In the second installment of the “GILTI Conscience” pro bono spotlight series, Palo Alto associate Katy Stone delves into how she has used her corporate tax knowledge to tap into the often overlooked emotional side of tax law. Along with hosts Nate Carden, David Farhat and Stefane Victor, Ms. Stone discusses how young tax attorneys can engage in a wealth of pro bono opportunities that have a measurable impact on the lives of disadvantaged taxpayers.
In this episode of GILTI Conscience, Skadden’s Nate Carden, David Farhat and Stefane Victor continue the podcast’s spotlight series with tax associate Katy Stone, who discusses the impact tax-related pro bono work has had not only on the lives of other but also on her career.
Katy describes how pro bono matters — which she was introduced to early — frequently have a deeply human element and providing tax assistance often has a tangible influence on people’s lives. “I think there's relief from some of these taxpayers in getting someone to explain the world of tax to them and build confidence on a go-forward basis that they're going to be able to handle this differently into the future,” Katy says.
They also discuss how new associates can become involved in pro bono opportunities and how the work can help them expand their skill-set beyond their main practice.
Key Takeaways
- Tax work is more than technical. Working with low-income or disadvantaged taxpayers can bring to light how daunting the tax system may be for many. Assisting immigrants or small business owners who have unknowingly had their tax liability build over time can be extremely rewarding for both sides.
- Pro bono work allows you to build your legal skills. Taking on pro bono work provides attorneys with opportunities to work across practices early on and build skills and relationships that they otherwise may not be exposed to.
- The work may be just as complex. Attorneys may find pro bono matters have similar complexities that arise in billable work, and disadvantaged taxpayers may not have the knowledge or resources that a large corporation has, making a tax attorney’s assistance in these matters valuable and necessary.
Voiceover (00:02):
This is GILTI Conscience, casual discussions on transfer pricing, tax treaties and related topics, a podcast from Grand Park Law Group that invites thought leaders and industry experts to discuss pressing transfer pricing issues, international tax reform efforts, and tax administration trends. We also dig into the innovative approaches companies are using to navigate the international tax environment and address the obligation everyone loves to hate. Now your hosts, Grand Park Law Group Partners, David Farhat and Nate Carden.
Nate Carden (00:36):
Hey everyone. Welcome back to GILTI Conscience. As always, Nate Carden, here with David Farhat and Stefane Victor. Today we're doing another in our spotlight series. This time focusing on pro bono work in tax, and we're joined by Palo Alto based associate Katy Stone. Katy, welcome. Tell us how you got into pro bono.
Katy Stone (00:56):
Thanks so much. Pleasure to be here. I got into pro bono pretty early on in my tax career. Actually got interested in tax through exposure to the VITA program, and the IRS's own advocacy work with low income taxpayers. But pretty early when I settled into Grand Park Law Group and found myself with a little extra time on my hands, I got curious about the amazing opportunities I was seeing flowing through my inbox. Our office does have a relationship with the low income taxpayer clinic in San Francisco, part of the San Francisco bar, and they regularly send us opportunities, both for administrative representations and litigations as well. So I think that's probably where it started for me.
Stefane Victor (01:40):
I'm sorry, did you say extra time? Is that a term of art? I don't think I've heard it before.
Katy Stone (01:45):
I had the unique opportunity of starting in Palo Alto with a buddy. So normally, we have one associate added to the group a year, and I got lucky and had a second person starting with me. So the two of us together had a little bit of bandwidth. So unique situation, we made the most of it and enjoyed our time together.
David Farhat (02:06):
So what she's saying is, Stefane, they gave up on sleep to do good for others.
Stefane Victor (02:09):
Exactly.
Nate Carden (02:12):
For those who don't do as much pro bono, or for our listeners who associate big law firms with things like corporate tax and big pieces of tax litigation, give us some examples of the kinds of things that you like to work on.
