JEFFREY S. BORTNICK

PARTNER

Jeff Bortnick has advised clients on federal, state, local and international tax and estate planning issues for over 30 years. Jeff frequently advises hedge funds and investment managers on the tax issues related to fund formation, operations and investments. He has also written articles and lectured on related topics.

Practices

Education

New York University (LL.M. in Taxation, 1986; J.D., cum laude, 1982)

Adelphi University (B.B.A., summa cum laude, 1979)

Bar Admissions

1992, U.S. Court of Appeals, Federal Circuit

1988, U.S. Tax Court and U.S. Claims Court

1983, New York

Accolades

Order of the Coif

Delta Mu Delta

Eta Chi Alpha

Delta Tau Alpha

American Jurisprudence Award in Estate Planning

Publications

Hedge Funds – Tax Issues and Planning to Consider Before Year-End

Bloomberg BNA Daily Tax Report, December 2016

Tax Court Decision Upholding “Investor Control” Doctrine May Nullify Tax Benefits for Some Policyholders Investing in Hedge Funds through Private Placement Life Insurance

The Hedge Fund Law Report, July 2015

Recent Developments Could Increase the Attractiveness of Hedge Fund Life Insurance And Annuities

Marcum & Kliegman LLP’s Private Investment Forum, Fourth Quarter 2006

PPLI Invested In Hedge Funds

Trusts & Estates, May 2006

Tax Management-Building Wealth, Reducing Taxes

The PPLI Solution: Delivering Wealth Accumulation, Tax Efficiency, and Asset Protection Through Private Placement Life Insurance, February 2005

Is Increasing Hedge Fund After-Tax Returns Using Private Placement Life Insurance and Annuities Still Viable?
The Journal of Wealth Management, Fall 2004

Tax-Efficient Investing Using Private Placement Variable Life Insurance and Annuities

The Journal of Private Portfolio Management, Winter 1999

Domestic Private Placement Life Insurance and Annuities Can Substantially Increase Hedge Fund After-Tax Returns

Bear Stearns Hedge Views, Winter 1998

Increasing Hedge Fund Returns Using Insurance and Estate Planning

Private Wealth Management, 1997/1998

Life Insurance for Your Hedge Funds

ReLATIVELY Speaking, ReGENERATION Partners, June 1997

Tax Advantages of the Section 83(b) Election Can Be Significant

The Journal of Taxation, January 1997

Increasing Hedge Fund After-Tax Returns Through Private Placement Life Insurance

Lookout Mountain, Volume 3, No. 4, Fourth Quarter 1996

The Section 83(b) Election — Is Alive and Well And Sometimes Indispensable

The Tax Magazine, September 1988

Insights

The Impact on Fund Investors and Fund Managers of the New Regulations on the Business Interest Expense Limitation under Section 163(j)

August 25, 2020

The Tax Cuts and Jobs Act (the “TCJA”), enacted on December 22, 2017, made significant changes to Section 163(j) of the Internal Revenue Code of 1986, as amended (the “Code”), regarding the deductibility of business interest expense. For tax years 2018 through 2025, Section 163(j) of the Code generally limits a taxpayer’s business interest expense…

A Tax Planning “Hat Trick” for Funds Acquiring Portfolio Company Debt

July 9, 2020

As a result of the COVID-19 pandemic, many companies are having difficulty meeting payment obligations on their outstanding debt. However, thanks to a combination of the U.S.-Irish income tax treaty and Section 108 of the Internal Revenue Code of 1986, as amended (the “Code”), private equity funds (and other funds) may be able to find…

More Global High-Wealth Audits Expected Soon

June 22, 2020

The Commissioner of the IRS Large Business and International Division recently announced that the Global High Wealth Industry Group of the IRS will initiate several hundred audits of high-wealth individuals. The audits are expected to commence beginning July 15 when the suspension of certain examination and collection functions of the IRS is lifted. A representative…

Hedge Funds – Tax Issues and Planning to Consider Before Year-End 2019

December 17, 2019

Year-end has always been a time for tax planning and we send our clients and friends our year-end tax planning newsletter on an annual basis. Similar to the end of 2018, there does not appear to be significant tax legislation on the horizon. Also, there are still many unanswered questions regarding the 2017 Tax Cuts…

