David D. Stewart: Welcome to the podcast. I'm David Stewart, editor in chief of Tax Notes Today International. This week: trivial pursuits. As we're heading into a long weekend here in the U.S., we figured it was a good time to have a little bit of fun. A couple of our podcast regulars joined me as we invited Mike Kowis, the author of a recent book of tax trivia, to test our knowledge. Stick around after the quiz to learn more about Mike and how this book came to be. Enjoy.
Joining me now is Mike Kowis, senior tax counsel at Entergy Services, and he's the author of the book, American Tax Trivia: The Ultimate Quiz on US Taxation. Mike, welcome to the podcast.
Mike Kowis: Thanks for having me, Dave.
David D. Stewart: And to join in the fun and help me answer Mike's questions, I'm joined by Tax Notes contributing editor Robert Goulder and chief correspondent Stephanie Soong Johnston. Bob, Stephanie, you ready to go?
Stephanie Soong Johnston: We are ready. Are you ready?
David D. Stewart: Oh, I hope so.
Robert Goulder: I was born ready.
David D. Stewart: Well, all right Mike, why don't you start us off?
Mike Kowis: Well, I'm glad to be here today. And so we're going to talk about American tax trivia. I've got four different chapters from the book that I want to try to quiz you guys and gals on and see how much you know about American taxation.
So, let's start with the fun stuff. Let's do some famous quotes. I always like quotes. I try to pick some good ones from the book. So, we'll start out with what I think is an easy one.
What U.S. federal judge made the following statements as part of his or her court decision? "Anyone may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there's not even a patriotic duty to increase one's taxes." Is it A) Antonin Scalia, B) Richard Posner, C) Ruth Bader Ginsburg, D) Thurgood Marshall, or E) Learned Hand?
David D. Stewart: All right. Now, there was something I learned in law school. And that was, whenever you find a pithy quote, err on the side of Learned Hand. That said, anybody else have an idea?
Robert Goulder: Can I do a write in vote for Oliver Wendell Holmes. No? OK. Then I'll go. I'll go for Learned Hand too.
Stephanie Soong Johnston: I'm going to say the answer is always C, so.
Robert Goulder: It's an old quote.
Stephanie Soong Johnston: Is it an old quote? OK. Then I'm going to go with you guys.
Robert Goulder: I think it goes back decades and I think it's like a 100 year old quote. So, you'd have to pick a judge that's a hundred years old.
David D. Stewart: Yeah, honestly, that was just my rule of thumb in law school. There's a great quote, it's Learned Hand. It's always Learned Hand. So, let's go with Learned Hand. How's that?
Mike Kowis: E, final answer, right? Learned Hand. And that is correct. Very good.
David D. Stewart: All right.
Mike Kowis: I thought that would be an easy one because it's been around a long time, like Bob said, and I actually quoted that in my application when I applied for the LLM program at Georgetown. I guess it worked because they took me or they were desperate either way.
David D. Stewart: Yeah, I mean it sounded familiar and it just felt like that. It feels like one— that felt right.
Mike Kowis: Yeah. I liked what you said about if it's a pithy quote, it's probably him. So, it's kind of like Mark Twain, right? You just, it's a good guess.
So, let's go with another one here. What rap artist was quoted with the following line: "Only two things that scare me are God and the IRS." Is it A) Dr. Dre, B) Snoop Dogg, C) Ice Cube, D) 50 Cent, or E) Grandmaster B?
Stephanie Soong Johnston: Oh man. I should know this. I'm going to say 50 Cent.
David D. Stewart: Yeah, I'm lost here. Because I heard a rap artist and tax problems, I was thinking DMX, but that's not him.
Stephanie Soong Johnston: There are a lot of rap stars with tax problems, to be fair.
David D. Stewart: All right, Bob, do you have any idea?
Robert Goulder: I want to write in vote for Eminem, my Detroit homie. Come on. No, I have no idea.
Stephanie Soong Johnston: Either 50 Cent or Snoop Dogg.
Robert Goulder: It doesn't seem like something Snoop Dogg would say out loud. He might think it, but would he say it? So, I don't know. If I had to choose, I'd say 50 Cent.
David D. Stewart: All right. Do you want to just, want to call it 50 Cent?
Stephanie Soong Johnston: I would say go with my original choice then, 50 Cent.
David D. Stewart: All right, let's do that.
Mike Kowis: All right, so 50 Cent is your final answer?
Stephanie Soong Johnston: Yes.
Mike Kowis: That is incorrect.
David D. Stewart: Oh.
Mike Kowis: It's actually A) Dr. Dre.
Stephanie Soong Johnston: Oh, OK.
Mike Kowis: So, how about an international tax quote? You need one of those for Dave. I think Dave likes the international stuff.
David D. Stewart: You got three international tax people on here.
Mike Kowis: Oh, OK, there you go. All of you then, that's perfect.
Stephanie Soong Johnston: No pressure or anything.
Mike Kowis: So, you all ought to know this quote. It should be a no brainer. OK.
So the question is, what TV talk show host from the 2000s era said the following: "Tax day is the day that ordinary Americans send their money to Washington D.C. and wealthy Americans send their money to the Cayman Islands." Was it A) Jimmy Kimmel, B) James Corden, C) Jimmy Fallon, D) Bill Maher, or E) Conan O'Brien?
