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Private Equity Looks to Avoid Tax Hit in Passive Investment Regs

Dec. 8, 2020, 9:46 AM

Private equity firms want Treasury to shield minority shareholders from higher taxes on their passive offshore investments.

Last week the agency issued final rules that failed to address how partnerships and their U.S. investors tally offshore income when it’s earned by a passive foreign investment company that is also a controlled foreign corporation—one that is more than 50% owned by U.S. shareholders who own 10% or more of the total stock.

Without targeted guidance, some investors in private equity and hedge funds—often structured as partnerships—could get hit with onerous yearly reporting obligations, higher taxes, and interest, tax practitioners warn.

Under ...