Hedge Funds Face Massive $25 Billion Tax Bill With No Way Out

A tax loophole in which hedge-fund managers avoid paying taxes on performance fees packed offshore will cease to exist on December 31, 2017.

According to Bloomberg, a proposed change to the tax loophole that hedge fund managers have been taking advantage of for years was actually proposed eight years ago. Unfortunately for the fund managers, no one has found a way to avoid the looming tax.

"They figured that by the time we got to 2017, someone would have found a way to eliminate all of the tax," Richard LeVine, a tax expert who caters to the ultra-wealthy, told Bloomberg. "That didn't happen."

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"Now we are halfway through 2016, and it's going to get very busy."

Hedge fund managers could repatriate the cash sitting oversees, but doing so would trigger a tax in itself.

The new tax bill for several of the largest hedge fund names, such as Steven Cohen, David Tepper and John Paulson alone could total in the tens of billions of dollars. Bloomberg noted that the Joint Committee on Taxation estimated in 2008 the new tax would generate around $25 billion over the ensuing decade.

Naturally, the inability of tax experts to find a loophole spells good news for the U.S. Treasury and states such as New York and Connecticut where many billionaire hedge funds are managed.