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Beltway Monitor.

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Byline: Editorial Staff

Obama's Tax Plan to Hit Private Equity Just when private-equity executives got used to the idea of having to pay higher taxes on their fund profits, President Barack Obama unleashed another broadside against the buyout community in the form of a potential tax increase for US companies with foreign subsidiaries.

The President's $210 billion tax proposal, unveiled in May, would levy additional taxes on multinational US corporations and private equity-backed companies with foreign business units.

Under the present system, corporations are able to secure a credit for income taxes imposed on business units in which a parent company owns a stake of 10% or more, if the division distributes income back to the domestic parent. At present, businesses that earn foreign income are not immediately taxed until that income is repatriated.

Businesses with subsidiaries abroad traditionally have skirted taxes through the "check-the-box" rules, allowing them to make deductions of foreign intercompany exchanges of interest or royalties, for example. But the new rules would tax at US rates.

"The administration is concerned that the check-the-box rules give US multinationals the ability to reduce non-US taxes significantly, thereby encouraging US multinationals to locate operations overseas," says Gary Friedman, a tax partner at Debevoise &...

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