Susan Wetzel in FundFire: Hedge Funds Face Massive Tax Bill for Billions in Deferred Comp


U.S.-based hedge funds with offshore versions of their funds need to act fast to avoid a massive tax bill as a result of changes to rules concerning deferred compensation in offshore funds. But many fund managers are unprepared for the 2017 deadline.

A rule change in Section 457A of the Internal Revenue Code made in 2008 requires repatriation of deferred compensation in offshore versions of U.S.-based hedge funds by the end of 2017. It followed on a previous ruling that stopped practices allowing deferred compensation to be allocated to those funds.

It is estimated that there are billions of dollars in compensation built up in these funds, and the U.S. Congress stopped allowing such deferred compensation preciously in a bid to avoid losing tax revenues on that income, says Susan Wetzel, partner and chair of the Employee Benefits and Executive Compensation Practice Group at Haynes and Boone, LLP.

Excerpted from FundFire, July 30, 2014. To view full article, click here (subscription required).


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