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Not Exactly a Day in the Sun: U.S. Court of Appeals Holds Private Equity Fund Is Engaged in a Trade or Business

by Sutherland Asbill Brennan LLP - Washington Office

August 2, 2013

Previously published on August 1, 2013

In Sun Capital Partners III LP v. New England Teamsters & Trucking Industry Pension Fund, No. 12-2312, 2013 WL 3814984 (1st Cir. July 24, 2013), the U.S. Court of Appeals for the First Circuit effectively found that the separate activities of a private equity fund’s managers caused the fund managed by those managers to be engaged in a “trade or business.” While this decision addressed the issue in connection with pension funding liabilities under Title IV of ERISA, the court reached its conclusion in part based upon an analysis of federal tax authorities. If the court’s conclusions were to be applied more broadly, it could drastically alter the landscape for structuring private equity funds, significantly heighten the tax risks for equity fund investors and managers, and potentially “dry up” financing for cash-starved portfolio companies.


The views expressed in this document are solely the views of the author and not Martindale-Hubbell. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.

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