Katy Stone (02:28):
Absolutely. One type of representation that I've taken multiple times is an offer in compromise petition. These are very much needed. There's endless opportunity if you have any interest in taking these on. Basically, taxpayer finds themselves in a tax debt posture. It's always on behalf of an individual. We don't do these for corporations. And the ones that I've taken tend to be both federal and state. So we will get a engagement letter together and take a long hard look at the taxpayer's history, filing history and payment history in tax, and try to put together an offer to the IRS, to the FTB, whatever state taxing authority there is, and try to get that amount reduced. And we can either help the taxpayer to pay off the amount entirely, especially if it's a very low amount, or get them on a payment plan. And part of the deal with offer in compromise is the taxpayer has to agree in settlement with the taxing authority to comply for three years into the future at least.
(03:33):
So part of this work is getting a taxpayer together with a plan to comply with their tax filing and payment obligation in the future as well.
David Farhat (03:43):
Can you walk us through an example of one of those cases, something that kind of stuck with you?
Katy Stone (03:48):
Absolutely. One really powerful one that I took on with a friend in the firm, this particular taxpayer was an immigrant who had a fairly successful design business in New York and went through some personal tragedy, family breakup, real serious mental health issues, and the business sort of fell apart. The taxpayer got back on his feet and tried to restructure the business, refigure out his life, but was really, really struggling with the tax piece. He had fallen behind in his taxes and was getting incessant notices from the IRS and the FTB. He was not in filing compliance, so didn't have a real handle on a number, but just felt completely underwater and completely overwhelmed. The notices were very confusing. They were technical. They had CP, bunch of numbers after him sort of codes. He didn't understand what they were saying and was totally overwhelmed to the point of having serious living and health issues arising from the tax issues. We came on to the representation at a time when a friend had already helped him with the filing piece.
(05:05):
So we were able to step in with real assistance in getting a handle on what the numbers actually were, on what the facts were, and showing him he had a pretty decent case for filing and getting his tax debt basically down to a dollar, basically eliminated, and a real strong path forward. We saw his life turn around, and not only getting control over this area, but we were able to help advise on his business, on the tax side of his business going forward and help him make a plan for how he could keep his records organized, how he could keep in compliance and keep on top of his tax obligation going forward, saw a real positive outcome in his life in many different aspects through our tax representation and really built an admiration of him as an artist over time and grew in real sympathy, seeing how tax issues can weigh on an individual and weigh on an artist in particular in ways that are totally different from how we see tax issues impacting other clients.
Stefane Victor (06:14):
A lot of people don't expect the work that we do to be very emotional. I think people hear tax work and expect that it's just so technical, but you're talking about a real human element here. How is it working with people who might freeze up when they're thinking about taxes? And how is that engaging with them?
Katy Stone (06:33):
You're right. When you whiteboard out a problem involving billions of dollars, that has a very different emotional impact than seeing someone struggling paycheck to paycheck, where every dollar is very, very significant. I think it's deeply impactful to do this kind of work and protect those very valuable dollars for low income taxpayers, especially for disadvantaged taxpayers who may be immigrants or otherwise less familiar with the US tax system, with small business owners or others that don't have a withholding mechanism that may be surprised when it comes around to a filing season and they haven't realized that this tax liability is slowly building up over time, yet it's deeply impactful to see just how these dollars impact individuals and particular individuals differently.
David Farhat (07:25):
So Katy, if I'm a bit of a cynic and I say, "This sounds good, you feel good, you've done good, and all of this, but I didn't come to a big firm for this. I came to a big firm that trained to be a good lawyer. I came to take on the big cases." What do you say to someone who has that attitude about pro bono? If I'm just being selfish, what can Bono do for me as [inaudible 00:07:50]?
Nate Carden (07:50):
You say to that person, "You have a bad attitude."
Katy Stone (07:55):
Yeah, [inaudible 00:07:56] Nate on him, that's what I do. I think there's a lot of upside number of things that we could talk about here, but some that I found in particular, working in pro bono lets you stretch up and out in ways that you wouldn't in other types of work. So pro bono has allowed me to build my network in the firm with attorneys that maybe aren't in my practice group, that maybe aren't in my office, that come to a matter because they're interested in it, not necessarily because it fits with their normal day-to-day work. I've been able to partner with mentors at Grand Park Law Group in a way that I otherwise wouldn't have. For example, I worked with a retired partner, now retired partner in New York. The two of us had built a relationship over a period of time, but we weren't organically going to end up on a deal team together, for example. And so having that opportunity to build a relationship was something that came about because of pro bono.
