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CFO/GC Deep Dive

Closing Reception. Breakfast Sponsor. CFO/GC Deep Dive . Greg Vlahos- Assurance partner Natalie Jessop – Tax Partner. PricewaterhouseCoopers, LLP. I nvestment Company - Characteristics. Fundamental Characteristics – “must meet”

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CFO/GC Deep Dive

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  1. Closing Reception Breakfast Sponsor CFO/GC Deep Dive

  2. Greg Vlahos- Assurance partnerNatalie Jessop – Tax Partner PricewaterhouseCoopers, LLP

  3. Investment Company - Characteristics • Fundamental Characteristics – “must meet” • Obtains funds (from one or more investors) and provides the investor(s) with investment management services • Investing solely for capital appreciation, investment income or both • Typical Characteristics - “apply judgment” • Multiple investments & investors • Investors not related to investment manager • Ownership in form of equity or partnership interests • Investments managed on fair value basis

  4. Investment Company - Disclosures • Status as an investment company and that it follows the accounting and reporting requirements of ASC 946 • Any financial support provided to any investees during the period • Any contractual obligations to support an investee that has not yet been paid • Effective Date – Interim & annual periods beginning after 12/15/13 (aka – “NOW”)

  5. Restricted Stock - Valuation • Question: Should a discount be applied to arrive at the fair value for IPO securities given the lack of marketability? • Answer: The accounting analysis is dictated by the nature of the restriction and whether it is associated with the security or not • Certificate stamped with a "restrictive" legend • Rule 144 • Black out periods • Short-swing provisions • Lockup agreements

  6. On the Horizon • Consolidation • Investments in other investment companies • Blocker entity • Revenue Recognition – Incentive fees • Disclosures

  7. State Taxation • Economic Nexus- Update • Experiences in the past year • Washington- Questionnaires continue, taxes paid • California- Evolution of “look thru” • San Francisco Gross Receipts Tax • Planning to bifurcate GP and Management entities? • Tracking of time spent in SF • Carried interest • Do stock distributions avoid inclusion?

  8. Foreign Bank Account Reporting (FBAR) • New mandatory e-filing maintained by FinCEN • New Form 114 similar to prior TD F 90-22.1 • Still due June 30th • No PDFs or other attachments accepted. • Rules on required reporting are consistent with prior year • Watch for email acceptance within 2 days assigning BSA identifier number.

  9. Management Fee Waivers • Treasury recently announced plan to issue comprehensive regulations • Informal discussions with Treasury note their focus on: • Upfront (locked in) waiver, versus annual or quarterly elections • Subsequent appreciation from waiver date required to earn priority allocation • Different entities receive mgmt fee reduction, versus priority allocation of gain. • Loans or other up front payments to GPs • Clawback on priority allocation • Recent audit activity

  10. Qualified Small Business Stock • Supporting the Determination • LP reporting. What we saw for 2013 • What happens if LP is audited on issue in the future? • Representations from the company • Deal docs may contain rep language at investment date. What about at exit? • Limitations on Carried Interest • Limited to “Capital Interest” on the date the QSB stock was acquired • Do the regulations under Sec. 1045 (rollovers) apply to Sec. 1202 (gain exclusions)? • 704B capital, GAAP, Capital, other? • Project underway to approach Treasury for clarification

  11. FATCA and Withholding • Registration • May 5th, First wave of registration, completed • Registrations by June 3, will be on July 1st scheduled listing • Treasury recently announced they will ease enforcement in 2014 and 2015 as long as firms are making good faith effort to comply • Remember registration is just the first step. Ongoing maintenance requirements • Withholding • Increased scrutiny of W-8s by escrow agents • Any invalidation can require backup withholding of 28% (including on gross proceeds) • Get reviews completed by escrow agents well in advance • Be prepared for duplicate reporting (1099 and K-1 to LP for same income)

  12. On the Horizon • Prospects for significant tax legislation • Timing? • Camp’s Proposal • President’s plan • Senate proposed extenders • Questions?

  13. Closing Reception Sponsored by SRS|Acquiom CFO/GC Deep Dive

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