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Tax Legislation Limits Future Deferrals, Penalizes Future Side Pocket Incentive Fees from Offshore Funds

October 7, 2008


On Oct. 3, 2008, the Emergency Economic Stabilization Act of 2008 (H.R. 1424) was signed into law. The Act, among other things, eliminates the ability of most cash-basis taxpayers to defer compensation earned from many non-U.S. corporations (including offshore hedge funds) and certain partnerships comprised primarily of persons non-taxable in the United States ("nonqualified entities"). The legislation is effective for compensation attributable to services performed after Dec. 31, 2008.