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A Conversation with Francine Lipman: Nevada Tax Commissioner, Pro Bono Advocate

Aug. 15, 2019

Francine J. Lipman, the William S. Boyd Professor of Law at the University of Nevada, Las Vegas, discusses her role as a Nevada state tax commissioner and her recent column in Tax Notes on U.S. Supreme Court Justice Ruth Bader Ginsburg’s pro bono tax work.

 

TRANSCRIPT

David Stewart: Welcome to the podcast. I'm David Stewart, editor in chief of Tax Notes Today International. This week: a discussion with Francine Lipman. Francine Lipman is a professor of law at the University of Nevada, Las Vegas William S. Boyd School of Law. She also has a new regular column in Tax Notes. We talked about her career, the challenges of teaching the tax law, marijuana taxation, and her new column. I'm joined on the phone by Professor Francine Lipman. Francine, welcome to the podcast.

Francine Lipman: Thank you very much, Dave.

David Stewart: You've just started a new column with Tax Notes. Why don't you tell listeners about yourself?

Francine Lipman: Well, I am a law professor at UNLV, which is actually the only law school in the entire state of Nevada. I also serve the state of Nevada as a Nevada tax commissioner. I was appointed by Governor Sandoval in 2016 to serve the state in that role.

David Stewart: Looking at your bio before we got started here, I see that you started out as a CPA but then entered the law. I'm kind of curious about that career arc, so what led you to where you are today?

Francine Lipman: So, I studied accounting, as you indicated, as an undergrad and then went into public accounting as a CPA. And I was a direct hire into the tax department, which was a little bit unusual then, but I really fell in love, surprisingly perhaps as an undergraduate, so I love tax. And started in public accounting and I also love going to school, so I was continuing to go to school, got an MBA, and then I wanted to continue my education and was trying to decide – should I do a PhD or law? – and decided to go with law. So really it was the academic experience that kind of drew me to law, but then I did practice with two big law firms both in California and both doing tax, really doing a lot of M&A work in California during the dotcom boom.

David Stewart: So you were in practice, what led you back to academia?

Francine Lipman: Well, I did enjoy practicing quite a bit. I loved the intellectual challenge, but like most tax professionals, realized tax practice and the practice of law is really a 7/24, and this was before cell phones were as small as they are now. And so, I really wanted to teach and pursue the opportunity to write and to think critically about tax. So, I am doing that and have been for almost two decades.

David Stewart: Now most recently in your teaching career you've had to, I'm sure, adjust to the new reality of the Tax Cut and Jobs Act. Are you facing any challenges teaching the next generation of professionals?

Francine Lipman: Absolutely. Because of the timing of the Tax Cut and Jobs Act, it was really – as we all know – kind of happened in the dead of night at the end of the year and so, we had law students who were basically sitting in classrooms, taking final exams with the old tax law and then within a couple weeks, I had an advanced federal income tax class that was starting, which is really a continuation of individual income tax. And the first day of class, we had to say, ‘Hey, what we just learned, what you just were tested on has completely changed.’ And casebook authors didn't even have a chance to update textbook. Our code wasn't even really updated because it happened so quickly really in the dead of night and so it was really just scrambling. And in fact, I basically assigned the law, which as you know, is hundreds and hundreds of pages. So, it's been really challenging to think about the Tax Cut and Jobs Act for law students, who woke up and the world had changed. What's fascinating, too, is everybody knows so much of it sunsets and so, it's really hard to think about how do you teach it, because you have to teach the old law as well as the new law, and so talk about complexity, it's really overwhelming.

David Stewart: I'm sort of amused to listen to the academic side of this, being here on the journalism side. We spent the same period of time pouring through these things, trying to figure out what they were and I hadn't actually thought about professors having taught the old law right up until the last moment.

Francine Lipman: Well, and law students when they took their winter break really were not thinking about what Congress is doing and then they come back and you have to say, ‘OK well, everything you've just really learned, we need to think about it differently,’ especially in areas like international tax, which really was scrambled.

David Stewart: I guess how do you teach the international tax portions when everyone was still trying to figure it out as the semester is going on?

Francine Lipman: Well, and as none of the casebooks have been updated, so you had to go to the original source and you're trying to teach the original source as you're really trying to figure it out. So, it's messy. It's just not pretty, but that's consistent with what tax lawyers do, right? Tax is dynamic, and so in hindsight, it was a good exercise for students. But think about trying to teach code section 199A, which were all trying to figure out how it worked and then having law students look at you in just complete confusion and wanting resources. ‘Do you have any resources that will help me better understand it?’ Well, let's see.

David Stewart: Alright, let's turn to another thing you mentioned earlier on about – you are one of the eight Nevada tax commissioners. Can you tell me a little bit about that role?

