Country / Language

New York City Unincorporated Business Tax Update: City Looking to Alter Its Position on Investment Management Partnerships


 We have been informally advised that the New York City Department of Finance ("the Department") intends to change its position regarding the taxation of investment management partnerships that are subject to the City's unincorporated business tax ("UBT"). If this new policy is implemented, most New York City-based investment management partnerships that receive an allocation of profits as an incentive from an investment partnership may be adversely impacted.

Many management companies of hedge funds are structured whereby advisory or management fees are received by one legal entity (the "Investment or Management partnership"). A second compensation component, a carried interest or incentive allocation, is received by a separate legal entity, often organized as an out-of-state partnership or limited liability company ("Carried Interest Partnership"). The bifurcation between these two separate legal entities was done as the City's UBT was imposed on management fees earned within the city, while the carried interest or incentive allocation was previously not subject to the UBT, as the Carried Interest Partnership was not based in New York City.

Based on the City's proposed position, the Department intends to attribute expenses incurred by the Management Partnership to the Carried Interest Partnership, thereby disallowing expenses currently deductible for UBT purposes by the Management Partnership. It is the Department's contention that IRC Section 482, Allocation of Income and Deductions, supports the proposed position.

For more information on New York City's proposed UBT changes or other state and local tax matters, please contact Corey L. Rosenthal, JD, a CohnReznick Principal and member of the Firm's State and Local Tax Practice, at crosenthal@cohnreznick.com or 646-625-5729.

Download the full PDF.

Circular 230 Notice: In compliance with U.S. Treasury Regulations, the information included herein (or in any attachment) is not intended or written to be used, and it cannot be used, by any taxpayer for the purpose of i) avoiding penalties the IRS and others may impose on the taxpayer or ii) promoting, marketing, or recommending to another party any tax related matters.

This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and J.H. Cohn LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

Published date: 1/20/2012

Search Our People

Search Our People

Look ahead. Gain insight. Imagine more. Is your business ready to break through?

View our new TV commercial..

Industry Outlooks

Industry Outlooks

Gain insight into what is ahead for the Commercial Real Estate, Technology and Middle Market Private Equity industries.

READ MORE

Learn about our upcoming events.

READ MORE

Working With Us

Working With Us

What makes CohnReznick different from others in our profession? And what should our clients come to expect when working with us? The answer is The CohnReznick Advantage. Contact us to learn how we can out the CohnReznick Advantage to work for your business.


People

The value of an organization is determined by the skills and qualities of its leaders. With more than 280 partners serving clients nationwide, CohnReznick is renowned for the diverse experiences, knowledge and backgrounds of its leadership.

Learn More

Services

We align our services in three segments: Accounting and Assurance, Tax, and Advisory. This approach allows us to provide holistic solutions to complex business problems and to seize upon opportunities requiring an integrated approach.

Learn More

Industries

Accounting and tax issues different significantly based on an organization's industry. We provide clients with expertise in nearly two dozen industries – we know the opportunities, the obstacles, the competitive landscape.

Learn more

Insights

CohnReznick professionals are thought leaders in their industries. Clients benefit from relevant and timely economic, legislative and industry insights that can keep them a step ahead of competition.

Learn More

Global Reach

Our involvement in the Nexia International network of firms enables us assist our clients wherever they do business-providing local expertise and connections wherever they needed. Nexia is comprised of 20,000 professionals operating in over 100 countries.

Learn More