Editor: WTAS is celebrating its 10th anniversary. Please tell our readers about the birth of WTAS on July 9, 2002. Who were some of the original ex-Arthur Andersen founders? What disciplines did they bring with them? From its early founding of only a few professionals, what is the size of the firm today?
Toce: The origin of WTAS was the unfortunate demise of Arthur Andersen. The founders of the firm were all tax partners at Arthur Andersen who decided that they did not want to go to another Big Four accounting firm with the potential for litigation over its audit practice, as Andersen experienced. We decided to form a tax-only firm that was largely oriented towards the tax needs of private clients – basically high-net-worth individuals, wealthy families, corporate executives and the like. We started with approximately 200 people in six offices. Today, ten years later, we have nearly 600 people in 14 offices. We were assisted in our formation by the international bank HSBC with which we were originally affiliated. They were very eager to help us develop an international, as well as domestic, private-client tax practice. We subsequently separated from HSBC in 2008, and today we are an owner-operated partnership with approximately 100 partners.
Since inception we’ve greatly expanded our tax offerings to include corporate tax services, a large alternative investment tax practice (we prepare K-1’s and partnership returns for some of the premier alternative investment funds across the U.S.), as well as a significant state and local tax practice. We also have a valuation practice that values property such as closely held companies, carried interests in funds and intellectual property.
Mark Vorsatz, our initial CEO, is headquartered in San Francisco, and he has managed the firm for its entire ten years. I manage our Northeast practice, which comprises our offices from Boston to Washington, DC. Many of our partners began their careers at Andersen, but we also have many partners who were with other large accounting firms. We are always gauging the marketplace to make any necessary updates to our operating policies to further ensure we are building a first-class tax practice.
Editor: What differentiates WTAS from other providers of tax services, such as the Big Four accounting firms?
Toce: Many of our partners are former Big Four partners. At WTAS our senior partners work closely with clients – we all have full client loads. Our partner-to-staff ratio is only five or six to one, whereas our competitors have higher ratios. Thus, our partners spend more time directly with our clients. We also have no mandatory retirement age, whereas at other firms, many of the more talented partners end up in administrative positions or are retired at early ages. At WTAS, tax is our only line of business. This enables us to be advocates for our clients in a very focused way.
Editor: The firm has extended both its original geographies as well as its practices. Please tell us about your original offices and the additional offices you have today. What was your strategy in deciding on locations?
Toce: Our original offices were clustered on the coasts: we started with San Francisco, L.A., Boston, New York, Washington DC and West Palm Beach. Our strategy was to have offices where Andersen had previously had very mature and sizeable private client practices. Our original strategy did not anticipate the impact of Sarbanes-Oxley. Many of our private clients hold significant ownership or management positions in corporations and looked to WTAS to provide corporate tax services that were not, or could not, be met efficiently by the Big Four firms. Accordingly, we expanded significantly in the corporate tax area, and our offices have full service capability in most areas of taxation. We have expanded geographically to Philadelphia, Palo Alto, Seattle, Chicago, Greenwich and New Jersey.
Editor: Please describe the unique talents and backgrounds that accompany some of those who have come on board.
Toce: One of our unique offerings is a large international, private-client tax practice that specializes in the tax issues that pertain to foreign nationals who are living in the U.S. – those with green cards, those who have married a U.S. citizen or those who have become U.S. citizens but still have parents or families in foreign countries. These are very complex situations that have received much IRS and media attention.
David Roberts has recently joined us from Citigroup’s international private bank and is an Andersen alumnus, having spent time in Andersen’s offices in London, Singapore and New York. He is a chartered accountant in the UK and has come to New York to head our international private client practice and also our UK Tax Desk, where he serves clients who have cross-border issues between the UK and the U.S.
Similarly, we have Janet Peng, head of our Chinese Tax Desk, who has 20 years’ experience in dealing with tax issues pertaining to Chinese businesses and individuals with U.S. interests. We have a Latin American Tax Desk headed by Carolina Strobino, an Argentinian, Spanish-speaking attorney who works in New York with our Latin American tax clients dealing with cross-border U.S.-Latin American tax issues.
In state and local tax, we’ve recently hired two partners with extensive Big Four resumes, Ken Zemsky and Raymond Freda. Ken and Raymond head our multi-state New York tax practice. Ken has over 30 years' experience at Andersen and Ernst & Young, and he has dealt previously with all types of state tax controversies (corporate and individual). Ray Freda was a partner at Ernst & Young. He is very active in working with Ken to resolve issues ranging from corporate controversies to executives with residency audits. They have handled some of the most sensitive and large-scale tax controversies, particularly in New York, but also in New Jersey, Connecticut and various other states.
Editor: How do you maintain quality control over the work done by this large group?
Toce: In terms of quality control, we have two partners on almost every engagement so that if one partner is not available, there’s another senior person who can step in. There is a benefit in having two persons conferring with each other on sensitive tax issues to make sure that two sets of eyes see every position – often in the area of tax, the answer isn’t crystal clear. Also, we do interoffice reviews every other year when partners from one office of the firm will go to another office and do a detailed review of the work in that office to ensure two things: (1) that from a quality control point of view, all advice is well documented, and that the files are in good shape and would sustain an IRS audit; and (2) that the clients in that office are getting the full benefit of the firm’s resources.
Editor: You have authored Tax Economics of Charitable Giving. What are the principal lessons of this volume? How do you keep it up to date? Where may our readers obtain a copy?
Toce: It’s published by Warren, Gorham & Lamont, a division of Thompson Reuters, and copies may be ordered from their website at http://thomsonreuters.com/. The principal lesson of this volume is that charitable giving is a big part of the economy, and the tax economics of structuring gifts can enable donors to achieve substantial savings – if done properly and creatively. Given the very large size of our high-net-worth practice, it was reasonable that we should develop leading-edge expertise in charitable giving. The four primary contributing editors, of whom I am one, are supported by all the partners in the firm. As partners get involved in interesting charitable-giving strategies, they will float them by us, share their research and look for our approval on the strategy. We incorporate some of that know-how into the book. The book is updated quarterly by our Washington partner Byrle Abbin, who is one of the editors.
Editor: Where do you as a managing director, along with your fellow managing directors, hope to take the firm over the next 10 years or so?
Toce: We have a very strong sense of stewardship in our firm. Our concept is that the older partners should transition relationships to younger partners in order to provide the continuity our clients desire. We also have a responsibility to our clients to make sure that we have talented young people in the pipeline. We put a lot of emphasis on having our partners share relationships with clients so that we institutionalize our client base, as opposed to one partner claiming individual clients. It’s a better client experience if the client can choose where he or she wants to be served. We continue to hire the best and brightest graduates from undergraduate programs, MBA schools and law schools. We are in a growth mode at WTAS. Our growth is an outcome of providing outstanding client service. The first 10 years have been extremely positive in that we’ve gone from 200 to 600 people and more than tripled our revenue. We are optimistic about the future and expect to continue to exceed our clients' expectations and offer a great opportunity for our young people to develop and excel in their careers.