Stephanie Soong Johnston: I'm going to say Bill Maher.
David D. Stewart: See, I'm thinking Jimmy Kimmel only because of the joke structure.
Stephanie Soong Johnston: Wow, you're really overthinking this.
Robert Goulder: No, the phrasing, the phrasing of the syntax, the verbs and nouns, the use of the gerund. All that. Yes, it feels like a Jimmy Kimmel statement.
Stephanie Soong Johnston: I'm going to go with Bill Maher, just to be contrarian.
David D. Stewart: All right. Well.
Robert Goulder: I think you are outvoted.
David D. Stewart: Two of us have Jimmy Kimmel and one has Bill Maher. What do we got here?
Mike Kowis: Final answer is A) Jimmy Kimmel.
Stephanie Soong Johnston: Oh, OK, well. See, I told you I was gonna be terrible at this.
Robert Goulder: Editors know.
David D. Stewart: See, I don't actually know things. I just have these rules of thumb. So, when we're talking about pithy quotes, Learned Hand. And when we got the joke structure, I got Jimmy Kimmel there.
Mike Kowis: All right. So, if you want, we can move on to history. Is history good now?
Robert Goulder: Please history!
Mike Kowis: All right, here we go. So, this question is which U.S. president created the IRS? Is it A) Theodore Roosevelt, B) George Washington, C) Ulysses S. Grant, D) Herbert Hoover, or E) Abraham Lincoln?
Robert Goulder: When was the first income tax? If we can figure out when the first income tax is, presumably you could figure out when the IRS, or its forbearer in interest, was created. Because presumably you'd need some kind of a executive branch administrative agency to enforce the tax.
And if I listened enough to Joe Thorndike, who knows everything about history, he would say that we briefly had a type of an income tax during the Civil War. I'm not sure it was ever collected. I don't think it raised much money. I'm not sure they actually called it the IRS, but there was a type of income tax around during the Civil War.
But if you're looking for an agency that was actually called the IRS, that would be much later. Something like maybe the Hoover era.
Mike Kowis: And just to clarify, it doesn't have to be called IRS. It's just the agency that acts as IRS, whatever the name was.
Robert Goulder: OK. Well then I've given my pitch for Abraham Lincoln.
David D. Stewart: I think Lincoln is a good bet here.
Stephanie Soong Johnston: OK. I'll go with you guys.
Robert Goulder: Now, Joe Thorndike would also say that the income tax, as it existed then, was unconstitutional. So ,you didn't have a constitutional income tax until like 1913 or so. Right. But I digress.
Mike Kowis: OK. And you are all correct, it is Abraham Lincoln. So, good job on that one.
Stephanie Soong Johnston: That would really be embarrassing if we did not know that though, right?
Mike Kowis: He has such an awesome reputation though. All the wonderful things he did for the country, you wouldn't think that he would create this, what became a monstrosity and sucks all the tax dollars from all Americans. Everyone loves to hate the IRS, so even though they obviously play an important role in government. You just don't equate the two. Abe Lincoln, the IRS, it just kind of, it throws people off. Or at least I would think so.
All right, next one, and this is kind of related to one of the topics for what we just discussed, actually. So, here's—this is a true or false. The IRS was originally named the Board of Stamps and Taxes. True or false?
Robert Goulder: You know, it's got the word "board" in it, and way back then everything the federal government did they called the board of fill in the blank. So, I think I'm going to go with true, just because it has the word "board" in it. Can I convince you guys?
Stephanie Soong Johnston: True.
David D. Stewart: I'm having trouble coming around to believing that this was ever a good name chosen for something. But then again, it is old timey.
Robert Goulder: Well, it's got stamps in it. How can you argue with stamps? And that's like the proof that you paid. You don't have like an invoice or a receipt or something from Turbo Tax. How do you know you paid your tax? They gave you a little stamp. What you did with it? I don't know, but.
David D. Stewart: All right, I'll come. I'll come.
Robert Goulder: Come on.
David D. Stewart: I'll come with you. All right.
Stephanie Soong Johnston: So true?
Robert Goulder: All right. The panel says true.
Mike Kowis: It's actually false.
Stephanie Soong Johnston: Ah.
David D. Stewart: Ah. Bob, you led me astray.
Mike Kowis: It was actually called the Bureau of Internal Revenue.
David D. Stewart: See, they landed on something pretty close to the right name at the beginning.
Mike Kowis: Next would be, oh, I like this question. It would be interesting to see if y'all know this one, because I did not.
Here's the question. What invention was created by an IRS service center employee in 1961 and is still used today to sort millions of paper tax return forms? Is it A) the Spaghetti Sorter, B) Octopus Organizer, C) Freeman Filer, D) Tingle Table, or E) Arthur Anderson Shredder?
Robert Goulder: The octopus one, because we all know that octopuses are really smart.
Stephanie Soong Johnston: I like octopuses, so I'm going to go with octopus.
Robert Goulder: I don't even know what came after the word octopus. I'm going with the one that mentions octopus in the title.
David D. Stewart: Yeah. If I've got nothing better to hang my hat on, it's a great name.
Robert Goulder: Eight legs. How can you go wrong?
Mike Kowis: The answer is D) Tingle Table.
David D. Stewart: Oh, that's terrible.
