AT LEAST a dozen US private equity firms – including Bain Capital, which was once headed by US presidential hopeful Mitt Romney – have been subpoenaed by the New York state attorney general.
The move is part of an investigation into whether a widely used tax strategy that saved these firms hundreds of millions of dollars is proper. Among the firms that were subpoenaed are Bain Capital, KKR Co, TPG Capital, Apollo Global Management and Silver Lake Partners.
The subpoenas, which were sent out in July, seek documents related to the conversion of fees these private equity firms charge for managing investors’ assets in fund investments.
The practice is known as a “management fee waiver”. As fund investments, the income would be taxed as capital gains, which attract rates about 15 per cent. Without the conversion, the fees would be taxed at about 35 per cent.
Mr Romney earned about $13 million over the past two years from the portion of a private equity fund’s profits that goes to its managers, according to his campaign. – (Reuters)