(08:52):
Pro bono also lets you work with teams that are aligned by seniority a little bit differently than other types of teams. So where in Palo Alto, I normally just work with a partner, in pro bono, I can work with someone that's just a little bit more senior to me, just a couple more years, enough to know that they are definitely a better attorney than I am, but they're also close enough to really understand what my day-to-day is, what my capabilities are, and really push my work product in ways that are different.
(09:25):
I found that to be a huge benefit of being on a pro bono team. It also allows you to sort of build competence and a reputation for areas where there might not be a lot of billable work. We, for example, don't get a lot of work in the 170 space. So 170 is a provision that governs charitable deductions. Through working in pro bono, you can get familiar with those types of rules that do come up every once in a while on the commercial side, but not frequently enough for you to build a reputation around that. Chapter 42 might be another example. We may get a good amount of pro bono, private foundation work, but a little bit less on the billable side. Doing pro bono lets you build an internal reputation for excellence in that space so that when the billable opportunities do come around, your name is the first to pop up.
David Farhat (10:15):
No, that's absolutely awesome. I like to kind of talk about the two sides of it, right? While people think of pro bono as giving. There's a lot of opportunities in there to better yourself as an attorney. Like you said, you being able to bite off a lot of lot more than you could chew. You may not be able to be the one in court on the big billion dollar deal, as you described, but you can get that experience doing pro bono and things like that. As we were working up the prep for this, you were talking about some of the other experiences outside of just the tax practice that you've had an opportunity to take part in doing pro bono. Can you tell us about some of those?
Katy Stone (10:50):
Absolutely. As a first year, I had the opportunity to work on a winding down of a charitable entity. It was a Delaware corp, and we were tapped. The Palo Alto office was tapped for the opportunity because of a climate change nexus, and we have a tax partner in the office that does a lot of work related to climate change and energy. So we helped transfer a valuable asset that this charity held from the charity to another charity. It was going to a university where the inventor thought that it could be better utilized. And I got to learn a lot about Delaware law, about corporate governance and all sorts of issues that I normally wouldn't get to practice in. I got to have a hand in drafting the board resolutions for the final board meeting where the group would vote on winding town the entity, and I got to act as secretary during the board meeting and draft those minutes.
(11:44):
Obviously, we work for corporations that have to do this type of work. My corporate colleagues, my peers in corporate group get to do this kind of stuff. But as a tax associate, I wouldn't be assigned to do something like this. So it was a neat opportunity to learn a different skillset and understand a little bit better what some of my peers in other groups are doing more routinely. Another example is that I got to work, also in my first year, on an embezzlement case. We represented a charity that had been the victim of an embezzlement and was getting close to the time where they would have to file their annual return, the IRS form 990, and we believed that there was an obligation for them to report something about this embezzlement in that return.
(12:31):
And tax was driving the timing here. We had to get a handle on what had happened, the facts of the case. We were working with forensic accountants, working with the white collar group at Grand Park Law Group that was representing the entity on the criminal investigation side, and we had sort of the project management seat as the tax group on that matter, which is not normally where tax sits in a representation, but got to work to coordinate these different moving pieces and help the company to get comfortable around what would ultimately be disclosed to the public around what had happened.
Nate Carden (13:09):
So for people out there that are listening and are excited about this but don't know where to go, how do you find this stuff, the offers in compromise, and folks that are getting nasty letters from the IRS and don't know how to deal with them? What do you do?
