Originally published on Forbes.com.
Dallas skyline. Photo credit Derek Evatt.
G. Brint Ryan and Ryan LLC may be transforming the way high end tax practice is done. And it does not appear that the industry is noticing. Ryan’s recent (September 15) $4.25 million investment investment in Incentify LLC, an enterprise tax credit and incentives platform attracted scant notice. James Cutchin covered it in the Los Angeles Business Journal on September 15. The story did not get much other coverage.
The Larger Story
The larger story of the development of Ryan LLC is rather more interesting. If Ryan LLC were a CPA firm, it would be in the top twenty by either revenue or headcount. G. Brint Ryan graduated from the University of North Texas and went to work for Coopers & Lybrand in 1988. 1989 was the last crop of accounting graduates that got to go into the Big Eight as two mergers knocked the count down to six. What was left of the Big Eight became the Final Four in 2001.
Brint Ryan was obviously not cut out to be a Big 4 lifer. He and his boss started their own firm in 1991. Ryan was with Coopers just over three years. The outline of how the firm transformed is inclued in the complaint filed in connection with litigation around Treasury Circular 230:
Ryan, LLC began as Collis & Ryan, P.C. (“Collis & Ryan”) in 1991 as a CPA firm. It was founded to provide tax audit defense and recovery services for clients seeking assistance with state and local tax audits. In 1993, Collis & Ryan became Ryan & Company, P.C., and in 1998, Ryan & Company, P.C. surrendered its license to practice as a CPA firm and became Ryan & Company, Inc. (“Ryan & Co.”), a tax services firm. Eventually, the firm’s professionals grew to include attorneys, CPAs, appraisers, engineers, and statisticians, and Ryan
& Co. became Ryan, LLC.
Value Billing
There were many gimmicks that were supposed to lead CPAs to the promised land of free money. There was “efficient auditing”.Figure out how little work you could do and still issue an opinion. Financial services. Get the money manager to cut you twenty-five of the hundred or two hundred basis points they charged. India – that vast pool of brilliantly educated incredibly hardworking people willing to work for a pittance. I know. I have a bad attitude
One concept that seemed to have some merit to it was “value billing”. Just marking up an hourly rate can only get you so far. There was a group that included engineers that would go in and look at a clients operation; They would determine that just about everything that they did was research and development qualifying for the credit. The group charged based on tax savings rather than hours worked.
A significant amout of Ryan LLC’s work appears to be billed on that sort of basis. Brint Ryan took it a step further and designed a work environment that paid people based on value rather than how many hours they logged at the office.
The Obscure
A lot of tax planning tends to center on the federal income tax, since it can be such a large bite. There are a host of other taxes, federal, state and local to consider and plan for, if your enterprise is large enough. And expertise in many of them can be rather rare. Note above Ryan LLC’s origin – “audit defense and recovery services for clients seeking assistance with state and local tax audits“.
Ryan LLC’s list of 20 practices areas includes federal and state income taxes. But there is more including – Abandoned and unclaimed property, business license tax, captive insurance, fuels and excise tax, property tax and severance tax. Severance tax is a big deal. Severance taxes are mainly an oil patch thing in the United States. It is a tax on the removal of natural resources.
The High End
This 1997 story in the Dallas Business Journal shows the strategic choice that allowed Ryan LLC to become a major player rather than being folded into a regional or national firm to round out their services.
Ryan did satisfy his goal of increasing revenue by 25% as the company landed 20 new Fortune 500 clients like Associates First Capital, J.C. Penney Co. Inc. and Texaco.
Up to 25% of the company’s services are now performed for out-of-state clients.
One of the company’s major challenges was the need to slow down the incoming workload to “make sure we maintained quality for our clients,” Ryan said.
The overall strategy of the company was also “modified” to focus on working with big clients with annual revenues of $50 million or more.
“We modified our strategy to target brand-name companies and increase the caliber of our clients,” he said.
Rather than feast of Big 4 leftovers, like some regional firms, Ryan LLC went after their clients, but with a different approach.
Our management philosophy is very simple, and I guess it came from my years in `Big Six’ — or back then, `Big Eight’: We do everything opposite of what they do,” he said. “I’m just a firm believer that, if you treat people right, you’ll be OK.
Not long after that the firm stopped being a CPA firm. Although CPAs are among those allowed to represent taxpayers before the IRS, they don’t need to be part of a CPA firm in order to do that. Competing strictly for tax work, CPA ends up being more of a brand and being a CPA firm creates regulatory restrictions.
Taking On The Big 4
I asked about Ryan’s challenging of the Big 4 and Brint Ryan responded:
Ryan does challenge the Big 4 – and wins – in high end tax consulting. We are the best in the business of tax. They don’t have the technology that we do which gives us a competitive advantage and better outcomes for our clients. When you look at Incentify, for example, Ryan is not only going to be able to run laps around the Big 4 in terms of efficiency, but our customer experience is in a whole other league.
