10 Things To Know About Tax Practice

For young lawyers who enjoy challenging themselves intellectually, tax law is a good fit.

Ed. note: Welcome to the latest installment of Better Know A Practice Area, a series introducing readers to different practice areas. Each post is written by an editor at Practical Law who previously practiced in that area and currently writes about it. Prior columns have covered capital markets and corporate governance, securities litigation and enforcement, patent litigation, executive compensation, commercial transactions, labor and employment, real estate, startup law, bankruptcy, antitrust, being an in-house generalistemployee benefits and executive compensation law, and entertainment law.

Today’s topic: tax law.

  1. What do you do in a typical day?

A typical day usually begins with reading daily tax publications. There are always many changes and developments to keep up with in tax law. It’s a challenge to stay on top of new regulations, IRS guidance, and other changes, but it also presents an opportunity for younger lawyers to know as much about a specific issue as more experienced lawyers.

Junior associates often spend a fair amount of time researching discrete issues. Although more senior lawyers spend less time on research, tax lawyers throughout their careers devote more of their time to research than lawyers in other practice areas. Despite the thousands of pages in the Internal Revenue Code and Treasury Regulations, there are still a lot of unanswered questions about how the tax rules apply to any given situation. Associates at large firms may also spend time reviewing tax disclosures in securities offerings, reviewing and negotiating the tax representations and other tax-related provisions in merger or other acquisition agreements, reviewing and negotiating the tax provisions in loan agreements, or drafting tax opinions.

As tax lawyers gain experience, they usually become more involved in tax structuring for joint ventures, acquisitions, dispositions, investment funds, or financial products, and provide more expert advice directly to clients on discrete tax issues.

  1. Who do you work with?

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Tax is a speciality area that supports work across the firm, so a fair amount of time may be spent working with members of other groups, including corporate, capital markets, finance, private equity, and real estate. Junior lawyers often work with more senior lawyers in the tax group. More senior lawyers work directly with clients (generally in-house tax counsel) and in transactional work may also work with the client’s accountants. Both junior and senior tax associates negotiate directly with lawyers and in-house counsel representing the opposite side in acquisitions and other transactions.

Lawyers in this area also work with government lawyers and auditors. This includes IRS attorneys and auditors when representing clients in connection with private letter ruling requests or IRS audits. Lawyers may also communicate with tax counsel at the Treasury Department to provide comments on proposed Treasury Regulations, or to address questions under existing regulations.

  1. What does a common career path look like?

Large law firms with a varied tax practice are a common starting point for law school graduates interested in tax law. Some tax lawyers also study for an additional year to earn an L.L.M. in tax, either while working at a firm or before entering private practice. After gaining a few years of experience at a big firm, many lawyers in this area move on to smaller firms, accounting firms, or in-house positions.

Those lawyers who stay at big firms may find the path to partnership difficult, as tax groups tend to be smaller than other groups and tax lawyers often do not bill as many hours and generate as much revenue as lawyers in other practice areas. There may be many years when no senior tax associate makes partner at a firm. However, a non-partnership position as counsel may be a possibility for an experienced tax lawyer.

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  1. If variety is the spice of life, how spicy is this practice area?

Work in this area can be quite varied. On any given day, a tax lawyer may work on many different matters, including structuring an acquisition, writing a tax opinion, or giving general tax advice. Compared to lawyers in other groups, a tax lawyer’s time is not usually consumed by one or more large matters.

As tax lawyers at large firms gain experience and move into partner roles, they often specialize and develop expertise in an area within tax (for example, financial products or M&A). Tax lawyers at firms with a relatively small tax department (or where there may be only one or two tax lawyers) must be able to handle any tax question and advise on any type of transaction, which is quite challenging given the complexity of tax law.

  1. How much wear and tear?

Although tax lawyers often have more reasonable schedules than corporate or litigation lawyers, tax practice at a law firm still involves long hours and unpredictable demands. Rush research assignments for junior lawyers are common. In some deals, such as mergers and other transactions meant to qualify for tax-free treatment, the tax stakes can be high. Mistakes in this area can be quite costly, and partners may rely on associates to review securities offerings or deal documents and identify any tax risks.

Tax is intellectually demanding, and it is difficult to keep up with constant changes and new developments. Besides handling the day-to-day client work, a tax lawyer has to be committed to spending time keeping up with changes in tax law and learning new areas.

  1. Of the people in this practice group who hate it, what exactly do they hate about it?

People who end up moving into different practice areas or exploring non-legal careers generally dislike the amount of research involved in tax and the length of time it takes to learn enough tax to really add value. They want to play a bigger role in whatever they’re working on at an earlier stage. It is also a challenge to keep up with the constant changes in tax law, and lawyers in this area must spend a fair amount of time on non-billable professional reading.

  1. Of the people in this practice group who love it, what exactly do they love about it?

Lawyers who stick with tax law enjoy the intellectual challenge of learning a very complex area of the law and providing expert advice that can help clients structure transactions or investments in a tax-efficient way or avoid costly mistakes. Tax law has many traps for the unwary, so an experienced tax lawyer who can steer clients away from these traps is of great value.

In a lot of transactions, tax structuring is key, so tax lawyers can play a prominent role and have a chance to be creative in devising new tax-efficient structures. Those interested in tax policy can become involved in organizations that comment on proposed Treasury Regulations and other government guidance. In doing this, they can influence the substance of final tax rules.

  1. Are there common avenues out of this practice area?

Tax lawyers who don’t enjoy practicing in a firm but still enjoy tax law can move in-house to companies with their own tax departments or the need for in-house tax counsel (for example, banks, large public companies, hedge funds or private equity funds). Accounting firms with tax transactional and planning practices also provide opportunities for tax lawyers looking to leave law firm practice. Government work at the IRS, Treasury Department or a state revenue agency is another possibility. Tax lawyers with strong quantitative skills may move on to business roles at banks or investment funds.

  1. What are some market trends that impact this practice area?

Transactional tax practice is subject to the same market forces that affect the broader economy. If the economy is slow, there are fewer acquisitions and joint ventures, and less need for tax structuring and tax review of deal documents. There may also be less demand for general tax advice as clients are more cost conscious. Any slowdown in financial markets will also affect tax lawyers who structure financial products or other securities, or review the tax sections of securities disclosures.

Tax practice is also affected by major legislative and regulatory changes. For example, the Foreign Account Tax Compliance Act (FATCA) was enacted in response to concerns that U.S. citizens and residents were evading U.S. taxes by maintaining financial accounts outside the US. It created a lot of opportunities for lawyers and accountants to help clients understand their account reporting, withholding, and other responsibilities.

  1. If you had to recommend one candidate from a room crowded with recent bar exam graduates, what specific qualities would he or she have that would ensure success in this practice area?

Recent graduates who are analytical and academic generally find tax law rewarding. There is a steep learning curve, and U.S. tax laws are extremely complex and constantly changing. Even tax lawyers who have been practicing for 30 years don’t know everything there is to know about tax. For young lawyers who enjoy challenging themselves intellectually and mastering complicated subjects, tax law is a good fit.


Sara McLeod is a senior legal editor on Practical Law’s Corporate & Securities team. She focuses on tax, with an emphasis on M&A and partnerships. Prior to joining Practical Law, she was a special counsel at Sullivan & Cromwell and a director and senior tax counsel at UBS.