Inside the Private Equity Lobby

The American Investment Council’s work includes: make private equity look good, and protect its much-attacked carried interest tax shelter.

Illustration by Institutional Investor

Illustration by Institutional Investor

Lobbying groups — in addition to pushing for regulations that significantly improve their industry’s position — are often the groups doing the most work to keep an industry’s reputation afloat. For private equity, keeping a reputation untarnished can be difficult. After all, many buyout firms exist to trim fat from portfolio companies. Those who do it well make oodles of money for their investors — and for themselves.

Making that look pretty isn’t easy. And yet, that’s the mission of the American Investment Council.

As private equity firms enjoy a banner year of investor interest, their advocates in Washington are busy pushing for tax reforms that would keep carried interest — the tax-advantaged profit share keeping private equity managers wealthy — in play. This is all while the group works to keep private equity firms looking good.

The AIC is headquartered near D.C.’s Chinatown neighborhood, six blocks from the National Mall. Its main funders are KKR & Co., Apollo Global Management, Carlyle Group, and Blackstone Group.

Right now, its biggest concern is tax reform, according to president and chief executive officer Mark Sommers. “We want to focus on creating a tax code that is pro-growth for the American economy,” he says.

Sommers, who took on the role roughly 18 months ago, was previously the chief of staff to former Speaker of the House John Boehner (R-OH). Since he started working with the private-equity trade group, Sommers has been pushing hard for tax reform.

In addition to retaining carried interest, the American Investment Council wants interest deductibility. The group belongs to a broader effort — the BUILD Coalition — pushing to allow businesses to deduct interest paid on debt from their taxable incomes. It makes sense that the American Investment Council has joined this effort: Leveraged buyouts are a key mechanism by which private equity firms acquire portfolio companies. “Both should be a part of any tax reform policies,” Sommers says. “We think they’re both pro-growth.”

Furthermore, the American Investment Council in 2014, 2015, and 2016 pushed the House of Representatives to pass a resolution “affirming that private equity plays an important role in growing and strengthening United States … and that it has fostered significant investment in the United States economy,” according to lobbying tracker OpenSecrets.

While giant players in the industry can overshadow smaller players in fundraising, their policy interests tend to align. “There have been very few times that the smaller and bigger firms have disagreed,” Sommers says. “Obviously our firms compete for deals, but it’s to everyone’s benefit to share industry trends and best practices.”

Expect more activity from the American Investment Council in years to come. “I do think as a result of the growth of the industry, the association is growing as well,” Sommers says. “Private equity firms recognize the importance of having a robust trade association in Washington.”