Greatest Tax Reform Challenge for Fund Managers is Qualified Business Income Deduction

CHICAGO (Feb. 28, 2018) – A flash poll conducted by Baker Tilly Virchow Krause, LLP (Baker Tilly) indicates 36 percent of fund managers specify qualified business income (QBI) deductions as the greatest challenge faced from the passage of tax reform.

“The Tax Cuts and Jobs Act (TCJA) contains one provision of particular concern to partnerships and sole proprietorships in the alternative assets industry, Code Section §199A, which reduces the QBI deductions tax rate for pass-through entities to 20 percent,” Jean-Paul Schwarz, JD, LLM, principal with Baker Tilly’s financial services tax practice, said.

“When calculating QBI deductions, the mathematics behind it can be exceedingly complicated,” Gregory Kastner, CPA, senior tax manager with Baker Tilly’s financial services practice, said. “Since you need to calculate the deduction at each trade or business level, structures having several partnerships can find this calculation to be a tedious process.”

Baker Tilly recently held an educational webinar, “Tax reform for hedge funds, private equity and alternative assets: Final bill impacts,” to assist hedge funds, private equity funds, management companies and general partnerships in understanding the impacts of the final tax reform bill, including specific provisions that could impact organizations’ planning and strategies in 2017 and beyond.

The webinar presenters discussed:

  • An overview of the key provisions in the TCJA
  • The impact on hedge funds, private equity funds, management companies and general partnerships
  • Transition rules and long term planning opportunities

Presentation slides and a recording of the webinar are available at

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Baker Tilly Virchow Krause, LLP (Baker Tilly) is a nationally recognized, full-service accounting and advisory firm whose specialized professionals connect with clients and their businesses through refreshing candor and clear industry insight. With approximately 2,800 employees across the United States, Baker Tilly is ranked as one of the 15 largest accounting and advisory firms in the country. Headquartered in Chicago, Baker Tilly is an independent member of Baker Tilly International, a worldwide network of independent accounting and business advisory firms in 147 territories, with 33,600 professionals. The combined worldwide revenue of independent member firms is $3.4 billion.