Entity-Level Taxes: Wait, I Thought I Was Tax Exempt

Doug Schwartz co-authored the article “Entity-Level Taxes: Wait, I Thought I Was Tax Exempt?” for the October issue of The NAPPA Report—the newsletter published by the National Association of Public Pension Attorneys (NAPPA). Established in 1987, NAPPA is a leading educational association dedicated exclusively to attorneys working directly for or serving public pension plans members.

The article begins “How U.S. public pension plans often operate under the assumption that they are immune from taxation. After all, most are considered ‘super tax-exempt’ under U.S. federal income tax law, meaning they are not subject to income tax, including on unrelated business taxable income. However, despite their tax-exempt status, public plans can, and often do, bear the economic burden of taxes imposed at the entity level of investments made by such pension plans. These taxes may not be upfront and apparent, but they quietly erode returns all the same.”