(BN) Leon Black’s Tax-Overhaul Dilemma Could Alter Wall Street Model
[{"sender": "Glenn Dubin (DUBIN & COMPANY LP)", "recipients": ["undisclosed-recipients:", "jeevacation@gmail.com"], "timestamp": "Wednesday, December 27 2017 05:02 PM", "subject": "(BN) Leon Black’s Tax-Overhaul Dilemma Could Alter Wall Street M", "body": "Leon Black’s Tax-Overhaul Dilemma Could Alter Wall Street Model\n2017-12-27 11:00:00.2 GMT\n\nBy Simone Foxman and David Carey\n\n(Bloomberg) -- Leon Black recently posed a question whose\nanswer will determine how profitable the new U.S. tax regime\ncould make Wall Street firms like his Apollo Global Management\nLLC.\n\nPublicly traded partnerships, such as Apollo, are taxed\ndifferently than corporations. So should Apollo take advantage\nof the overhauled tax rules to pay less in taxes? Or should it\nuse this chance to change to an Inc. from an LLC, which would\nincrease its tax bill but allow it to attract investments from\nmutual funds that have previously been out of reach?\n\n“We're still analyzing,”’ Black told the Goldman Sachs U.S.\nFinancial Services Conference Dec. 6. “It’s an uncertain\noutcome.”\n\nEither way, it’s most likely a money-making outcome. The\ntax changes are a boon for private equity firms such as Apollo,\nwhere Black is chief executive officer. The new lower corporate\nrate has made it possible for bigger publicly traded\npartnerships to consider the change. As it is, management fees,\nwhich typically account for 30 percent or more of their\nearnings, are already taxed at the corporate rate. That will\ndrop. The legislation scarcely touched the 23.8 percent rate\npaid on incentive fees, also called carried interest, which\n\nincur no additional levy when paid out to shareholders.\n\nDouble Tax\n\nIf the partnerships converted to corporations, the\n\nincentive fees would be hit with a second layer of tax when\nthey’re paid out. That would push the combined tax rate on\nincentive income paid out as dividends to nearly 40 percent,\naccording to Peter Furci, co-chair of Debevoise & Plimpton’s\nglobal tax practice.\n\nBut it would also allow the newly minted corporations\n\naccess to indexes, and therefore the mutual-fund and ETF\nmarkets. About $2.2 trillion follows the S&P 500 Index,\naccording to its website. As of June, $122.6 billion in assets\ntracked the Russell 2000 Index, the best-known small-cap U.S."}]