Swordsmyth
02-14-2018, 03:54 PM
"I’ve already met with the IRS and our Office of Tax Policy this morning as a result of that article," Mnuchin said Wednesday during a Senate Finance Committee hearing, referring to a Bloomberg News story about hedge fund managers creating shell companies to work around stricter limits on carried interest. "Taxpayers will not be able to get that loophole."
Mnuchin made his comments in response to criticisms from Oregon Senator Ron Wyden, the ranking member of the Senate Finance Committee, who questioned the administration's decision to change the carried-interest requirements to force hedge funds to hold assets for three years now if they want to qualify for the lower rate. Previously, investors only needed to hold them for one year.
Wyden called the provision "a farce."
As Bloomberg (https://www.bloomberg.com/news/articles/2018-02-14/mnuchin-says-irs-to-ban-hedge-fund-tax-dodge-on-carried-interest) explains, carried interest is the portion of a fund's returns that are paid to hedge fund managers, private-equity players, venture capitalists and some real estate investors. For federal tax purposes, it’s eligible for a tax rate of 23.8% - which includes a 3.8% tax on investment income imposed by the Affordable Care Act - on sales of assets held for at least three years. Otherwise, it’s treated as ordinary income and managers face a top federal income tax rate of 37%.
Big names have appeared to be embracing the tax dodge, which involves setting up LLCs for managers to help them shield some of their pay from the higher rate. For example, four LLCs have been created under the name of Elliott Management Corp., the hedge-fund giant run by Paul Singer. More than 70 have been established under the names of executives at Starwood Capital Group Management, the private-equity shop headed by Barry Sternlicht.
More at: https://www.zerohedge.com/news/2018-02-14/mnuchin-irs-will-ban-carried-interest-tax-dodge
Mnuchin made his comments in response to criticisms from Oregon Senator Ron Wyden, the ranking member of the Senate Finance Committee, who questioned the administration's decision to change the carried-interest requirements to force hedge funds to hold assets for three years now if they want to qualify for the lower rate. Previously, investors only needed to hold them for one year.
Wyden called the provision "a farce."
As Bloomberg (https://www.bloomberg.com/news/articles/2018-02-14/mnuchin-says-irs-to-ban-hedge-fund-tax-dodge-on-carried-interest) explains, carried interest is the portion of a fund's returns that are paid to hedge fund managers, private-equity players, venture capitalists and some real estate investors. For federal tax purposes, it’s eligible for a tax rate of 23.8% - which includes a 3.8% tax on investment income imposed by the Affordable Care Act - on sales of assets held for at least three years. Otherwise, it’s treated as ordinary income and managers face a top federal income tax rate of 37%.
Big names have appeared to be embracing the tax dodge, which involves setting up LLCs for managers to help them shield some of their pay from the higher rate. For example, four LLCs have been created under the name of Elliott Management Corp., the hedge-fund giant run by Paul Singer. More than 70 have been established under the names of executives at Starwood Capital Group Management, the private-equity shop headed by Barry Sternlicht.
More at: https://www.zerohedge.com/news/2018-02-14/mnuchin-irs-will-ban-carried-interest-tax-dodge