Private Equity Fund Taxation Post-Tax Reform: What Really Changed?

by Orrick, Herrington & Sutcliffe LLP
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Congress has passed the tax reform bill, known as the “Tax Cuts and Jobs Act” (the “Act”), and President Trump signed it into law on December 22, 2017.  The Act contains wide-ranging changes to the tax law, many of which will impact private equity funds, for good or ill.  We discuss below the most important provisions of the Act affecting private equity funds, their investors and their managers, including:

  • New three-year holding period for carried interests
  • New interest expense limitation to 30% of EBITDA
  • Ability to write off the cost of all depreciable assets acquired
  • Lowered income tax rates for businesses and their balance sheet impact
  • Limitation on NOL usage
  • Partnership interests owned by foreign partners now subject to U.S. tax on sale
  • Effect on the buyout market of the lower tax rates and the mandatory repatriation of offshore funds

Although these changes affect all funds to a greater or lesser degree, many private equity funds may not consider their tax position to have significantly changed, depending largely upon the extent to which they are leveraged.  The new three-year holding period required to obtain long-term capital gains on carried interests, however, is likely to become a point for consideration in almost every fund’s exit planning and disposition discussions.

A.        Carried Interests

The treatment of carried interests is an issue that affects not so much the private equity fund itself but, rather, affects the taxation of the return paid to the managers of the fund.  The term “carried interest” is a reference to interests that managers may receive in a fund’s earnings with no associated capital contribution to the fund.  When the tax reform process began, it was feared that legislation would recharacterize all of the return paid to manager-partners in private equity funds, even return that was derived from the disposition of capital assets, as ordinary income instead of as capital gain, on the theory that the return was really compensation for the performance of services.  The change that was implemented is not, however, a wholesale change to the treatment of all carried interests.  Rather, the compromise position that was enacted is that recharacterization occurs only if and to the extent that the relevant asset holding period is not more than three years.

Under the Act, new Code section 1061 recharacterizes gains derived from an “applicable partnership interest” as short-term capital gains (which are taxed at ordinary income rates) rather than as long-term capital gains, to the extent the gains relate to property that does not have a  holding period of more than three years.  An “applicable partnership interest” is a partnership interest that is transferred to or held by the taxpayer in connection with the performance of “substantial services” by the taxpayer in an “applicable trade or business.”  An “applicable trade or business” is defined as the activity of raising or returning capital and investing in or developing “specified assets.”  “Specified assets” are defined as securities, such as shares of stock and promissory notes, commodities, cash or cash equivalents, real estate, options or derivatives and partnership interests but only to the extent the assets of the partnership are comprised of the preceding items.  Excluded from the definition of “applicable partnership interest” are partnership interests held by a corporation and interests that are received in exchange for a capital contribution.

This provision will apply to most private equity funds, other than ones that are owned and operated as corporations (whether C or S) for tax purposes.  To the extent that private equity funds and their managers tend to have longer holding periods and frequently hold assets for longer than three years, the provision may not work a significant change on the tax profile of the recipients of carried interests in private equity funds.  For those who receive carried interests in hedge funds, which typically engage in very short-term trading, it can be expected that the new rule will prevent their access to long-term capital gains.  The trading programs of many hedge funds are so short term, however, that even when only a one-year holding period was required, the hedge funds were not able to obtain long-term capital gains.  In that regard, this new rule may not have much impact on the recipients of carried interests in hedge funds.

Calculation of Holding Period

The three-year holding period requirement places a premium on careful calculation of the relevant holding period.  The holding period for stock in a corporation begins on the date of purchase of the stock and each share has a holding period corresponding to the date of purchase of that share.  The holding period for an interest in a partnership or LLC (taxed as a partnership) also begins on the date of purchase or date of issuance.  However, the holding period for an interest in a partnership is split in proportion to the amount of the interest acquired or issued on each date.

