Congress has passed the tax reform bill, known as the “Tax Cuts and Jobs Act” (the “Act”), and President Trump signed it into law on December 22, 2017.  The Act contains wide-ranging changes to the tax law, many of which will impact private equity funds, for good or ill.  Click below for a discussion of the important provisions of the Act affecting private equity funds, their investors and their managers, including:

• New three-year holding period for carried interests
• New interest expense limitation to 30% of EBITDA
• Ability to write off the cost of all depreciable assets acquired
• Lowered income tax rates for businesses and their balance sheet impact
• Limitation on NOL usage
• Partnership interests owned by foreign partners now subject to U.S. tax on sale
• Effect on the buyout market of the lower tax rates and the mandatory repatriation of offshore funds

Although these changes affect all funds to a greater or lesser degree, many private equity funds may not consider their tax position to have significantly changed, depending largely upon the extent to which they are leveraged.  The new three-year holding period required to obtain long-term capital gains on carried interests, however, is likely to become a point for consideration in almost every fund’s exit planning and disposition discussions. Full text is available here.