Report
Private Funds Tax Developments: 2025 Review and 2026 Planning Considerations
Key legislative, regulatory, and judicial developments shaping private fund tax planning.
February 04, 2026
2025 was characterized by significant new legislation impacting private funds that in many respects preserved the status quo for core features relevant to private equity, alongside ongoing judicial activity shaping the enforcement and resolution of key tax matters.
Against this backdrop, tax policy continues to be a key variable in private fund structuring and returns, with important implications extending into 2026 and beyond. Our 2025 Year in Review provides a comprehensive roadmap of the developments that will shape private fund strategies in 2026 and beyond.
Key Takeaways
- OBBBA Impact: Why the final legislation preserved carried interest and capital gains but introduced targeted changes with meaningful implications for fund structuring
- Expanded Qualified Small Business Stock Planning: How higher exclusion caps ($15 million) and new three- and four-year holding period tiers create new exit opportunities for venture and growth funds
- Heightened Partnership Scrutiny: Why IRS focus remains high despite the withdrawal of certain basis-shifting reporting rules
- Substance-over-Form Risks: Critical takeaways from recent Tax Court activity affecting management companies and continuation funds
- Border Complexity: Navigating new guidance for private credit and global structures where ECI and sourcing determinations remain fact-specific
- 2026 Strategic Outlook: Why policy volatility makes proactive structuring and flexible fund documentation a competitive necessity