For example, if a partner invests in a partnership in Year 1 for a $50 capital contribution and in Year 2 for $150, upon a sale of the interest that is three years after the Year 1 investment, only 25% of the gain will be considered to have been derived from property with a three-year holding period.  Similarly, if ownership of a partnership interest is increased through purchases over time, gain on sale would be prorated across the holding periods arising from each purchase. It is not possible to specifically identify a portion of a partnership interest tied to a specific holding period.

There is considerable uncertainty as to how new Code section 1061 will be applied in a number of important respects.  The obvious first question is whether the rule applies to both gains that flow through a fund up to a manager or general partner, as well as gains that might be realized by a manager or general partner upon sale or redemption of its interest in the fund.  The statutory provision (new Code section 1061) applies to “gain with respect to” the applicable partnership interests, which would seem to cover both gains from disposition or redemption, as well as gains on the assets of the partnership.  But what if the gain is from disposition of the manager’s interest when the manager has a three-year holding period in the interest but the partnership has a shorter holding period in the stock or partnership interests of its portfolio companies?

Although not clear from the statute, one would expect that the rule would be interpreted such that the carried partner could not get a different or better answer by selling at one level rather than another (i.e., selling the partnership interest rather than the partnership’s assets).  However, the Act specifically provides that if a taxpayer holding an applicable partnership interest transfers such interest to a related person, then the taxpayer is required to recognize as short-term capital gain its share of the gain with respect to such interest that is attributable to assets not held for more than three years.  The negative implication of the presence of a specific provision to achieve such a result might be that a look-through rule will not apply to a transfer to a party that is not related and, thus, that the carried partner’s transfer to a non-related party could be treated as entirely long-term capital gain despite the shorter holding period at the asset level.  Because the tax law with respect to partnerships tries to ensure that the results from a sale of an interest are the same as the results from the sale of assets by the partnership, however, it would be aggressive to expect that a different answer can be obtained depending upon the level at which the sale occurs, at least until the IRS promulgates guidance that clarifies this result.

Interest Received for Combination of Services and Capital

What if the carried partner’s interest in the fund (partnership) is derived from the performance of services, as well as from some capital contributions?  The rule applies to gains received with respect to an “applicable partnership interest” but an applicable partnership interest is one received for the performance of substantial services.  It is not clear, however, that the exception for interests received for capital contributions can apply to part of an interest.  It would appear that the most rational answer would be that the gains are then prorated between the interest that was received for the performance of services (which would be the applicable partnership interest) and the interest that was received in exchange for the capital contribution, with the three-year holding period requirement only being applied to the proportionate share of the gains with respect to the performance of services.  Even if partial application of the exception is allowed, however, there could be considerable accounting complexity involved in identifying the amount of the return received with respect to services as compared to the amount received with respect to capital.

Avoidance of the Rule If All Portfolio Companies Are Partnerships?

A very intriguing question is the treatment of partnership interests as “specified assets.”  The three-year holding period requirement only applies if the partnership is investing, all or in part, in specified assets.  The definition of specified assets includes “an interest in a partnership to the extent of the partnership’s proportionate interest in any of the foregoing [specified assets]” (emphasis added), i.e., securities, commodities, real estate, cash or cash equivalents and options and derivatives.  Therefore, if a private equity fund’s portfolio company is an LLC that is a partnership for tax purposes, the private equity fund would only have a specified asset if and to the extent that the portfolio company had specified assets.

If the portfolio company is an operating business and is not a holding company (and does not invest in real estate), then it would likely have very few if any assets that would fall within the definition of specified assets.  If the fund has only invested in such operating partnerships then it arguably is not in an applicable trade or business because it does not have specified assets and so the three-year holding period should not apply. This analysis does not appear to apply, however, if the fund has investments in both corporations and partnerships, since the statute provides that an applicable trade or business exists if the fund invests even in part in specified assets, such as corporate stock.

