Thu, Aug 25, 2016
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

New York hedge funds heave sigh of relief as Albany junks carried interest tax in new budget

Friday, August 06, 2010
Opalesque Industry Update – Hedge fund managers who work in New York but live out of state can heave a sigh of relief after the state passed a budget Tuesday minus the controversial carried interest tax provision it previously contained.

The New York Senate ratified the bill without the divisive tax measure after Gov. David Paterson and Mayor Michael Bloomberg opposed the bill on concerns it will force affected hedge fund managers to relocate to other states, reported the Wall Street Journal.

Travis Proulx, a spokesman for the New York Senate, said Gov. Paterson has yet to sign the budget bill.

In another report, the New York Times disclosed that New York state lawmakers passed the budget on fears hedge fund managers may be swayed by the persistent wooing of rival state Connecticut with an offer of a better tax regime.

Under current New York laws, performance earnings of hedge fund managers are considered as capital gains and are charged with 15% tax. Lawmakers in Albany had proposed to reclassify these earnings as “ordinary” income which carries higher tax rate, the report said.

A Bloomberg report said that New York lawmakers backed away from their plan to raise an additional $50m a year by taxing hedge fund managers who work in the state, but live elsewhere.

Connecticut not giving up the fight yet
In her most aggressive move yet, Connecticut Gov. M. Jodi Rell issued handouts to participants of a dinner she hosted on August 2 at a posh waterfront restaurant in the upscale Darien entitled: "Connecticut: The Wise Choice,". In the handouts she compares the tax regimes of New York and Connecticut, as if the New York legislature was still considering the proposed carried interest tax, according to report by the Wall Street Journal.

According to the handout, a married Connecticut hedge fund manager earning $2m in management fees and $5m in carried interest, would be slapped with a 17.46% tax rate if they worked in New York. That same person would have a tax rate of only 6.28% if the manager worked in Connecticut.

About 20 people attended the dinner in Darien, including hedge-fund managers and members of Rell's staff such as, Lieutenant Gov. Michael Fedele and Joan McDonald, commissioner of Connecticut's Department of Economic and Community Development. The Wall Street Journal quoted Tim Selby, president of the New York Hedge Fund Roundtable and a partner at Alston & Bird LLP, as describing Rell as "a gracious host."

Brett Cohen of JGB Capital, with offices in Madison Avenue, commented after the dinner: "It's nice to be wanted. [In New York,] there's a hostile atmosphere of continuing to tax the finance firms. It's nice when a governor of a state says welcoming things. It's like a breath of fresh air."

Another dinner participant, Jeffrey Bortnick, a Fifth Avenue tax attorney, said he was there to see "whether it's worth it" for his clients to head to Greenwich.

Debate still on to stay or leave New York
Even with the New York legislature dismissing the carried interest tax, many hedge fund managers practicing in the state fear the threat still remains that the Senate will enforce a new tax measure against hedge funds in the future. Some hedge funds are still considering leaving New York, reported Forexlive.com.

But there are those who still consider New York as the best place for hedge funds. According to the latest finding from HedgeTracker.com, most hedge fund launches this year were from New York, followed by London, Hong Kong and Singapore. The study showed that at least 13 fund launches were recorded in New York from January to July, six in London, five in Hong Kong and three in Singapore.

-Komfie Manalo

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing

 



  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. LatAm hedge funds surge in 1H to +24.4%, emerging markets assets rise[more]

    Komfie Manalo, Opalesque Asia: Hedge funds investing in Latin America posted strong gains through mid-2016, reversing declines in four of the past five years, including the last three years, to lead all areas of hedge fund performance through the first half of 2016, according to the latest HFR Em

  2. Asia - LGT Capital Partners: Alternatives set for continued rise in Asia[more]

    From Asianinvestor.net: More flows are likely into insurance-linked strategies, private equity and trend-following strategies/CTAs, given the benefits of such investments, argues LGT Capital Partners. Despite the numerous quantitative easing programs and bailouts of recent years, the quest for

  3. Investors yank money from hedge funds after poor performance[more]

    From Marketwatch.com: A growing exodus from hedge funds extended to two of the biggest names in the industry Tuesday, Tudor Investment Corp. and Brevan Howard, as disenchanted investors increasingly shun what was once the hottest place to put money. The funds’ problem is clear: They just aren’t perf

  4. Banks look at hedge funds differently - and it should matter to allocators[more]

    From Valuewalk.com: Looking at two bank reports on the same topic can often yield interesting results. There are times when bank research is best viewed from the standpoint of how their analysis does or does not correlate with one another. Regarding hedge fund allocation decisions, one bank appears

  5. Legal - Hedge fund’s fixer kept deals flowing with bribes, U.S. says, Big four banks sued by U.S. hedge funds over BBSW, Lessons for hedge fund managers from the government's failed prosecution of alleged insider trading[more]

    Hedge fund’s fixer kept deals flowing with bribes, U.S. says From Bloomberg.com: With the Miami villa, stopovers at New York’s Plaza Hotel and millions channeled in bribes to win mining deals, Samuel Mebiame was the relationships guy in a corruption scheme that spanned continents, accord