How to Track Tax Distributions After the LPA Close

How to track tax distributions is an advance ledger on the signed limited partnership agreement (LPA), not the deal-sale waterfall and not a K-1 intake folder. For each commitment, log whether the LPA authorizes a tax distribution, the Tax Amount definition copied, the notice date, the amount on the notice, whether the cash is treated as an advance of later distributions, the remaining Tax Amount after prior Article 14 cash, and whether any withholding sat on a separate row. Raziel's private equity distribution tracking page is DPI cash under the waterfall. Raziel's K-1 alternative investments tracking page is whether the Schedule K-1 arrived. This page is tax-related cash that the LPA treats as an advance.

This is not legal, tax, or investment advice. Raziel does not provide it. Copy the signed LPA and the notice. Do not invent an April 15 clock.

What this tax-distribution ledger is (and is not)

The Institutional Limited Partners Association (ILPA) Model Limited Partnership Agreement (whole-of-fund, last updated July 2020) puts Tax Distributions in Section 14.5. The Model LPA is a starting point. It is not legal advice for particular facts. Section 14.5 opens "Notwithstanding the priorities set forth in Section 14.3," and gives the General Partner authority to cause the Fund to make distributions to all Partners pro rata to their respective Commitments, up to the excess, for each Partner, of that Partner's aggregate Tax Amounts for the relevant fiscal year and all prior fiscal years over the cumulative amount of distributions previously made to that Partner under Article 14 for those years. Those distributions "shall be treated for all purposes hereof, other than this Section 14.5, as advances" of Section 14.2 (Temporary Investment Income) and Section 14.3 (Distributable Proceeds) distributions, and they reduce future 14.2 and 14.3 amounts. Mayer Brown's May 2020 analysis of the Model LPA states the same structure: tax distributions, if any, are made to all limited partners and the general partner on a pro rata basis based on Commitments. A K-1 is not a tax-distribution notice. Do not merge them.

Seven columns on one tax-distribution row

Open one row per fund per tax-distribution notice (or one standing row plus child rows for each notice). Attach the LPA excerpt and the PDF.

• LPA tax-distribution clause (yes / no, section). Copy the section number. If the signed LPA is silent, store silent. Do not paste Section 14.5 onto a fund that never used the Model LPA.

• Tax Amount definition copied. The Model LPA defines "Tax Amount," with respect to each Partner (without regard to whether or not a Partner is taxable or non-taxable), as an amount equal to the actual taxes payable by such Partner with respect to the Distributable Proceeds cumulatively allocated to such Partner in accordance with the Agreement and not otherwise offset by allocations of Fund losses and other deductions allocated to the Fund. Mayer Brown notes that using actual tax amounts, with no deemed-tax concept and without regard to whether the partner is taxable, can be hard to implement. Copy your definition. Store silent if the notice does not restate it.

• Notice date. Date the GP sent the tax-distribution notice. The July 2020 Model LPA (Sections 6.2.1 and 14.1.3) requires capital-call and distribution notices to be consistent with the ILPA Capital Call and Distribution Notice Template. Attach that PDF. If no notice has arrived, store missing.

• Amount on the notice. Dollars printed for this Partner. The Model LPA cap is the excess of aggregate Tax Amounts over prior Article 14 distributions, paid pro rata to Commitments. Copy the printed number. Do not back-solve a tax rate the notice does not print.

• Treated as advance (yes / no). Model LPA: yes, as advances of 14.2 and 14.3, other than for purposes of Section 14.5 itself. Copy your clause. If the signed LPA treats tax distributions as a separate non-advance item, store that instead.

• Remaining vs Tax Amount. Running excess of aggregate Tax Amounts over cumulative Article 14 cash already paid to this Partner. After this notice posts, the remaining excess should fall. If the notice does not print a cumulative Tax Amount, store that it was missing.

• Withholding (separate row). Model LPA Section 14.6 is a different mechanic. If the Fund pays a Tax Liability (including withholding on a Partner's share of income or gains), that payment is treated as distributed to the Partner to whom the Tax Liability is attributable and reduces later distributions. Do not book a 14.6 withholding as a 14.5 tax distribution. Open a withholding row, or mark none.

Copy the signed clocks, not a filing-season default

Do not paste an April 15 industry clock. The Model LPA does not print a statutory tax-distribution date. It prints an authority, a pro rata Commitment split, a Tax Amount definition, and advance treatment. Mayer Brown also notes that basing the right on relative Commitments does not track the General Partner's carried-interest tax in a year before carry is otherwise paid. That is commentary on the model, not this fund. Your executed LPA controls.

When the ledger holds

The row holds if the seven cells are copied from the PDF (or marked missing). It fails when you invent an April 15 deadline, book a K-1 as the cash event, fold Section 14.6 withholding into the tax-distribution row, or treat an advance as incremental DPI. Raziel's IRR calculator is only honest if that cash has a date and a label. Raziel's fund book is the record those notices should sit on: documents, dates, IRR and MOIC. Raziel does not interpret your LPA. Copy the seven columns.