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John Magee Tax litigation doesn’t get any bigger than this: In what may be the largest single-taxpayer deficiency case in U.S. history, the government is trying to collect nearly $8 billion from GlaxoSmithKline Inc. McKee Nelson partner John Magee is in the early stages of preparing for trial as lead counsel for the pharmaceutical giant. Throughout his career, Magee, 60, has earned a reputation as a top-notch tax litigator, sought out by large companies when the stakes are highest. “There are very few people I’d trust to handle major tax litigation or strategic planning, and John is number one on my list,” says Gareth Glaser, vice president for corporate finance and counsel at Alcon Laboratories Inc. Magee cut his teeth as a litigator the old-fashioned way � before a jury in local court. Within months of earning his J.D. from the University of Washington in 1972, Magee, along with a classmate, took over the White Center, Wash., law practice of a lawyer who was appointed to the bench. They called their firm Norman & Magee. The work, says Magee, was akin to “unsubsidized legal aid.” Magee handled his first jury trial, a timber trespass case, in King County Superior Court just a year out of law school. “It scared me to death,” he recalls, but he won the case and the appeal � and treble damages for his client. In 1976, Magee’s wife received a White House fellowship, and the couple moved to Washington, D.C. � temporarily, they thought. Magee used the year to earn an LL.M. in taxation from Georgetown University Law Center. Tax law, he says, “turned out to be a perfect match,” and the nation’s capital became home. Magee accepted a job at Miller & Chevalier in 1977, and made partner in 1980. He went on to chair the firm’s tax practice. In 2000, he and seven colleagues joined tax startup McKee Nelson, where notable colleagues include William McKee and William Nelson. In 2001, Magee garnered what he calls “a wonderful victory” for the Host Marriott Corp. The U.S. Court of Appeals for the 4th Circuit held that interest payments on federal income tax deficiencies could be treated as specified liability losses. For Marriott, this meant a multimillion-dollar tax refund. Magee represented the Dow Chemical Co. in a 2002 bench trial in the U.S. District Court for the Eastern District of Michigan. Dow successfully sued for a $20 million-plus tax refund after the Internal Revenue Service disallowed deductions for interest on loans used to pay premiums on corporate-owned life insurance policies. The government appealed, and a decision is pending from the 6th Circuit. Dow has turned to Magee for 15 years, says Charles Hahn, the company’s director of taxes. “He’s quickly able to grasp the essence of what we do and integrate it with the tax laws,” Hahn says. “He focuses on the essentials, the key issues, and gets it right.” Hahn praises Magee’s skills as a trial attorney, as well as his honesty, integrity, and judgment. “He’s a multifaceted attorney, and you don’t find many of those.” These days, Glaxo is the big case on Magee’s plate. The dispute concerns profits that Glaxo Wellcome made on sales in the United States from tax years 1989 to 2000, before its merger with SmithKline Beecham. The IRS charges that Glaxo did not report sufficient income on those U.S. sales and owes about $7.8 billion in taxes and interest. Glaxo responded that it actually overpaid $1.8 billion in taxes and that the IRS’ treatment of its accounting methods is inconsistent with that given to other pharmaceutical companies, including SmithKline. The case is set for trial in U.S. Tax Court in October 2006. “John is my most trusted tax adviser. He thoroughly understands my business,” says Rick Gossin, Glaxo’s vice president of taxes-Americas, who also praises Magee’s “disarming personality, intense thirst for the facts, wide range of corporate tax knowledge, and excellent oral presentation skills.” Over the years, Magee observes, tax litigation has evolved from being “like badminton, where everyone put on their whites and hit the birdie over the net.” That is, cases tended to be less fact intensive, with more stipulations and fewer witnesses. Nowadays, he says, “it’s more like football. Everyone puts on the heavy equipment, fields a big team, and slams up against each other.” But the change hasn’t fazed him. Harkening back to his days in King County Superior Court, Magee notes, “I was trained as a football player.”

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