Stephanie Soong Johnston: OK, that sounds like a disease.
Mike Kowis: Yeah, it was actually created by a gentleman named James Tingle. He invented the sorter while he was employed at an IRS service center in Georgia. And he built a prototype in his backyard and he was later, it was first tested in a service center in Georgia. And the invention greatly reduces the time it takes for the mail opener to remove the contents and stick the envelopes here and the contents there and file away for action.
So, if you ever Google Tingle Table, you'll see what looks like a sort of a semicircle around the— sitting on the desk. And it's like an inbox and an outbox, where you put mail. And they're stacked up, one on top of the other. And there's like six of them on a semicircle. So, there's like 12 different boxes. And it just helps people sort the mail or the tax returns when they get them. And that's all it does. But it's kind of ingenious contraption. I assume it's used less and less these days because most people are doing of course, electronic filing. But it's still being used today is what I found out.
All right. So, I think that'll do for history. Let's move on to politics. All right. Good stuff here. This is one I did not know. So, it'll be interesting to see how you folks do.
Stephanie Soong Johnston: I mean we utterly failed at Tingle Table, so I don't know.
Mike Kowis: All right, so this is a true or false question. In 2021, the president of the United States is not entitled to any special income tax breaks on his presidential salary and compensation. True or false?
Stephanie Soong Johnston: Hmm, true?
David D. Stewart: Feels like it should be true.
Robert Goulder: I don't know. The United States of America is the land of tax breaks. There's going to be a tax break for everything, like breathing and oxygenating your blood. I can't believe there isn't some special tax break, some loophole somewhere that doesn't enter solely to the benefit of the president of United States.
David D. Stewart: I don't recall on my 1040 the line, the box to check if you're president so you get the extra break.
Robert Goulder: Maybe that's the tax break. You get your own 1040. I don't know. I'm thinking there's something there.
David D. Stewart: I'm going with no. I gotta say, I don't think so.
Robert Goulder: Well, I guess I'm out voted.
Mike Kowis: So, it sounds like you're a mixed bag. Some of you say true and some say false.
David D. Stewart: Yeah.
Robert Goulder: So, I'll go along with the others, but just note the reservation that I'm skeptical here.
Mike Kowis: So, the actual answer is false. So, there's two special tax perks that the president gets. One of them is non-taxable annual travel account of $100,000 a year. And the other is a non-taxable, annual entertainment account for $19,000 a year, which I assume they use for Disney+ and Netflix subscriptions and wholesome things like that. So, there you go. They get a couple of nice perks in addition to the nice salary, if you make it to the White House.
Robert Goulder: What was the travel budget? $100,000?
Mike Kowis: Yes.
Robert Goulder: Think of all the tax conferences you could go to. I mean, that might cover IFA right there. Who knows.
Stephanie Soong Johnston: All right, Bob you win this one. We should have gone with Bob.
Mike Kowis: All right, so next one. Oh, this is an interesting one. OK.
So, which state below declared war on Germany three months before the United States officially entered into World War II in an effort to give its military residents a monthly bonus without the need to pass a new tax to pay for it? Is it A) Vermont, B) Texas, C) Florida, D) California, or E) New York?
David D. Stewart: All right. So, a state declared war?
Mike Kowis: Yes.
Stephanie Soong Johnston: I feel like Texas because you don't mess with Texas.
Robert Goulder: But if Texas was going to declare war, wouldn't it declared war against Oklahoma? I mean, Germany is a long way away. I'm thinking maybe New York state.
David D. Stewart: I'm kind of in the New York state frame of mind on this because it feels New York. I mean, I know the sort of independent streak of Texas declaring war and deciding to rebel. Yeah. I'm kind of— I'm torn.
Stephanie Soong Johnston: I guess New York is closer to Germany than Texas is.
David D. Stewart: Honestly, I would go, I could go either for New York or Texas.
Robert Goulder: Were there more tax attorneys living in New York state or in Texas?
Stephanie Soong Johnston: Probably New York state.
Robert Goulder: Yeah, that's what I'm thinking.
David D. Stewart: It feels like given relative tax rates, the benefit would be better out of New York.
Stephanie Soong Johnston: So, New York.
David D. Stewart: All right. Let's try New York.
Mike Kowis: The actual answer is A) Vermont.
Stephanie Soong Johnston: What!
David D. Stewart: Wow. That's bold.
Mike Kowis: So, in 1941, Vermont wanted to give its military residents a $10 per month bonus. And in order to do so during peace time, they would have to raise, they would have to pay for it with the new state tax. And they didn't want to do that. So, they had to expand their definition of armed conflict to include President Roosevelt's order for the Navy to shoot first if they encounter a German war ship.
Stephanie Soong Johnston: Huh.
Mike Kowis: So, that's how they got around it. And they were able to pass it without a new tax.
Stephanie Soong Johnston: Interesting.
Mike Kowis: All right. So, one more for politics. This is a fun one actually. I could have put this in other chapters as well. True or false question for y'all.
The cartoon figure wearing a black top hat and tails with white mustache on the famous Monopoly board game is modeled after the U.S. Secretary Treasury from the 1920s era. Is that a true or false statement?
Stephanie Soong Johnston: True.
Robert Goulder: True.
David D. Stewart: Yeah. We'll, we'll go with that.
