Monday, September 3, 2012

PEU's Tax Dodge: No Operating Income

Private Equity Underwriters (PEU's) turned operational management fees into carried interest, i.e. capital gains, so they could be taxed a lower rate.  NYTimes reported:

The IRS has known that private equity funds have been doing this for 20 years.
Twenty years ago President Clinton was elected to his first term.  Clinton later appointed Charles Rossott as IRS Commissioner.  In 2003 Charles Rossotti became a Senior Advisor for The Carlyle Group.

PEU's took investor management fees and rolled them into investment fund.  Articles are silent on management fees PEU's charge affiliates. 

Under scrutiny for this practice are:

Kohlberg Kravis Roberts & Co., TPG Capital, Sun Capital Partners, Apollo Global Management, Silver Lake Partners, Bain Capital, Clayton, Dubilier & Rice; Crestview Partners; HIG Capital; Vestar Capital Partners; and Providence Equity Partners.
KKR has ex-RNC Chair Ken Mehlman, while Apollo Global employs Senator Evan Bayh.  Presidential hopeful Mitt Romney founded Bain Capital, while the Obama White House regularly hosted Silver Lake's Glenn Hutchins, who knows the place having worked in the Clinton White House.