Portfolio Company Employees May Avoid the Three-Year Requirement

Another exception to the rule is available when the manager receiving the interest is an employee of another entity affiliate.  An applicable partnership interest is one received “in connection with the performance of substantial services” in any applicable trade or business but the rule does not apply to an interest held by a person employed by another entity that is conducting a trade or business other than an applicable trade or business and who only provides services to such other entity.  This exception could be useful for an employee of a portfolio company that receives part of his or her compensation for services to the portfolio company in the form of a profits interest in the fund that has invested in the portfolio company.  It appears that the theory behind the exception is that such an employee may not be providing any services at the fund level and thus his or her tax treatment should be differentiated from that of the fund management. 

Could this exception be helpful to the employees of a management services company that provides the services to the portfolio companies (frequently for a 2% fee)?  Managers may be employees of the management company as well as receive a partnership interest in the fund or the general partner of the fund.  The exception would not appear to be available in such a structure because the employment must be with an entity that is not conducting an “applicable trade or business,” i.e., is not an investment management business.  One could argue that the management services company is not conducting an applicable trade or business because it is not “raising or returning capital,” however, the definition of applicable trade or business applies “regardless of whether the business is conducted in one or more entities.”  Therefore, an attempt to distinguish the regular outside management company for the private equity fund from the fund itself for purposes of using the employee exception may not be successful.

B.        Interest Expense Limitation

The Act restricts the deduction for interest expense by corporations (under section 163(j)) and puts in place analogous rules to limit the amount of the business interest deduction by pass-through entities.  For corporations, the Act limits deductible interest to an amount equal to the corporation’s interest income plus 30% of the corporation’s earnings before reductions for interest, depreciation and amortization (termed “adjusted taxable income” but comparable to EBITDA) until 2022 and thereafter further restricts the deduction to 30% of earnings after depreciation and amortization (comparable to EBIT, i.e., a lower number).  The rules do not apply to regulated public utilities, electric cooperatives and businesses with average gross receipts for the prior two years of $25 million or less.

Analogous rules limit the interest deduction by businesses in partnership form.  In general, the interest deduction cap is applied to partnerships at the partnership level.  To the extent that the partnership has unused interest expense limitation, such excess can be used by the partners.  To do so, the Act requires that the partner ignore the partner’s distributive share of all items of income and deduction.  To the extent that the cap limits an interest deduction, the excess interest expense is allocated to the partners and is not treated by the partnership as interest expense to be carried forward to the next year for the partnership.  Instead, the partner treats it as additional deductible interest expense of the partner in the next taxable year that the partner is allocated excess limitation from the partnership.

 The extent to which the interest deduction limitation will affect the private equity industry is not yet clear.  Certainly, when interest is entirely deductible, borrowing to finance acquisitions or growth may be more attractive than dilution through issuance of additional equity.  If earnings are low enough to trigger the new interest deduction cap, however, capitalization through equity issuances may become preferable.  Much of the recent growth in private equity funds and their portfolio companies has been financed with debt.  Such businesses must now consider with careful modeling the earnings expectations that might limit their ability to deduct interest expense;  the result could be a shift to the use of more preferred equity instead of debt.

If preferred equity in partnerships is used as a substitute for debt in order to avoid the interest limitation rules, it will put pressure on the characterization of such preferred interests as equity.  To generalize, in the past, a partner’s taxable income could be reduced by the same amount regardless of whether it was because of the partner’s share of the partnership’s interest deduction or because additional equity had diluted the partner’s interest and taxable income was being allocated to the new equity and away from the partner.  Accordingly, the characterization of the preferred interest in a partnership as debt or equity was largely without a tax consequence.  Now, however, the tax stakes have increased:  the interest deduction might be limited whereas the allocation of taxable income to the preferred partner would reduce the non-preferred partner’s taxable income dollar-for-dollar.  This is another reason that the new Act will call for careful projections and modeling.

We may also see a re-evaluation of the structures in which foreign and tax-exempt investors invested in funds through a U.S. blocker corporation and financed those investments with leverage applied at the blocker level.  Such a U.S. corporate blocker would be subject to the interest expense limitation rules whereas leverage at the foreign or tax-exempt investor level might not.