Mike Kowis: Ah, and you would be correct. It was Andrew Mellon—
Stephanie Soong Johnston: Yay!
Mike Kowis: Andrew Mellon, who was a U.S. Secretary of Treasury from 1921 to 1932. He was also, before he became U.S. Treasurer, he was like an old tycoon. He was in banking and other industries, aluminum. So, they might've chosen his character because of that more so than his position as U.S. Secretary of Treasury. But I just thought that was interesting.
All right. So, now we've got odds and ends, which is kind of a mixed bag of different fun facts, if you will. This has an international tax flavor to this question. All right, so the question is true or false. The United States is the only country in the world that taxes its non-resident citizens on worldwide income. True or false?
Robert Goulder: Well, we're not the only one because Eritrea does it as well.
Stephanie Soong Johnston: Yes.
Robert Goulder: You're talking about residence-based taxation versus citizenship-based taxation. And last time I researched this, there were two countries that had the citizenship-based taxation, the U.S. and Eritrea. So, for that reason, Mike, I'm going to say false.
Stephanie Soong Johnston: False.
David D. Stewart: Yeah.
Mike Kowis: That's exactly right. Wow, you hit the nail on the head with that one, Bob. Good job.
David D. Stewart: You came for one in our wheelhouse there.
Stephanie Soong Johnston: Yeah, I was nodding along. I was like, oh yeah, I know this one.
Mike Kowis: There you go. Yeah. All right. What about this? We'll see if you can do this one. It's not international tax, but it's interesting all the same. It's another true or false.
In 2021, the IRS does not yet have a mobile phone app. True or false?
David D. Stewart: True.
Stephanie Soong Johnston: I mean true?
David D. Stewart: I don't remember one.
Stephanie Soong Johnston: I'm going to go with true, I guess.
David D. Stewart: I mean, there is always that discussion about how old the computer systems are. So, I'm just thinking that an app wouldn't be the primary thing that they would do.
Robert Goulder: If the IRS had an app, wouldn't somebody have hacked it? Wouldn't there be ransomware out there? So, yeah, i think they don't have one.
David D. Stewart: I would be suspicious if I found an IRS app in the iTunes store.
Mike Kowis: Stephanie, what say you?
Stephanie Soong Johnston: I mean, I don't think there's an app.
Mike Kowis: So, it sounds like you're all in agreement. There's no app, so it's false or it's true. I'm sorry.
The correct answer is false. The IRS launched IRS2Go in 2011. And they can use it to keep track of their refund status and that sort of thing. I had never heard of it until I researched this book.
Stephanie Soong Johnston: Oh, interesting. So, to be fair, our minds are all international tax anyway, so.
Mike Kowis: Good excuse, good excuse.
David D. Stewart: Yeah, we are going to hide behind that one, yeah.
Stephanie Soong Johnston: Yeah.
Robert Goulder: I knew they had a web portal called called IRS2Go or Documents2Go. But I didn't know it was as an app.
David D. Stewart: I would make the argument that that is a public relations issue of getting the marketing out there.
Robert Goulder: Yeah.
Mike Kowis: Very good. So, the next one is also a true or false question. One of the astronauts on the Apollo 13 mission forgot to file his federal income tax return before he was launched into space on April 11, 1970. True or false?
Stephanie Soong Johnston: That sounds so crazy I think it's true.
David D. Stewart: It was in the movie.
Stephanie Soong Johnston: Which movie?
David D. Stewart: Apollo 13.
Robert Goulder: That's what he meant. When he said, "Houston, we have a problem." The original quote was, "Houston, we have a tax problem."
David D. Stewart: So, assuming that Ron Howard did not lead me astray, I'm going to go with this is true. Wasn't it the Kevin Bacon character? I think so. So, if I'm wrong, I'm blaming Ron Howard and Kevin Bacon.
Mike Kowis: So, it sounds like you all say it's true, correct?
Stephanie Soong Johnston: True.
Mike Kowis: The right answer is true. Very good. It was in the movie. Astronaut Jack Swigert asked NASA mission control, "Uh oh; have you guys completed your tax return?" Then commander Jim Lovell followed up with, "How do I apply for an extension?" And then mission control burst into laughter. And then Swigert replied, "It ain't too funny; things kind of happened real fast down there, and I do need an extension." Again, Jack was met with raucous laughter. Luckily Jack's considered a U.S. citizen abroad, which qualified him for an extension to file his taxes late but penalty-free.
Stephanie Soong Johnston: I like that. A citizen abroad.
Mike Kowis: Yeah.
Stephanie Soong Johnston: That's about as far as you can go.
David D. Stewart: It would be interesting if the interpretation was you actually had to arrive at another place instead of just be in transit because then they would have had another serious problem.
Mike Kowis: That's kind of an international tax question now that I think of it.
Stephanie Soong Johnston: Intergalactic tax question more like.
David D. Stewart: Interplanetary tax, that's our next angle.
Mike Kowis: All right. So, another true or false. Got a bunch of them in this chapter. When the IRS started requiring taxpayers in 1987 to include Social Security numbers for their dependents aged five and above, approximately 7 million children immediately "vanished" when compared to the total dependents listed in the prior year's tax returns. True or false?
Stephanie Soong Johnston: I'm gonna say true.
