Revived focus on monitoring fees
This issue had died out for a while since the 2014 articles by Gregg Polsky and the NYT but is now back in full force. The Center for Economic and Policy Research (for short CEPR) just released a populist paper titled “Fees, Fees and More Fees: How Private Equity Abuses Its Limited Partners and U.S. Taxpayers.” In addition, Americans for Financial Reform addressed a similar letter to Jack Lew and John Koskinen. The spirit of these reports is basically a rehash of Mr. Polsky’s 2014 arguments. The gist of it is, bad private equity is abusing the law and hurting hard working...
May 13, 2016 read more
Fee Waiver Hearing Set for February 26th
The IRS just announced in Federal Register Vol. 81, No. 17 that it will hold a hearing on February 26th about the disguised payment for services proposed regulations under Section 707(a)(2)(A) (REG–115452–14). The proposed regulations were issued in July last year and our original coverage can be found here. Arguably, if the proposed regulations are adopted in their current form, they will put a significant dent into the fee waiver strategy prevalent with some private equity funds. The NY Bar and various stakeholders have raised multiple issues with the proposed...
January 27, 2016 read more
Proposed Regulation 1.707-2 makes the future of “fee waivers” dim!
The topic of “fee waivers” has been covered several times by fund-taxation.com. A "fee waiver" is a technique often used in the private equity fund context whereby the fund manager waives all or portion of its 2% fee in exchange for a profit interest or an offset against the GP’s capital commitment. A lot has been written on this topic by various authors debating the tax issues associated with the strategy. As many practitioners who follow the industry know, the IRS has been studying “fee waivers” for the last few years. Moreover, the IRS had...
July 24, 2015 read more