New York probes private equity tax strategy: source

(Reuters) - At least a dozen U.S. private equity firms have been subpoenaed by the New York state attorney general as part of a probe into whether a widely used tax strategy is legal, a source familiar with the situation said on Saturday.

Among the firms are Bain Capital, which was once headed by Republican presidential nominee Mitt Romney; Kohlberg Kravis Roberts & Co ; TPG Capital ; Apollo Global Management ; and Silver Lake Partners, the source said.

The office of Attorney General Eric Schneiderman declined to comment. The firms were not immediately available for comment.

The subpoenas, which were sent out in July, seek documents related to the conversion of fees that the firms charge for managing investors' assets, the source said.

The probe, which is being done out of the attorney general's taxpayer protection bureau that was set up in early 2011, is focusing on whether these management fees were converted to fund investments, which would be taxed at a lower rate, the person said.

The management fees would be taxed as ordinary income, which attracts a much higher tax rate than capital gains from investments, potentially saving the firms hundreds of millions of dollars in taxes.

Other firms that received subpoenas include Sun Capital Partners; Clayton, Dubilier & Rice; Crestview Partners; H.I.G. Capital; Vestar Capital Partners; and Providence Equity Partners.

The New York Times first reported news about the probe.

(Additional reporting by Nivedita Bhattacharjee in Chicago; Editing by Peter Cooney and Xavier Briand)

Source: http://news.yahoo.com/york-probes-private-equity-tax-strategy-source-003807415--sector.html

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