Death, Taxes and Politics

Patrick Duffey: Welcome. We're here today to talk about death, taxes and politics. The lead up to the 2024 election has us thinking about the 2017 tax act and future tax policy. My name is Patrick Duffey. I'm a partner in the firm's Tampa office Private Wealth Services Group. I'm joined by Brent Berselli, who is a partner in the firm's Portland office also in the Private Wealth Services Group, and also by Josh Odintz, who is a partner here in the Washington, D.C., office, advises clients on tax matters, including tax policy. So, Josh, Brent, let's talk. 

Brent Berselli: Thank you for having us here today. 

Joshua Odintz: Thank you for having me. 

Patrick Duffey: The 2017 tax act, 2024 election, the way the timing lined up, not coincidentally, I think we're looking at both together. They're an inseparable unit in some ways. Right. You know, with the 2017 tax hike, there were a lot of provisions, not the corporate tax cut, but a lot of provisions that are going to sunset. One of the most relevant to our clients is the exemption exclusion amount. But I think there's more there.

Brent Berselli: There is more there. But, you know, I mean, starting with the exemption exclusion amount — right now, our clients or all taxpayers enjoy about a $13.6 million per person estate and gift tax exemption. It's scheduled to increase by an inflation adjustment next year. We don't have that inflation adjustment figure yet. But under current law, as of June or after December 31, 2025, the exemption will sunset. And for rough numbers, we're expecting it to be cut in about half down to, you know, call it $7 million per person. So there's certainly this element of kind of use it or lose it. We know that the exemption will go away. We are counseling and encouraging clients. We have the ability to do some planning now, while we know that the high exemption is available to them, so that we are prepared, even if we're not yet pulling the trigger on, you know, making gifts at this exact moment. What we're encouraging our clients to do — a lot of our family office clients — is have the infrastructure in place so that when it is time to implement the plan, we're able to do that efficiently in advance of any upcoming potential tax law changes. Because I believe already this year — understanding, you know, this is, of course in an election year, so it might not, probably will not, go anywhere — but there is a bill out there that would propose to accelerate the sunset to after December 31, 2024. So, you know, word of caution to our clients has been to be proactive and try to implement some of these plans sooner than later. 

Patrick Duffey: So don't pull the trigger. But be ready.

Brent Berselli: Exactly. 

Patrick Duffey: Now, what about on the family office side? The actual family office. 

Brent Berselli: So on the actual family office side, what we've really seen over the last decade-plus is this tremendous rise in popularity and assets under management of family offices in the U.S. and abroad. But focusing, you know, here in the U.S. on single family offices. You know, we've seen the number and assets under management of U.S. single family offices, you know, double effectively over the last 20 years. And a recent report came out from Deloitte projecting that U.S. family offices by 2030 will have $4 trillion in assets under management. I think it's in excess of $5.4 trillion for a worldwide basis, which will put family offices at, or as projected, family offices will have a higher asset under management level than hedge funds. So they are absolutely going to continue to be a significant player in this space. And, you know, there are tax and non-tax reasons why we have seen such a proliferation in family office structures. You know, the non-tax reasons are not going away. They're going to continue to be relevant. That's everything from, you know, customized investment portfolio structuring. You know, kind of gone are the days of turning over the entire family's asset net worth to a single private bank or asset manager families at this level. And typically, we think of at a minimum $100 million net worth for structuring a new family office. And oftentimes, you know, many more than — I think the average U.S. family office right now has $2 billion assets under management and employs a staff of like 15 people. So there's a strong, strong desire in this segment of our clientele for very bespoke, unique planning that, you know, they don't want a product pushed at them. They want the ability to have someone in-house really vetting the opportunities available to them and putting the family and their long-term prospects and goals at the forefront. And kind of to that end, you know, one of the unique things that we've long been seeing in family office structuring is kind of gone are the days of the 60/40, you know, stock portfolio. Right. And I think right now in the U.S., about 46 percent of family office assets are invested in some form of alternative investment structure, you know, largely private equity and hedge funds, but also an increasing number of direct investments by family offices. And again, all of these non-tax justifications, I think, continue regardless of what may happen with the 2017 Tax Cuts and Jobs Act.