Certain Fund Managers May Be Required To File TIC Form SHL By August 30, 2019

August 21, 2019,

Fund managers may be required to file Treasury International Capital (“TIC”) Form SHL, Report of Foreign-Residents’ Holdings of U.S. Securities, Including Selected Money Market Instruments (SHL (2019)) by August 30, 2019, based on the fair value of certain U.S. securities determined as of June 28, 2019, issued to foreign persons. This newsletter focuses on the…

Tax Planning for Losses

December 26, 2018,

This newsletter is a brief follow-up to our recent year-end tax newsletter. Click here for our year-end newsletter. Since our 2018 year-end newsletter was distributed, the stock market has been very volatile and decreased significantly (although the market was up a lot today, December 26th, fortunately). Many funds may have significant unrealized losses. This newsletter…

Hedge Funds – Tax Issues and Planning to Consider Before Year-End

December 5, 2018

Year-end has always been a time for tax planning and we send our clients and friends our year-end tax planning newsletter on an annual basis. Unlike the end of 2017, there does not appear to be significant tax legislation on the horizon, although there still could be some changes enacted in 2019, including some potential…

Potential One-Time Opportunity Today For Federally Deductible Charitable Contribution With A Credit Against State And Local Taxes -Check Must Be Mailed Today, August 27th-

August 27, 2018

The Internal Revenue Service and Treasury issued proposed regulations on August 23rd which are proposed to be effective beginning tomorrow, August 28th. As such, the proposed regulations offer a potential opportunity, which expires today, August 27th, in which to make contributions to a state charitable fund to potentially receive a charitable deduction for federal tax…

New Connecticut Tax on Pass-Through Entities — Impact on Hedge Funds and Hedge Fund Managers

June 12, 2018,

On May 31, 2018, Connecticut enacted the “Act Concerning Connecticut’s Response to Federal Tax Reform”. Among other things, the Act imposes a 6.99% tax on certain pass-through entities (which, prior to the Act, were not subject to any Connecticut entity-level income tax). This tax may have significant implications for fund managers and other businesses with…

Mark-to-Market Election

March 13, 2018,

Section 475(f) of the Internal Revenue Code of 1986, as amended, provides that a trader in securities or commodities can make elections to “mark-to-market” their securities and/or commodities and treat increases or decreases in value as ordinary. A fund must be a trader, and not an investor, in order to be able to make a…

Carried Interest Taxation – IRS Issues Notice 2018-18 Stating it Intends to Issue Regulations that “Corporation” does not include an S Corporation

March 1, 2018,

On March 1, 2018, Notice 2018-18 was released, announcing that the Department of the Treasury and the Internal Revenue Service (the “IRS”) intend to issue regulations providing guidance on the application of Section 1061 of the Internal Revenue Code, which relates to the taxation of carried interest. The Notice further announced that the regulations will…

Carried Interest Planning Under the New Tax Legislation

December 21, 2017,

–Year-end planning should be Considered– The tax legislation, which passed Congress and is expected to be signed by the President shortly, includes a new section of the Internal Revenue Code which is entitled “Partnership Interests Held in Connection with Performance of Services.” This section (Section 1061) changes the taxation of “carried interests” in certain circumstances,…

Important CRS Deadline and FFI Agreement Renewal Notices

June 22, 2017,

Reminder: Upcoming Deadline for the Common Reporting Standard As indicated in our newsletter sent on June 9th, the deadline for Common Reporting Standard (CRS) notification is Friday, June 30, 2017. Any Cayman Islands funds that have not completed the required notification on the Cayman Islands AEOI Portal must do so by Friday, June 30, 2017.…

FATCA and Common Reporting Standard Upcoming Deadlines and New Requirements

June 9, 2017,

Upcoming Deadlines for Cayman Islands Funds (Including Cayman Master Funds) June 30, 2017 Notification: U.S. FATCA and Common Reporting Standard U.S. FATCA notification to the Cayman Islands Tax Information Authority (the “Cayman TIA”) is required for entities that have not previously notified the Cayman TIA and entities that need to update an existing notification (for…

