Private funds with operations or investors in multiple states face a complex and shifting taxation regime. For example, a manager that derives all of its management fee income from its New York operations may still have to file returns in other states and allocate portions of that income to those states. A recent presentation by Baker Tilly Virchow Krause
offered an overview of the rules for sourcing state income; the related filing and apportionment rules; and other state tax issues relevant to private fund managers. The program featured Gregory Kastner, senior tax manager at Baker Tilly; and Michele Gibbs Itri
, partner at Tannenbaum Helpern Syracuse & Hirschtritt. The issues addressed in their presentation are particularly timely in light of New York’s recent settlement with Harbinger Capital over its alleged improper shifting of performance fee income from New York to a lower-tax jurisdiction. See “New York State Record Tax Whistleblower Settlement With Harbinger Capital Partners Illustrates Pitfalls of Domestic Tax-Shifting Schemes
” (Apr. 27, 2017). For a comprehensive look at hedge fund taxation, see our four-part series: “Allocations of Gains and Losses, Contributions to and Distributions of Property From a Fund, Expense Pass-Throughs and K-1 Preparation
” (Jan. 16, 2014); “Provisions Impacting Foreign Investors in Foreign Hedge Funds
” (Jan. 23, 2014); “Taxation of Foreign Investments and Distressed Debt Investments
” (Jan. 30, 2014); and “Taxation of Swaps, Wash Sales, Constructive Sales, Short Sales and Straddles
” (Feb. 6, 2014).