Lawyers at K&L Gates and Dechert have begun to examine the implications for the industry resulting from the Tax Cuts and Jobs Act signed into law on December 22, 2017. Some of the more significant aspects of the law are relevant to private funds, investment advisers, and mutual funds while other provisions, such as revisions to the rules for Section 529 plans and for Individual Retirement Accounts, could affect investor behavior and demand for certain investment products, the lawyers say. The law firm publications list several provisions of the act relevant to the industry, including:
- Carried interest. Capital gains from certain partnership interests of three years or less will be taxable as short-term capital gain rather than potentially long-term, after 2017.
- Section 529 plans for elementary and secondary school tuition.Such savings plans, which permit investors to save tax-free for college tuition and related expenses, would be available for elementary and secondary school tuition and expenses, up to an annual limit of $10,000.
- Dividends received deduction.The dividends received deduction is being adjusted downward from 70 percent to 50 percent (from 80 percent to 65 percent in certain cases) to reflect the lowering of corporate income tax rates.
- Roth IRA conversions.Certain Roth IRA conversions would be restricted after 2017.
Dechert lawyers also discussed recent SEC staff guidance for publicly traded companies, auditors, and others to help ensure timely public disclosures of the accounting impacts of the Tax Cuts and Jobs Act.