Playing With the Interplay
Nancy Crow on the giant puzzle of tax law and the special joy of the Windsor decision
Published in 2015 Colorado Super Lawyers magazine
on March 13, 2015
Updated on March 11, 2021
Q: So how much money does a person need to make in order to hire a tax lawyer?
A: It really depends upon what you need a tax lawyer for. Recently in my practice, I have been focusing a lot on estate and trust issues. In that area, the estate tax exemption was $60,000 when I started practicing law and it’s now $5.43 million. But I do a great deal of planning transactions for people who have a lot less money than $5.4 million, I can assure you. Sometimes people contact me as a tax lawyer because they need help paying their taxes, or negotiating with the IRS, and sometimes those are people with very little money. The limitation is that I’m not inexpensive.
Q: For people who have far less than $5.4 million, what kinds of issues are they hiring you for?
A: Part of what I do as a tax lawyer is to play with the interplay among the different kinds of tax laws, and the interplay of tax laws with other laws. Probably the sweet spot for my practice is the closely held business. I don’t represent a lot of public corporations—although I do sometimes represent individuals who receive benefits such as stock options from public corporations. That’s an example of a tax planning issue that I might deal with for corporate executives, for example: what the tax consequences might be in making different kinds of selections.
Q: There’s a general complaint that our tax code is too complicated. Is it?
A: Well, I first got interested in tax law because it appealed to me as a giant puzzle. I’ve always loved doing puzzles—word games, Scrabble, crossword and jigsaw puzzles—and I look at the Internal Revenue Code as being a gigantic puzzle, with, unfortunately, pieces that don’t always smoothly connect. You think they should. An example is the word “substantial.” It can mean anything from 10 percent to 90 percent, depending on which code section is used.
Q: So if the tax code were a jigsaw puzzle, how many pieces would it be?
A: [Laughs] Oh gee, I couldn’t even begin to answer that question. But there would definitely be a few missing. At the same time, it does all sort of fit together, and that’s part of the fun. It’s trying to figure out how these sections work together—since the goal is always to make sections work together. It’s not always possible. It has little odd sections that were designed for one particular family or one particular situation that were stuck in to accommodate special interests—which is one of the frustrations and one of the reasons why it’s so challenging to reform.
Q: Have you ever been involved in trying to reform the tax code?
A: I’ve certainly been engaged in those conversations when I was chair of the Colorado Bar Association tax section. We got involved in advising on particular provisions of the estate tax law—which is actually fairly simple. But it’s only fairly simple because it plays off of the federal tax laws. They take your federal adjusted gross income and just make a few adjustments to it and then apply a flat rate to it. The IRS does all the heavy lifting for the state on that calculation.
Q: Can it be reformed—the tax code?
A: It can be done very simply if you want to do away with certain huge deductions. The problem is that every single one of the deductions, as well as every single provision that goes into defining gross income, has interest groups attached to it. That was one of the challenges of the Affordable Care Act: The deduction for health insurance has become so intertwined with business taxation, and with employers, it’s been very difficult to even separate health insurance from employment.
The 1986 Tax Act was a major tax reform. When I started practicing tax law [in the mid-1970s], we were working with the Internal Revenue Code of 1954. It was replaced in 1986 with substantial simplification. A lot of the tax loopholes, a lot of the deductions that really had little economic substance, were eliminated. But in the almost 30 years since, the code has grown and the special-interest provisions have multiplied and increased in complexity. One of the issues that’s often talked about, and which may even progress some with the newly elected Congress, is not only the complexity but the high tax rate applicable to corporations.
Q: Is there a high tax rate applied to corporations?
A: Compared to other countries, the U.S. has a fairly high corporate income tax rate, which does result in the creation of a lot of tax shelter plans. And while the 1986 Tax Act did eliminate many of the tax shelters that were available to individuals, it did not do much to eliminate some of the extremely complicated mechanisms [for corporations]. Something that’s been getting a great deal of press lately is the phenomenon of corporate inversions, so-called inversions, where companies reincorporate outside the United States to take advantage of, for example, Canada’s lower income taxes that are applicable to corporations. And U.S. corporations are taxable generally on worldwide income, which is not typical in other countries.
