September 22, 2015

Sens. Warren, Franken, Baldwin, Whitehouse Urge Treasury to Close Loophole Private Equity Fund Managers Use to Avoid Taxes

For Years, Fund Managers Have Used So-Called "Management Fee Waivers" to Disguise Earned Income and Shirk Tax Responsibility

WASHINGTON, DC - In a letter to the United States Department of Treasury, Senators Elizabeth Warren (D-Mass.), Al Franken (D-Minn.), Tammy Baldwin (D-Wis.), and Sheldon Whitehouse (D-R.I.) called on federal tax officials to act swiftly on a loophole private equity fund managers have been exploiting for years to disguise income and avoid paying taxes.

In the letter, which was sent to Treasury Secretary Jack Lew and IRS Commissioner John Koskinen, the Senators wrote that for more than a decade many fund managers have used so-called "management fee waivers" to classify portions of their income as capital gains, allowing them to sidestep ordinary income taxes.

While the Treasury Department has issued proposed rules to close this loophole, the Senators urged the agency to finalize these rules and promptly enforce them to prevent and deter further abuse.

They added, "Just like teachers, firefighters, police officers, and all other hard working taxpayers, wealthy fund managers must pay ordinary income tax on their salaries. We will be watching your enforcement of these rules closely and look forward to your vigilance on this issue."

You can read a copy of the letter here.