The TCJA did, however, do a couple of things that also helped to expand the family office planning. Pre-2017 — prior to the 2017 tax act — you were able to deduct miscellaneous itemized expenses under Section 212 for further production of income. The 2017 tax act did eliminate that, and that in conjunction with a very taxpayer-favorable ruling in the Lender Bagel case, did help kind of provide a roadmap and provide some additional benefits for these family office structures because in lieu of looking at the Section 212 expense, a properly structured family office operating as a trade or business may be eligible for deductibility of expenses paid through the family office under Section 162 as just a trade or business expense. I mean, it's well beyond the scope of our discussion today to get in to all of the nitty gritty on how we structure that. But, you know, for our purposes here today, it is important to know that the Tax Cuts and Jobs Act did help popularize this trade or business structure, you know, operating the family office as a true business with a profit motive and profit incentive.

But I — you know, the question has been raised by others, after the 2017 tax act does sunset and we have the ability, again, to deduct miscellaneous itemized expenses under 212 for the production of income, the question has come up — are family office structures going to continue to be relevant? And I think one, the whole host of non-tax reasons argue very, very strongly in favor of yes. But two, the tax rationale also argues in favor of the continued relevance and growth of family offices because you know, pre-2017, prior to the Tax Cuts and Jobs Act, we had significant hurdles in structuring, you know, in deducting investment advisory fees and the types of expenses that are often paid through the family office. I mean, namely under Section 67(g) you had the 2 percent floor, so you had to have those expenses exceed 2 percent of AGI, you know, to make them deductible above that threshold. But also when the 2017 tax act does sunset, we're going to have the return up the AMT and in full force. And what that's going to mean is that a majority, a majority or maybe of family office clients are going to be subject again to the to the full brunt of the AMT, rendering them unable to take those deductions. So really, we are going to remain, I think, in a scenario, where to do this type of planning effectively and to achieve the desired tax result, which is deductibility, in many cases, you're going to, I think, still need the full family office structure where you're in your family office as a true recognized trader business with a profit motive so that you can enjoy the tax benefit of some of those deductions. 

Patrick Duffey: So the 2017 tax act ends up just phasing out. 

Brent Berselli: Yeah. 

Patrick Duffey: What I'm hearing is your reporting is going to change. Some of your consequences are going to change. And at the end of the day, your structure is not going to need to change. And that's true even if you're starting your family office in 2026. 

Brent Berselli: That's correct. Yeah. And I mean, I think the way I look at it is — even if we have the sunset of some of the exempt or some of the provisions of the 2017 tax act — the way that we have come to now structure family offices to be eligible. (inaudible) That doesn't, the fact that we might now have the return of the 212 itemized deductions does not, in my mind, alleviate the need for sound family office planning, structuring those management companies as operating trades or businesses.  

Patrick Duffey: OK. So, Josh, on the subject of the 2024 election, sitting here early September, I went ahead and checked betting markets, and they imply roughly a coin flip at the White House, a coin flip in the House, and a 60-to-65-percent chance of the Republicans taking back the Senate. What does that look like to you from a tax policy perspective? And maybe you can just take a step back from a political pushback. 

Joshua Odintz: You know, so you think if one party controls all levels of government, it makes it a lot easier to pass legislation and specifically tax legislation. Congress would use reconciliation to bypass the 60-vote threshold in the Senate of winning filibusters. So as long as one party controls, then there's an easier path for tax legislation. It gets more tricky if we have divided government. 

Patrick Duffey: OK. You mentioned filibuster and reconciliation. That was ultimately how the 2017 tax act got passed. 

Joshua Odintz: Correct. 

Patrick Duffey: But coming from the '90s, a child — as a child of the '90s, my experience was Schoolhouse Rock, when a bill becomes a law. That is not exactly how that works. 

