Private equity funds, unfunded pension liability | KPMG | GLOBAL

KPMG report: Private equity funds liable for unfunded pension liability

US: Private equity funds, unfunded pension liability

A federal district court found that two private equity funds that owned a bankrupt company were treated as being in a single deemed partnership engaged in a trade or business that created common control of the bankrupt company for purposes of imputing liability for unfunded pension obligations.


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At a minimum, the case has direct implications on the potential exposure of a fund for pension obligations of a portfolio company. However, the district court’s analysis could be invoked by others—such as the IRS or the courts—to disregard a taxpayer’s organizational formalities and create deemed partnerships that could result in unanticipated tax consequences beyond the funding of pension plan liabilities. Unless modified on appeal, the decision may affect future structuring and due diligence for private equity investments.


Read an April 2016 report [PDF 226 KB] prepared by KPMG LLP: What’s News in Tax: Private Equity Funds Found Liable for Unfunded Pension Liability

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