Sun, Apr 20, 2014
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   |   
Banner
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. Opalesque Exclusive: Classic Auto Funds Limited (CAF) launches several car investing funds[more]

    Bailey McCann, Opalesque New York: A new trend in alternative alternatives is emerging - car appreciation funds. Classic Auto Funds Limited (CAF) is the first to market with several funds that make super elite luxury cars into real asset investments. As a result of growing overseas demand couple

  2. CTAs could face new challenges in a rising rates environment[more]

    Bailey McCann, Opalesque New York: CTAs have taken a beating performance wise lately, and asset flows reports show that investors aren't sticking around to see how the movie ends. Now, a new white paper from Roy Niederhoffer and Coen Weddepohl notes that as interest rates start to tick back u

  3. Investing – Big hedge funds bought Puerto Rico's junk bonds, Fidelity explores new trading venue amid flash trade concerns, Crisis-era Greek bonds reward early buyers with big effective returns, Cargill unit discloses stake in Freddie preferred[more]

    Big hedge funds bought Puerto Rico's junk bonds From Reuters.com: Several large hedge funds doubled down on Puerto Rico in last month's giant bond sale despite the U.S. territory's financial struggles, the Wall Street Journal reported, citing confidential documents reviewed by the newspa

  4. Opalesque Exclusive: Hedge fund replicators evolve[more]

    Bailey McCann, Opalesque New York: Hedge fund replicators as a group of products tend to get a bad rap from hedge fund managers who suggest that the best a replicator can offer is dynamic beta capture. A

  5. Commodities – Popular value fund manager David Iben bets on Russia, gold,[more]

    From Reuters.com: With large bets on Russia and North American gold miners, one of the best performing stock pickers in the wake of the 2008 financial crisis is back with a new fund that reflects his deep aversion to following the crowd. In the Kopernik Global All-Cap Fund, David Iben is follo