Joshua Odintz: So also, as a child who grew up listening to Schoolhouse Rock, you know that is not how it works. There's a little asterisk for reconciliation. So reconciliation is a budgeting rule that allows a party to either, to pass legislation with a simple majority in both houses or spending, revenue or debt limit. There are some limitations, including one, the bill cannot exceed whatever metric they set for by way of spending or revenue in the 10-year window. And then outside the window, the bill cannot cost any additional revenue. It could raise revenue outside the window. But it cannot lead to a deficit outside the window. 

Patrick Duffey: To increase taxes net… 

Joshua Odintz: Yes. 

Patrick Duffey: … can't decrease net outside the window.

Joshua Odintz: Correct. 

Patrick Duffey: And that's why we have a sunset of half of the provisions in 2017. 

Joshua Odintz: So that's right. It's purely budgeting. 

Patrick Duffey: So I thought it might be constructive, Brent, if we talked to Josh about how that worked as a practical matter, with some of the proposals we've seen on the campaign trip. The first one, and it started, I think, with President Trump, but has some level been adopted by Vice President Harris, is no tax on tips. So what do we think that looks like under those structures? And assume, by the way, that, you know, even though it's being proposed by both, the party who doesn't win would be in opposition to it.

Joshua Odintz: That's correct. Right. And so let's assume one party has all the levers. I think they use reconciliation to exempt tips from income tax, but they cannot exempt tips from SECA and other and the payroll taxes because payroll taxes —  anything that goes to Social Security —  is outside of reconciliation.

Brent Berselli: And so these are what we would think of as the trust fund taxes, right?

Joshua Odintz: Exactly. 

Patrick Duffey: If I'm a waiter or a waitress, I hear no tax on tips. But as a practical matter, probably most of the taxes that I pay as tips would be under (inaudible.)

Joshua Odintz: As a practical matter, that is correct. And so at the end of the day, it may not mean much to those who are paid by tips, although we might decide to take some of our income as tips. 

Patrick Duffey: We'll work on that in the engagement letters. OK. Brent, we were talking earlier about some of the Harris proposals, right? 

Brent Berselli: Yes. So one of the Harris proposals that we've seen is this concept of raising the corporate and/or capital gain rates to 28 percent. And we were curious to get your thoughts on, you know, how that might work under a reconciliation process. Obviously, it's a tax increase. There's no reduction there. So is that something that, if the votes are there, could be permanent? And where do you see the Republican Party's kind of pressure points to a Harris proposal along those lines? 

Joshua Odintz: So let's assume Democrats run the table and control both houses and the White House. I expect there will be a corporate tax increase. President Biden has campaigned on this issue, has been in the Green Book. Vice President Harris is running on the issue. Richard Neal — he's chairman again of Ways and Means — has expressed an interest in raising the rate to 25 percent. Ron Wyden wants to raise the rate to 28 percent. So I think the corporate rate will go up. It also raises between $100 and $120 billion a year for each 100 basis point increase in the rate. So it's a fairly easy razor, and it's easy to explain to the population. 

Capital gains is a little trickier. And so if it's Democrats, yes, they're looking to increase taxes on high-net-worth individuals. Maybe they'll do something like the Fed and just a bit increase. That way, instead of 3.8 percent, it'll go up to an even number, 8 percent maybe. So that would hit the right caliber of individuals that Democrats might target. 