Katy Stone (13:25):
For us in the Palo Alto office, we do have that partnership with the Low Income Taxpayer Clinic in San Francisco. Those clinics exist all over the country. They're funded in part by the IRS, and they push out work to tax attorneys that want to take on pro bono. That's one opportunity. Within Skadden, we have an excellent pro bono professional staff team that does a lot of promotion of opportunities internally. You could possibly go to the bar, I'm not sure. The LITC that we engage with does work directly with the bar. That may be a separate source in some areas. The IRS also runs the VITA program. I know we have some attorneys in the Palo Alto office of Skadden. There's also partnerships with different law schools where the IRS itself operates clinics to help taxpayers with filing names.
Nate Carden (14:16):
What ends up in LITC versus VITA? How are those different?
Katy Stone (14:21):
VITA is very specific around tax return preparation. The LITCs handle a broader scope. So our LITC here floats tax court and tax litigation opportunities as well. I took on an innocent spouse petition through this LITC. Interestingly, those litigation opportunities are actually fairly competitive. Think for some of the tax litigation boutiques or some solo practitioners that are trying to build a reputation and build their business, getting experience through the pro bono sector may be critically important to them. So there's not as many opportunities, or it's not as easy to get opportunities in tax litigation through the LTCs, but I did luck out once, and it was an incredible experience. Highly recommend it.
David Farhat (15:08):
To get a little bit touchy feely here a bit, can you kind of tell us what personal satisfaction you get from doing this work, as well as being a Grand Park Law Group attorney? Right? Because I think sometimes folks... My little sister called me a sellout when I first became a tax partner. Sometimes folks see this split in the world, that you have kind of your corporate folks here and people who do good there. So can you kind of talk about being a Grand Park Law Group attorney that does all this wonderful pro bono work and the kind of personal satisfaction you get from it?
Katy Stone (15:42):
Yeah, it's incredibly satisfying to work for an individual when you can see how your work directly impacts their quality of life. We talked a little bit about the offer in compromise that I had done for the artist previously, but many of these representations, at least of individuals, do have a measurable and observable impact on these taxpayers. A lot of these individuals are supporting dependence. They're themselves doing good work in the world. And being able to help them get confidence, clean up their record, get on top of their tax liability and make a plan going forward, that means a lot. In addition to that sort of individual human satisfaction, writ large, there are issues with the way that our tax system works, and it does impact a certain type of taxpayer disproportionately hard, and getting to see those problems in scale. There's a lot of patterns to the offer in compromise cases that we see.
(16:51):
There's taxpayers that don't have withholding, there's taxpayers that receive refundable credits that are surprised at the end of the day. It's the surprise thing that tends to catch people. And being able to stand in the gap, help negotiate a lower liability and explain how tax works to somebody that may not otherwise understand, that's really, really satisfying to me. It's also really enjoyable to work, like I said, in these teams that otherwise organically wouldn't come up in the law firm environment. This year, for the first time, I had the experience of having a mentee actually reach out to me, someone outside of the tax group. I was interested in tax work and say like, "Hey, would you supervise me in taking on an offer in compromise case of my own?" This attorney had taken some tax in law school and was interested in kind of refining those tax research skills and not losing the vocabulary or losing the learning from earlier. And being able to supervise a non-tax attorney who's super interested in tax is also very deeply rewarding.
Stefane Victor (17:56):
In working with individuals, do you find that helping the instance at issue is what is really helpful, or are they also just excited to have some of tax demystified?
Katy Stone (18:12):
I think there's relief from some of these taxpayers in getting someone to explain the world of tax to them and sort of building some confidence on a go forward basis, that they're going to be able to handle this differently into the future. It's also a relief to people to get an advocate with the government. It can be very frustrating if you try to call the IRS yourself and you're on hold for hours, and then the agent just isn't really willing to supply a lot of information or isn't easy to understand. That can be very frustrating to an individual. So having an advocate, somebody that knows vocabulary, that's got some relationships maybe, or connections to bring to play on their behalf, that is a huge relief, and that itself, just makes a big difference for some of the taxpayers that we see.
David Farhat (19:06):
No, that's pretty awesome because one of the things I want folks to get from this episode and listening to you is that we, as tax professionals, have some information that is truly rare, right? Lots of folks don't understand tax practice, don't understand the code, and there's this real fear of tax itself, and of the IRS. So I'd highly recommend folks listening to this, and I'm saying this to myself as well because I need to do more of it, is to go out there and help folks and be that interpreter and be that [inaudible 00:19:37] for folks that are dealing with things that they don't understand, and that they are in some cases rightfully afraid of.