The Department of Labor Officially Delays the New Fiduciary Rule from April 10, 2017, to June 9, 2017

April 14, 2017,

On April 7, 2017, the Department of Labor officially delayed, until June 9, 2017, the applicability date of regulations that would change the definition of an “advice fiduciary” for plans covered by the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), or Section 4975 of the Internal Revenue Code of 1986, as amended.…

The Department of Labor Has Proposed Delaying the New Fiduciary Rule for Sixty Days from April 10, 2017, to June 9, 2017

March 9, 2017,

In April 2016, the Department of Labor (“DOL”) released regulations that, among other things, modify the definition of an “advice fiduciary” for plans covered by the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). The new definition also applies to IRAs and other non-ERISA plans which are subject to Section 4975 of the…

Section 475(f) Mark-to-Market Election

February 16, 2017,

A Section 475(f) election might be beneficial for a fund experiencing losses in 2017 or possibly where a fund has significant net unrealized losses coming into 2017. Not as well known is that a section 475(f) election might also be beneficial where a fund is experiencing gains or has significant unrealized net gains coming into…

Hedge Funds – Tax Issues and Planning to Consider Before Year-End

November 21, 2016,

This newsletter briefly highlights certain tax issues and planning that hedge fund managers should consider (or reconsider) before year-end. 1. Trump Presidency. With the election of Donald Trump as President, year-end tax planning is “business as usual” – that is, generally accelerating deductions and deferring income since rates are not expected to increase in 2017.…

Broader U.S. Withholding on Dividend Equivalent Amounts is Effective Beginning on January 1, 2017, for Agreements Entered Into On or After Such Date

November 18, 2016,

In General Section 871(m) of the U.S. Internal Revenue Code of 1986, as amended, was enacted in 2010 and imposes a 30% U.S. withholding tax (subject to reduction by an applicable tax treaty) on dividend equivalent amounts paid (or deemed paid) on certain swaps and equity linked instruments referencing U.S. equities if the long party…

Foreign Bank Account Reports (FBARs)

May 31, 2016,

OVERVIEW This newsletter serves as our annual reminder of the requirement to file Reports of Foreign Bank and Financial Accounts (“FBARs”) where applicable. For calendar year 2015, FBARs are required to be filed on or before June 30, 2016. The form (which was known as Form TD F 90-22.1 before 2015) is known as FinCEN…

U.S. FATCA, U.K. FATCA and CRS – Upcoming Deadlines and Revised Self-Certification Form

May 10, 2016,

Upcoming Deadlines for Cayman Islands Funds (Including Cayman Master Funds) June 10, 2016, Notification: (extended from April 30, 2016) U.S. FATCA and U.K. FATCA Cayman Notification A Cayman fund (including a Cayman master fund) is required to notify the Cayman Islands Tax Information Authority (“TIA”) (via the Cayman portal) that it is a reporting financial…

Proposed 2017 Budget Would Eliminate Self-Employment Tax Exception Utilized by Managers

February 10, 2016,

Self-employment tax is imposed on individuals’ trade or business income. Net investment income tax (“NIIT”) generally applies to high-income individuals’ investment income. Both taxes generally apply to income earned directly or through flow-through entities, and for most fund managers are applied at a marginal rate of 3.8% (although the self-employment tax has a lower effective…

Section 475(f) Mark-to-Market Elections

February 8, 2016,

A Section 475(f) election might help ease the pain for taxable investors in a fund experiencing losses in 2016 or possibly where a fund has significant unrealized losses coming into 2016. Specifically, Section 475(f) provides that a trader in securities or commodities can make elections to “mark-to-market” their securities and/or commodities and treat increases or…

Congress Passes Extenders Bill Affecting REITs

December 21, 2015,

On December 18, 2015, Congress passed the Protecting Americans from Tax Hikes Act of 2015 (“PATH”), the permanent “extenders” legislation. Included among the provisions are many potentially significant changes affecting REITs and foreign investment in U.S. real property through REITs. This newsletter highlights a few of the provisions. REIT Spinoffs Disallowed The extenders bill would…