It's a little harder to predict what Republicans will do if, let's say, they control all the levers of government. We have a very different Republican Party than we had back in 2017. In 2017, Chairmans Brady and Hatch were pro-business Republicans. They were very focused on getting the rate down, building out a territorial tax system. They were also concerned about the capital gains rate and making sure it stayed low. So both Hatch and Brady have retired from Congress, and we have effectively a brand-new Republican Party at Ways and Means. There are only two members that Ways and Means who were there in 2017, and several of the real big thinkers from 2017 on the Senate side have retired. So what does that mean? They might make different deals, and I would expect pressure to raise the corporate rate to pay for other things, including keeping the rate down on high-net-worth individuals, perhaps expanding the deduction for (inaudible). So I think there'll be — there might be some interest in raising the corporate rate a few percentage points despite what Donald Trump says on the campaign trail. And obviously former President Trump has been a bit mixed in his messaging. He said he wants to bring the rate down to 20 percent, but he didn't say anything about the corporate rate. And then he said, we'll bring it down to 15 percent so long as the corporate entity does something in the United States. In other words, produces in the United States or conducts the services out of the United States. So perhaps some type of export subsidy. So I think we're still waiting to see what campaign, what candidate Trump wants. But if he's president and it's a Republican Congress, then I think we still could see an increase in the corporate rate. 

Patrick Duffey: So speaking of exports and also former President Trump, one of his proposals is to, I think, more or less replace the individual income tax with tariffs. Assume for a second that's possible to get to roughly $2 trillion worth of tariffs (inaudible). What does that look like in the framework of reconciliation? 

Joshua Odintz: I think it's very difficult, the framework of reconciliation. So once again, reconciliation focuses on tax, spending and debt limit. But this is a trade issue. And so the question is, could this fit into revenue? That would be an issue for the parliamentarian to take on as specifically the Senate parliamentarian. The House can do whatever it wants on a simple majority. The House is a dictatorship. It's always been. That's how it operates, whichever party is in charge. But the Senate, on the other hand, it will require the Senate parliamentarian to agree that that type of tariff is germane and operates like a tax. 

Patrick Duffey: So it's a career government employee. 

Joshua Odintz: That is a career government employee. She was appointed by Harry Reid in 2012. 

Brent Berselli: And she could theoretically decide the future of the, you know, tariff/income tax regime. 

Joshua Odintz: That is correct

Brent Berselli: Wow. 

Patrick Duffey: At least she'll get a good book deal afterwards. 

Brent Berselli: And stop worldwide trade too. 

Patrick Duffey: So we touched on it earlier. But, you know, the exemption exclusion amount that we focus so much on right now, it's in the $13 million range — that's inflation adjusted amount — so 10, which then would go down to five-plus inflation adjustment under the current terms of the act. Brent, how do you see that fitting into this? Given the amount of revenue that's involved, it feels like there might be a little mismatch.

Brent Berselli: Yeah, I think so. I mean, here's the thing. I think we we've talked about this. I think the annual revenue from the estate taxes, $8 billion.

Patrick Duffey: Right and we were, to be clear, dealing with $2 trillion earlier.

Brent Berselli: Yes. Yes. So, you know, I hate this expression, but it's a relative drop in the bucket. The political importance of the estate tax regime is really outsized based on its fiscal impact. I do question — and Josh, I'm always very curious for your thoughts on something like this — you know, under current law, all that has to happen for the $13 million or $14 million with inflation perhaps next year, adjustment to drop to what we're thinking is going to be a $7 million, give or take, exemption per person. All that has to happen for that 50 percent sunset to occur is Congress to do nothing. And I think one of our, unfortunately, one of the things that we've come to realize is Congress can be quite good at doing nothing in this context.

Josh, what is your thought in terms of, if the exemption were allowed to sunset, did the Republican Party, do they potentially have more to gain from a, you know, fundraising standpoint by seeing that, that exemption decreased to that extent and using that as an ability to say that Harris and the Democrats presided over the largest tax increase that we've seen?

Joshua Odintz: So I think you're assuming a split government in that fact, in that scenario.

Brent Berselli: I am, absolutely. 

Joshua Odintz: Because if it's unified government, Republicans — this is a big issue for Republicans and they have made it an issue for the last 30 years, and so they will absolutely retain the exemption. They might increase it slightly, but I think they would retain the exemption of the rate. They might even lower the rate. 

Brent Berselli: And actually, on that point, I would say we have never seen an exemption — the estate and gift tax exemption — increase and then actually be allowed to sunset to two prior levels. And it wasn't that long ago, I mean, earlier in our careers that we were starting off with $1 million exemption and a much larger percentage of the population being subject to it. 

