pdf

Bloomberg Tax: Carried Interest Rules Prompt Investment Funds to Rethink Plans

August 03, 2020

O’Melveny corporate tax partner Alexander Anderson is quoted in this Bloomberg Tax article discussing the new IRS rules for carried interest and how they will affect hedge funds and private equity managers. The new laws will force dealmakers to rethink strategies and deal structures that protect some of their pay from higher taxes following the new carried interest rules. The law requires the funds to hold assets for more than three years—up from one—for managers to get a more advantageous tax rate of 20% versus 37%, Bloomberg Tax noted. “The cautionary note will likely prompt funds to consider adjusting their agreements in a way that allows managers to benefit only from future appreciation after the date of the carried interest waiver,” said Anderson. “They may also want to give themselves authority to modify the waiver provision to comply with any future IRS guidance. That is, I think, the primary change that we probably will see.”

Bloomberg Tax subscribers can read the full article here.