Blackstone: Senate Bill Would Cost Firm $525M a Year

NEW YORK -- Blackstone Group LP said its annual tax bill would increase by $525 million, or triple what it would otherwise pay, under legislation proposed in the U.S. Senate, Bloomberg News reported Friday.

The bill raising taxes on publicly traded private-equity and hedge-fund firms also would dissuade other companies from going public, depriving the government of revenue it would have collected as a result of those initial stock sales, New York- based Blackstone said in a letter requested by Democratic Sen. John Kerry of Massachusetts, Bloomberg News reported.

“In our opinion, the Baucus-Grassley bill would actually result in a significant net loss of tax revenues by dramatically decreasing the number of firms willing to access the public markets,'' Blackstone said in the five-page letter, Bloomberg News reported. Blackstone also claims that the tax increase would depress earnings and erase as much as $10.5 billion of the firm's $25 billion market value.

The two-pronged argument laid out in the letter to Kerry asserts the measure introduced by Senate Finance Committee Chairman Max Baucus, a Montana Democrat, and Senator Charles Grassley, an Iowa Republican, would cost the government revenue because higher taxes on Blackstone would be partly offset by lower tax payments from individual partners. The Treasury also would forgo billions of dollars in capital-gains taxes because the Senate measure would depress the firm's market capitalization, Blackstone said, according to Bloomberg news.

Grassley took issue with Blackstone's assessment, according to Bloomberg news. “This analysis doesn't support the idea that private-equity firms were ever meant to get an exception to the general rule that publicly traded partnerships are taxed as corporations,'' he said in a statement.

-- NYSSCPA.org News Staff

Posted on 8/24/07