C.        Bonus Depreciation

The Act has increased bonus depreciation from the previously applicable 50% bonus depreciation to 100% bonus depreciation, i.e., complete expensing and write-off, for qualified property acquired or placed in service after September 27, 2017, and before January 1, 2023.  Qualified property is, generally, non-building property and certain qualified improvements of building property.  The 100% bonus depreciation is phased down by 20% each year for property placed in service in years beginning after 2022.  The phase-down is pushed out by one year for certain property deemed to take longer to place in service, such as gas pipelines and transmission lines.

Importantly, bonus depreciation can be taken for property that is used; there is no requirement that the original use of the property commence with the taxpayer.  Therefore, a taxpayer can purchase used property that is operating and currently in service and immediately write off the purchase price.  In order to “prevent abuses,” however, there is a rule that the acquisition of the used property cannot be an acquisition from a related person or entity.  For this purpose, a related person is one that is more than 50% owned or controlled.

With respect to property that was acquired before September 27, 2017, the previous depreciation rules apply, that is, 50% bonus in 2017, 40% in 2018, and 30% in 2019.  Property will be subject to the older, less favorable rules, even if it was placed in service after September 27, 2017, if its acquisition was subject to a binding written contract as of that date.  An acquisition of such property by another taxpayer after September 27, 2017, however, could bring the property under the new rules.

The availability of 100% bonus depreciation for even used assets that are acquired can be expected to stimulate mergers and acquisitions activity for capital asset-intensive industries.  There has been considerable speculation as to the effect that 100% bonus depreciation may have upon purchase prices.  Recognize that if a buyer can immediately expense the capital assets it acquires regardless of whether the buyer is the first user of such property, then its tax-effected cost of purchase is reduced.  Sellers may now demand the buyer share some of its tax windfall with the seller and ask for higher purchase prices.

D.        Tax Rate Changes


Tax Rate Drop for Corporations

The headline change coming from the legislation is a corporate tax rate cut to 21%.  This rate cut is obviously helpful to corporate taxpayers (“strategics”) but its impact on private equity investment is less clear.  The effect of the new rate for corporations and the new rate for partnerships (discussed below) will need to be considered in deciding the best form in which to hold portfolio companies.

Along with the change in rate, the Act repeals the corporate alternative minimum tax.  The Act does allow corporate taxpayers to claim a refund of any remaining minimum tax credits that would have been usable in subsequent years had the alternative minimum tax remained in place (50% refundable in 2018 through 2020 and 100% refundable starting in 2021).

The balance sheet impact of the tax rate cut is striking.  Companies that have booked deferred tax assets (“DTAs”) are placing on their balance sheet the tax savings that will arise from future tax deductions whereas deferred tax liabilities (“DTLs”) reflect taxes that will be due on future taxable amounts.  Both items are measured using the tax rates expected to be in effect when the deductions or liabilities are realized.  With the corporate tax rate drop, the value of a DTA will be cut and the exposure from a DTL will be reduced.  Companies with sizeable DTAs must record a charge to earnings when they write down the value of those assets.  Companies with sizeable DTLs will report a big one-time earnings gain as they write down the amount of their liabilities.  Numerous recent earnings reports have illustrated this result in companies of all sizes.  For private equity companies that have valued DTAs in their earnings multiples for buyout purposes, the write-down will not be positive news, however, it may be mitigated by the benefit of the ongoing lower tax rate on earnings.

Tax Rate Drop for Pass-Throughs

As a nod to those businesses that want a tax cut similar to the one given to businesses conducted in corporate form, Congress reduced the tax on income from “pass-throughs,” which, for purposes of this provision, are sole proprietorships, partnerships (and LLCs taxed as partnerships) and S corporations.  New Code section 199A reduces the tax by allowing individuals to take a deduction from income of 20% of the “qualified business income” received from pass‑throughs.  The other 80% of the pass-through income is taxed at regular rates.  Assuming the highest individual tax rate of 37% is applied to the 80% of the income that is passed-through, pass-through income would be taxed at a blended rate of 29.6%.

