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July 23, 2008

Nonprofit Groups May Be Aftected by Review of Offshore Tax Shelters

The Senate Finance Committee on Thursday is playing host to a hearing that will focus on the controversial use of offshore banks in places like the Cayman Islands to shield earnings from federal taxes.

The committee has not yet announced its list of witnesses for the hearing.

But for many nonprofit institutions that manage overseas funds, the session bears watching.

Two key leaders of the powerful committee — Sen. Max Baucus and Sen. Charles Grassley — have made previous statements that condemn the use of overseas accounts to block the federal government from collecting taxes on income from hedge funds.

Mr. Baucus, a Democrat from Montana, chairs the committee. Mr. Grassley, of Iowa, is its senior Republican member.

Under current laws, institutions are able to use so-called blocker companies overseas to convert taxable profit from hedge funds into dividends, which are not taxed.

Committee aides have been looking at the structure of offshore hedge-fund investments by major universities such as Harvard, Stanford, and Yale. Many large foundations and nonprofit hospitals use similar tactics to protect their hedge-fund income from taxes.

— Peter Panepento

Wednesday July 23, 2008 | Permalink

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