Take THAT, Blackstone! Senators Baucus and Grassley to Tax Private Equity Firms Somervell County Salon-Glen Rose, Rainbow, Nemo, Glass....Texas


Take THAT, Blackstone! Senators Baucus and Grassley to Tax Private Equity Firms

15 June 2007 at 6:27:22 AM

Good going!

Thursday, two U.S. lawmakers introduced legislation that would tax all publicly traded partnerships, including private equity firms, which derive income from investment adviser or asset management services, like any other corporation. Hedge funds and buyout firms, historically structured as lucrative private partnerships, continue to pay taxes at the lower rate of partnerships in spite of becoming publicly traded companies. The senators said that they seek to clarify tax treatment for partnerships acting as corporations and filed the legislation to ensure that publicly traded partnerships do not gain an unfair advantage over established financial services corporations. If the bill is passed, it would be effective as of the date of introduction.

The bill was introduced by senators Max Baucus and Charles Grassley, Chairman and Ranking Member of the Senate Finance Committee, respectively and comes in the midst of recent large buyouts by private-equity firms.

The move would also likely impact the proposed $4.7 billion initial public offering of private equity firm, Blackstone Group LP. The firm, like other private-equity firms, collects investments from pension funds, endowments and billionaires, and uses the funds to acquire companies, turn them around and resell them.

Baucus said, "If a publicly traded partnerships makes its money by providing financial services, that active business should be taxed as corporation."

Grassley said, "If left unaddressed, the tax concerns presented by the public offerings of investment managers, like private equity and hedge fund management firms, could fundamentally erode that corporate tax base. That would leave other individuals and business taxpayers with a greater share of the nation's tax burden."

P.S. That includes hedge funds, too. I wondered why, after the first Democratic presidential candidates debate on MSNBC, Chris Matthews asked several times why none of them addressed hedge funds.

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