Paul L. Dillingham resigned his TEI membership in 1978 when he was promoted out of the tax department of the Coca-Cola Company. This was five years after he completed his term as 1972-1973 Institute President and four years before I joined the Institute's staff. Nevertheless, I was introduced to his work my first week on the job. Paul, who died on July 15 at the age of 84, led the organization in a time of significant tension between the Internal Revenue Service and the corporate tax community. High-profile corporate failings, revealed by whistleblowers, had prompted the IRS to develop a series of 11 questions to be asked of every taxpayer involved the Coordinated Examination Program (which is now called the Coordinated Industry Case, or CIC, program). The questions addressed what were euphemistically called "sensitive payments," that is to say, corporate bribes or "slush funds."
Do you think that Schedule UTP goes too far or, by its very existence, impugns the integrity of in-house tax professionals? Consider the very first of the IRS's "Eleven Questions":
During the period from ___ to ___, did the corporation, any corporate officer, or employee or any third party acting on behalf of the corporation make, directly or indirectly, any bribes, kickbacks, or other payments to any employee, person, company, or organization, or any representative of any person, company, or organization, to obtain favorable treatment in securing business or to otherwise obtain special concessions, or to pay for favorable treatment for business secured or for special concessions already obtained?
Subsequent questions drilled more deeply, broadly asking about direct or indirect payments, loans, the provision of services, etc., to government officials, political candidates, or political parties, whether foreign or domestic, national or local. (You may be thinking, "Oh, this relates to the Foreign Corrupt Practices Act, right?" The answer is that it led to the FCPA, which was not enacted until 1977.)
It was not a particularly pleasant time to be a corporate tax director, as corporate behavior was scrutinized, both independently and as part of the whirlwind of investigations that came to be known as Watergate. At TEI's Annual Conference in 1972, Johnnie Walters, the Commissioner of Internal Revenue, forthrightly challenged the audience about the conduct of the business community. Conference participants were taken aback at the Commissioner's provocative words, qualified as they were, interpreting them as an attack on their character and professionalism. More than a few of them pressed TEI to "do something" about the Commissioner's remarks, and Paul Dillingham, as TEI's leader, did — and he did so in a thoughtful, effective way.
Doing something, or perhaps more accurately, doing the right thing, is often easier said than done. For some people, "doing something" means engaging in a verbal knife fight — taking the Commissioner on, mano-a-mano, arguing (essentially) that "you can't do that." Alas, while viscerally rewarding, a "we'll show you" approach often fails to produce positive results. Recall those commentators on Schedule UTP who argued that the form violated the corporate taxpayer's right against self-incrimination. While perhaps not wholly frivolous, the claim became little more than a distraction since the Fifth Amendment is generally considered not to extend to corporations. To quote Shakespeare's Macbeth, it was "full of sound and fury, signifying nothing."
What TEI did in 1972 presaged what the Institute did in 2010 with Schedule UTP: It engaged on the merits, not the emotion of what the IRS was doing. Through Paul Dillingham, TEI did not dispute the IRS's right to ask the 11 questions (or, more generally, its obligation to root out "corporate tax fraud"), but rather the wisdom of painting with too broad a brush.
First, Paul successfully urged the Commissioner to confirm, both internally within the IRS and publicly, that the IRS recognized that "there are only a ‘few rotten apples in the barrel' among large corporations." (Although the Commissioner had said this in his Annual Conference speech, TEI was concerned that the qualification would be lost on some, including field agents.)
Paul also persuaded the Commissioner to sit down for a candid conversation — which was videotaped — during which the two men talked openly and positively about TEI's history of cooperating with the IRS and the Commissioner's heartfelt desire to strengthen the relationship. For his part, Paul provided the Commissioner with TEI's Standards of Conduct and emphasized the Institute's (and its members') dedication to the principles of sound and honest tax administration.
Copies of the Walters-Dillingham tape were distributed in late 1972 to all TEI chapters, with the suggestion that the tape be played, not only for chapter members but for IRS case managers and agents in their vicinity. (Since this was before the days of everyone having a Betamax or VHS — younger members, Google it! — many chapters had to rent something called a "Sony VP-1000 U-matic Videocassette Player" to watch the conversation between the Commissioner and Paul.) The exercise likely prompted guffaws and under-the-breath comments in some quarters (from TEI members and IRS employees alike), but based on the reports in TEI archives, it spawned numerous productive conversations between our members and their IRS counterparts.