Patrick Duffey: Josh, we won't ask what it was at the beginning of your career. 

Joshua Odintz: Well, when I was at Treasury, there was a year where there was no estate tax. So, zero.

Patrick Duffey: 2010. 

Joshua Odintz: Yep. But I don't remember because I tend to work with boxes so — as in corporations — so I can tell you what the corporate rate was. But going back to — and obviously Democrats have been very focused on addressing tax advantages that high-net-worth individuals can take advantage of. So I would expect the rate to increase if Democrats are in control and the exemption to decrease, which would go against history. That being said, if it's split government and if Republicans decide to obstruct, and then the exemption would decrease. I think they're playing with fire because it means most likely that taxes are going up for everyone. And while I know we're talking about a very important issue for family offices, the reality is Congress is going to focus on the middle class because that's frankly the majority of the taxpayers who will be subject to higher taxes. We have an expanded standard deduction. We have eliminated PEPs and Pease, the different phaseouts, eliminated the EMT for most wage earners. That would all disappear if allowed to expire, and that is a risk. So if they were to feel lucky punk, then it's possible (inaudible) that yes, the Republicans could do it and use it as fundraising and blame the Democrats for a tax increase. But that is a very risky maneuver.

Patrick Duffey: So to kind of synthesize all of this, what I think I'm hearing is if there's an extension, more or less, of the 2017 tax act, we're in a world where there's probably been a Republican (inaudible). But, that said, some of those changes that you were talking about in the Senate and in the House since 2017 might lead to a different result, even if there is a Republican (inaudible).

Joshua Odintz: That is correct. So I think it's also important to level set how much revenue we're talking about. So if Republicans, say, have all the control of Congress and the presidency and they just decide to change the dates on everything in the TCJA — so make no other modifications — that would cost $4.6 trillion over 10 years. 

Patrick Duffey: Which is substantially more than it did then. 

Joshua Odintz: That's correct. And it was a $1.6 to $1.8 trillion bill back in 2017 based on Joint Committee on Taxation's scoring. So we can — there are other scoring mechanisms and other groups have, you know, tried to count what's called dynamic scoring or the trickle-down effect, but Joint Tax scores things with their model based on tax returns. 

Patrick Duffey: So more or less, I think it would be what? The CBO, the CBO would try their best to say, well, if we tax this less, then maybe people spend more or something like that.

Joshua Odintz: That's correct. There would be some GDP growth. That's where CBO adds. But JCT solely focuses on tax changes. So looking at, if, let's say, we were to eliminate the offsets — so allow SALT to come back fully, which I would like, any of us would like — then if we eliminated all the offsets, that would cost $8 trillion over 10 years. 

Patrick Duffey: But bringing back the state and local tax deduction probably makes some folks very happy, particularly in California, some northeastern states.

Joshua Odintz: I think so. New Jersey. New York. Absolutely. And so — but remember, Republicans in this Congress and potentially the next Congress are quite different from the last, from 2017. So the international provisions, for example, were designed by Senators Toomey, Portman and Enzi. And they have all retired and they were pro-business Republicans and pro-multinational Republicans. I'm not sure that's where the party is now. And so they may make some very different decisions about where they want to spend their money. They might, for example, raise the corporate rate a few points to then put the money back into pass-through businesses where they've shown a lot of interest. Senator Johnson, for example, created 199A, the deduction for pastors. So he might decide to put the money there. Or they might want to lower the corporate, lower, for example, the capital gains rate, bring up the corporate rate because they think that's the mechanism for collection, it's a better mechanism. So there's a variety of ways that the money could be shifted and still have a bill that costs the same.

Brent Berselli: Josh, you mentioned, you know, kind of potentially the willingness to raise the corporate rate. I'm just curious how that, if at all, how that reconciles with, you know, some of the past statements. You know, as part of the 2017 tax act, reducing the corporate rate to bring us more in line with other developed industrial nations and make us — the U.S. —more competitive on the corporate rate. 