Ryan LLC recently started a lawsuit against EY in the District Court of Harris County, Texas. The allegation is that EY is using its audit teams to penetrate the secret sauce in Ryan’s severance tax and federal royalty representation. The complaint states:
Through its deliberate focus on and experience in this area, Ryan has developed trade secrets and confidential methodologies to efficiently navigate a patchwork of disparate state and federal laws, state and federal regulatory guidance, opinion letters, and state comptroller and auditor positions to achieve significant benefits for clients.
The theory is that EY auditors are insisting on looking at proprietary workpapers that then show to consultants. The consultants then go after the work. I picked up that story from Going Concern, but have not delved deep into it beyond reading the complaint.
How Incentify Fits With Ryan LLC
C&I stands for credits and incentives. It is not easy for a large company to keep track of them. Incentify has created a software platform for that purpose. Brint Ryan explains it this way:
The partnership between Incentify and Ryan will bring cutting-edge C&I technology to our clients and enhance the C&I value with better forecast monetization, maximization of benefits, enhanced collaboration, centralized data, and automated workflows. No other tax advisory firm provides its customers with the sort of analytics and dashboard that we now do as a standard operating procedure. Our clients are going to be at the forefront of technology in the vital arena of C&I – and I’m very proud to say that.
Laurence Sotsky of Incentify commented:
This is the kind of deal of which technology companies in our position dream. Hundreds of new major organizations are now going to have their C&I portfolio on Incentify, thus normalizing the use of our platform in an extremely short period of time. Suffice to say, our growth trajectory as a business has dramatically steepened.
But more than just our own growth trajectory as a business steepening, what I’m really excited about is the growth trajectory for the C&I we serve. Our clients see an average of 6.5% improved monetization which not only means significant impact for their business, but it means tremendous things for local communities. You have to remember that to monetize C&I, a tangible pro-societal outcome has to have been verified. Whether that is a certain number of jobs or environmental remediation or greater innovation is specific to the particular C&I, but the rule holds true: when C&I monetizes, communities benefit. So that’s the growth trajectory we are most interested in seeing improve.
Controversy
I am going to take an agnostic stance on controversy surrounding Brint Ryan, Ryan LLC and credits and incentives in general, but if I ignored it you might think that I wasn’t paying attention. A New York Times piece in 2012 by Louise Story – Lines Blur as Texas Gives Industries a Bonanza – took a hard look at corporate incentives in Texas and Ryan’s role in Texas politics.
Brint Ryan is a major GOP donor. Judd Legum of ThinkProgress wrote about him being responsilbe for Donald Trump Jr.’s $100k speaking gig at the University of North Texas in 2017.
He is also a philanthropist and a booster of his home town, where he grew up in modest circumstances.
Accounting As An Engine Of Upward Mobility
Last December the Horatio Alger Association of Distinguished Americans made G. Brint Ryan one of its members. In case you are weak on 19th century pop culture, Horatio Alger (1832-1899) wrote young adult novels about impoverished boys rising from humble backgrounds. I know you knew that, but you have to consider the other readers. The association gives scholarships to young people in diffiicult circumstances. It also “honors the achievements of outstanding leaders who have accomplished remarkable successes in spite of adversity by bestowing upon them the Horatio Alger Award and inducting them as lifetime Members.”
The award announcement is enough on the TMI side, that I think some people might pass on it.
From humble beginnings, Mr. Ryan battled adversity through much of his early life. His parents met in high school and eloped shortly after in Mexico to avoid age legalities in the United States. As a boy, Mr. Ryan grew up on a farm outside of Big Spring, Texas where finances were tight because of his father’s meager earnings at a gas processing plant. His mother sold insurance to help keep the family afloat. Throughout his upbringing, his parents struggled with alcohol, and they ultimately divorced. Tragically, his mother was killed in an alcohol-related automobile accident while still very young. Although his adolescent years were often chaotic, Mr. Ryan was a diligent student and worked a number of jobs. His first job was a newspaper carrier. He later helped pay his way through college by bagging groceries at a Piggly Wiggly supermarket. He attended the University of North Texas for both undergraduate and graduate school, majoring in accounting.
A degree in accounting is probably one of the most accessible credentials that can provide entry into the middle class. And working in public accounting depending on where you land can provide a kind of practical business education and give you insight into how the world actually works. And it has room for brilliant entrepeneurial spirits like Brint Ryan, who is still in a way running an accounting firm even though he doesn’t call it that. More significantly if you are looking for a path out of poverty, even slackers like me end up doing OK.