Friday, June 12, 2009

House Considers Bill to Tax Investment Adviser Partnerships as Corporations

On June 8, 2009, Congressman Peter Welch (D-VT) reintroduced a bill in the House of Representatives that would tax as corporations all publicly traded partnerships that directly or indirectly derive income from providing investment advisory or asset management services. In 2007, similar bills were introduced in the Senate, and in the House by Congressman Welch, which he said would fill “a gaping tax loophole” that allowed partnerships to “rip off American taxpayers.” H.R. 2762, now in front of the House Ways and Means Committee, would amend Section 7704(c) of the Internal Revenue Code of 1986 to require this tax treatment whether or not the investment adviser is registered under the Investment Advisers Act of 1940. If the bill is enacted, investment advisers organized as partnerships that are publicly traded would no longer be treated as pass-through entities for tax purposes and would be subject to corporate income tax.