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Alternative Market Briefing

Other voices: Proposed tax reform legislation: what managers, investors and advisors are discussing

Friday, December 15, 2017

By: Gerard O'Beirne, Eisner Amper

As of the date of this article, both the House and Senate have voted on and approved separate versions of tax reform legislation. The process of reconciliation is now underway. Although tax planning decisions, both long term and short term, cannot be finalized until a bill is signed into law, many fund managers, their investors and their advisors are discussing various aspects of the proposals and the effect on the financial services industry. This article addresses some of the issues being addressed in the financial services fund world. It is meant to be a springboard for discussion between the fund managers and their advisors and not meant to be advisory.

1. Converting management companies currently organized as partnerships, limited liability companies and S corporations to a C corporation

One of the major components of both the House and Senate bills is the reduction of the corporate income tax rates to a flat 20% (possibly 22%). In the House bill, this would take effect after 2017 and in the Senate bill after 2018. The House bill provides that personal service corporations ("PSCs") would be subject to a flat 25% rate for the first two years and 20% thereafter. The Senate bill would eliminate the special tax rate of a PSC. A PSC is a corporate entity formed by individuals who provide personal services for their clients. Examples of this type of business include doctors' offices, law firms and accounting fi......................

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