The Financial Accounting Standards Board (FASB) has been evaluating accounting standards for the past several years to identify the requirements that could be streamlined. One area that received recent attention involves accounting for convertible instruments and contracts in an entity’s own equity under ASC Topic 815, Debt.
Topics: Private Equity & Venture Capital, PE/VC, debt, convertible debt, ASC 2020-06
It is somewhat common for private equity and venture capital firms to distribute stock held in a pass-through entity (PTE) to their partners. The tax rules around PTE distributions are complex, however. There are an array of issues that may impact the presumption of a tax-free transaction. This article outlines some of the general rules around distributions of stock by a PTE and highlights particular rules and issues surrounding distributions of marketable securities from private equity (PE) and venture capital (VC) firms.
Topics: pass-through entities, Private Equity & Venture Capital, PE/VC, PTE, stock distribution, PE, VC, Investment Partnerships, Section 731(c)(3)
The end of the calendar year is approaching and with that Private Equity (PE) and Venture Capital (VC) firms should review whether any Form W-8 documentation on file for their non-U.S. investors may expire and become invalid after year-end. A Form W-8 generally remains valid for a period starting on the date the form is signed and ending on the last day of the third succeeding calendar year unless a change in circumstances makes any information on the form incorrect. For example, a Form W-8BEN signed on Sept. 30, 2019, remains valid through Dec. 31, 2022.
Topics: Private Equity & Venture Capital, PE/VC, W-8 Form
Private equity (PE) and venture capital (VC) firms with interests in partnerships with international operations know: navigating international tax requirements and reporting the appropriate share of partner income on a Schedule K-1 was never easy. Tax reform under the law commonly known as the Tax Cuts and Jobs Act (TCJA) didn’t make reporting any easier with its numerous changes to international taxes.
Topics: TCJA, Private Equity & Venture Capital, PE/VC, Schedule K-1, Schedule K-3, Schedule K-2
Private equity (PE) and venture capital (VC) firms face numerous tax reporting requirements when it comes to their business interests. The structure of many PE/VC investments often involve pass-through entities, and as such, capital gains subject to Section 1061. Elements of reporting requirements for Section 1061 – which originated from the tax reform law commonly known as the Tax Cuts and Jobs Act (TCJA) – begin to take effect for tax years beginning after Jan. 19, 2021. Following the release of additional guidance from the IRS on Section 1061, our team recently compiled the following information to help PE/VC firms understand and better manage their obligations.
Topics: Partnership Audit Regulations, pass-through entities, Private Equity & Venture Capital, PE/VC, section 1061, PTE
IRS Commissioner Charles Rettig and many Democrats in Congress have called for additional IRS funding to aid in enforcement of the nation’s tax laws. It is not yet clear whether the Build Back Better plan currently working its way through Congress will include such funding. That does not mean that all is quiet on the IRS enforcement front. The IRS is on the verge of a major enforcement initiative authorized by Congress that will affect partnerships and their partners.
Topics: Partnerships, Partnership Audit, partnership audit regime, Private Equity & Venture Capital, PE/VC
The House Ways and Means Committee issued their initial proposal to help fund the Build Back Better Act reconciliation bill on September 13. The proposal includes a number of tax increase provisions that if passed in current form would have a significant impact on investment funds in the Private Equity and Venture Capital industry, their investors, and portfolio companies.
Topics: Private Equity & Venture Capital, PE/VC, GILTI, global intangible low-taxed income, Qualified Small Business Stock, QSBS, FDII, carried interest, Carried Interest Regulations, section 1061, House Ways and Means, long-term capital gain, Build Back Better, NIIT, foreign derived intangible income, net investment income tax
Companies are beginning to enter into nontraditional investments, such as Bitcoin and other digital assets. With strong growth potential, digital assets are an appealing venture. For one, certain digital assets may act as a natural hedge against fluctuating government-issued (fiat) currencies. Also, as more companies embrace modern and open technology, digital assets could become a more common form of customer payment.
Topics: Bitcoin, Cryptocurrency, Private Equity & Venture Capital, PE/VC, Digital Assets
An increasing number of states are embracing the creation of elective taxes on pass-through entities (PTEs) to help business owners pay state and local income taxes (SALT) at the entity level rather than through personal income tax returns. The workaround is becoming a popular way for states to avoid the negative repercussions of the $10,000 limit on individuals’ deductions for state and local taxes, which was part of the tax reform law commonly known as the Tax Cut and Job Act (TCJA).
Topics: pass-through, pass-through entities, Private Equity & Venture Capital, PE/VC, PTE
Private equity and venture capital firms with investment activities tied to the Cayman Islands should take action on upcoming Common Reporting Standards (CRS) deadlines. The deadlines for 2019 and 2020 CRS Compliance forms were modified in response to the disruption caused by the COVID-19 pandemic. Early in 2021, the Department for International Tax Cooperation (DITC) of the Cayman Islands announced that the deadline for filing the 2019 CRS compliance form was extended to Sept. 15, 2021. The deadline for the 2020 CRS compliance form also remains Sept. 15, 2021.
Topics: Common Reporting Standards, CRS, Private Equity & Venture Capital, PE/VC, CIMA, Cayman Islands, Cayman Islands Monetary Authority, DITC
