The Blackstone Group is spending handsomely to combat proposed legislation that would increase its taxes: it has doubled its team of tax lobbyists and increased spending with its lobbying firm by more than 3,000 percent, according to midyear disclosure reports filed by lobbyists with Congress this week.
Blackstone has retained lobbying firm Ogilvy Government Relations since 1995, but its spending with the well-connected lobbying firm skyrocketed this year – as of 30 June, the it spent $3.74 million employing 13 lobbyists, as compared with the $120,000 it spent on seven lobbyists in the first six months of 2006.
New on the lobbyists’ agenda this year a bill introduced in the House which would tax carried interest as ordinary income at a rate as high as 35 percent, rather at the capital gains rate of 15 percent, as well as a Senate bill commonly called “The Blackstone Bill”.
The Blackstone bill – co-authored by Charles Grassley and Max Baucus, the ranking Republican and Democrat members of the Senate Finance Committee – would cause publicly traded partnerships that receive income from asset management or investment advisory services to be taxed at a higher, corporate rate. If passed as written, the bill would not affect firms that began trading or registered to trade prior to the bill’s 14 June introduction, though Grassley has now said he would consider changing that clause.
“Many people are trying to say Blackstone is the reason [for increased Congressional scrutiny of private equity taxation], that’s really the Trojan Horse for the carried interest issue,” US Congressman Thomas Reynolds, a pro-private equity Republican from New York, recently told PEO.
Reynolds, as well as industry leaders such as Carlyle Group co-founder David Rubenstein, believes Congress has set its sights on a profitable industry in order to capture additional tax revenue.
Most major private equity firms, as well as industry group the Private Equity Council, have stepped up lobbying of late.
The lobbying firm working on behalf of Blackstone is led Wayne Berman, a former Assistant Secretary of Commerce for Policy under former President George Bush, and a major player in Republican campaigns and fundraising.
Lobbyists are not the only ones receiving millions from Blackstone as a direct result of the firm’s management IPO. Blackstone intends to pay lawyers approximately $15 million, and bankers $22 million, according to its registration with the Securities and Exchange Commission. The private equity firm has also said its partners will pay more than $900 million in taxes as a result of the $4.75 billion offering.