Blocker Corporation Structures in Private Equity Funds: Tax and Other Considerations for Fund Investors

Avoiding UBTI and ECI; Entry and Exit Strategies

Note: CPE credit is not offered on this program

Recording of a 90-minute premium CLE video webinar with Q&A


Conducted on Tuesday, April 13, 2021

Recorded event now available

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Program Materials

This CLE webinar will provide fund counsel with the tools for structuring investments by private equity and venture capital funds (PEVC funds) in a manner that seeks to address the various tax sensitivities of PEVC fund investors.

Description

PEVC fund investors have various, sometimes competing, tax concerns when it comes to how their capital is invested. For example, U.S. tax-exempt investors are often sensitive to the direct receipt of unrelated business taxable income (UBTI), and non-U.S. investors are often sensitive to the receipt of income treated as effectively connected to a U.S. trade or business (ECI).

Blocker structures may be available to address the concerns of these investors. Still, PEVC funds should be aware that how a blocker is utilized (and how the underlying investment is sold) can impact other investors as well. While navigating a diverse investor base's concerns is not a new task for PEVC funds, tax reform has added more wrinkles to the analysis.

Listen as our authoritative panel outlines the benefits and potential risks to PEVC funds generally and their non-U.S. and tax-exempt investors, specifically, using blocker structures and other strategies to mitigate UBTI and ECI. The panel will also examine the impact of such structures and strategies on investors who are not sensitive to UBTI or ECI and will discuss practical considerations for exiting blocker structures and the competing concerns PEVC funds may encounter.

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Outline

  1. General overview of fund structures and investor types
  2. Common fund strategies to mitigate UBTI/ECI exposure
  3. Blocker structure variations
  4. Practical tax considerations in employing blockers for portfolio investments
  5. Additional strategies for tax efficiency

Benefits

The panel will review these and other important issues:

  • What private investment fund activities result in UBTI? ECI?
  • How can blocker corporations be used to mitigate the impact of UBTI and ECI?
  • How does the investment strategy of the fund impact the blocker structure?
  • How has tax reform impacted the structural options available to private investment funds?

Faculty

Clegg, Jace
Jace E. Clegg

Partner
Gunderson Dettmer Stough Villeneuve Franklin & Hachigian

Mr. Clegg's practice encompasses all areas of general corporate and partnership income taxation as well as the...  |  Read More

Huber, Brian
Brian D. Huber

Partner
Gunderson Dettmer Stough Villeneuve Franklin & Hachigian

Mr. Huber supports venture capital and growth equity fund managers on all aspects of the fund lifecycle. He has...  |  Read More

Xu-T. Tina
T. Tina Xu

Associate
Gunderson Dettmer Stough Villeneuve Franklin & Hachigian

Ms. Xu's practice encompasses all areas of general corporate and partnership income taxation as well as the...  |  Read More

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