Joshua Odintz: Yeah. Things have really changed since 2017, in part because the OECD and (inaudible) setting to a minimum of 15 percent tax rate in all the countries that have signed up, so the EU, many Asian countries, etc. So maybe there is less pressure on the corporate rate on keeping it super low or lower than 21 percent. And there's mixed messaging from the Republican Party. So we hear, you know, like I said, President Trump has said he would like, you know, a 20 percent rate or 15 percent rate. We've heard some Republicans are willing to raise the rate because, frankly, they are from jurisdictions that do not have large multinational businesses and they work closely with split (inaudible). And so the corporate rate doesn't benefit their, you know, their base. 

Patrick Duffey: So I think we talked a little bit about the Paris tax agenda. It feels like in light of the discussions we had on where the election stands today, which is early September, and you were joking earlier that, you know, if we had filmed two months earlier, we'd be having a total different discussion, how likely does it feel to get meaning, that meaningful portions of that agenda are going to get past in the cycle? 

Joshua Odintz: Yeah. So if — let's assume — if there's split government, I think a lot of the Harris agenda would be dead on arrival, especially the more controversial items. However, some of the items, for example, increasing the ability for small businesses to deduct their expenses, I think that's going to be attractive on both sides of the aisle. That will help startups. 

Patrick Duffey: And I think they've gone back and forth on the childcare credit, right? It feels like they are (inaudible). 

Joshua Odintz: Clearly, there's a huge interest, from both parties, to expand the child tax credit. Question is, how do you to do so? But so whoever wins will help decide how that debate is decided. But that is certainly, there is agreement there as well. 

Patrick Duffey: Well, that probably brings us to a really good final discussion, which is what a compromise is like. 

Joshua Odintz: So I think, let's take it where I think where Trump has prevailed as president, Senate flipped and House is flipped, which is a possible outcome. I think if Richard Neal is chairman again of Ways and Means, he is willing to compromise. He works well with Republicans. He's worked very closely with now Chairman Smith on tax legislation. I would expect Chairman Neal to work closely with White House to try to reach a compromise. 

Patrick Duffey: And tax legislation would start there. It has to.

Joshua Odintz: It has to start in the House under the Constitution. All tax legislation has to start in the House. However, there is a little asterisk there. As long as the House sends over a House resolution, a House bill, the Senate could strip out whatever is in that bill and send it back with tax legislation. So it will be up to the House to jealously guard the legislation and decide when to send over a bill. 

Patrick Duffey: OK. 

Joshua Odintz: So that, I think, is a — it's easy to see a compromise there. And clearly, we don't know, Senator Crapo, what his agenda is, he's working on that agenda right now with his caucus. But I think compromise is doable. It's a lot harder to predict what compromise looks like if Trump loses. And, in part, because if Trump has control over the party he might enjoy, might enjoy impeding or preventing a tax cut from going through because then it would be viewed as Democrats that raise taxes. The most in history. And that would — that could help Republicans retake government. 

Patrick Duffey: Because to Brent's point, that would essentially be status quo — just serve as blocker. And then you have an effective tax rate, a tax increase on probably most of everyone. 

Joshua Odintz: Everyone. Yeah. Almost everyone. Yeah. 

Patrick Duffey: And so when we're looking at the different compromise scenarios and trying to prioritize things, where do we think things land with,  if there's a Trump loss? But again, we seem pretty likely a Senate victory. Mitch McConnell isn't there.

Joshua Odintz: Correct. Matter of fact, we don't know who's going to be the leader. There are three "Johns" that would like to be the leader in the Senate. 

Patrick Duffey: So the start of a poem or a good joke. 

Joshua Odintz: Exactly. It's a great joke. But there are three — John Thune, John Barrasso and John Cornyn. Thune from South Dakota, Barrasso from Wyoming, Cornyn from Texas. And all three of them have served for many years in the Senate. They're really, you know, institutions. There is (inaudible) in the Senate, but there's also a fourth person who is not named John who would like the role, and that's Senator Daines for Montana, and that's Donald Trump's choice. So clearly, the Senate, how it operates — is it going to be, is the leader willing to reach deals will depend on who the leader is in the next Congress. But Mitch McConnell will not be that leader. 

