Senator Says Lobbying ‘Killed’ Alternatives Tax Bill

Feb 7 2008 | 4:11am ET

An influential Senate Republican said yesterday that a private equity lobbying push “killed” an effort to boost taxes on alternative investments, but he’s not giving up.

Sen. Charles Grassley (R-Iowa), the ranking Republican on the Senate Finance Committee, told a conference that the economic slowdown also helped put the brakes on the plan.

“The economy has deteriorated,” he said. “Right now maybe we don’t want to make Wall Street any more nervous.”

A bill sponsored by Grassley and Sen. Max Baucus (D-Mont.) last year would have more than doubled taxes on publicly-traded private equity firms, as well as other partnerships, and closed a loophole allowing alternative investment executives to avoid paying taxes on offshore income.

Grassley hasn’t given up on the latter provision.

“That’s closing a loophole, that’s not raising taxes,” he said.

“Somebody’s looking at the tax code and saying, ‘Well, you can go offshore here and not pay your taxes,’” Grassley added. “It wasn’t anticipated when the bill was written.”

Much of the bill for the lobbying effort that helped sink the Baucus-Grassley bill was footed by hedge fund giant Citadel Investment Group. According to Senate filings, the Chicago firm paid $150,000 in the second half to the Palmetto Group, a lobbying firm.


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