Dave Kautter returns to RSM as the firm’s federal specialty tax leader, a growth-focused role, after serving the U.S. Department of the Treasury as its assistant secretary for tax policy for three and a half years ending January 2021. He also was acting commissioner of the Internal Revenue Service for 11 months ending October 2018. Before he became the Treasury Department’s top tax policy official, he was partner-in-charge of RSM’s Washington National Tax practice. Now, Kautter returns with rare knowledge and experience, including design and implementation of the Tax Cuts and Jobs Act of 2017 and tax components of pandemic relief legislation.
In the following Q&A, Kautter explains why he chose to return to RSM, what appeals to him about helping clients and growing the firm’s specialty tax services, and how his experience at the Treasury Department and IRS will help him serve the middle market. The discussion has been edited for clarity.
Welcome back, Dave. What compelled you to return to RSM?
The time I spent with RSM prior to joining the Treasury Department was one of the most rewarding periods of my career. I was not looking for a new job when the last administration approached me about taking the assistant secretary of the Treasury for tax policy job, and leaving RSM was a difficult decision. I admire the firm’s leadership, its strategy and its culture. Those are the three key factors in my decision to return.
RSM has one of the best leadership teams in the professional services business. Second, I think the firm has a sound strategy. Its unwavering commitment to the middle market is a source of focus and strength. Finally, probably the most important of these three factors to me is the firm’s culture, which is another way of saying its people. RSM is filled with smart, dedicated professionals who constantly try to do the right thing day in and day out.
Your new role focuses on growing the firm’s specialty tax services. Why does this appeal to you?
I believe that professional services firms exist to serve clients. To serve clients effectively, a firm has to understand their clients’ needs and then provide each client with services that will help them succeed. In other words, to help clients create value.
Most of RSM’s tax clients have the vast majority of their operations here in the United States, and federal taxes are one of the most significant expenses they incur. The opportunity to again work with RSM tax professionals to help clients understand the federal tax rules and implement appropriate tax planning strategies that will help their business succeed is very compelling.
How would you describe your experience at Treasury, especially given your involvement with some transformative, extraordinary events—the TCJA and the pandemic?
It was a privilege for me to serve in the Treasury Department for the past four years. Earlier in my career, I worked on Capitol Hill, and I found public service to be both challenging and rewarding. I would have to describe my time at Treasury the same way—rewarding and fulfilling. It was certainly challenging.
Being involved in the design and passage of the TCJA and then being the lead person in the federal government responsible for its implementation came with plenty of unforeseen twists and turns. Implementation of the TCJA was even more complex with the pandemic and the need to enact more tax legislation, decide which tax filing and payment deadlines to defer, and oversee the payment of millions of economic impact payments by the IRS. It seemed that just when things were getting close to being under control, something else happened.
How do you think you will be able to apply your experiences at Treasury to your new role? What experiences do you expect to be particularly valuable?
The approach I used when I was at Treasury is the same as the approach I think works well in private practice. First, understanding the needs of your client is critical. At Treasury, your client is the American public, which includes both individuals and businesses. Then, it is a matter of developing ideas and policies that will allow your client to succeed.
This is not a finite process. Done right, whether at Treasury or in private practice, it is a process of constant feedback and iteration. I think if our federal specialty tax practices can do this day in and day out, they will be able to build on the successes they already have, and RSM will increase the gap between our competitors and us.
Regarding federal specialty taxes, broadly speaking, what ideas to help clients are you bringing back with you?
While there are plenty of new tax planning ideas and services that came out of the TCJA, there are also a lot of primary tax planning services that have existed for years that will continue to be of great value to our clients. Things like research and development credit studies, accounting methods advice and similar services.
One area where there is clearly going to be a lot of activity in the future—which is not new, but it will be enhanced by all the changes in TCJA—is tax audits, and that will create the need for greater controversy services.
During your three years as RSM’s Washington National Tax leader, you helped develop and implement standardized processes for certain types of tax engagements. How has your thinking about those processes evolved since you left the firm in 2017?
I believe even more strongly in standardized processes today than I did when I left. As acting commissioner of the IRS for almost a year, I got to see a lot of tax planning gone wrong. Many of those controversies could have been avoided had the tax planning process been more disciplined.
The use of standardized processes has three significant benefits:
- One, by providing a standard template for performing an engagement, we enhance quality. Even though every engagement is different, having a standardized road map ensures that all the appropriate tax issues are considered.
- Two, it facilitates review, which again enhances quality.
- Three, it allows engagements to be performed at the appropriate level. Done right, we can delegate work and monitor in a way that enhances experiential learning.
What is your sense of how technology can best serve taxpayers in the current federal tax landscape?
While most people can intuitively see why technology makes sense when it comes to tax compliance, people don’t always see why technology is important for tax planning. The fact of the matter is that virtually all tax-planning engagements today involve data in one way or another. The ability to extract the data required for the engagement and run various alternative scenarios, just to name two things, frees up tax professionals to focus on the more value-added aspects of an engagement without sacrificing quality.
You developed a six-year plan to modernize IRS business operations. How has your thinking about tax technology evolved because of your experiences at Treasury and as acting commissioner of revenue?
My experience at Treasury and the IRS has only enhanced my belief that technology needs to be a critical component of most tax consulting engagements. It reduces the time required to complete a project and enhances quality.
As the current tax legislative cycle unfolds, what elements are you paying closest attention to? What components are you most eager to see resolved?
In terms of overall impact on the economy, the biggest issue right now is probably in the international tax area, whether there will be a global minimum tax. Close behind are three key domestic issues: the corporate tax rate, the top individual tax rate and the capital gains rates. There will likely be changes in all four of these areas before the year is over.