The amount of income that can be deducted, however, is limited to the pass-through owner’s share of certain jobs-related amounts:  the limitation on the deductible amount is the greater of (i) 50% of the pass-through business’s payroll (W-2) amount or (ii) 25% of the payroll amount plus 2.5% of the unadjusted basis of the business’s assets to the extent such assets consist of “qualified property.”

If, as first proposed, the limitation were solely 50% of payroll, many businesses in pass-through form but with little or no payroll, such as real estate businesses, would have been unable to take the deduction.  However, the second formulation of the limitation caps the deduction at 25% of payroll plus 2.5% of the “unadjusted basis” of the business’s assets, giving capital-intensive businesses a chance at the deduction.  This formulation will help businesses in pass-through form that may have significant investments in capital assets but few employees.  Note that the limitation is based on the unadjusted (i.e., undepreciated) basis of “qualified property,” which is defined as tangible, depreciable property held for use in the trade or business, subject to an age limit of the later of 10 years or the last year of the cost recovery period.

The deduction is not available to partners in service businesses above certain income levels.  The provision contains a definition of a service business for this purpose (a “specified service trade or business”).  A specified service trade or business is defined to include the provision of services in the fields of health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, brokerage services or any trade or business where the “principal asset of such trade or business is the reputation or skill of one or more of its employees.”  In addition, a specified service trade or business includes investing and investment management, trading and dealing in securities, commodities or partnership interests.  Architectural and engineering services, however, have been excepted from the definition of services businesses.   The definition of specified service trade or business is highly ambiguous; it must be hoped that the IRS will quickly provide guidance as to the meaning of this term.

Because investment management is included in the definition of specified services, the deduction is not likely to be available to the owners of a management company in pass-through form that provides services to a private equity fund.  Note, however, that the business income with respect to which the deduction is taken is business income exclusive of capital gains and dividends (which are currently taxed at lower rates in any event).  Therefore, if the income flowing to the management company through its carry is capital gains, the loss of the deduction may not be of much concern.

Impact on Choice of Entity Decisions

For a private equity business, the 20% deduction for pass-through income is unlikely to be available:  most funds would be investment management businesses that fall within the definition of service businesses not allowed the deduction, except for partners below the stipulated income levels.  Therefore, in deciding whether it is more tax efficient to have portfolio companies in partnership or corporate form, funds should be comparing the 36.8% rate (21% plus 20% rate on qualified dividends or 39.8% if the 3.8% Medicare tax on dividends is included) on corporate earnings to the 37% top marginal rate imposed on individuals receiving pass-through income (or 40.8% with the Medicare tax).  A rate differential this small is unlikely to drive the choice of entity decision and other considerations such as administrative costs, loss pass-through, basis step-up on exit and investor appetite may prove to be greater determinants.

E.         Net Operating Loss Usage

Under the Act, the use of corporate net operating losses (“NOLs”) to reduce taxable income is restricted.  Beginning in 2018, NOLs for taxable years beginning after December 31, 2017, may not be used to reduce taxable income to zero; they may be used against a maximum of 80% of income.  NOLs previously could be carried back to reduce tax in prior years but under the Act they may not be carried back at all, although there is unlimited carryforward to future years with respect to the portion of NOLs limited by the new 80% cap (i.e., the full 20% of any NOLs disallowed can be carried forward indefinitely whereas previously the carryforward was limited to 20 years).  Limitations on the ability to use operating losses may have a chilling effect on investors’ desire to buy into turn-around situations.

