Rep. Levin on Private Equity Firm Taxation

Jul 13, 2007
Press Release

Washington, D.C. -- Rep. Sander Levin issued the following statement regarding recent news reports about the tax activity of private equity firms.

"In order to avoid triggering payment of the corporate income tax rate, partners are setting up "phantom" corporations in a manner which facilitates the avoidance and can provide a major tax benefit to the selling partners larger than the original capital gains tax they paid.

"Fairness must be a basic principle of tax policy.  We began looking into the issue of "carried interest" because we were concerned that fund managers were turning compensation for services into capital gains for tax purposes rather than paying the ordinary income tax rate.  Now it appears these partnerships are taking the avoidance one step further resulting in a windfall for the partners.

"Under our legislation, there would have been no incentive to establish the "phantom" corporation because the publicly traded partnerships would not have been able to avoid paying the corporate income tax rate.

"This new development further highlights the need for a comprehensive hearing on these issues in our effort to create a fair and equitable tax code."

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