Francine Lipman: Certainly. So, Nevada is a very interesting state. It's a small state population wise, so there's only about 3 million people even though geographically it's a very large state. When you want to think about what Nevada looks like, its size, California basically spoons Nevada. And so, Nevada is as high as California is, and then its tip is kind of held, spooned, by California so it's a huge state, but not a lot of people. That's why we have one law school. I am basically the tax law professor in Nevada. But back to serving as Nevada tax commissioner, we have eight Nevada tax commissioners that are citizens and we each statutorily have to represent different demographics. So, for instance, there's someone who's in mining, there's someone who is in farming, and we actually don't legislate or administer the gaming taxes, which as you might imagine are a significant amount of our revenue. That's a whole different commission. But we regulate sales and use tax, which is a huge revenue source. We don't have an income tax, but we do have a gross receipts tax on businesses. We have entertainment taxes. We have marijuana taxes that we regulate. And we are, as I said, just citizens, so you don't have to be a lawyer. You don't actually have to have tax expertise, but you're appointed by the governor based upon some expertise that's relevant. And we come together about once a month and we actually administer the Department of Taxation, who are full-time employees, and we come together and we rule on regulations. So, we completely set up the whole marijuana regulation regime. The prior governor wanted the tax department to regulate marijuana, including all the health and safety issues, but if you think about it, that's a big responsibility because the federal government is not regulating marijuana at all. And in Nevada, you can't smoke marijuana any place except in your home. A lot of tourists don't have homes there, so as a result what type of marijuana do you think people buy? Edibles, and so we regulate edibles as well. So, it's a very interesting opportunity to study the tax system on this side. So, it's a little bit like a judge, but not exactly – more we're an administrative regulatory body.

David Stewart: Now while you were working on these rules for marijuana, were there other states you could look to for examples of issues you needed to address?

Francine Lipman: Absolutely. This was actually voted on by the population, by the residents at large, so there was a long period of time that we could think about it. And the executive director of the tax department spent a lot of time in Colorado and Oregon and they really went to school on those states' pros and cons. And so, we avoided a lot of missteps that other states had made because we were able to see what worked and what didn't work and we have had a really successful marijuana regulatory program. The prior governor really wanted it to be the gold standard of regulating marijuana, somewhat on par with how Nevada is looked at for regulating gaming. What's interesting is it took an enormous amount of time and it still does because there's such a check and balance on the marijuana. We track it from seed to sale. And of course, as you probably know, it's 100 percent cash business and so that creates all sorts of other issues. And indeed, the Department of Taxation had to buy some really sophisticated money counting machines, cash counting machines, because when someone walks in with $100,000 in cash to pay their taxes, you don't want to have a person counting it and so had to invest in that and a lot more people to do auditing. So, it's been very interesting. The most interesting thing I think [is] even the IRS has to segregate the cash because it reeks so much of marijuana that they have special Febreze rooms where they spray the money.

David Stewart: I would not have thought about that. Let's turn to your new column that you'll be writing for Tax Notes. It's a quarterly column I understand. What sort of issues will you be focusing on?

Francine Lipman: So, I'm going to focus on pro bono tax and it might not be something that folks think about when they think about a tax practice. But since the mid ‘90s, more and more of our social welfare programs are run through the income tax system. Why is that? Because we have had and now it's really kind of set in stone, a welfare to work program, so there really is not much out there for individuals in true welfare. It's almost all work fare. So how do you measure work? Well, typically we pretty much measure work every year on your income tax return. And so Congress has used the income tax system to deliver benefits for working lower- and middle-income Americans and so tax practice for an enormous part of the population is about getting a wage subsidy. And the problem with that is our tax system is so complicated that these individuals aren't really able to navigate the audit and the disallowances themselves and about almost 40 percent of all audits are now on the earned income tax credit, which is the refundable credit that lifts millions and millions of kids and their parents out of poverty every year. And in our tax system, if you don't respond, you lose. And so these people need representation and the good news is across the country we have a wonderful network of pro-bono tax lawyers like myself and at every calendar call, every tax court calendar call is covered because so many individuals are pro-se. They're representing themselves. Can you imagine that? Against the IRS. Think about how intimidating that is. In a federal court room; you've probably never even been in a courtroom. It's hard for these folks to even get off work and so, it's fascinating that welfare law is now really tax law. And so, I want to highlight this, so that we can continue this robust pipeline and tell the pro bono tax stories, which are just heartwarming and give every tax lawyer an opportunity to participate.

David Stewart: Well speaking of the stories, your first column was published August 12. Can you tell me about your first column here?