The Act also placed restrictions on an individual taxpayer’s ability to deduct net operating losses that flow through to the taxpayer from pass-through operations.  The Act disallows a deduction for business losses in excess of business income plus $250,000 (for individual filers).  Unused losses can be carried forward and used in subsequent years subject to the same limitation and subject to the passive loss rules.  This provision will limit the ability of owners of a management company to use losses passed through from portfolio companies in partnership form.

F.         Portfolio Company Management Compensation

Code section 162(m) imposes a limitation on the deductibility of compensation above $1 million, including performance-based compensation, for publicly traded corporations.  Although not directly applicable to the compensation of portfolio company management which, for the most part, will not be publicly traded, the presence of a statutory standard such as this may have an influence on the optics of providing compensation of this amount to portfolio company management teams, even when the company is not publicly traded.

G.        Partnership Interests Owned by Foreign Partners Subject to U.S. Tax on Sale

Under the Act, gain or loss on the disposition of a partnership interest by a foreign partner is treated as effectively connected income and subject to tax in the United States if the partnership itself is engaged in a U.S. trade or business.  In addition, a withholding tax obligation is imposed on the purchaser unless the seller certifies it is not a foreign person (similar to current FIRPTA certification).  The Conference Committee Report to the legislation states that it is intended that regulations be promulgated that will allow a broker, as agent of the buyer, to deduct and withhold 10% of the sales price on behalf of the buyer.  This provision of the Act was included in order to override the result in a recent tax case, Grecian Magnesite Mining v. Commissioner, 149 T.C. No. 3 (July 13, 2017), in which the court held that a foreign person’s gain on sale of an interest in a partnership that is engaged in a U.S. trade or business is foreign source income and thus not subject to U.S. tax.  The provision applies as of November 27, 2017, although the withholding tax obligation only applies after December 31, 2017.  This provision has implications for sales of interests in private equity funds, portfolio companies in partnership form, and in some structures, sales of the interests in fund management companies.

H.        Impact on Market from Rate Cut and Repatriated Cash

The Act contains sweeping provisions with respect to international taxation, designed to move the United States closer to a territorial tax system taxing only earnings from U.S. operations.  Previously, earnings by foreign subsidiaries in most structures would not be subject to U.S. tax until such profits were distributed to the U.S. parent.  As a result, U.S. corporations have stockpiled untaxed foreign earnings offshore and the Act imposes a one-time mandatory tax on such earnings after which repatriation of the cash to the U.S. parent would not trigger an additional tax.  The rate of tax is 15.5% on cash equivalent assets and 8% on non-cash assets.  The tax is imposed on the greater of the untaxed earnings of the foreign subsidiary as measured on either November 2, 2017 or December 31, 2017.  Once U.S. multinationals have paid this repatriation tax on their foreign-held earnings, they have no reason not to return the cash to the United States, since repatriating the cash will now not trigger U.S. tax as it would have previously.

It has been estimated that U.S. companies currently hold almost $3 trillion in untaxed profits offshore.  If that amount of cash, or even a significant portion of it, comes back to the United States, the resulting cash placed in the hands of multinational banks and strategics, which has already been widely reported in the media regarding companies such as Citibank and Apple, may give them the upper hand in competing against private equity funds for the available deals. 

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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  • Our Legal Basis for Processing: Generally, we rely on our legitimate interests in order to process your personal information. For example, we rely on this legal ground if we use your personal information to manage your Registration Data and administer our relationship with you; to deliver our Website and Services; understand and improve our Website and Services; report reader analytics to our authors; to personalize your experience on our Website and Services; and where necessary to protect or defend our or another's rights or property, or to detect, prevent, or otherwise address fraud, security, safety or privacy issues. Please see Article 6(1)(f) of the E.U. General Data Protection Regulation ("GDPR") In addition, there may be other situations where other grounds for processing may exist, such as where processing is a result of legal requirements (GDPR Article 6(1)(c)) or for reasons of public interest (GDPR Article 6(1)(e)). Please see the "Your Rights" section of this Privacy Policy immediately below for more information about how you may request that we limit or refrain from processing your personal information.
  • Your Rights
    • Right of Access/Portability: You can ask to review details about the information we hold about you and how that information has been used and disclosed. Note that we may request to verify your identification before fulfilling your request. You can also request that your personal information is provided to you in a commonly used electronic format so that you can share it with other organizations.
    • Right to Correct Information: You may ask that we make corrections to any information we hold, if you believe such correction to be necessary.
    • Right to Restrict Our Processing or Erasure of Information: You also have the right in certain circumstances to ask us to restrict processing of your personal information or to erase your personal information. Where you have consented to our use of your personal information, you can withdraw your consent at any time.

