Over Half of Alternative Investment Companies Have Not Revisited Their Structure since the Passage of Tax Reform

CHICAGO (November 15, 2018) – A flash poll conducted by Baker Tilly Virchow Krause, LLP (Baker Tilly) indicates over 50 percent of alternative assets industry professionals have not revisited their company’s structure since the passage of the Tax Cuts and Jobs Act (TCJA).

“Structuring a corporation as a pass-through entity was often considered to be a strategic arrangement,” Jean-Paul Schwarz, JD, LLM, tax principal in Baker Tilly’s financial services practice group, said. “However, because the tax rate of c-corporations have been significantly reduced under the TCJA, and the fact that pass-through entities are taxed at the higher individual level, revisiting your company’s corporate structure is strongly suggested.”

“Before tax reform, there was around a 10 percent difference in tax rates in favor of pass-through entities over c-corporations,” Benjamin Lipman, CPA, senior manager in Baker Tilly’s financial services practice group, said. “However, this disparity has significantly decreased since the majority of asset management professionals are not able to claim the new §199A deduction for qualified business income under the TCJA.”

Baker Tilly recently held an educational webinar, 2018 tax updates and clarifications for hedge funds, private equity funds and alternative assets, to assist alternative asset industry professionals in understanding key questions about tax reform and tax planning strategies being asked by fund managers, including updates on carried interests, s-corporations, c-corporations and more.

The webinar presenters discussed:

  • Key provisions in the TCJA
  • The impact tax reform has had, and continues to have, on hedge funds, private equity funds, management companies and general partnerships
  • Long-term and end-of-year tax planning strategies

A recording of the webinar is available at bakertilly.com/insights/2018-tax-updates-and-clarifications-for-hedge-funds-private-equity-funds-an/.

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