As a result of the $700 billion bailout bill passed by Congress and signed into law on October 3, 2008, US fund managers will no longer be able to defer income from offshore funds.
The bill includes a new section of the Internal Revenue Code (Section 457A) that disallows deferrals of compensation from offshore entities that are not subject to either US income tax or "comprehensive" foreign income tax, which includes most offshore funds.
Income earned for years beginning January 1, 2009 and later cannot be deferred.
Any deferrals currently in place for amounts earned (or to be earned) prior to January 1, 2009, may remain deferred, but only until 2017. Any deferral elections currently in place that provide for payment later than December 31, 2017 (or, for fiscal year entities, the end of the last taxable year beginning before 2018) must be amended to provide for earlier payment; guidance is expected shortly as to the deadline for making such changes.
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