Lowenstein Sandler's Investment Management Group is pleased to provide you with (i) a summary of recent legislative and regulatory developments that impact the investment management community and (ii) checklists of annual considerations for private investment funds, investment advisers, commodity trading advisors, and commodity pool operators. The checklists appear after the legislative and regulatory summary. For more information regarding any matter covered in this update, please contact one of the attorneys in our Investment Management Group.
SELECT LEGISLATIVE AND REGULATORY DEVELOPMENTS
Key Tax Reform Provisions Affecting Hedge Funds, Private Equity Funds, and Other Investment Vehicles
Synopsis: On December 20, 2017, Congress passed a statute originally named the Tax Cuts and Jobs Act (the "Act"), which enacted a broad range of tax changes. The President signed the Act on December 22. A number of provisions are of particular importance to the investment management industry. Status: Among other changes, the Act: (i) imposes additional time-based restrictions on the recognition of long-term capital gain in respect of carried interest; (ii) subject to limitations, provides a new 20 percent deduction to individuals, trusts, and estates that receive income from certain S corporations, sole proprietorships, and partnerships (generally not available to investment funds or investment managers, but could be used by partners in a real estate investment fund); (iii) taxes corporate income at a flat 21 percent rate, resulting in less tax leakage in connection with an investment in a fund through a domestic blocker; (iv) restricts the deductibility of interest paid or accrued by certain investment funds that are engaged in a trade or business; (v) subjects to U.S. graduated income tax rates the gain on the sale of a partnership interest by a foreign person (including a foreign blocker), which may result in increased withholding responsibilities; and (vi) eliminates miscellaneous itemized deductions for expenses that were previously subject to the 2 percent floor.
The Lowenstein Sandler LLP Tax Group alert analyzing the Act's impact on hedge funds, private equity funds, and other investment vehicles is available here.
Download the full alert here.