Private equity's "grandfather" grumble about the tax bill
Private equity executives are largely pleased with the tax bill, but there are growing grumbles about how the change to interest deductibility isn't grandfathered in for existing loans.
- Primer: Under current tax law, corporations can deduct 100% of interest on their debt. The new bill limits that deduction, and further strengthens the limit after four years.
Bottom line: This could be a particularly acute problem for highly-leveraged companies that are either unprofitable or barely profitable. In those cases, private equity sponsors may have to choose between pumping in new cash and crossing their fingers.