Last week, Senator Carl Levin (D – Mich.) introduced the Stop Tax Haven Abuse Act (S. 506) (the “Bill”).[1] As the Bill’s name implies, it is aimed at curbing offshore tax haven and tax shelter abuses. [2] U.S. based investment managers should take note of the substance of the Bill, however, since the proposed legislation, if enacted in its current form, would have a significant impact on the U.S. federal tax treatment of U.S. managed offshore private funds, including hedge and private equity funds.

Morrison & Foerster will be following the progress of the Bill carefully, given that a similar bill introduced by Senator Levin in 2007 was co-sponsored by then-Senator Barack Obama (D – Ill.), among others.[3] It is also noteworthy that Treasury Secretary Timothy Geithner’s recent testimony before the Senate Committee on Finance indicated his support for the Bill.

We discuss below provisions of the Bill that we believe may have particular relevance to private funds and their investment managers.

Please see full update for more information.