David D. Stewart: Yeah. I'm going to go with true. Assuming that the 7 million is the correct number and it's not a trick there.
Robert Goulder: I'm going to go with true. And I think 7 million is actually lowballing it. I'm surprised it's not more like 20 or 30 million disappearing kids.
Mike Kowis: All right. So, it sounds like everyone's in agreement with true. The correct answer is true. When this new rule took effect each dependent qualified for $1,900 exemption. The sudden shrinkage in total claimed dependents resulted in an extra $2.8 billion, with a 'B,' of federal income taxes collected that year. Mercy.
David D. Stewart: That is a whole different kind of tax gap. That's a whole like a human gap.
Mike Kowis: All right. One more. Oh yeah. We'll end on a good one here. OK. What state below imposes a $5 per customer tax on strip clubs that serve alcohol? Is it A) Texas, B) California, C) Florida, D) Louisiana, or E) Vermont?
Stephanie Soong Johnston: I'm not falling for the Vermont trap this time. I'm going to go with Florida.
David D. Stewart: Oh, I think this one's Texas.
Stephanie Soong Johnston: I don't know. I just think Florida is, it seems appropriate in Florida.
Mike Kowis: Bob, what say you?
Robert Goulder: Well, it comes down to me and strip clubs. How did I end up in this position? Not Vermont, because I'm upset with them for declaring war on Germany. Let's see. Not California, because it would be more than $5. If it was California, it would be like $50. A five, I mean $5. OK. What did you guys say? Texas or Florida?
David D. Stewart: I have a notion. I'm thinking this is Texas. This feels very Texas.
Stephanie Soong Johnston: Yeah. Maybe Texas, because Florida was kind of low tax rate. They don't like taxes. So, I don't know.
Robert Goulder: I think it was one of the ancient Greek philosophers or somebody who said, "If you want more of something you subsidize it. And if you want less of something, you tax it." And I have a hard time believing that Texas would want fewer strip joints. They might be like subsidizing it. They may be like, you show up, you knock on the door and the state gives you $5. So, for that reason, I'm going to go with Florida. Sorry, Dave Stewart.
David D. Stewart: All right.
Stephanie Soong Johnston: All right, I'll go Florida, my original choice.
Mike Kowis: So, it's kind of a mixed bag, but you all landed on Florida?
Robert Goulder: Yep.
Mike Kowis: The correct answer is A) Texas.
Robert Goulder: You shouldn't have listened to me. You shouldn't have listened to me, Dave.
Stephanie Soong Johnston: No, your logic was sound, you swung me.
Mike Kowis: So, in 2007, the Texas legislature passed the Sexually Oriented Business Fee Act, so I guess technically it was a fee not a tax, which imposed a fee on businesses that provide live nude entertainment and allow patrons to consume alcohol. Revenues collected go to the sexual assault prevention programs and health insurance coverage for low-income people. This poll tax was challenged in court and the Texas Supreme Court upheld it as constitutional in 2014. And fun fact, you don't have to pay the fee in singles. Womp, womp, womp.
So, that's all I have. I hope you guys enjoyed that.
David D. Stewart: Yeah. This was a lot of fun.
Stephanie Soong Johnston: That was super fun.
David D. Stewart: Well, thank you so much. This is great. And thank you, Bob and Stephanie for helping me, and in some cases hurting me, in answering these questions.
Robert Goulder: Our pleasure.
Stephanie Soong Johnston: That was a lot of fun! We should do it again sometime. We learned a lot today.
David D. Stewart: Absolutely. Mike, why don't you stick around for a bit, and we'll talk a little bit about you and a bit more about your book.
Mike Kowis: Sounds good.
David D. Stewart: Well, Mike, that quiz was a whole lot of fun. So, I'd like to learn a little bit about you. Could you tell listeners a bit about yourself and what you do in tax?
Mike Kowis: Sure. So, I got my LLM in tax, I guess it was in 1996, so about a quarter century ago. Wow, it makes me sound old just to say it out loud. But, so I got my LLM from Georgetown and I went into the Big Six accounting. Back then it was Big Six, and I did that for a year. And then I went to a small law firm in Amarillo of all places and did that for a year, a little bit of tax and corporate work.
And then I've been at Entergy Services pretty much for 20, about 23 years now. And I've worked out of the Woodlands and really love it there. The people are fantastic. We have a pretty good size tax group. And there's folks that do different things. I do federal income tax planning. And so, I help them with that and help them structure deals and work on all kinds of stuff. Securitization of big storm costs and purchasing power plants and that sort of thing. So, really enjoy the work and the people. And, yeah, it's been a good run so far.
David D. Stewart: All right, so, one question I'm always curious about is what sent you down the path of working in tax?
Mike Kowis: Great question. So, when I was I guess in law school getting my JD, I was in my first tax class, never dreamed in a million years I would one day be a tax geek. So, I took that first class, James Beard was the professor and I just immediately, I just fell in love with it. I thought, "Oh, this is what I'm going to do the rest of my life." I really loved the challenge and the code. It just seemed really interesting to me. I just thought, yeah, this and so I started taking every tax class they offered in the JD program that that was available on my schedule. I think I took like four or five of them.
