reported earnings. In some cases it will be quite large and quite negative.
EY
The third person they mention Kate Barton who as America’s Vice Chair, Tax Services at EY seems to be both a lawyer and an accountant based on her resume.
Expect turbulence.
“Maybe 50 percent of our clients were following the debate and knew it was headed this way, but I’ve been surprised by the numbers of clients who, by their own admissions, didn’t think this would happen,” said Kate Barton, the vice chairwoman of tax services for the Americas at Ernst & Young. “Maybe 30 to 40 percent of the heads of tax at corporate clients are scrambling to model out the new law and its impact on their businesses.
Grant Thornton
Then they shift to Dustin Stamper – Director, Washington National Tax Office at Grant Thonton who, with that lamentable tendency we have to use sports analogies indicates that this has been his Super Bowl -the most exciting time of his career. His resume also lacks any evidence that he is an accountant. Prior to his employment at Grant Thornton he was a reporter and then an editor.
At Last A Couple Of Accountants
To be fair at the tail end of their piece they got Matthew Becker of BDO and Jeffrey LeSage of KPMG who based on their resumes are actually tax accountants. There was some commentary on how tough it was working late.
Building managers in the firm’s Washington office had to double-check that the heat and lights, normally controlled by automatic timers, were left on for employees.
“There was lots of pizza day and night
It Really Is Exciting For The Tax Geeks
Actually, the excitement conveyed in the article is a real thing. The bill just passed is comparable to the Tax Reform Act of 1986, which is pretty much what made my career, such as it was. Times like this are especially good for accountants who actually read and look stuff up. We’re not a really high percentage of the profession. The national firms know this which is why most of the people the New York Times found are not actual accountants. If I was still working full time as an accountant, I would be studying the bill now, since I would not have bothered with all the iterations leading up to it. There was a chance nothing would pass. Of course my second career dictated following the bill in close to real time.
How It Will Be For Those Who Actually Do Returns
What will happen with the majority of tax oriented CPAs, enrolled agents and other preparers and advisers is that the implications of the act will be absorbed at varying rates. Some will not give it much thought until faced with preparing 2018 returns in 2019. Many clients are not all that proactive and are not real enthusiastic about incurring expenses. Most practices can’t afford to have deep thinkers on their staff full time. There are a couple of them that have me play that role, so I will have to get out of my basement and drive somewhere next week. It’s not like having a ski vacation interrupted, but if the weather is bad I will have to scrape the ice off my window.
Some people will never get it. After the Tax Reform Act of 1986 it was quite clear that a company needed a compelling reason to remain a C corporation. But inertia ruled and I have read many many tax decisions of people who went to great length to avoid corporate level taxation on a gain and ended up failing and having penalties and interest heaped on them in addition to a totally avoidable tax. They were asleep at the switch in 1987 and did not wake up until sometime in 2001 when an offer was made on their assets.
The adjustment that I think a lot of small businesses will miss is getting their payroll and depreciable assets deployed in the entities where there are profits . Rarely do I accuse people of outright lying but the Joint Committee could not have meant it when they wrote about the qualified business income deduction.
It should not result in an increase in disputes with the IRS, nor will regulatory guidance be necessary to implement this provision.
The statute does not tell us how activities will be grouped under Section 199A. I think there is going to be some need for regulatory guidance right there. And those regulations will be mind numbing. But you won’t have to read them, because I will and clue you in on what you need to know. What a strain.
Update
There is something going on with an upgrade of the comments function. So I am relaying one I received by email.
Mr. Jonathan Traub is an incredibly kind and wicked smart individual. He knows the tax code better than NFL players know the feel for a football.
I don’t doubt that my dislike of sports analogies to the contrary notwithstanding. My crack about not doing returns might seem harsh, but the fact is that high level tax attorneys don’t prepare returns. I have been examining my conscience about this post and realize that it is perhaps tinged with envy. I have a sense that I would probably enjoy Mr. Traub’s job more than being an accountant and recognize that he likely has that job because he works harder and is smarter than I am.
I realize I was mainly being hard on the New York Times and again it is a matter of envy. Tax bloggers, particularly the ones on forbes.com, cover taxes much better than the NYT, but I realize that if I had worked harder in the graduate school I flunked out of, I might be writing about something more intrinsically interesting.