Q: Is it possible to have a conversation about tax in this country without people getting upset?
A: As soon as people hear I’m a tax lawyer, they say, “Well, why don’t we just get a flat tax!” I can’t tell you how many times I’ve had that conversation. It’s often an emotional discussion. I can’t even begin to tell you how many times I’ve dealt with tax protesters and the people who just want to latch onto any bizarre theory to avoid paying taxes.
So certainly one can get very, very emotional and even angry, but I do think it’s absolutely possible to have a very rational, public, civil and civic conversation about the tax law. The problem is that it’s also intricately tied into the budget and the deficit. It’s very easy to solve the deficit problem. You either raise taxes or …
Q: Close loopholes?
Q: What’s your answer when people ask you about the flat tax?
A: That it does not deal with the basic underlying question. The first question that we talked about on the first day of basic income tax in law school was “What is income?” Defining what income is—and is not—is not an easy question. You can’t say, “Well, you just sold your house for a million dollars, so you’ve got a million dollars in income and you should pay a flat tax of X percent on the million dollars,” because that isn’t all income. You paid something for that house in the first place. And you may have been taking deductions against that house, for example, for depreciation, etc. So you need to have some kind of deduction system in place in order to determine what is income that should be fairly taxed.
One system that has a fair amount of validity, I think, is to throw out the income tax system entirely and replace it with a consumption tax. I’m not sure we can get there from here; it’s certainly a possible discussion. There are a number of other countries where the basic tax is a value-added tax as well—also a pretty viable way of raising revenue. It’s not terribly simple, because you have to determine how much value’s been added at each stage of the production process. Nonetheless, it is a reasonable approach that has nothing to do with income; it has to do with consumption.
Q: Which were you drawn to first: the law or tax law?
A: I hadn’t really focused on tax law as a career until my third year of law school. I was drawn to law, like so many other people, because it feels like such a fascinating combination of the use of my intellect and problem-solving ability with actually helping people. It was a way I could use my mind and my heart.
Q: When did you first start thinking about becoming a lawyer?
A: Actually, when I was very young. I had this silly fantasy of being the first woman president of the United States. I figured out relatively early that most presidents were either generals or lawyers, and I knew I didn’t want to be a general.
At that time, and even when I applied to law school, I had a pretty naïve idea of what lawyers do. My image was that I would sit in an office and people would come in and I’d solve their problems. The practice of law is a lot more complicated, but amazingly enough I have spent most of my career doing pretty much that. “Gee, I’ve got a problem with the IRS,” or “Gee, I’d like to help my sister but she’s under my brother-in-law’s thumb.” They come into my office and I help solve their problems.
Q: What did your parents do?
A: My parents were both mathematicians. My father worked for the Bureau of Standards in Boulder—now it’s the National Institute of Standards and Technology. He was very much a scientist and a mathematician. My mother got her bachelor’s and master’s degrees in mathematics, then worked towards her Ph.D. in social psychology and eventually took a job with the Colorado Civil Rights Division, where she applied some of her statistical analyses to civil rights cases.
Q: What was their reaction to you going into law?
A: I think they were a little surprised. At that time we didn’t have any lawyers in the family. My father was sometimes baffled by what I did. He would say, “But how can I take a depreciation deduction for something that’s increasing in value?”—applying his mathematical, logical mind to the very different and at times questionable logic of the tax code.
There were times when my father thought what I did was prepare income tax returns, which is a common misunderstanding. I think there are some tax lawyers who do prepare income tax returns, but I generally don’t. I am not an accountant. I know people also expect me to be very busy around April 15th, and I say, “No, that’s not really when I’m busy.”
Q: When are you busy?
A: During the last four months of the year, primarily, because you have to plan transactions to be done by the end of the year. There’s very little you can do about your income tax picture after the end of the year.
Q: You were part of that first small wave of women attorneys in the 1970s. How many female classmates did you have?
