As Congressional Republicans rush to pass tax reform before 2018, public pension plan officials are determined to see one new idea not make it to the finish line: the House plan for a new tax on unrelated business income from direct investments, such as real estate and private equity.
Chris Phillips, director of institutional relations for the $120 billion Washington State Investment Board, Olympia, said that as officials there get up to speed on what is at stake, they are networking with their investment partners, peer funds and trade associations to be heard in Washington, and have already written their state delegation to make sure the specific provision in the House bill goes no further. The proposed retroactive tax that would even apply to current investments "severely changes the rules of the game after the game already is being played," WSIB Executive Director Theresa Whitmarsh wrote.
"There is definitely a reason for public pension plans to communicate with congressional leadership," said Mr. Phillips.
"There's a states' right issue, first and foremost. That could set a dangerous precedent. Also, it could take money out the pockets of our beneficiaries — people like teachers, firefighters and other public employees," he said.
At WSIB, which has nearly a 40% exposure to private markets, "we're still trying to figure out the tax impact, but it's significant," he said.
"We certainly don't view this as a political issue as much as a fiscal one."