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Tax Analysts Exclusive: Conversations: Caplin Reflects on His Time as IRS Commissioner

Posted on July 11, 2016 by van den Berg, David

Mortimer M. CaplinMortimer M. Caplin, who has an extensive legacy in the tax community, turns 100 July 11. He founded the prominent Washington law firm Caplin & Drysdale Chtd. and was appointed by President John F. Kennedy as IRS commissioner in 1961, a position he held until 1964. During his time as IRS commissioner, Congress passed a tax reform package and the agency installed its first computer systems through a program called the New Direction.

Before Caplin's IRS tenure, he served as a U.S. Navy beachmaster in World War II, taking part in the invasion of Omaha Beach in Normandy, France. He also worked as a law professor at the University of Virginia, where his students included both Robert and Edward Kennedy.

In a recent conversation with Tax Analysts' David van den Berg, Caplin discussed his legacy as IRS commissioner and how his experience could be applied to the agency's current challenges. An edited transcript follows.


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Tax Analysts: What's the biggest challenge you faced as IRS commissioner, and how did you overcome it?

Mortimer Caplin: When I first came aboard, we ran into the attitude that IRS personnel were regarded as policemen. We hesitated about going to taxpayer or practitioner meetings. We just kept to ourselves. That was one of the big things we changed.

We kept on publishing new booklets, helpful materials, encouraged our people to participate in bar conferences. The whole point was to strengthen the self-assessment process.

TA: Tell me about the New Direction.

Caplin: The idea was to emphasize self-assessment -- more accurate reporting of your income -- instead of putting people in jail.

We encouraged IRS personnel to get involved with the taxpayer organizations, work with them, and be as helpful as they could.

It changed the relationship between practitioners and the IRS and encouraged accurate self-assessment.

TA: What do you think we could apply from your experience with the New Direction to voluntary compliance now?

Caplin: The same principles apply. The IRS needs to be a reliable source of taxpayer and practitioner assistance. Building a positive relationship with the public will aid voluntary compliance.

TA: What do you make of IRS efforts to ensure voluntary compliance now?

Caplin: I think that Congress hasn't helped much in getting the level of cooperation that is very important.

We had to encourage our people to get to know the local congressmen, to work with them, to help them if they had any particular difficulties rather than to have a closed door.

TA: As you look at the climate between the IRS and Congress, where Congress is trying to impeach Koskinen, have you ever seen the relationship between IRS and Congress this bad?

Caplin: No, this is as bad as I can recall. I think John Koskinen, the current commissioner, is a very able fellow, but Congress is not giving him an easy time. He almost doesn't get a chance to present his side.

TA: Based on your experience, what advice would you offer to improve the relationship?

Caplin: The IRS needs to build bridges with congressmen. We used to invite the congressmen to us; they would visit different offices. We were installing the computer systems for the first time and brought the people from [Capitol] Hill with us. It's a two-way street to try to be cooperative with one another.

It was that way all the time. We were on a very friendly basis with Congress, and I worked on that.

TA: As you think back to the tax reform package achieved then, what were the keys to President Kennedy and his team getting that done, and what lessons can be drawn from that for current tax reform debates?

Caplin: For one thing, President Kennedy gave us a lot of freedom. We had an assistant secretary of the treasury for tax policy. My job was not to really change the law, it was to administer the law, but I became very much involved with the treasury group which was focused on tax policy. We were the administrators, but we had lots of say.

I was friendly with Harry Byrd, who was at that time the chair of the Senate Finance Committee. I had a good working relationship with him. I was able to meet with him almost whenever I wanted and express my views.

So my job was rather unique at that time because I had my hand in the policy as well as in administering the tax law.

TA: Have those who followed you as IRS commissioner had their hand in policy and in administering the law, or was that unique to you?

Caplin: I think they always were involved to some extent, but I had a unique position because I was close to Harry and I was close to the attorney general, Bob Kennedy.

And then there was my relationship with the president [Kennedy]. The president came over to the IRS -- it was the only time in the history of the country a president came to the IRS. It was my first meeting with my district directors and regional commissioners, and it had an enormous impact on the IRS and the amount of respect people gave the agency.

You can see the photos on the computer -- you'll see pictures of President Kennedy at the IRS building speaking with the IRS people present.

TA: What was the nature of President Kennedy's visit to the IRS? What did he say? What was he hoping to achieve?

Caplin: Well, for one thing, I made a real effort to get him over there.

When I first raised the question, I spoke with the person who kept the president's calendar, a fellow named Kenny O'Donnell. When I told him what I was interested in -- the first visit to the IRS and the impact it would have -- he said, "Are you kidding?" He said that there were no votes over at the IRS.

TA: How different was the climate then in terms of relationships between the IRS, the White House, and Congress than it is now? How did that different climate help you do your job?

Caplin: I think that there was a more cooperative feeling among them. There was availability to speak to each other and get their attention.

Wilbur Mills was the chair of the House Ways and Means Committee, and taxation was his field. So we had Harry Byrd in the Senate and Wilbur Mills in the House, and there was always an open door.

TA: Did you have one tax law teacher who had a particularly significant influence on you? What are some of the most important things that teacher taught you? It could be a professor, a professional mentor, or anyone that you consider a teacher.

Caplin: [After I joined what is now Paul, Weiss, Rifkind, Wharton & Garrison LLP], I became well acquainted with Randolph Paul, who had been the general counsel of Treasury, and at that time he was really the leading tax person in the country. When Paul joined the firm, he brought in leading practitioners from government, and there was a whole style then that made them highly respected by the people in the government as well as outside.

TA: To what extent did you try to pattern Caplin & Drysdale on Paul, Weiss?

Caplin: Very much so. I kept in touch with Paul while I was teaching and a part of the American Law Institute's effort to rewrite the Internal Revenue Code. I used to come up regularly from Charlottesville, where the University of Virginia is located, to the meetings of the ALI tax group, and I'd always go over to Paul's office here in Washington. He had some practitioners -- they eventually became leading practitioners -- that were in his office. And it became a model for what I wanted to establish at Caplin & Drysdale.

In Paul's establishment, at about 5:30 you'd go downstairs, be sure to have a drink, and talk about the issues of the day. It created a great atmosphere of collegiality. His was a model that we followed for years in our own firm. We worked well with the government and they respected us, and we hired many of the outstanding government lawyers to join us. We were very successful in recruiting.

TA: Regarding your time at Caplin & Drysdale, other than starting the firm itself, what was the best decision you made?

Caplin: I recruited some of the key people who were in government at the time. The assistant secretary of the treasury for tax policy was Stanley Surrey of Harvard, and he had put together a very good staff at Treasury. I began recruiting right from his staff and always felt we had the cream of the crop.

TA: What were some of the things those people were able to achieve once they came to your firm?

Caplin: They were able to do tax planning that was well coordinated with the tax code. In examinations, they had the respect of the IRS.

We put together an extraordinary group of people, and we were even able to recruit Supreme Court law clerks to be tax lawyers, which would be unheard of today.