And then afterwards I thought, "Well, you can't be a tax attorney without an LLM or a CPA, or I need some other credentials." So that's why I went on to study it at Georgetown. But yeah, there's just something about the subject that clicked for me and I really enjoy it. And I just never dreamed I would do this, but here I am 25 years later and I still love it.
David D. Stewart: Yeah. That seems to be like a universal thing. It always goes back to one professor and just falling in love with it when you didn't expect to. Because I don't think anybody starts out saying that's where I'm going.
Mike Kowis: Exactly.
David D. Stewart: All right. So, how did you end up writing a book on tax trivia?
Mike Kowis: So, I've been writing books about one a year for the last five years. And then last year I was, the pandemic hit 2020 and I still hadn't decided what to write about. And so anyway, one thing that happened during the pandemic was of course everyone's office building shut down and we were all sent home and we had to work exclusively from home.
So, here we are in the summer of 2020, so it's been whatever three or four months, and we haven't seen each other except through Zoom meetings or WebEx, and start to miss your coworkers and the comradery that you have. And WebEx is nice, but it's not the same. And then one of my coworkers, Amanda McGlaun, she had this idea that we should have like a work happy hour, like a Zoom call after work and just, she had some topic it wasn't even tax-related.
And so, we all enjoyed about an hour of each other's company, just on a Zoom call after work one day. And then I thought, "what the heck, I think I can do this." And so the next month, it's still in the summer of 2020, I came up with the idea I'm going to do tax questions. And I spent about three hours researching 25 questions, tax-related questions, true-false or multiple choice. And then when we had the actual work happy hour, I spent about an hour with them and we had a blast. We were laughing and giggling, kind of like what we just went through. And so, it was a really good time, and I thought, "This is an interesting concept." And we never did it again, but it stayed on my mind because I guess we got busy with other projects.
And so, lo and behold, I finally decided, you know what, my next book needs to be about that. And I'll tell you, it was a hard decision because it's a lot of work to write a book, obviously. And when I look on Amazon, there is zero tax trivia books. I couldn't find a single one. I Googled it. I couldn't find any one. And I thought this is either a really good idea or it's really a bad idea. Maybe there's a reason why there's no tax trivia books out there.
And so, my book has only been out two months at sales have been kind of so-so. So we'll see how it goes. Maybe things will pick up at Christmas and then next year at the tax season. But anyway, whether it sells a book or a million, I'm just happy because it was a lot of fun to research this. I discovered a lot of stuff that I didn't know about, and it was a really fun project.
David D. Stewart: Yeah. So, actually I was going to ask about that. Where'd these topic ideas come from? Was it mostly from what you knew or were you just going out there and checking for things in among various categories? Basically, what was your process for coming up with the topics for the book?
Mike Kowis: So, I ended up coming up with 10 different topics. You know, each chapter has its own topic. There's 25 questions in each. And what I did was I started with the original 25 questions that I used in the little work happy hour, and I figured out, OK, this looks like it's clearly a history question. And this one's more about the IRS structure. And this was more about the audit cycle. This one's about the tax forms. And this is about the code. I had a bunch of questions about the code. And so, it just sort of neatly fit.
I was just trying to categorize each one and I came up with eight or nine right away. And then, politics was another one because I was, that was one thing I learned was, oh my gosh, I didn't realize how much they IRS as an agency has been used or abused by presidents. It wasn't just one bad apple, either. It was multiple ones, where they kind of use the IRS as a political weapon, if you will.
So, I learned so much about this. And I'm not even a history buff. I'm not even like a political junkie, it was just, I liked taxes and the more I dove into this stuff and the history of it, and the first income tax, and how, as Bob was saying, there was a period of time where they had a temporary income tax paid to fund the Civil War. And then that was repealed and then there was later a more permanent one. So, just learning all this stuff or relearning some of it was very interesting to me and I thought maybe other people would enjoy it too.
David D. Stewart: Well, on that note, we're heading into the gift giving season. Who do you see as the target audience for this book?
Mike Kowis: So, great question. So, I'm thinking obviously tax professionals would ideally be a target audience for this book. But it could be history buffs or just anybody that's into trivia, American trivia questions. Because there's a lot of that in there too. I gave a copy to my parents and they are none of the above and they loved it. They loved the chapter on the quotes. Because I have like a 25 questions on just funny tax quotes and they got a kick out of that. So really, it's a pretty broad spectrum of people that will enjoy it. But I think primarily the target audience is tax professionals, CPAs, tax attorneys, anybody like that.
David D. Stewart: Now, you mentioned you've written some other books. What else have you written about?
Mike Kowis: I kind of write books based on just my hobbies or my passions. And one of my loves is I teach a night class at the local community college at Lone Star College and I teach business law and I've taught a corporate and partnership tax there as well. And so, my very first first book came out five years ago is called Engaging College Students: A Fun and Edgy Guide for Professors. And that was just really based on my experience, just teaching tips, if you will. And so, that was my first book. After that I wrote two books for authors. One was a self publishing guide. All my books are self published, and my self publishing guide, I just sort of threw it together. It literally came out four months after my first book. I didn't even plan to write it, but so many people kept asking, "Well, how do you self publish your book?"
And so, I published it four months after the first one. And lo and behold, that little book has sold 3,000 copies. I mean, I'm just floored by that. Just never expected that. Then I have a book marketing guide to help other authors sell their book, because believe it or not marketing your book is even harder than writing a book.
