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Print articleIRS Issues Proposed Regulations Targeting Management Fee Waiver Arrangements
July, 2015 - Kenneth K. Bezozo, Sam Lichtman, Vicki L. Martin-Odette, Susan A. Wetzel, Michael Threet, Chris M. Kang, Don Shiman
On July 22, 2015, the Treasury Department and the Internal Revenue Service (“IRS”) released proposed regulations (the “Proposed Regulations”) providing that in certain circumstances a service provider’s allocations of a partnership’s income may be treated as compensatory payments for services under the Internal Revenue Code of 1986, as amended (the “Code”). In particular, the Proposed Regulations are targeting arrangements in which a partnership’s manager has the ability to waive all or a portion of a management fee that the manager is otherwise entitled to receive in exchange for the manager (or the general partner) receiving a profits interest equal to the amount of the waived fee.
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