(Reuters) - New York state Attorney General Eric Schneiderman has subpoenaed more than a dozen U.S. private equity firms as part of an investigation into a widely used tax strategy in the industry, The New York Times reported on its website on Saturday, citing unnamed executives.
At issue is the conversion of fees that firms typically charge clients for managing assets into investments in the private equity funds, according to the Times. The management fees would be taxed as ordinary income, which attracts a higher tax rate than capital gains from investments.
Schneiderman’s office is looking into whether that strategy helped the firms illegally cut their tax bills by hundreds of millions of dollars, the newspaper said.
The firms subpoenaed include Bain Capital, once headed by Republican presidential candidate Mitt Romney, the newspaper said.
The Times said Clayton, Dubilier & Rice, Crestview Partners, H.I.G. Capital, Vestar Capital Partners and Providence Equity Partners also received subpoenas.
The attorney general’s office and the private equity firms were not immediately available for comment.
Reporting By Nivedita Bhattacharjee in Chicago and Greg Roumeliotis in New York; Editing by Peter Cooney