And my next book was about off-road racing, believe it or not. So, one of my passions and hobbies is I like to off-road race. I'm into the side-by-side like a Polaris RZR, they kind of look like a golf cart on steroids. And we race them through the woods for like an hour and try not to hit any trees and run over each other. It's a lot of fun and something I can do with my son. He's my copilot. So, I wrote a book about that one that one's called Texas Off-road Racing: A Father-Son Journey to a Side-by-Side Championship. And so then my fifth book is this one, American Tax Trivia: The Ultimate Quiz on U.S. Taxation.
David D. Stewart: Well, all right. Thank you so much. It was great having you here and the book sounds fantastic. Thank you for being our quizmaster.
Mike Kowis: Thank you, Dave. I really enjoyed it.
David D. Stewart: And now, coming attractions. Each week, we highlight new and interesting commentary in our magazines. Joining me now is Acquisitions and Engagement Editor in Chief Paige Jones. Paige, what will you have for us?
Paige Jones: Thanks, Dave. In Tax Notes Federal, Binnan Wang examines the different ways the automatic child tax credit is being used by various categories of taxpayers. Dean Zerbe explores how the IRS can crack down on tax evaders and close the tax gap by strengthening the IRS whistleblower program. In Tax Notes State, Andrew Swain examines the important role of moral storytelling in educating listeners about ethics and morality. Billy Hamilton examines New Jersey’s efforts to lure film and television productions to the state. In Featured Analysis, Roxanne Bland examines efforts that states and localities could make to help increase gun control without infringing on the Second Amendment and citizen’s right to own firearms. On the Opinions page, Robert Goulder wonders whether a domestic FATCA regime would be plagued by disproportional overreach and unintended consequences.
And now, for a closer look at what’s new and noteworthy in our magazines, here is Tax Notes Executive Editor for Commentary Jasper Smith.
Jasper B. Smith: Thank you, Paige I'm here with tax practitioner and Tax Notes International columnist Peter Mason for a special edition of "In the Pages." Peter has recently published a new book, Building Better Taxes, which features several of his TNI articles. Peter, welcome to the podcast.
Peter Mason: Thank you and hello. I'm delighted to be here.
Jasper B. Smith: And certainly delighted to have you. So, to begin, could you tell us a little bit about your book?
Peter Mason: Yeah, sure. So, my new book is called Building Better Taxes and it goes to the heart of the tax legislation. It looks at how taxes are applied in practice and just questions if that makes sense. Taxation should motivate or discourage or redistribute wealth or just all of that as part of a logical government strategy to build stronger trade and better societies. My book, Building Better Taxes, critiques and challenges current tax practices. It's a collection of articles, as you said, targeting tax policy and tax risk to transfer pricing and tax people.
Now it builds my first book, Tax Commandments for Business, where I revealed best practices and tips of the trade in operating an effective, successful, and responsible tax function. But I tried to get under the surface in really both books of practical corporate tax management in an engaging, thought-provoking, and entertaining way. So, my new book, this Building Better Taxes, is for tax professionals, but it's also for anyone who wants to understand how big business is really taxed in concise articles on hot tax topics. Jasper, in effect it's the ultimate coffee table tax book.
Jasper B. Smith: It sounds like it Peter, and thank you for that overview. So, in the time we have left, I thought maybe we cover just a few highlights from the book.
Peter Mason: Sure.
Jasper B. Smith: So, could you first tell us how you dealt with tax risk as a tax director?
Peter Mason: Yeah. In fact, I've actually dedicated a quarter of the book to this critical area of tax risk. Above all, I believe that risk and opportunity are opposite sides of the same coin. In that sense, a tax professional should embrace calculated tax risks to claim the best opportunities for his business. Put simply, if you do not deduct an expense for tax purposes, then there is no tax risk of it being disallowed. But then you've completely lost any potential for tax relief. We have to be bold when we manage tax risks, as well as being commercial business people in judging the risks we take. Companies design great new products that at their outset have huge risks of failure. But to not embark on that journey would result on zero potential a grand prize of business success in the market later on. Of course, there are unknown and unexpected tax risk or surprises.
And unfortunately as tax people, these are our tax mistakes and problems. Every tax director has to have some sort of robust tax compliance framework to deal with those risks. But some will always get through. There are many ways to identify, assess, and monitor those risks and indeed mitigate them. I personally favor sort of lean methodology, which I call "the three Cs." And this systematically looks at the main tax concerns, identifies the causes of them, and then deploys countermeasures in a controlled process. Tax people though sometimes make risk elimination their sole goal. We must be proportionate with those tax compliance frameworks to not overly burden business. I remember one CFO said to me, his tax director had eliminated more risks than he knew he actually had. Now, that is either a poor use of tax time or a failure of communication. So, Jasper, it's this balance I discuss in my new book of security versus commercialism in managing those tax risks.
Jasper B. Smith: And that's certainly great advice for a tax director. What advice from an in-house tax executive would you give to external tax advisors?
