Taxation

Tax risk is at the top of MFA's agenda. MFA is working to provide clarity on a wide range of potential repercussions that would affect investors should revisions to longstanding partnership tax rules change.

MFA leads an aggressive lobbying initiative that includes building coalitions with other industry organizations:

• MFA’s continues to build on its longstanding relationships with staff from Treasury, House Ways & Means Committee, Senate Finance Committee and the Joint Committee on Taxation.
• MFA works with Treasury and the IRS to promote clarity on rules regarding tax exempt entities, hedge fund lending activities, and the tax treatment of credit default swaps.
• MFA successfully received guidance from Treasury on rules such as the nonqualified deferred compensation arrangements. (Section 409A).
• MFA's Tax Committee meets monthly to help shape MFA's legislative initiatives with respect to pending and potential taxation issues and to foster a greater understanding of the implications of the taxation of the industry.

The latest industry news, as well as MFA's Tax Committee and association activities with respect to tax issues includes:

6.19.2009		MFA submitted a letter to the IRS Commissioner regarding FBAR compliance concerns in light of the upcoming filing deadline and statements made by IRS officials during a recent presentation to industry associations. The letter requests that the IRS (1) provide temporary relief in advance of the filing deadline, and (2) issue formal guidance in response to MFA’s prior submissions, which sought clarity on a number of issues, including whether offshore hedge funds are “financial accounts” for FBAR compliance purposes.
5.13.2009		MFA submitted a letter as a follow up to its meeting on April 7 with officials from the IRS to discuss compliance issues faced by private investment funds when filing a Foreign Bank and Financial Accounts Report (FBAR). The letter summarizes all of the points that were raised during the meeting and requests that the IRS issue temporary guidance to assist hedge funds in complying with the rules and instructions for FBARs.
3.26.2009		MFA submits a letter to the Australian Treasury requesting they support legislative and regulatory relief to eliminate the uncertainties in the application of certain Australian tax laws as they apply to many foreign investment funds, including those managed by many MFA members. In the letter, MFA emphasized that these uncertainties potentially act as an ongoing impediment to foreign investment in Australian capital markets.
8.29.2008		MFA submitted a comment letter to the Department of the Treasury and Internal Revenue Service regarding Temporary Regulation TD 9407, which, among other things, changes the automatic extension filing deadline for partnership tax returns from October 15th to September 15th. In MFA’s letter, MFA requests that the deadline revert back to October 15th because the new deadline will make accurate reporting exceedingly difficult for alternative investment partnerships due to the shorten timeframe in which they have to complete their tax-reporting process.
8.20.2008		MFA sent a comment letter to the Financial Accounting Standards Board (FASB), requesting that FASB adopt a rule exempting hedge funds and certain other private investment funds from FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes - An Interpretation of FASB Statement No.109 (FIN 48). Click here for a copy of MFA’s August 20, 2008 letter. The recent letter sent to FASB makes reference to an earlier MFA letter sent on January 12, 2007 to FASB, requesting the postponement of the effective date of FIN 48 because of significant uncertainty in the implementation of FIN 48 by private investment funds. Click here for a copy of MFA’s January 12, 2007 letter.
6.10.2008		MFA sent a letter to Senate Republicans expressing our concerns regarding H.R. 6049, which is titled the Energy and Tax Extenders Act of 2008 and proposes to, among other things, temporarily extend many expiring tax provisions of the Internal Revenue Code by eliminating the deferral of taxation of certain compensation that U.S.-based hedge fund professionals invest in their firms’ offshore funds.
5.15.2008		MFA sent a letter to House Ways & Means Committee Chairman Charles Rangel (D-NY) expressing our concerns regarding H.R. 6049, which is titled the Energy and Tax Extenders Act of 2008 and proposes to, among other things, temporarily extend many expiring tax provisions of the Internal Revenue Code by eliminating the deferral of taxation of certain compensation that U.S.-based hedge fund professionals invest in their firms’ offshore funds.
4.9.2008		MFA has sent a letter to the Internal Revenue Service (IRS) and Treasury requesting guidance on the tax treatment of the acquisition and restructuring of distressed debt by non-U.S. funds