Common Reporting Standard (“Global FATCA”) – New Self-Certification Forms

December 16, 2015,

The Cayman Islands government just released new individual and entity self-certification forms, which were developed for purposes of compliance with U.S. FATCA, U.K. FATCA and the Common Reporting Standard (“CRS”). Under U.S. FATCA and U.K. FATCA, Cayman funds are required to identify investors that are “specified U.S. persons” or “specified U.K. persons” and to report…

Hedge Funds – Tax Issues and Planning to Consider Before Year-End

November 18, 2015,

This newsletter briefly highlights certain tax issues and planning that hedge fund managers should consider (or reconsider) before year-end. Tax rates are scheduled to remain the same in 2016. 1.  Federal Income Tax Rates in 2015 and 2016.      Long-term capital gains and qualified dividend income:    25%*      Ordinary income:    44.6%*      (*includes effect of net income investment tax and 3%…

BEA Form BE-180, 2014 Benchmark Survey For Financial Services Transactions, is due by November 1st (but extensions may be obtained)

October 20, 2015,

The Bureau of Economic Analysis (BEA) Form BE-180, the 2014 Benchmark Survey of Financial Services Transactions Between U.S. Financial Services Providers and Foreign Persons, is due by November 1, 2015 (30 or 60 day extensions may be obtained), and may apply to many hedge fund managers. The purpose of Form BE-180 is for the BEA…

IRS Extends Certain FATCA Deadlines

September 25, 2015,

On September 18, 2015, the IRS issued Notice 2015-66 announcing its intent to amend FATCA regulations to extend timelines for certain transition rules and to reduce certain compliance burdens on withholding agents by modifying the rules for grandfathered obligations. Most importantly, withholding on gross proceeds will not be required until January 1, 2019 (extended from…

Final and Temporary Regulations on Dividend Equivalent Withholding Are Issued

September 22, 2015,

On September 17, 2015, the IRS issued final regulations (the “Final Regulations”) requiring withholding on certain dividend equivalent payments beginning January 1, 2017. (Please see our prior newsletter regarding the delay of imposing withholding on dividend equivalents.) The Final Regulations reflect some important changes suggested in comments to the IRS following the issuance of the…

Tax Court Case Uses “Investor Control” Doctrine to Tax Inside Build-up of Private Placement Life Insurance

July 7, 2015,

The tax benefits of making investments through private placement life insurance (“PPLI”), including investments in hedge funds, are very significant (i.e., the potential elimination of income tax and possibly estate tax as well). For information on the tax benefits and risks of PPLI click here to see the chapter written by partner Jeff Bortnick from…

Foreign Bank Account Reports (FBARs)

June 9, 2015,

OVERVIEW This newsletter serves as our annual reminder of the requirement to file Reports of Foreign Bank and Financial Accounts (“FBARs”). For calendar year 2014, FBARs are required to be filed on or before June 30, 2015. The form, which was formerly known as Form TD F 90-22.1, is now known as FinCEN Report 114.…

Treasury Postpones The Effective Date for Dividend Equivalent Withholding Regulations for One Year Until January 1, 2017!

May 8, 2015,

Senior counsel for the Treasury Office of Tax Legislative Counsel announced today that the effective date for proposed regulations regarding U.S. withholding tax on dividend equivalent payments (e.g., payments on certain equity swaps or other derivatives referencing U.S. equity securities) has been postponed for one year from January 1, 2016, to January 1, 2017. As…

Hedge Funds – Upcoming FATCA Compliance Deadlines

April 7, 2015,

This legal update highlights certain important upcoming FATCA compliance deadlines for Cayman Islands funds (i.e., offshore standalone funds, offshore feeder funds, and offshore master funds). Register with the Cayman Islands on or before April 30, 2015. Each Cayman Islands fund must register with the Cayman Islands on or before April 30, 2015. Funds must register…

