Wyden Tax Proposal: Effects on Mutual Funds, Exchange-Traded Funds & Publicly-Traded Partnerships

Dechert LLP

Dechert LLP

Senator Ron Wyden (D-Oregon), chair of the Senate Finance Committee, released on September 9, 2021, draft tax legislation (find links to the text here and a summary here) that would directly impact the tax treatment of mutual funds, exchange-traded funds (“ETFs”) and publicly-traded partnerships (“PTPs”) and their investors. 

The proposed legislation would require mutual funds and ETFs, which are taxed as regulated investment companies, to recognize gain when redeeming in-kind appreciated portfolio investments.  ETFs in particular rely on the current tax-free nature of such in-kind redemptions in their routine day-to-day operations.  

The proposed legislation would also eliminate the pass-through tax treatment applicable to certain PTPs including master limited partnerships (“MLPs”).  Currently, PTPs that earn certain types of investment or passive income are taxed as flow through entities for income tax purposes.  This proposal would eliminate the pass-through treatment for such entities and impose a corporate income tax at the entity level.  

Both proposals as drafted would be effective for tax years beginning after December 31, 2022.

The draft tax legislation includes certain other provisions, most of which would affect the income tax rules for partnerships more generally.

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.

© Dechert LLP | Attorney Advertising

Written by:

Dechert LLP

Dechert LLP on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide
- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.