The I.R.S. almost never audits private equity firms, even as whistle-blowers have filed claims alleging illegal tax avoidance. There were two weeks le

Private Inequity: How a Powerful Industry Conquered the Tax System

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2021-06-12 16:30:04

The I.R.S. almost never audits private equity firms, even as whistle-blowers have filed claims alleging illegal tax avoidance.

There were two weeks left in the Trump administration when the Treasury Department handed down a set of rules governing an obscure corner of the tax code.

Overseen by a senior Treasury official whose previous job involved helping the wealthy avoid taxes, the new regulations represented a major victory for private equity firms. They ensured that executives in the $4.5 trillion industry, whose leaders often measure their yearly pay in eight or nine figures, could avoid paying hundreds of millions in taxes.

The Trump administration’s farewell gift to the buyout industry was part of a pattern that has spanned Republican and Democratic presidencies and Congresses: Private equity has conquered the American tax system.

The industry has perfected sleight-of-hand tax-avoidance strategies so aggressive that at least three private equity officials have alerted the Internal Revenue Service to potentially illegal tactics, according to people with direct knowledge of the claims and documents reviewed by The New York Times. The previously unreported whistle-blower claims involved tax dodges at dozens of private equity firms.