Hedge Funds – Update Regarding FATCA Compliance Issues

December 12, 2014

This newsletter discusses important FATCA compliance issues that hedge funds should consider before the end of the year.   Though the phased implementation of FATCA has afforded hedge funds additional time to comply with FATCA, important  deadlines are approaching. 1. Offshore funds must register with the IRS (i.e., obtain a GIIN) to avoid FATCA withholding. While…

Hedge Funds – Tax Issues and Planning to Consider Before Year-End

November 11, 2014

This annual newsletter briefly highlights certain tax issues and planning that hedge fund managers should consider (or reconsider) before year-end. Tax rates are scheduled to remain the same in 2015, but with the recent filing of 2013 tax returns by many high net worth individuals, taxpayers are even more aware of the increased tax rates…

IRS Issues Chief Counsel Advice on Self-Employment Tax

September 10, 2014,

Overview On September 5, 2014, the IRS released a Chief Counsel Advice (ILM 201436049), which discusses the application of self-employment tax to members of a limited liability company providing investment management services. The CCA concludes that all members of the limited liability company (the “LLC”) are subject to self-employment tax on their distributive shares of…

IRS Issues Final Instructions for New FATCA Forms

June 27, 2014

OVERVIEW We have previously issued newsletters discussing FATCA generally, preparation for compliance, and developments in the timeline for implementing FATCA. On June 25, 2014, the IRS released final instructions to new Form W-8BEN-E. This follows last week’s release of final instructions to Form W-8IMY. The FATCA world has been waiting for these instructions. FATCA GENERALLY…

FATCA Extension Announced

March 31, 2014

The IRS has just announced that the April 25th deadline for fund managers to register their offshore funds and offshore master funds with the IRS and obtain Global Intermediary Identification Numbers (“GIINs”) has been extended to May 5th. Obtaining a GIIN by May 5, 2014, will allow a fund to avoid withholding under FATCA. IRS…

–FATCA– What Hedge Fund Managers Need To Do Now

February 28, 2014

Most hedge fund managers, understandably, have held off doing heavy lifting regarding FATCA in anticipation of guidance to be issued and forms to be finalized (and possibly holding out hope that FATCA would be delayed for another 6 months or even repealed). At this point, hedge fund managers that manage offshore funds need to take…

Hedge Funds – Tax Issues and Planning to Consider Before Year-End

December 4, 2013

This annual newsletter briefly highlights certain tax issues and planning that hedge fund managers should consider (or reconsider) before year-end. Tax rates are scheduled to remain the same in 2014. FATCA compliance deadlines are beginning to approach (unless they are further delayed) and net investment income tax final regulations were just issued. Federal Income Tax…

IRS Extends FATCA Deadlines by Six Months

July 11, 2013

On July 12, 2013 the Internal Revenue Service (the “IRS”) issued Notice 2013-43 (the “Notice”) extending the deadline for the implementation of the Foreign Account Tax Compliance Act (“FATCA”). In general, the FATCA deadlines have been extended by six months. With no final revised W-8 forms, intergovernmental agreements still in a state of flux and…

Hedge Funds – Tax Issues and Planning to Consider Before Year-End 2012

November 12, 2012

This annual newsletter briefly highlights certain tax issues and planning that hedge fund managers should consider (or reconsider) before year-end. Although tax planning at the end of each year is always important, tax planning at the end of 2012 is crucial due to potential tax rate increases. Even with the election over, there is still…

June 30th Deadline – Foreign Bank Account Reporting (FBAR)

June 17, 2012

This Hedge Fund Tax Alert serves as a reminder for filing of Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts. For the calendar year 2011, this should be received (not merely mailed) by June 30, 2012. By June 30th of each succeeding calendar year, U.S. persons (1) with foreign accounts that in…

IRS Offshore Voluntary Disclosure Program – Practical Q&A

March 21, 2012

On January 9, 2012, the IRS reopened its Offshore Voluntary Disclosure Program (“OVDP”), a limited federal income tax amnesty for unreported foreign assets and income. This newsletter identifies key features of the OVDP for U.S. taxpayers and highlights the risks and issues that all taxpayers should consider in evaluating the OVDP. If you have unreported…