Election results may lead to considerable tax law changes for the private equity industry

Republican candidate Donald Trump has been elected to serve as the 45th President of the United States. Although some Congressional races remain undecided, it appears that the Republicans will retain control of the next Congress albeit with reduced majorities in both the Senate and the House of Representatives.

President-elect Trump’s tax plan includes proposals that, if enacted, could impact the private equity (PE) industry. His proposals would meaningfully reduce federal income tax rates for both individual and business taxpayers. However, his proposals seek to change the taxation of carried interest. The proposals also include a mandatory deemed repatriation of current foreign earnings of US businesses which would be subject to a one-time tax at reduced rates.

Despite certain differences, Trump’s tax plan is, in principle, similar to the House Republican plan for comprehensive tax reform unveiled last June (House Republican Plan). Accordingly, with the Republicans having control of the House, Senate, andWhite House, there is an increased possibility for significant tax reform over the next four years. Many Republicans, including senior Trump campaignofficials, have said that comprehensive tax reform is a key priority, although this will need to be balanced with other policy priorities of the Trump Administration.

At least some parts of Trump’s and the House Republicans’ proposals are expected to face opposition in the Senate, where 60 votes generally are needed to advance legislation (the Republicans are expected to hold between 51 and 53 seats in the Senate). House Speaker Paul Ryan (R-WI), however, has said a Republican-controlled Congress could advance tax reform in 2017 by using budget reconciliation procedures that allow legislation to be approved in the Senate with a simple 51-vote majority.

The new 115th Congress will be sworn into office on January 4, 2017 and Trump will be inaugurated on January 20, 2017. The private equity industry should pay close attention to tax legislation Congress proposes in 2017, as well as Trump’s fiscal year 2018 budget, which is expected to include more details on his proposals.

In the meantime, the current Congress will return next week for a lame-duck session. It must act on legislation to fund the federal government beyond December 9, 2016, when a temporary spending bill expires. Congress could also act on proposals to extend certain renewable energy tax provisions that are set to expire at the end of 2016.

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President-elect Trump’s tax plan includes proposals that, if enacted, could impact the private equity (PE) industry. His proposals would meaningfully reduce federal income tax rates for both individual and business taxpayers.

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Oscar Teunissen
US Tax Strategy Leader
Tel: +1 (646) 471 3223
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Andrew Cristinzio
US Private Equity Leader
Tel: +1 (703) 918 1474
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Joseph Foy
US Financial Services Tax Leader
Tel: +1 (646) 471 8628
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Thomas Groenen
Principal, International Tax Asset Management
Tel: +1 646 471 7026
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Constantinos Magdalenos
Director, International Tax Asset Management
Tel: +1 (202) 346 5247
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Keith Clarke
Director, International Tax Asset Management
Tel: +1 646 471 4991
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Pam Olson
US Deputy Tax Leader & Washington National Tax Services Leader
Tel: +1 (202) 414 1401
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Rohit Kumar
WNTS Tax Policy Services Leader
Tel: +1 (202) 414 1421
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Larry Campbell
Director, Tax Services
Tel: +1 (202) 414 1477
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