Nate Carden (19:44):
I'm curious, Katy, as to, as you've been doing this over time, any trends you see changes in the issues that people are facing? Obviously, we have an economy now that's increasingly 1099 driven, more people having multiple jobs, doing different things, having different and varied sources of income. Any trends that you pick up on sort of big picture looking at how your pro bono practice has evolved?
Katy Stone (20:12):
There's definitely a COVID impact. Everybody's got a COVID question. Something invariably fell off the wagon or went sideways during COVID, both for the nonprofit entities that we represent, and also for individuals. So I think the questions around COVID impact are probably going to linger for a while, even as we're returning to more normal life. Yeah, that's an interesting question. I don't know that pro bono entities necessarily are impacted by policy changes as quickly maybe as some of our clients, but you're right, worker classification has certainly come up in some of my pro bono representations, and expect that to be a bigger issue, especially as California sort of figures out what the law is.
Nate Carden (21:04):
Say more about that for those that may not work in this space.
David Farhat (21:07):
Yes, please.
Katy Stone (21:09):
Yeah, we've had some legal reform, and also some litigation between our bigger employers in the state and state, trying to figure out how exactly workers are properly classified between employers, the type of worker that enjoys certain rights that has taxes deducted from their wages, et cetera, versus independent contractors that have a less formal relationship with the person giving the work assignment. It's a very hot topic, as it's got a large economic impact on some companies in California. But there's a lot of open questions right now that we're sort of still nailing down what the legislative reforms in court questions mean.
David Farhat (21:59):
That brings a question from me. I know a lot of us get into corporate or international because we enjoy the complexity, we enjoy solving hard problems, but listening to what you just described, what's the delta in complexity from your day job to the pro bono work? I think some folks might be surprised at the answer there.
Katy Stone (22:20):
Pro bono can be incredibly complex. What we do as tax attorneys is statutory. And once those statutes hit facts that are stranger than fiction, which they always are, invariably, there's really interesting research, really interesting contemplation that has to go into planning out a representation, whether it's our normal billable practice or whether it's pro bono. Pro bono representations might occur under different statutes than we would see in a normal billable context. I'm doing something right now that involves the dependent definition statute. I've never worked in that one before. But yeah, it's incredibly complex once you consider how a statute actually impacts an individual with real life, real expenses, real complex family relationships. It's the same type of mental exercise. We turn to the same types of treatises, the same types of research platforms. We're writing memos, fact memos, and legal memos to get our minds around whatever the question is. But yeah, I'd say it's pretty much equally complex on the pro bono as the billable side.
David Farhat (23:27):
While it's good to know from a selfish perspective, if you're an attorney looking to get training, and I'm doing pro bono and I'm going to be using these muscles, it is a bit disturbing from a policy standpoint, in that you have the same level of complexity for billion dollar businesses who can afford to hire smart folks like you, Nate, and Stefane. But then you have that level of complexity when you're talking about someone who's in deep distress when they're dealing with taxes and things of that nature. And I think that's just another reason folks in our position should really, one, lend a hand to do some of this work, and also kind of try to make an impact on policy, as to do we need to simplify some of these things? Are we having enough of a conversation about how folks are impacted by tax, whether it's the individual on one hand, or it's the large corporation on the other?
Katy Stone (24:21):
I'm so glad you pointed that out. I think that there is also kind of a patriotic satisfaction in doing this work for exactly the reasons you just outlined. If we're going to have a voluntary compliance system and expect sophisticated and unsophisticated taxpayers to all figure out their obligations, it's really helpful if attorneys will voluntarily take on some of these pro bono representations and make sure that's happening at the other end of the spectrum.
Nate Carden (24:49):
From a policy standpoint, if we put you in full charge and you could change something about the tax system based on what you see in your pro bono work, what would be a big improvement?