You can make a request to exercise any of these rights by emailing us at privacy@jdsupra.com or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

You can also manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard.

We will make all practical efforts to respect your wishes. There may be times, however, where we are not able to fulfill your request, for example, if applicable law prohibits our compliance. Please note that JD Supra does not use "automatic decision making" or "profiling" as those terms are defined in the GDPR.

  • Timeframe for retaining your personal information: We will retain your personal information in a form that identifies you only for as long as it serves the purpose(s) for which it was initially collected as stated in this Privacy Policy, or subsequently authorized. We may continue processing your personal information for longer periods, but only for the time and to the extent such processing reasonably serves the purposes of archiving in the public interest, journalism, literature and art, scientific or historical research and statistical analysis, and subject to the protection of this Privacy Policy. For example, if you are an author, your personal information may continue to be published in connection with your article indefinitely. When we have no ongoing legitimate business need to process your personal information, we will either delete or anonymize it, or, if this is not possible (for example, because your personal information has been stored in backup archives), then we will securely store your personal information and isolate it from any further processing until deletion is possible.
  • Onward Transfer to Third Parties: As noted in the "How We Share Your Data" Section above, JD Supra may share your information with third parties. When JD Supra discloses your personal information to third parties, we have ensured that such third parties have either certified under the EU-U.S. or Swiss Privacy Shield Framework and will process all personal data received from EU member states/Switzerland in reliance on the applicable Privacy Shield Framework or that they have been subjected to strict contractual provisions in their contract with us to guarantee an adequate level of data protection for your data.

California Privacy Rights

Pursuant to Section 1798.83 of the California Civil Code, our customers who are California residents have the right to request certain information regarding our disclosure of personal information to third parties for their direct marketing purposes.

You can make a request for this information by emailing us at privacy@jdsupra.com or by writing to us at:

Privacy Officer
JD Supra, LLC
10 Liberty Ship Way, Suite 300
Sausalito, California 94965

Some browsers have incorporated a Do Not Track (DNT) feature. These features, when turned on, send a signal that you prefer that the website you are visiting not collect and use data regarding your online searching and browsing activities. As there is not yet a common understanding on how to interpret the DNT signal, we currently do not respond to DNT signals on our site.

Access/Correct/Update/Delete Personal Information

For non-EU/Swiss residents, if you would like to know what personal information we have about you, you can send an e-mail to privacy@jdsupra.com. We will be in contact with you (by mail or otherwise) to verify your identity and provide you the information you request. We will respond within 30 days to your request for access to your personal information. In some cases, we may not be able to remove your personal information, in which case we will let you know if we are unable to do so and why. If you would like to correct or update your personal information, you can manage your profile and subscriptions through our Privacy Center under the "My Account" dashboard. If you would like to delete your account or remove your information from our Website and Services, send an e-mail to privacy@jdsupra.com.

Changes in Our Privacy Policy

We reserve the right to change this Privacy Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our Privacy Policy will become effective upon posting of the revised policy on the Website. By continuing to use our Website and Services following such changes, you will be deemed to have agreed to such changes.

Contacting JD Supra

If you have any questions about this Privacy Policy, the practices of this site, your dealings with our Website or Services, or if you would like to change any of the information you have provided to us, please contact us at: privacy@jdsupra.com.

