pesp-atf-afr_report_pe-tax-code_2025-5d6f175171f58ef9.pdf

The report argues that the private equity (PE) industry uses aggressive financial engineering to extract short-term value from companies, a process facilitated by specific U.S. tax loopholes. Key mechanisms include the carried interest loophole, interest deductions, and fee waivers, which allow PE managers to pay significantly lower tax rates than ordinary workers. The document provides case studies in housing, healthcare, energy, and labor to illustrate the negative impacts of this model, such as increased hospital mortality rates, the proliferation of high-emission LNG terminals, and the degradation of manufactured housing parks.

• Private equity firms employ a business model of 'legalized looting' where they acquire companies using leveraged buyouts, implement severe cost-cutting, and extract value through debt-funded dividends, often leading to higher bankruptcy rates for the target companies.
• The 'carried interest loophole' allows private equity fund managers to misclassify employment compensation as long-term capital gains, reducing the top tax rate from 37% to 20%. This loophole is estimated to have saved U.S. private equity executives $142 billion in federal income taxes between 2000 and 2020.
• Private equity's expansion into healthcare has been linked to degraded patient care; one study found that adverse events in hospitals increased by 25.4% following a PE buyout, and another indicated that PE ownership of nursing homes can increase Medicare patient mortality by 10%.
• In the energy sector, private equity firms are responsible for 1.17 gigatons of annual emissions as of 2024, driven by investments in offshore drilling, fracking, and liquefied natural gas (LNG) export terminals.
• The industry utilizes several other tax avoidance strategies, including 'fee waivers' to convert management fees into capital gains, 'monitoring fees' to disguise dividends as deductible business expenses, and lobbying to exempt PE portfolios from the 15% Corporate Alternative Minimum Tax (CAMT).
• IRS enforcement against private equity has declined significantly due to budget cuts; in 2020, fewer than 0.05% of pass-through partnership businesses, including PE firms, were audited, compared to higher rates in 2010.
• Private equity's entry into the housing market has seen firms acquire over one million units, with a specific focus on manufactured housing parks where they have increased rents and neglected maintenance, often supported by financing from Fannie Mae and Freddie Mac.

APA

Rice, W., O’Grady, E., Dabos, V., Bugbee, M., Ash, J., Viera, O. V., Woodall, P., & Tashman, Z. (n.d.). pesp-atf-afr_report_pe-tax-code_2025-5d6f175171f58ef9.pdf. Private Equity Stakeholder Project. https://pestakeholder.org/wp-content/uploads/2025/02/PESP-ATF-AFR_Report_PE-Tax-Code_2025.pdf

Chicago

Rice, William, Eileen O’Grady, Valentina Dabos, Mary Bugbee, Jordan Ash, Oscar Valdés Viera, Patrick Woodall, and Zachary Tashman. pesp-atf-afr_report_pe-tax-code_2025-5d6f175171f58ef9.pdf. Private Equity Stakeholder Project, n.d. https://pestakeholder.org/wp-content/uploads/2025/02/PESP-ATF-AFR_Report_PE-Tax-Code_2025.pdf.

Wikipedia

{{cite report |last1=Rice |first1=William |last2=O’Grady |first2=Eileen |last3=Dabos |first3=Valentina |last4=Bugbee |first4=Mary |last5=Ash |first5=Jordan |last6=Viera |first6=Oscar Valdés |last7=Woodall |first7=Patrick |last8=Tashman |first8=Zachary |title=pesp-atf-afr_report_pe-tax-code_2025-5d6f175171f58ef9.pdf |publisher=Private Equity Stakeholder Project |url=https://pestakeholder.org/wp-content/uploads/2025/02/PESP-ATF-AFR_Report_PE-Tax-Code_2025.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{ricendpespatfafrreportpetaxcode20255d6f175171f58ef9pdf, author = {Rice, William and O’Grady, Eileen and Dabos, Valentina and Bugbee, Mary and Ash, Jordan and Viera, Oscar Valdés and Woodall, Patrick and Tashman, Zachary}, title = {{pesp-atf-afr\_report\_pe-tax-code\_2025-5d6f175171f58ef9.pdf}}, institution = {Private Equity Stakeholder Project}, url = {https://pestakeholder.org/wp-content/uploads/2025/02/PESP-ATF-AFR_Report_PE-Tax-Code_2025.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }