Private Credit Blockers: Legitimate Structure or Substance-Free Tax Avoidance?
Exempt Organizations
·
Complexity
Medium
2026-03-28
98ac8a07
University endowment investing $50M in private credit fund generating UBTI through loan origination activities, sourcing fees from borrowers, and active credit servicing. Endowment uses wholly-owned Cayman blocker corporation as LP to avoid direct UBTI exposure, accepting 21% corporate tax drag versus potential trust-rate UBTI taxation.
Blocker structure necessary and appropriate. Fund's regular loan origination activities, receipt of sourcing fees paid by portfolio companies (80/20 split to fund), and ongoing borrower relationship m…