After a slow response to tax legislation aimed at private equity firms, the Private Equity Council tells Reuters that it’s gearing up for a fight. Better late than never.  

“Do I wish we had been doing it for ten years, absolutely,” PEC spokesman Robert Stewart told Reuters’ Rachel Younglai in an interview, referring to the group’s representation of the buyout industry in Washington. “But I think we are making some progress as we explain to members and staff, what are the principles behind this tax treatment to all general partnerships, not just private equity, and what some of the economic benefits are and what some of the economic consequences might be if the tax treatment were changed.”  

The council launched late last year, hiring Doug Lowenstein from his role defending the video game industry, and officially opened at the end of February. At the time, the private equity industry faced growing resentment from unions in Europe and the U.S., which focused their anger mainly on the issue of job losses. The negative press on the buyout industry was building, and executives at top LBO firms were pushing for a sort of trade group to represent them. Enter Lowenstein and Co.
    Preaching a kinder image of private equity was one thing, but within a month of the council opening for business, Blackstone filed to go public, and lawmakers pounced. By June, policians proposed bills to double the tax rate of private equity firms that go public and to impose a higher tax on a fund’s “carried interest” or the fund manager’s share of the profits from 15 percent to 35 percent.
    The Private Equity Council would be quick to react, one would think. But it turns out, they didn’t have much to offer. Lowenstein was out of town around the time news of the Blackstone Bill hit. The group didn’t even have a website then, and they still don’t.
    The response to the legislation was slow. Now, Stewart says the group is ramping up its efforts.
    The council, which represents some of the country’s largest firms like Blackstone, Apax Partners, the Carlyle Group and KKR, is on board with a coalition of Republican lawmakers and industry associations such as the U.S. Chamber of Commerce which oppose the bill. As well, it is “talking to many other people,” said Stewart.
    Stewart said the group was formed to educate and explain the ins and outs of private equity firms and it was formed “at a time when there wasn’t any particular tax issue around.” Now there is.

    Mind you, Lowenstein’s past utterances indicate he is far from a shrinking violet of lobbyists. 
    In a speech just before leaving the Entertainment Software Association for the job in private equity, he attacked some video game developers for producing controversial games and then not being prepared to defend them when critics turned on the heat. “Don’t duck and cover when the s*** hits the fan. Stand up and defend what you make,” he told them, according to Wired.com.
 
Henry Kravis, Stephen Schwarzman and friends beware. Don’t back down.
(Additional reporting by Martin Howell and Rachelle Younglai (correcting name))

(Photo: Doug Lowenstein, Reuters file)