The tax strategy used by Bain and other firms to convert management fees — the compensation normally taxed as ordinary income — into capital gains is known as a "management fee waiver".
A couple of weeks ago in this column, I described how private equity firms like Bain Capital convert management fees, which would normally generate ordinary income, into investments that yield capital gain.
Within Procurement Leaders, we have observed that major corporations have been able to leverage deeper knowledge of their supplier spend data and are able to successfully convert management information into predictive data that informs decision-making.
Fleischer, a critic of the tax strategy, said a 2006 Romney financial disclosure shows more than $1 million in income from a Bain fund that has received converted management fees.
Tax lawyers have justified the arrangements by arguing that converting the management fees into carried interest, which could lose some or all of its value if a fund does poorly, entitles the managers to the lower capital gains rate, which is intended to help mitigate the risks taken by investors.
His talk was interesting, although it was all about converting active management strategies into indexes.
I have clients turning off internal controls, resetting security and converting contact management databases into inventory systems because it's cheaper than buying a true inventory system.
Dalglish, a phenomenal goal scorer in a winning Liverpool team in the 1980s, had seamlessly converted to management even before he hung up his boots.
The attorney general, Eric T. Schneiderman, has in recent weeks subpoenaed more than a dozen firms seeking documents that would reveal whether they converted certain management fees collected from their investors into fund investments, which are taxed at a far lower rate than ordinary income.
NEW YORK TIMES Private Equity Firms Face Subpoenas on Tax Strategy | The New York attorney general, Eric T. Schneiderman, has subpoenaed more than a dozen firms seeking documents that would reveal whether they converted certain management fees collected from investors into fund investments, which are taxed at a far lower rate than ordinary income, The New York Times reports.