TEI was hardly alone in raising questions about the IRS's approach (as was the case three decades later with Schedule UTP), but the Institute's responsible, constructive engagement on the issue not only helped improve the overall environment — an ethereal, even evanescent benefit to be sure — but also led to the IRS's reducing the 11 questions to 5 (plus a preamble). This result, again, foretold the outcome of the Institute's involvement on Schedule UTP, where the IRS made significant changes to the schedule in response to firm, but respectful, comments from TEI and others.
Three days after becoming TEI's Tax Counsel in 1982 I watched the videotaped conversation between IRS Commissioner Walters and Paul Dillingham. (Candidly, it probably took me a day to figure out the machine!) It showed me two individuals — one from industry and the other from government — both top-notch professionals, both articulate, and both committed to the cause of collaborative tax administration. It affirmed my decision to join TEI's staff — here was an organization that engaged firmly, respectfully, and effectively — and it was almost certainly the first time I applied the "great person" theory of history (which I discussed in my March-April column) to TEI. In other words, it made me think that TEI was indeed fortunate to have Paul Dillingham as its president in 1972.
These memories came flooding back to me in July when Paul's wife, Barbara, called to tell me that Paul had died. What a giant of the Institute, I thought. How fortunate I was to have known him, however fleetingly. One of the obituaries of Paul began, "There is hardly one word or sentiment that can capture the essence of Paul Dillingham. He was deeply spiritual and wise, he was romantic and loving, and he was encouraging and upbeat." He was, as his daughter noted after his passing, "the master of positive thinking" — a trait exemplified by his "making lemonade out of [the] lemons" in the IRS Commissioner's remarks at the 1972 Annual Conference.
Paul Dillingham began his tax career with the Kentucky Department of Revenue after graduating from the University of Kentucky. When he left government service, Paul spent two years as a selfemployed tax professional and certified public accountant. He joined Coca-Cola in 1958 and served as Vice President-Taxes before being promoted out of the tax department. After he retired from Coke in 1984, Paul was elected to Honorary Membership in TEI. In retirement, Paul was able to step up his volunteer efforts for the Salvation Army and several other organizations, work that continued throughout his life.
Before Mike Murphy, TEI's former Executive Director, got to know Paul as a past TEI president, he knew him as one of "his" taxpayers. After attending a memorial service for Paul, Mike wrote me:
I met Paul Dillingham when he was at Coke and I was District Director and Acting Regional Commissioner in Atlanta. [Atlanta, by the way, was the location of the 1972 Annual Conference.] After Paul completed his term as TEI International President, he stayed in touch with Joe McGowan, Director of the IRS Office of International Operations (OIO). I was the Assistant Director and remember how impressed Joe was with Paul. I was, too. We did not meet again until TEI celebrated its 50th Anniversary in 1994, and Paul was one of TEI's special guests. I will never forget how outgoing and friendly Paul was to all he came in contact with. That's the way I will remember Paul Dillingham...
At his memorial service, I was able to spend a few minutes with Barbara. When I told her I knew Paul while I was at IRS, she did not say anything, but when I mentioned TEI, her eyes lit up and she expressed her appreciation for my attending and the regards from Paul's friends at TEI. I left the church grounds with tears still flowing but still a smile. . . . A great and caring friend is gone from our midst.
I also heard from past TEI President, Sol Coffino, who had recommended in 1982 that I watch the videotape of Paul interviewing Commissioner Walters:
I was so saddened to learn of Paul's passing. Paul was TEI International President when I joined TEI, and when I became President, he extended his hand and generously provided sage advice. TEI benefitted greatly from Paul's decades of contributions to the Institute. Over the years, whenever I saw him I was impressed by his demeanor, his presence, and his warmth. Paul was the consummate corporate tax professional and always made himself available to those who followed him at TEI. And Paul and Barbara were among the classiest TEI people in our history. He will be missed.
I will let Paul himself have the last word, because by his example, he pointed the way for TEI to remain relevant and effective in the 21st century. In his annual report to TEI members at the end of his term in 1973, he quoted from the Institute's Principle and Purposes, which commits TEI "to promote and support . . . the improvement of the tax laws, and of their administration, at all levels of government." He then wrote: "As a citizen and a member, as well as in the role of Institute President, I am proud of the courage and the forthrightness of our organization in facing up to this broader concept of our professional responsibility. There is a constant increase in the recognition and appreciation of our contribution expressed by legislators and legislative staff at federal, state, and local levels. This will show up more and more in a better corporate tax system."