Patrick Duffey: OK. Well, you know, Brent, we were talking earlier about — you have the estate tax and kind of what does that mean for the families that we work with? The exemption exclusion means a lot, but oftentimes that's more of a starting point.

Brent Berselli: Yeah. I think it's really some of the advanced planning that we can do on top of the exemption. You know, leveraging, you know, discounts for closely held business interests, taking advantage of, you know, what are still historically low interest rates to effectuate some sale transactions to, you know, undertake estate freezes and additional value outside of the estate. And I think to your point where we would be, you know, what might move the needle more for certain clients who have substantial estates where, you know, the $26 million exemption between spouses is, certainly it is more than a rounding error. But when you're talking some of the, you know, multiple hundreds of millions to $2 billion net worth families, it's not a real substantial sum. What would potentially move the needle more is if there was, you know, allocation of budget to increased enforcement or even, you know, looking at some of the old proposed regulations from, you know, 2015, 2016, that President Trump did to do away with when he came into office for, you know, 2703, 2704. 

Patrick Duffey: So that brings up two interesting points because we're talking about compromise. And of course, we're all really in the back of minds thinking that there's a good chance that instead of compromise, it's just status quo, (inaudible) doing anything. But in the event that there's a Harris Administration, it sounds like they could do quite a bit because you have substantial IRS budget, which was increased by $80 billion. 

Brent Berselli: And then back to 60. Yeah. 

Patrick Duffey: Josh, with the additional funding to the IRS, which we understand is mostly allocated to the income tax now, couldn't an administration without congressional action shift a lot of that spending over to enforcement, get to the state tax side and take some more muscular positions into the regulatory aspects? 

Joshua Odintz: So I'll take the spending first. A lot of that money is actually being spent on technology. The IRS until recently used FORTRAN and COBOL as its programing languages for returns, which are languages that are no longer taught in colleges. So they do need to modernize their systems. And a big focus has been on customer service as well, so that people can actually reach a live voice at the IRS. It would be nice occasionally to talk to someone. 

Patrick Duffey: Customers in this case, meaning taxpayers. 

Joshua Odintz: Taxpayers or their counsel. Yes. And so, yes, the IRS, if it got additional funding, could use that for enforcement. I don't know how much they follow through already of that roughly $60 billion. But it's not spread evenly over the budget cycle. It actually is a (inaudible) number. So I think they're probably close to half now of that number. But yes, the IRS could get additional funding. Even if nothing happens, there's an annual fight over how to fund the government and it's been a priority of President Biden. I would expect if Harris is president, she would also continue that priority of increasing the size of the IRS. 

Brent Berselli: But on the flip side, if we did see a red wave. 

Joshua Odintz: If it's a red wave, I think we would expect to see two things happen. One is the budget of the IRS shrink. And second, what budget exists for the IRS, more of it should be used for customer service because... 

Brent Berselli: Over enforcement. 

Joshua Odintz: ...over enforcement. So the honey versus the stick. And so the second piece was...

Patrick Duffey: Regulation. 

Joshua Odintz: …regulation. And that gets into a change at the Supreme Court. I think it's, the Supreme Court ruling in Loper Bright is a very significant change in how the administrative state is going to operate. We see already. Prior to Loper Bright, taxpayers were suing the IRS, challenging various regulations. There are a lot of problematic regulations on the international side, and taxpayers have been winning those challenges. So I think the IRS might get skittish about coming out with the fighting regulation. It might be better to audit as opposed to trying to come out with a very aggressive regulation that may not be supported by the statute. 

Patrick Duffey: OK, fair enough. We've covered everything today. We'll look forward to watching everything as it develops and, of course, the next few months. Thank you both for joining us. 

Brent Berselli: Thank you for having us. 

Joshua Odintz: Thank you for having us.