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Tax attorney Mark Klein: 'I find myself in many cases being a life coach'

Mark Klein knows he probably sounds nerdy to a lot of people. After all, he's a tax lawyer, and he loves it.

Klein has been working for Buffalo's largest law firm, Hodgson Russ, for his entire 35-year career – all of it in the same practice area. He's considered one of the state's leading tax-law experts, and has written five books about state tax issues while also teaching about taxation at University at Buffalo's School of Management.

The Amherst native, who graduated from SUNY – Buffalo State and UB Law School, was recently named as the new chairman of the firm, taking his turn in a rotating position. He's counting on his experience counseling clients to help him counsel younger attorneys, as he works to help them – and the firm – grow.

Q: What got you into tax law?

A: It's actually a strange story. I started at the firm and I wanted to be a litigator, because every lawyer when they watch TV and they see what a lawyer is, it's the guy who litigates.

The firm didn't have room for me to be a litigator until Christmas, so I started around Labor Day in tax. They said, try it for a few months. I tried it, and I kind of fell in love with it. We were working on some cases for some national companies, with sales taxes. The litigation partner in December said, we're ready for you now, and I said, I think I'll stay in this.

I don't think many people go into law school to be a tax lawyer. It's like how many doctors go to med school and say I want to be a proctologist. Someone must find it interesting. Tax law was just my calling, apparently.

Q: What do you particularly enjoy?

A: Every day is different. You wake up in the morning and I never know what the day will bring. It could be some celebrity having tax problems. It could be some local restaurant facing tax warrants that could put it out of business. It just runs the gamut. It's just fascinating stuff.

I like the residency issues, because there's so many nuances and so much misinformation out there, that it really feels good to put people on the right path. Most people get their residency advice from their friends on the golf course, which is the best place for legal advice.

Most people think if I go down to Florida for 180 days, I'm a Floridian. But New York isn't excited about letting people leave, so the tests are difficult, and people fall into traps.

I can sort of guide people to live the way they want. There's so much nonsense out there.

Q: Like what?

A: Auditors, everybody focuses on the quantitative nature of things. How many days did you spend there?

But New York looks at qualitative aspects. Where do you spend the holidays?

A lot of auditors these days say where did you go for your summer vacation? Europe for three weeks. But most people after a vacation, they're kind of exhausted. They can't wait to get home. Where do you go? Do you go to Florida? Or do you go to Buffalo? Nobody goes on vacation and then goes back to Florida for more vacation.

A lot of advice also deals with where doctors are. Who in their right mind goes on vacation to get their teeth cleaned? You do that when you're home. So auditors are focused on things that my clients, most people, are clueless about. They really find it fascinating that auditors think that way.

People forget that when you're audited, you're dealing with a very nice man or woman, who makes $35,000 or $40,000 a year. There's a real disconnect between auditors and our clients that make $3 million or $4 million.

When an auditor moves, they hire a moving truck and pack everything up. When our clients move, they can afford to have more than one home. The first question an auditor will ask a client is when you moved to Florida, where is your receipt for the moving van? There's this disconnect with auditors who expect to see a moving van.

The other thing people don’t realize is how smart New York State is and our computers are. The first thing auditors do when someone claims they moved is go online. The last thing I want my clients to show my auditors is their Facebook page with a big photo of them in Florida wearing an I-Heart-NY T-shirt. That's not good. That sends the wrong signal.

I had a client in Western New York who sold a chain of stores, and he became a Floridian. He sold the stock so there was no tax at all. Except my client turns out to be the cheapest man in all of America. My client loved to come back to Western New York because he enjoyed the fishing and weather. But my client realized that when he went for his fishing license, a non-resident pays three times as much as a resident –$70 versus $17.

He paid the lower amount for the resident license. New York got wind of that. So the answer there is be consistent, don't be cheap.

Q: How does this experience prepare you for your new role?

A: In addition to dispensing legal advice, I find myself in many cases being a life coach. I try to help clients through financial crises and try to get them on the right path. That experience has served me well to deal with people and their problems they might experience, with attorneys at my firm who might have difficult clients or difficulties in their life or difficulty advising clients.

Thirty-five years gives you a lot of perspective, and that's the kind of experience you want to impart to younger lawyers.

Q: This must be an interesting time to be a tax lawyer, with the recent changes in federal law.

A: It's a good timely topic, since a lot of what I do is help New Yorkers move to Florida.

As a result of Trump's reform, a lot of Western New Yorkers and others are fleeing for the sunshine because the tax structure is not as harmful to them. Trump's legislation says that you can't take a deduction for your taxes that exceeds $10,000. Anybody who pays more than $10,000 in combined property and income taxes, it's just terrible.

So it's become a lot more expensive to be a New Yorker these days.

Q: Any other focus areas for you right now?

A: The other issue is that New York is one of the few states that has an estate tax. It's 16 percent. If you come down to Florida, your estate tax becomes zero. Suddenly that becomes a lot more interesting to New Yorkers who don't feel like paying New York's estate tax.

With the estate tax, the governor has increased the threshold to a little more than $5 million. If you die with under $5.2 million, you don't pay estate tax. If you die with $5.5 million, you pay estate tax on every penny. You lose that first $5.2 million exemption completely. It's a cliff.

That's why your marginal tax rate, we've seen it hit close to 200 percent. For every additional dollar your estate is worth, you pay $2 in tax.

As you may know, the federal government raised the estate tax limit to $22.4 million for a married couple, from $11 million. So if you have less than $22 million when you pass, you have nothing to worry about. It's $11.2M for each spouse.

But New York State has $5.2 million, and you don't get to double it for a married couple. So if I die and I give everything to my wife, she could die with $22 million with no federal tax. New York doesn't have portability. It says if I had $10 million, and if I pass away and give everything to my wife, it's called an "I Love You" will. I don't pay federal and I don't pay state. But when my wife dies with that same $10 million, for federal purposes, my wife pays nothing. But her estate will pay over $1 million in New York estate taxes.

When people read the papers and see $22 million, they think, why should I do estate planning, not realizing that just $5.2 million and you have a problem in New York.

President Trump has made my life very busy.

Q: Is this one of the biggest changes you’ve dealt with?

A: It really is. I've been busier now than ever, and I think that's because people of means are very frustrated at their inability to get this deduction

The New York income tax rate is about 8.82 percent, and the real cost of that after the federal tax deduction was 5 to 6 percent, which is still high but palatable.

Now it's 9 percent, and it stays 9 percent. So basically the New York income tax rate has basically doubled because people can't deduct it anymore. So it causes their federal taxes to go up dramatically. It's really a very expensive change to high-income individuals.

The governor is very upset about it, and the governor is saying he's going to take steps to change that. I hope he can.

But Secretary [of the Treasury Steven] Mnuchin called those work-arounds ridiculous, so I don't think the federal government thinks those work-arounds are going to work at all.

We shall see. It keeps life interesting.

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