IRS Deputy Commissioner (International) Danilack to Resign

Michael Danilack, who has served the Internal Revenue Services in two key international positions, confirmed June 25 that he plans to resign July 2. Dolores W. Gregory's story, which appeared in the June 26 issue of Transfer Pricing Report, follows.

U.S. Competent Authority Michael Danilack has resigned effective July 2.

Danilack, the deputy commissioner of the Large Business & International Division of the Internal Revenue Service, confirmed his departure from the agency in an e-mail to Bloomberg BNA.

“I'm not retiring, I'm just moving on,” he said, but provided no further details.

Douglas O'Donnell, assistant deputy commissioner (International), has been appointed acting deputy commissioner and acting competent authority, according to an internal IRS announcement.

As the competent authority, Danilack oversaw the implementation of tax treaties and tax information exchange agreements and represented the IRS at the Organization for Economic Cooperation and Development and other multilateral tax organizations. As deputy commissioner, he managed international tax compliance strategies within the IRS.

Danilack joined the IRS in early 2010 and quickly developed a reputation as a visionary manager who found innovative ways to work around limited resources in an often beleaguered agency.

He oversaw the reorganization of the former Large and Mid-Size Business (LMSB) division into LB&I and the creation of the Transfer Pricing Operations within LB&I. He also oversaw the creation of the Advance Pricing and Mutual Agreement (APMA) program, combining the double tax functions of competent authority with the former APA program in the Office of Chief Counsel.

For these changes, Sean Foley of KPMG LLP said, Danilack “will be remembered as one of the most influential leaders of international tax at the IRS.”

Following its reorganization, APMA's productivity soared, closing triple the number of agreements that the APA program had previously.

Most recently, Danilack oversaw the creation of international practice networks aimed at improving knowledge management in the international examination function.

“He was always looking for a best practices approach—how can we do it better, how can we do it more efficiently, how can we do it with less? Because that was always the challenge,” said Barbara Mantegani, of Grant Thornton LLP, a former senior manager in the APMA program.

“It will be very hard for the next CA to fill his shoes because he's left such a mark on how that part of the IRS goes about its business,” she said.

Indian APAs

As U.S. Competent Authority, Danilack made headlines by drawing a line in the sand with India over its newly launched APA program. In early 2013, Danilack announced that the IRS would not approve bilateral APAs with India until that country's competent authority adopted more principled positions in negotiating double tax cases.

At the time, Danilack cited a backlog of 140 double tax cases with India that had proven extremely difficult to resolve. He also expressed unhappiness at the Indian competent authority's approach to negotiations, saying the official appeared to be advancing a policy agenda that most people would see as controversial, while it was not clear that his agenda was in fact the position of the Indian government.

“If you are a policy official and you think policy needs to move in a certain direction, that is fine,” Danilack said at the time. “Work policy, work it up your chain, have a multilateral discussion about it and advance your policy and make it clear this is the policy of the government.”

Since then, India replaced its competent authority, and the lines of communication have opened—though the IRS position on Indian APAs is unchanged. That position did not win Danilack favor in the international business community, Mantegani said, but it is characteristic of his approach to his work.

“He was not afraid to break the eggs to get the omelet, if he was convinced it was the right thing to do and the best thing to do,” she said. “You see that in the whole stance he has taken with India. There are lots of people who are mad because Mike has been so rigorous about India,” she said. “But he took it very seriously when in the Indian press there was stuff being written we knew we had not told anybody. He had his view and he felt like we maybe were going down a path that was not as principled.”