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ARTICLE · 15 DECEMBER 2008

Limit on Deferred Compensation for Offshore Investment Funds

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On October 3, 2008, Congress passed and President Bush signed the Tax Extenders and Alternative Minimum Tax Relief Act of 2008 (the “Act”) which dramatically limits the ability of certain non-US investment funds (e.g., hedge funds and private equity funds) to provide nonqualified deferred compensation to US taxpayers.

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Article by James R. Barry , Jeffrey M. Bruns , Anne Marie Konopack and Wayne R. Luepker

Originally published December 10, 2008

Keywords: deferred compensation, offshore investment funds, Tax Extenders and Alternative Mnimum Tax Relief Act, non-US investment funds, taxable income,

On October 3, 2008, Congress passed and President Bush signed the Tax Extenders and Alternative Minimum Tax Relief Act of 2008 (the "Act") which dramatically limits the ability of certain non-US investment funds (e.g., hedge funds and private equity funds) to provide nonqualified deferred compensation to US taxpayers. As a result, such funds' existing deferred compensation arrangements will generally no longer be effective for deferring taxable income with respect to services performed by US taxpayers after December 31, 2008. This memorandum outlines these new limitations.

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