Francine Lipman: Yeah, so I'm excited about the first column and as you say it's already out there, so I want everyone to download it and read it. And it is called “Pro Bono Matters in On the Basis of Sex,” and that is referring to the wonderful tax movie On the Basis of Sex, that features Justice Ruth Bader Ginsburg and her husband Marty Ginsburg. So, as a tax lawyer looking at this, it's a lovely story because, first of all, you learn a lot more about Justice Ginsburg who, as we all know, is already notorious, but you see a side of her that I am not sure that we really have seen before. First of all, you see this magical love story and as a tax lawyer, we love when somebody loves a tax lawyer. So, Marty Ginsburg has been a brilliant, renowned tax lawyer, very well known in the bar. He has since passed away, but he was also known as just a lovely, fun, engaging person. So, tax lawyers love to see themselves represented like that rather than the guy on L.A. Law, Stewart, who is not nearly as engaging. So, here you have this lovely love story between Justice Ginsburg and her husband Marty and then, more importantly, they do this amazing tax pro bono work that sets the stage for Justice Ginsberg's career in gender equality. And it's the case of Charles Moritz, who is a bachelor, never got married, hard-working, lived in Denver, Colorado, really kind of a classic bachelor who's working hard and just trying to get by. But his mother, who's almost 90, is not well and she needs care. And she of course doesn't want to go to a nursing home and so she moves in with him. Well, in order to live his life, he still has to work and so he gets a caregiver and he pays for it, and then he takes on his tax return the caregiver deduction. But the caregiver deduction was disallowed because he was a man. It was only allowed for women and for widowers or someone whose wife was institutionalized so it was not allowed for a man who had never married. So wonderful Marty Ginsberg saw this and he says, ‘Ruth, you have to read this case.’ And she said, ‘I don't read tax cases.’ And he said, ‘This one you'll want to read.’ And that set the stage for gender equality because they appealed that case and they won in the appellate court. And then the opposing counsel tried to assert the case to the Supreme Court and in that cert request, they listed all the laws that discriminated on the basis of sex. And the Supreme Court did not take the case, but Ruth Bader Ginsburg took that list, and one by one she started attacking all those laws. So, what I love about this movie is that it celebrates tax lawyers, Marty Ginsburg specifically, and it also shows the juxtaposition of how a pro bono case can literally change the landscape of the world as well as the actor who plays Charles Moritz does a wonderful job of demonstrating how that tax law really hurt him. He felt as if he was let down by the federal government and not allowed a deduction that made so much sense for him to take, but he couldn't take it because it discriminated. And once Justice Ginsberg flies to his house in Denver and tries to convince him to appeal the case. At first, of course, he doesn't want to, but then she convinces him. And then when they're starting to think at some point of not proceeding, he says, ‘No, we have to do this.’ Like so many of our pro bono clients, he becomes personally, emotionally engaged. And when they prevail, it changes the world, but it also changes his world and that's what I want people to get out of the movie.

David Stewart: Alright, I haven't seen the movie yet, but I definitely have to. But I do have your column here, so I've got the next best thing.

Francine Lipman: See the movie. It’s not in theaters. You can get it online, I'm sure. It's really a wonderful movie.

David Stewart: I hadn't really thought about it as a movie about tax lawyers. I hadn't been aware of it until your column, so I will definitely take your advice and check this out.

 Francine Lipman: Wonderful.

David Stewart: And I'm looking forward as well to your next column, which I'm sure you're already planning out, but until then I want to thank you for being here.

Francine Lipman: Thank you very much

David Stewart: And now, coming attractions. Each week, we preview commentary that will be appearing in the Tax Notes magazines. I'm joined by Content and Acquisitions Manager Faye McCray. Faye, what will you have for us?

Faye McCray: Thanks, Dave. In Tax Notes Federal, Kenneth Orbach examines the tax ramifications of capital gain redemptions during a post-termination transition period of an S corporation. Steven Walker and Adria Price discuss practitioner recommendations regarding changes to the IRS's passport revocation policies in the case of unpaid taxes. In Tax Notes State, Mitchell Newmark and Eugene Gibilaro discuss the issue regarding New Jersey's allocation and taxation of global intangible low taxed income. Edward Bernert and Kelvin Lawrence argue that a recent Ohio appeals court decision improperly upheld commercial activity tax on transactions that took place entirely in Georgia, though the material were ultimately shipped to retailers nationwide including Ohio. In Tax Notes International, David Rosenbloom and Fadi Shaheen examine how corporate tax changes implemented by the TCJA interact with U.S. tax treaties. Wei Zhuang discusses the implementation of the BEPS project in China and analyses its impact on tax administration and tax compliance. And on the opinions page, Roxanne Bland discusses whether all churches should be entitled to tax exemptions. And Carrie Brandon Elliot asks whether 2008's recession undermined the real business cycle theory.

David Stewart: You can read all that and a lot more in the August 19th editions of Tax Notes Federal, State, and International. That's it for this week. You can follow me online at @TaxStew, that's S-T-E-W. If you have any comments, questions, or suggestions for a future episode, you can email us at podcast@taxanalysts.org. And as always, if you like what we're doing here, please leave a rating or a review wherever you download this podcast. We'll be back next week with another episode of Tax Notes Talk.

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