'Good will' tax dodge for IPOs eyed

The Blackstone Group has found a way to dodge billions in taxes, The New York Times reported.
JUL 13, 2007
While Congress debates over private equity firms’ tax loopholes, The Blackstone Group has found a way to dodge billions in taxes, The New York Times reported. The New York-based private equity firm is set to pay $553 million in taxes on $3.7 billion raised from its initial public offering, but the firm’s partners will get those tax dollars back, plus another $200 million, from the government, the Times said. Using “good will,” a term that describes the value of intangible assets, the firm first paid a 15% capital gains rate on the shares they sold in their June IPO—shares in the management company and not the funds—according to the Times. Then Blackstone sought deductions spread out over 15 years for $3.7 billion in good will at a 35% rate. These deductions add up to $1.1 billion over a 15-year period, the Times said. Blackstone is far from being the only firm to use this elaborate tax trick: Other hedge funds and private equity firms that have gone public or plan to already use similar techniques, the Times said.

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