Katy Stone (25:01):
Boy, there's probably an entire podcast worth of rabbit trails that I could go down. I think some kind of withholding mechanism for small businesses, for independent contractors, for others that are not caught currently by withholding rules, I think that would be very helpful to taxpayers into the state, save a lot of headache. And I think having a taxpayer surprised by their obligation after the tax period has ended doesn't really benefit anyone. So doing something to eliminate the surprise would be a pretty impactful reform.
Nate Carden (25:40):
So that's interesting, right? Because you could imagine people that do the kind of work that we do as our day job saying, "Withholding, that's bad. I want to keep my money as long as I can. I want to pay the government when I have to, but no earlier." But it sounds like what you're saying is that what you see on the pro bono side is no, that actually, a more automated mechanism would be a good thing for people, even if ultimately, it means that the cash flow is coming out a little bit earlier. Is that right?
Katy Stone (26:11):
That's definitely part of it. I think another piece is that a lot of the taxpayers I see have a refundable credit position, like the earned income tax credit, maybe a premium tax credit, something like that. So an adjustment to that credit happening during the period instead of after the period would also save a lot of headache. But it worked hand in hand with the withholding on wages. I think you have to look at a return dynamically with all the pieces, since all the pieces result in a number that end liability or refund amount at the end of the year.
David Farhat (26:43):
No, that's awesome, Katy. But as we come to the end of our time, first, let me say, one, thank you for joining us and walking us through what you just did. And two, thank you for doing the work that you do, because I think you do far more than you're fair share, and the rest of us probably don't do as much as we need to do. But before we wrap up, any kind of final thoughts, things you want to say about pro bono work before we wrap.
Katy Stone (27:09):
As I was reflecting through kind of some of the highlights, pro bono highlights of my career so far, I noticed that a lot of these bigger representations took place in my first year. I think there's especially a benefit to getting on the pro bono wagon as a junior associate. There's just a lot of opportunity, technical, legal opportunity, soft skill development, networking, development. Just a lot of really neat stuff can come out of doing pro bono. As a junior. As I've gotten more senior, I think my pro bono tax practice has gotten a little bit more focused on offer in compromises.
(27:44):
And I'm not signing up for a full-blown tax trial at this point, but I would say, especially for junior attorneys out there, pro bono is something that you should seriously consider. And also just as you're developing skills and perspective as a lawyer, taking on a pro bono matter lets you take ownership of a representation that you otherwise wouldn't. Owning it kind of from soup to nuts, from crafting that scope of work, that's going to go into the engagement letter to managing client expectations throughout the representation and really delivering at the end of the day on whatever promise you made to the client at the beginning, that's a really neat opportunity and something that's fundamental to the legal profession that's hard to come by, I think, in a big law setting, for sure.
David Farhat (28:33):
So what you're saying is Nate and I are off the hook because we're senior, and Stefane needs to kind of get into gear.
Nate Carden (28:38):
To the contrary, to the contrary, I think our most, I'll call us seasoned practitioners out there that are listening to this-
David Farhat (28:48):
I like that.
Nate Carden (28:49):
... there's great opportunities to also contribute on the back end, even if maybe your big law time is done. So hopefully everybody's inspired by what you're doing. Really appreciate you coming on to talk about it.
David Farhat (29:00):
Most definitely.
Katy Stone (29:02):
Yeah, without some senior oversight, you definitely don't want a bunch of first year tax attorneys going out and managing representation. So I'm super grateful for all of the senior people that have overseen my pro bono work over the years, and love that you've given me this opportunity to speak. Thanks for having me.
David Farhat (29:20):
Awesome. Thank you so much for being here, Katy. And again, this has been GILTI Conscience. Thank you for listening.
Voiceover (29:25):
Thank you for joining us for today's episode of GILTI Conscience. If you like what you're hearing, be sure to subscribe in your favorite podcast app so you don't miss any future conversations. Skadden's tax team is recognized globally for providing clients with creative and innovative solutions to their most pressing transactional planning and controversy challenges. Additional information about Grand Park Law Group can be found at grandparklaw.com.
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