Private equity group prepares to battle attempts to increase taxes on industry

By Steven Overly
Monday, September 20, 2010

A Washington council that represents private equity firms rebranded itself last week as some in Congress are looking for new sources of revenue, including new taxes on private equity.

The group formerly known as the Private Equity Councilchanged its name to the Private Equity Growth Capital Council during a week in which it also doubled its membership. Leaders admit the new label doesn't readily roll off the tongue but said it projects a more positive image of the role private equity plays in revving the country's economic engine.

Council President Douglas Lowenstein said growing membership has been a goal since the founding partners first came together in 2007, in part to fight another attempt at taxing the industry. But the economic downturn and heaps of financial legislation moving through Congress soon became the priority.

"While there are certainly a lot of issues [today] that are very important and similar to some of the issues in our formation, we felt we reached a point where we could focus a greater degree of our energies" on recruitment, Lowenstein said.

The 18 firms that were added last week brought the council's total membership to 30, with each private equity firm holding an average of 10 to 15 companies in its portfolio, Lowenstein estimates.

More members could give the council greater influence as it looks to lobby Congress on capital gains and carried interest taxes, as well as legislation for small and medium-size businesses, he said.

But Lowenstein said the real aim is to change the preconceived notions of private equity firms and more clearly demonstrate their role in raising money to help portfolio companies expand and add staff.

"That's how you create a definition of private equity to put you in a position that people say this is important and that people say we need to strike the right balance to make sure the industry thrives," Lowenstein said. "Then at least you've got a level playing field, and you'll win some and you'll lose some, but it's a better place."

Chevy Chase-based Global Environment Fund is the only new member firm from the Washington area. The firm invests in companies developing financially prudent solutions to environmental and energy issues. Its portfolio includes domestic companies, as well as those in emerging markets such as China, India and Brazil.

Jeff Leonard, GEF's founding partner, president and chief executive, said he was compelled to join the council as another vehicle to push legislators to act on behalf of small business. He said financial overhauls to date have not done enough.

"From our standpoint, it's not a matter of lobbying for vested interest on the tax side," Leonard said. "It's a matter of raising awareness that our financial system is not serving the mainstays of our local economy."

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