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Blackstone Partners Profit on IPO Taxes

Loopholes pay off for buyout firm managers after $3.7 bil offering

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(Newser) – The Blackstone Group's partners have expertly negotiated a labyrinth of loopholes to dodge taxes on $3.7 billion they raised with an IPO last month, the Times reports. The maneuver comes as congress discusses what to tax private equity managers, but analysts say the rate debate misses the point; firms are just too good at dancing through the tax code.

Blackstone is selling the intangible asset of "good will" to itself and shoring up tax deductions to be spread out over the next 35 years; in the end, they may actually turn a significant profit on the deductions. “These guys have figured out how to turn paying taxes into an annuity,” one tax lawyer says.

Traders crowd the floor at the post that handles Blackstone Group LP at the New York Stock Exchange as they wait for the stock to open on the initial public offering, Friday, June 22, 2007. Blackstone Group LP, the investment firm known for making billion-dollar bets to buy huge companies...
Traders crowd the floor at the post that handles Blackstone Group LP at the New York Stock Exchange as they wait for the stock to open on the initial public offering, Friday, June 22, 2007. Blackstone...   (Associated Press)
Stephen Schwarzman attends The 39th Annual Museum of Modern Art's Party in the Garden honoring Martin Scorsese, held at the Museum of Modern Art, in this May 15, 2007 file photo in New York. Blackstone Group LP, the private-equity powerhouse that controls corporate names like Universal Studios Orlando and Madame...
Stephen Schwarzman attends The 39th Annual Museum of Modern Art's Party in the Garden honoring Martin Scorsese, held at the Museum of Modern Art, in this May 15, 2007 file photo in New York. Blackstone...   (Associated Press)
In this photo released by The Blackstone Group, Stephen Schwarzman, the chief executive of The Blackstone Group is shown. Schwarzman, will pocket $449.2 million and hold about 24 percent of the company after it goes public, the private equity firm said in a regulatory filing Monday, June 11, 2007....
In this photo released by The Blackstone Group, Stephen Schwarzman, the chief executive of The Blackstone Group is shown. Schwarzman, will pocket $449.2 million and hold about 24 percent of the company...   (Associated Press)
In this photo released by The Blackstone Group, Peter Peterson, the senior chairman of The Blackstone Group is shown. The chief executive of Blackstone Group, Stephen Schwarzman, will pocket $449.2 million and hold about 24 percent of the company after it goes public, the private equity firm said in...
In this photo released by The Blackstone Group, Peter Peterson, the senior chairman of The Blackstone Group is shown. The chief executive of Blackstone Group, Stephen Schwarzman, will pocket $449.2 million...   (Associated Press)
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