On Wednesday, October 16, 2019, the Financial Accounting Standards Board (“FASB”) unanimously voted to delay effective dates on standards related to accounting for leases, credit losses and hedging. These delays impact private companies and smaller SEC filers. The effective dates remain unchanged for larger public entities.
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I’ve recently had some mutual fund and ETF clients ask if they can reflect securities lending fees as an offset to expenses, as opposed to income on their fund’s Statement of Operations. While this alternative presentation would not have any impact on the reported net investment income of the fund, it would serve to reflect a reduced net expense ratio, which could be helpful in marketing the fund to investors. My initial reaction to this question was- “No, of course not!” However, after performing a little research, the answer is actually “maybe.”
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A Section 754 election can be a favorable tax efficiency tool that is unique to partnerships (as compared to corporations). However, the complexity, administrative burden and changing economic environment should always be considered carefully. Every general partner of a partnership should be aware of these rules and their implications.
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This post is the second in a three-part series that examines implications of the 2017 Tax Cuts and Jobs Act for the investment management industry. Part One introduced the Section 199A deduction and its impact on the investment management industry. Part Three will examine the deduction and C Corporation to S Corporation transitions. Feel free to be in touch with Matt Romano, tax partner, with questions about how these complex new tax developments affect you and your business.
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On April 17, 2019, Treasury and the IRS issued a second round of proposed regulations, which significantly addressed many of the questions that existed with respect to the operation of a Qualified Opportunity Fund (“QOF”). Below is a discussion about the main provisions of the new proposed regulations that would impact managers and advisors of a QOF. Additional references are made to the statute (IRC section 1400Z-2) as well as the first round of regulations (issued on October 19, 2018).
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In June 2019, the SEC issued amendments to Rule 2-01 of Regulation S-X (“the Loan Rule”). The amendments now more effectively identify whether independence may be impaired with respect to an audit client when the audit firm or its covered members have a lending relationship with certain shareholders of that audit client.
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Non-public entities, including private funds and investment advisors, will likely see changes to Auditor’s Reports, or the Opinion, included beginning with December 2020 audited financial statements.
In recent years, we have seen an increase in the popularity of interval funds. Interval funds are hybrid products that contain characteristics of both open-end and closed-end funds. Like open and closed-end funds, they are registered under the Investment Company Act of 1940 and generally take subscriptions daily, although some interval funds may take subscriptions less frequently than daily.
Currently, there are no specific rules or requirements for investment companies relating to the financial statements of acquired funds. Instead, investment companies apply the general SEC requirements of Rule 3-05 and the pro-forma financial information requirements in Article 11 requiring disclosure and information, which are not always relevant to investment companies.
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This post is the first in a three-part series that examines implications of the 2017 Tax Cuts and Jobs Act for the investment management industry. Part Two will detail the effect of Section 199A on financial products and investors. Lastly, Part Three will examine the deduction and C Corporation to S Corporation transitions. Feel free to be in touch with Matt Romano, tax partner, with questions about how these complex new tax developments affect you and your business.
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