Peter Mason: Well, I think very simply I would say to be BRAVE. I want external tax advisors to be my comrades at my side throughout the life of the transaction, not just when the advice is given. I discussed in my book how to be a trusted tax advisor. And I use this acronym of BRAVE for what I typically expect. So we start with a B, I'm looking for business focused. A tax advisor does need to be creative, but aligned with the direction of the business. For the R, I want them to be risk sensitive and be prepared to take on risk as we've talked about, but understand the company's thresholds and parameters for where its risk appetite sits. The A of BRAVE is to be adaptable and agile. Business changes so fast and we must all be agile and adept at changing fast to keep ahead. V is obviously for value and value adding and the advisor must provide a clear value proposition. Now obviously, I have to say as an in-house professional, that's got to be associated with fair and transparent billing so that we know what we are paying for. And then lastly, the E of BRAVE is for effective and efficient. And that's really important that the advisor can deliver exactly what was required precisely, safely, on budget, and on time. So, that is, Jasper, the BRAVE acronym for generating trust, and I think further assignments for those advisors that adopt it.
Jasper B. Smith: Thanks, Peter. And we certainly hope that's a mnemonic device we see in use in the future. And one more kind of substantive question from the book for you. Is intercompany financing still an effective tax management tool?
Peter Mason: Well, it was a great question, Jasper. I mean, I think transfer pricing and all its related elements is such a moving area at the moment with obviously the public criticism, shortfalls in government finances and of course, OECD's BEPS initiative. Now, I cover this across my book in dealing with the Action 13 documentation requirements, management charges, and as you've mentioned, intragroup financing. Intragroup financing is probably one of the largest and arguably easiest profit shifting mechanisms out there, but that happens across independent businesses too. It's just not just an intragroup situation. And the OECD has updated its transfer pricing guidelines for multinational enterprises and tax authorities on this specific point. But it largely over-complicates and creates more uncertainty and confuses. All in all Jasper, this is another death note in the arm's-length principle, which is arguably on its last legs or perhaps last arms. Academics and advisors tend to focus on it as an economic nicety, but practically it's a nightmare for management in business because of lack of certainty.
Business typically tends to operate on global product lines and international marketplaces, not national geographies. And this is a constant tension with a jurisdictional taxation regime and a multinational business. And BEPS too and other developments are increasingly looking at the sort of global pie of profits and allocating them for tax purposes around the world. The sort of global formulary apportionment. Realistically, that's what multinational businesses do. And it's all the time to really sort of break down corporate profits into local tax returns.
So, I have some controversial provocative views in this book on the likes of intercompany financing. I think a greater degree of certainty is needed in this area because every business person I talk to is amazed at the amount of time wasted by tax people dealing with really zero value added intercompany relationships. So, Jasper, just to somewhat ridicule the area, I wrote a rather than rueful poem about transfer pricing in the book, which frankly must be the first time anyone's ever done that.
Jasper B. Smith: Well, Peter, we can definitely tell, even from this brief discussion that your book is full of information based on your extensive experience. But we'll give you a chance to do a little bit of prognostication. How do you think the role of the tax professional will evolve in the future?
Peter Mason: That's a big question. Let me give you a sort of George Orwell type view of the future. Obviously we're seeing artificial intelligence and improved ERP systems will probably drive automated real time tax compliance with practically very little human oversight. Transfer pricing, as I sort of intimated a bit earlier, I suspect might actually disappear as we seamlessly globalize. Personal taxes will be withheld at source and credited. Indirect taxes probably flow through government portals like in Italy where there's no tax leakage. And then audits will be virtual and managed by the company's tax robot. So, to not become redundant, I guess the tax professional needs to become a business person. Tax people have been developing commercial acumen in the last decade, and now we need to really move on to the front foot and become much more commercial people with tax expertise. I explained in my first book, Tax Commandments for Business, the huge array of business skills that a tax person must and can develop, which takes him or her beyond just tax.
And again, tax is ubiquitous, involved in nearly every part of a transaction and every transaction. And that gives us all a huge insight into the walks of business life, whether it's legal, financial, commercial, but also transactional or operational strategic. So, government tax policy I think will always direct business. It will always redistribute wealth and protect our environment and support our societies. But there are huge opportunities for tax people to play their important role in this process. And I discussed that in Building Better Taxes. Taxes is a great profession and Jasper, it provides a wonderful potential for career development and to make a real positive difference to our future.
Jasper B. Smith: Peter, we appreciate that. It's clearly something you've spent some time thinking on. And again, we know that readers of this book will have a lot of very good things to chew on. So, before we let you go, where can listeners go to find the book and find you as well online?
Peter Mason: Well, I've got my own website, which is www.taxcommandments.com and there you'll find details of both books, which can be procured through that website. Also, there is a method of contacting me through that, although also I can be found on LinkedIn.
Jasper B. Smith: Peter, thanks again for taking some time to talk to us today.
Peter Mason: Well thank you. And thank you to Tax Notes for inviting me.
Jasper B. Smith: And listeners, of course you can find all of Peter's Tax Notes International articles online at taxnotes.com. And be sure to subscribe to our YouTube channel Tax Analysts for more in-depth discussions on what's new and noteworthy in Tax Notes. Again, that's Tax Analysts with an S. Back to you, Dave.
David D. Stewart: That's it for this week. You can follow me online @TaxStew, that's S-T-E-W. And be sure to follow @TaxNotes for all things tax. 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 review wherever you download this podcast. We'll be back next week with another episode of Tax Notes Talk.
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