Blocker Corporation Structuring in Investment Funds: Tax and Other Considerations for Fund Investors
Avoiding UBTI and ECI; Entry and Exit Strategies
Course Details
- smart_display Format
On-Demand
- signal_cellular_alt Difficulty Level
Intermediate
- work Practice Area
Banking and Finance
- event Date
Tuesday, February 6, 2024
- schedule Time
1:00 p.m. ET./10:00 a.m. PT
- timer Program Length
90 minutes
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This 90-minute webinar is eligible in most states for 1.5 CLE credits.
This CLE course will provide fund counsel with the tools for structuring blocker corporation investments by investment funds, in particular private equity and venture capital funds (PEVC funds), in a manner that seeks to address the various tax sensitivities of PEVC fund investors.
Mr. Clegg's practice encompasses all areas of general corporate and partnership income taxation as well as the taxation of mergers and acquisitions (both domestic and cross-border). He is broadly experienced with partnership taxation and has worked on numerous matters involving structuring tax efficient commercial and transactional structures for our corporate clients. Additionally, Mr. Clegg's practice focuses on the formation and general representation of venture capital and private equity funds and related entities.
Mr. Huber supports venture capital and growth equity fund managers on all aspects of the fund lifecycle. He has significant experience advising fund managers on issues related to fundraising, GP management, and economics, including the tax and structuring aspects of fund formations and investments globally. He helps clients navigate complex matters in the evolving legal and regulatory landscape, such as the impact of recent tax reform on investment and organizational decision-making. He also has significant experience advising fund managers and investors in connection with secondary purchases and sales of fund interests.
Ms. Xu's practice encompasses all areas of general corporate and partnership income taxation as well as the taxation of mergers and acquisitions (both domestic and cross-border). She is broadly experienced with partnership taxation and has worked on numerous matters involving structuring tax efficient commercial and transactional structures for fund and corporate clients. Additionally, Ms. Xu's practice focuses on the formation and general representation of venture capital and private equity funds and related entities.
PEVC fund investors have various, sometimes competing, tax concerns about how their capital is invested. For example, U.S. tax-exempt investors are often sensitive to the direct receipt of unrelated business taxable income (UBTI), and non-U.S. investors are often concerned about effectively connected income from a U.S. trade or business (ECI).
Blocker structures may be available to address the concerns of these investors. Still, PEVC funds should be aware that how a blocker is utilized (and how the underlying investment is sold) can also impact other investors. While navigating a diverse investor base's concerns is not a new task for PEVC funds, tax reform and subsequent changes to tax laws have added more wrinkles to the analysis.
Listen as our authoritative panel outlines the benefits and potential risks to PEVC funds generally and their non-U.S. and tax-exempt investors, specifically, using blocker structures and other strategies to mitigate UBTI and ECI. The panel will also examine the impact of such structures on investors who are not sensitive to UBTI or ECI and discuss practical considerations for exiting blocker structures and the competing concerns PEVC funds may encounter.
- General overview of fund structures and investor types
- Overview of UBTI/ECI-generating activities and common fund strategies to mitigate UBTI/ECI exposure
- Blocker structure variations
- Practical tax considerations in employing blockers for and exiting portfolio investments
- Additional strategies for tax efficiency
The panel will review these and other vital issues:
- What private investment fund activities result in UBTI or ECI?
- How can blocker corporations be used to mitigate the impact of UBTI and ECI?
- How does the investment strategy of the fund impact the blocker structure?
- How has tax reform and subsequent changes to tax law impacted the structural options available to private investment funds?
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