A: I think there were about 28 of us. I know there was a huge percentage increase. The class of ’74 was 15 percent women and the previous class was 7 percent women. At the time we entered law school in 1971, only 3 percent of the lawyers in the U.S. were women.
Q: What was that like?
A: I didn’t much like law school, and I didn’t get the sense that we as women were particularly welcomed there; but I loved studying law. I had such a sense of recognition that this was the right place for me to be, and the right area for me to be studying in. And the women who were there really bonded together. We had a very close-knit group. We still get together periodically and celebrate.
There was certainly an attitude among some that women were taking places in law school away from men, and after all, the women were just going to quit and have children. That was voiced. That was a concern expressed by employers. I found employers pretty openly hostile and disbelieving in some cases. I remember one law firm telling me, “Well, we hired a woman once, but that didn’t work out.” Another law firm told me, “We have a lot of oil and gas clients, and they’re a pretty rough crowd. I’m not sure how they would relate to a woman.” It’s hard for people today to believe that employers would make those statements out loud.
Q: Did you have a mentor?
A: I worked for the IRS in New York City, and there were a number of women in the IRS—women lawyers who had found it difficult to get jobs in private practice. One of my friends was a woman whose mother was a tax court judge: Irene Scott. She was a lovely lady who made a point of introducing me—as well as her daughter—to well-known tax lawyers at ABA tax-section functions, for example. I don’t know that I would call her exactly a mentor, but she was certainly someone who opened doors.
When I left the IRS, I went to work for a law firm in Beverly Hills. One of the co-founders was a woman, Cynthia Hall, who became a tax court judge and subsequently went on the 9th Circuit. I wouldn’t say she was a mentor—I only met her a few times—but I look upon Irene Scott and Cynthia Hall as women who paved the way for people for like me. We were sort of the second generation. I think my generation owes tremendous gratitude to those women for making it a little easier for us.
And it still wasn’t easy. It still isn’t today, but it’s a very different world today. My daughter graduated from law school in 2005, and her class was over 50 percent women.
Q: What is she practicing?
A: She became an ERISA lawyer, working for the employees’ side. I did a lot of employee benefits or ERISA work in my earlier days when I was pregnant with my daughter. We referred to the unborn fetus as Erisa, so it’s ironic that she ended up being an ERISA lawyer.
Q: How long have you been with Pendleton, Wilson, Hennessey & Crow?
A: Twenty-two years. It was founded in 1970 as Pendleton & Sabian. This firm has been not only dedicated to the high-quality practice of law with great integrity, but they’ve really given me the freedom to explore what I wanted to do.
One of the benefits of that freedom is falling into a position as president of my college alumni association, where we ended up essentially saving my college, Antioch, in Ohio. I happened into this alumni position—which is not generally a position of power—at a time when the university announced they were going to suspend operations of the college. So I ended up leading this haphazard movement to save Antioch College, which required a lot of my knowledge of governance, particularly nonprofit organization governance and tax law, as well as my experience with charitable fundraising and obtaining tax-exempt status. We ended up purchasing the college back from the university. Essentially, we created a 150-year-old startup.
Q: When was this?
A: 2007 to 2011.
Q: So during the global financial meltdown.
A: You got it. Yes, trying to raise money to revitalize an underfunded college with a small endowment with pre-Civil War dilapidated buildings in the worst recession since the Great Depression. It was a huge challenge.
Q: Is there anything you’d like to talk about that I haven’t asked yet?
A: There is one other area. Since the 1970s, I’ve been involved with planning for same-sex couples. It really happened quite by chance. Someone came into the office in Beverly Hills when I was a young associate, and said, “I want the person I love, and not my family, to have control over my assets,” and one of the lawyers in the firm said, “Nancy’s a feminist. Why don’t we have Nancy do this?”
At the time, it wasn’t even possible to have a durable power of attorney in place to give to your life companion to make decisions when you’re not able to make them. It’s been so exciting to be a part of the marriage equality movement, which I certainly didn’t see coming as rapidly as it has. Imagine how excited I was when the Windsor case went to the U.S. Supreme Court. How often do you have that opportunity to combine tax law and constitutional law? I was so excited!
This interview has been edited and condensed.