Exempt Organizations Advisory - Ways and Means Committee Hears Testimony on Debt-Financed Income Rules

By: Catherine W. Wilkinson (cwilkinson@steptoe.com)
Suzanne Ross McDowell (smcdowell@steptoe.com)

In the House Committee on Ways and Means hearing today on fair and equitable tax policy for American working families, which focused on the Alternative Minimum Tax and tax treatment of hedge funds and partners in private equity funds, Janne G. Gallagher, Vice President and General Counsel of the Council on Foundations, and Suzanne Ross McDowell of Steptoe & Johnson LLP testified on investment by US tax-exempt entities in off shore funds.  Mss. Gallagher and McDowell addressed the need to change the debt-financed income rules under Section 514 to remove the barriers to permit direct investment in US hedge funds by tax-exempt entities and to provide broader exceptions to the debt-financed income rules for all tax-exempt entities.