JD Supra Cookie Guide

As with many websites, JD Supra's website (located at www.jdsupra.com) (our "Website") and our services (such as our email article digests)(our "Services") use a standard technology called a "cookie" and other similar technologies (such as, pixels and web beacons), which are small data files that are transferred to your computer when you use our Website and Services. These technologies automatically identify your browser whenever you interact with our Website and Services.

How We Use Cookies and Other Tracking Technologies

We use cookies and other tracking technologies to:

  1. Improve the user experience on our Website and Services;
  2. Store the authorization token that users receive when they login to the private areas of our Website. This token is specific to a user's login session and requires a valid username and password to obtain. It is required to access the user's profile information, subscriptions, and analytics;
  3. Track anonymous site usage; and
  4. Permit connectivity with social media networks to permit content sharing.

There are different types of cookies and other technologies used our Website, notably:

  • "Session cookies" - These cookies only last as long as your online session, and disappear from your computer or device when you close your browser (like Internet Explorer, Google Chrome or Safari).
  • "Persistent cookies" - These cookies stay on your computer or device after your browser has been closed and last for a time specified in the cookie. We use persistent cookies when we need to know who you are for more than one browsing session. For example, we use them to remember your preferences for the next time you visit.
  • "Web Beacons/Pixels" - Some of our web pages and emails may also contain small electronic images known as web beacons, clear GIFs or single-pixel GIFs. These images are placed on a web page or email and typically work in conjunction with cookies to collect data. We use these images to identify our users and user behavior, such as counting the number of users who have visited a web page or acted upon one of our email digests.

JD Supra Cookies. We place our own cookies on your computer to track certain information about you while you are using our Website and Services. For example, we place a session cookie on your computer each time you visit our Website. We use these cookies to allow you to log-in to your subscriber account. In addition, through these cookies we are able to collect information about how you use the Website, including what browser you may be using, your IP address, and the URL address you came from upon visiting our Website and the URL you next visit (even if those URLs are not on our Website). We also utilize email web beacons to monitor whether our emails are being delivered and read. We also use these tools to help deliver reader analytics to our authors to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

Analytics/Performance Cookies. JD Supra also uses the following analytic tools to help us analyze the performance of our Website and Services as well as how visitors use our Website and Services:

  • HubSpot - For more information about HubSpot cookies, please visit legal.hubspot.com/privacy-policy.
  • New Relic - For more information on New Relic cookies, please visit www.newrelic.com/privacy.
  • Google Analytics - For more information on Google Analytics cookies, visit www.google.com/policies. To opt-out of being tracked by Google Analytics across all websites visit http://tools.google.com/dlpage/gaoptout. This will allow you to download and install a Google Analytics cookie-free web browser.

Facebook, Twitter and other Social Network Cookies. Our content pages allow you to share content appearing on our Website and Services to your social media accounts through the "Like," "Tweet," or similar buttons displayed on such pages. To accomplish this Service, we embed code that such third party social networks provide and that we do not control. These buttons know that you are logged in to your social network account and therefore such social networks could also know that you are viewing the JD Supra Website.

Controlling and Deleting Cookies

If you would like to change how a browser uses cookies, including blocking or deleting cookies from the JD Supra Website and Services you can do so by changing the settings in your web browser. To control cookies, most browsers allow you to either accept or reject all cookies, only accept certain types of cookies, or prompt you every time a site wishes to save a cookie. It's also easy to delete cookies that are already saved on your device by a browser.

The processes for controlling and deleting cookies vary depending on which browser you use. To find out how to do so with a particular browser, you can use your browser's "Help" function or alternatively, you can visit http://www.aboutcookies.org which explains, step-by-step, how to control and delete cookies in most browsers.

Updates to This Policy

We may update this cookie policy and our Privacy Policy from time-to-time, particularly as technology changes. You can always check this page for the latest version. We may also notify you of changes to our privacy policy by email.

Contacting JD Supra

If you have any questions about how we use cookies and other tracking technologies, please contact us at: privacy@jdsupra.com.

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