The Blackstone Group, one of the largest and most successful hedge fund partnerships, is facing a serious roadblock in their attempt to go public. Two weeks after announcing their IPO, Congress is waving the red flag and saying, “Not so fast boys, we want our money.”

See, as a private partnership, Blackstone Group fund is taxed at the 15 percent capital gains tax rate. But public companies pay a 35 percent corporate rate. And the government does love it’s tax reciepts so they don’t want the precedent set to see 20 percent of some of the highest earners profits getting out of their grasp.

Why, that could be dangerous…

Publicly traded partnerships are rare, especially in the financial sector. The senators expressed concern that Blackstone’s offering would set a dangerous precedent and lead to a wave of financial firms reorganizing themselves to take advantage of the tax loophole.
“Right now, some businesses are crossing the line between reasonably lowering their tax burden and pretending to be something they’re not to avoid most, if not all, corporate taxes,” Grassley said. “If left unaddressed, the tax concerns presented by the public offerings of investment managers, like private-equity and hedge fund management firms, could fundamentally erode the corporate tax base. That would leave other individuals and business taxpayers with a greater share of the nation’s tax burden.”
The proposed legislation would force private-equity and other financial firms to pay taxes as corporations instead of as partnerships when they sell shares to the public. via the washingtonpost.com.

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