Menu
Tax Notes logo

In Memoriam: Michael Danilack 

Posted on Sep. 5, 2019

Colleagues are mourning and sharing their memories of Michael Danilack, former deputy commissioner of the IRS Large Business and International division, who recently died at age 59.

Danilack, who was LB&I deputy commissioner (international) and U.S. competent authority from January 2010 to July 2014, died August 12, according to an obituary posted by the Norman Dean Home for Services Inc. in Denville, New Jersey.

Former colleagues described him as a gifted intellect and visionary who worked tirelessly to help the IRS enforce international tax compliance in more effective and strategic ways.

Danilack arrived at the IRS when tax authorities around the world were ramping up efforts to combat offshore abuse by financial institutions and other entities. He played key roles in several major operational changes at the IRS, including the October 2010 reorganization of the Large and Midsize Business division into LB&I, which centralized international functions, and the February 2012 merger of the advance pricing agreement and competent authority programs to gain new efficiencies.

Danilack also helped usher in the transfer pricing practice, overseen by the newly created position of transfer pricing director.

“Mike was the moving force in the efforts to remake the international program — he was involved in everything from [the Foreign Account Tax Compliance Act] to the OECD to training,” said Samuel Maruca, the first transfer pricing director.

Maruca said that Danilack was one of the best organizational people he has ever worked with.

“He had this unique combination of vision and ambition for the organization and a very practical, ‘get it done’ attitude on the implementation side,” said Maruca, now with Covington & Burling LLP

Spreading the Knowledge

Danilack understood that the IRS is a knowledge-based organization and that “unless there's a breadth of knowledge of international tax up and down the ranks, it's unlikely to be a successful enforcement organization,” Maruca said.

Maruca said that Danilack was innovative in the ways he thought about training.

“He reorganized the whole way of thinking about international tax inventory in the field,” Maruca explained. “He put together this thing that we fondly referred to as the matrix, which was just a very insightful, simple, manageable way to think about how the various components of international tax fit together — inbound, outbound, income shifting, sourcing, foreign tax credits. It was all put into an integrated matrix that was very elegant and made all the sense in the world.”

According to Maruca, the matrix “was used to spin out a taxonomy for managing the inventory that was sitting in LB&I international. And nobody had ever done that before. Mike essentially said, ‘If we're going to influence the kind of cases we’re bringing and how were bringing them, we’ve got to know what we have in the hopper.’”

LB&I Commissioner Douglas W. O’Donnell, in an internal message to employees announcing Danilack’s death, said he realized as soon as he met Danilack in January 2010 “how special a leader he would be.”

“His tax intellect and visionary capability were immediately apparent,” O’Donnell said in the note, which was provided to Tax Notes. “It is not possible to describe the early days when Mike trekked the country to meet with employees in an effort to understand his leadership challenge other than to say he was a man on a mission.” 

O’Donnell said Danilack’s energy was infectious and could be intimidating. “Mike quickly determined that the organization and skill base of the agency did not match the challenges that were emerging,” he said. 

Danilack saw every interaction as an opportunity to learn and teach, O’Donnell said. 

“Mike’s ideas influenced LB&I and the IRS in terms of knowledge management, e.g., capture what we each know and share it with those who have not had the experience,” O’Donnell added. 

Swiss Bank Program

Kathy Keneally of Jones Day worked closely with Danilack on offshore tax initiatives when she was assistant attorney general at the Justice Department Tax Division.

Because Danilack also was U.S. competent authority, the Justice Department worked with him to get information from treaty partners.

“Mike was engaged with us in how to make effective treaty requests and how to get information back,” Keneally explained. 

She added that Danilack also played an integral role in developing the proposal that became the Justice Department’s Swiss bank program. “The very concept of that program was the result of a meeting between me and Mike, and the complete structure of it was the result of Mike’s input,” Keneally said.

Keneally remembers showing him a first draft of what the government planned to present to the Swiss government.

“I ran it by Mike, and he pointed out that we were trying to define terms that had already been negotiated with the Swiss in the FATCA deal,” Keneally said. “So the reason why, when you look at the Swiss bank program, it tracks the U.S.-Swiss FATCA deal is because that was Mike’s idea. Mike said, ‘Stop trying to reinvent the wheel. Just make your program fit with what’s already been negotiated.’”

Danilack was also a key source of guidance when the Justice Department developed what became the offshore voluntary disclosure initiative streamlined program, Keneally said. “I don’t think Mike’s role in that has ever fully come out,” she added. “That’s something else we had a significant number of meetings on, and he was the driving force behind getting that implemented at the IRS.” 

Competent Authority Process

Barbara Mantegani, who worked in the competent authority program during Danilack’s tenure, said he transformed the treaty process and helped make LB&I more effective as a whole.

“He came to the role of competent authority willing and eager to learn from the staff how things could be better, and he wasn’t afraid to take bold action,” said Mantegani.

Most importantly, Danilack “had his people’s back,” Mantegani said. She gave an example of a case involving a foreign-initiated adjustment that she believed was unprincipled and should have been withdrawn.

“I had worked the case very hard for months, making sure that I was solid on my facts and the law,” Mantegani said. “It was a very big case, and one that in some other time might have been compromised by the other countries with the initiating country withdrawing most, but not all, of the adjustment.”

Mantegani said Danilack asked her if accepting some small adjustment was the right answer. “I told him no, it’s not the right answer, and so we refused to agree,” she said. “Mike had to meet in person with the foreign competent authority. It was a huge mess — the company had to litigate the case, and it definitely had a temporary impact on the overall relationship between the countries.”

Nevertheless, Mantegani said that Danilack read everything she had put together and trusted she had the right answer. “He backed me up, even though it would have been a lot easier to just give a small compromise and be done with it.”

“That’s who Mike was, and it was an honor to have worked with him,” Mantegani said.

Copy RID