AIC: Tax reform more likely under Trump

The private equity advocacy organisation also expects an improved regulatory environment under a Trump administration.

With the election of Donald Trump and Republicans in control of both chambers of Congress, the American Investment Council anticipates the likelihood of a tax reform in the first half of 2017 potentially impacting private equity has “increased substantially”

“Several issues important to private equity, including the tax treatment of carried interest capital gains and interest deductibility, will be at increased risk in this environment,” the private equity advocacy organisation said in a statement on Monday.

In June, the House Tax Reform Task Force unveiled a plan to eliminate interest deductibility, while early versions of president-elect Trump's tax plan also indicated potential reform limiting interest deductibility.

The AIC also expects the regulatory environment to improve somewhat for private equity in 2017, with particular issues of focus including furthering reforms to the Investment Advisers Act to reduce unnecessary burdens on private equity. 

Keeping private equity investment advisors from being wrongly classified as broker-dealers and ensuring that pending regulations in the US and globally are tailored more appropriately for the industry represent other issues that are likely to be addressed by the new administration, according to the AIC.

The AIC has been active in defending the current tax law treatment of carried interest capital gains and interest deductibility and said it will continue to do so under the new administration.

The organisation “supports reforming the nation's tax code, where appropriate, to encourage greater entrepreneurship, investment, capital formation, job creation and economic growth”, it wrote in a comment letter in April 2015 to the Senate finance committee's individual income tax working group. “Precisely because of this position, we oppose increasing taxes on carried interest or enterprise value.”