Corporate structure and the evolving tax function: as the tax role elevates in importance, so does status in corporate hierarchy.

• Position: Discussion

Let's tell it like it is. The role of the corporate tax practitioner has changed dramatically in the last twenty years as the tax function has expanded in scope and responsibility. Not surprisingly, the status of the head of corporate tax has changed as well, and now more chief tax officers are reporting directly to the chief financial officer (CFO). The participants convened to discuss the place of the chief tax officer in the corporate hierarchy. Joining in the roundtable were Janet Kreilein, senior director of tax and assistant treasurer at Fortis Management Group LLC; Don Rath, senior vice president of global tax and corporate risk assurance at Symantec Corporation *; and Cooper Monroe, director of state tax at Duke Energy Corporation.

Michael Levin-Epstein: When you first came aboard, what did the corporate structure look like in terms of the tax function?

Janet Kreilein: The senior tax leadership position has always reported to the CFO with one exception, and that was a unique situation where the controller was taking the lead on many CFO functions to allow the CFO to focus on M&A [mergers and acquisitions] work for a couple of years.

Don Rath: When I joined the company, the head of tax position also reported directly to the CFO, and I don't remember a time when that wasn't the case.

Cooper Monroe: I'm going to go way back--to about 1988. At that time, the tax function reported to the controller, so it's always been in the finance organization, but way back then the head of tax reported to the controller. Over time it's migrated, as Janet and Don indicated, to report directly to the CFO. I think it's an indication of an evolution of the tax department and recognition of the higher value provided by the tax function.

Levin-Epstein: In addition to recognizing the higher value that the tax function has, where did it originate that heads of tax started to report more to the CFO?

Monroe: I think it evolved out of the vice president of tax marketing to the rest of the organization the value that the tax department was providing to the enterprise. I also think the tax function across all industries has evolved and become more specialized. For instance, we became an international company, and that added complexity, which led to the recognition of the tax function as a field that needed to be represented directly to the CFO.

Kreilein: To follow up on that, in my organization, we were fairly active from a mergers and acquisitions perspective. And, often, to have the right tax results come from those transactions requires the tax team to be at the same table as the CFO as those transactions are being negotiated and modeled. So that approach has developed in our organization. When there is a business improvement activity or any activity that requires some modeling such as disposition or acquisition work, the tax team generally has a seat at the table. That lent itself well to reporting to the CFO position rather than the controller position. I would also add that some of reporting structures came about as a result of Sarbanes-Oxley--legislation that highlighted the tax functionality within organizations and put greater scrutiny on the tax function through subsequent audit requirements of an organization.

Monroe: I agree Janet--being at the CFO table allows for tighter integration across the different finance functions. Being under a controller limits that to an extent. 1 think it's really about integrating tax into the multiple finance areas that can be touched, with M&A being one of those that you just pointed out.

Rath: I would agree with all of that, and I would also add that from what I've observed, there is a recognition by members of the board of directors that tax is growing in complexity. There is more risk than perhaps there has been in the past. They want the right person on the job, so I think there has been board pressure, or at least audit committee pressure, to upgrade the level of the lead tax role. In particular, this can happen after...