Tax attorneys working around Treasury leadership voids

Changes in leadership at the U.S. Treasury haven't changed the fact that the Office of Tax Policy is still missing a go-to expert with a deep background in tax-exempt bonds, leaving lawyers and other stakeholders to adjust and with some worries it could eventually be a problem.

The OTP is responsible for developing and implementing tax policies and programs while  serving as a key partner in interpreting Internal Revenue Service regulations. Attorneys, industry groups, and investors interact with the office by seeking or shaping guidance for the muni industry. The current leadership has some tax attorneys hoping for a more responsive future.  

"I wouldn't say they're understaffed as much as just missing the tax expert that has dedicated his or her career to tax-exempt bonds," said Rich Moore a tax partner at Orrick, Herrington & Sutcliffe. 

Orrick, Herrington & Sutcliffe

Up until 2019 the office included John Cross, a savvy muni tax expert with experience in both the private and public sectors. "Until his retirement, that position has been more or less continuously filled with a muni tax expert dating back to at least the 1990s," said Moore. 

To help fill the gap some tax attorneys are leveraging expertise offered by the Bond Branch of the Chief Counsel's Office. That shop has been run by acting deputy director Vicky Tsilas, who according to sources, has now been promoted to another yet unnamed position. 

Going through the counsel's office generally does the trick for most issues. "The workaround has been adequate since John's retirement," said Moore.  "Some of that is a credit to the Bond Branch carrying the water on requests for urgently needed guidance during the pandemic.  Another part of it is that there has not been a big need for regulatory projects." 

Concerns remain about the lack of depth in experience and an always uncertain future. "I fear that the absence of a muni tax expert in the Office of Tax Policy dedicated solely to tax-exempt bonds will eventually harm the industry," said Moore. 

"Maybe at some point Treasury won't move quickly enough in response to a crisis.  It could also be more subtle.  Regulations should evolve as the world evolves and maybe we will get to a point where the regulatory guidance doesn't match up as well as it could." 

Earlier this month the Treasury revealed it had hired muni veteran Patrick Early as a senior policy analyst to help fill out the Office of State and Local Finance. The OSLF functions as an internal think tank for the agency providing guidance on the muni market, public pensions, and revenue streams. 

Last August, the agency hired Jacqueline Knights away from the state of Oregon's Debt Management Division. Prior to that, Knights was a principal at Williams Capital Group. 

The recent hires have some bond lawyers seeing the Treasury beefing up staff to deal with its still unclear role in the implementation of the Financial Data Transparency Act and the ongoing challenge of dispensing funding flowing from the Bipartisan Infrastructure Legislation.  

 The staffing changes could also be attributed to the upcoming presidential election as Biden's original appointees, many from academia, are flying back to campus jobs. 

It's been reported that Lily Batchelder, currently serving as Assistant Secretary for Tax Policy is being replaced by Aviva Aron-Dine, an economist who's exiting as deputy director at the National Economic Council. Ted Lee is moving from senior adviser, to a newly created position as the deputy assistant secretary for tax policy and delivery.