Sinema’s Private Equity Donations Keep Flowing After Saving Tax Loophole
Sinema has received at least $526,000 from donors in the private equity, hedge fund, and venture capital industries after killing proposed taxes last year.
By Donald Shaw and David Moore, Sludge
Shortly after striking a deal to kill legislation that would have made it harder for investment managers to pay low tax rates, Sen. Kyrsten Sinema (I-Ariz.) received donations from 10 employees of the private equity firm whose co-founder owns the winery where she was an intern.
Sinema’s leadership PAC, named Getting Stuff Done, disclosed paying an “event catering” bill on October 26 to Three Sticks Wines in Sonoma, California. In the days before making that payment, the senator’s joint fundraising committee reported receiving nearly $41,000 from private equity and hedge fund industry donors, including nearly $35,000 from employees of Texas-based firm TPG Capital. Three Sticks is owned by Bill Price, one of the three co-founders and a partner emeritus at TPG.
In the summer of 2020, Sinema was paid $1,117 by the Three Sticks winery for work she performed as an intern. Senate ethics rules allow for senators to derive a small amount of outside income, but they prohibit senators from receiving income that is derived, directly or indirectly, from their position as a public official, or from work that is “in conflict with the conscientious performance of official duties.” That same summer, Sinema held a fundraiser at the winery.
In its most recent FEC filing, covering October 20 to November 28, Sinema’s joint fundraising committee reported receiving 10 donations from employees of TPG Capital, the Texas-based firm where Bill Price is a co-founder and partner emeritus. Price is also the owner of Three Sticks Wines in Sonoma, California, where Sinema was paid $1,117 in the summer of 2020 as an intern. The donations from TPG employees total $46,400 and include $11,600 from Fort Worth-based partner Hana Davis, as well as contributions from firm CEO Jon Winkelried, general counsel Brad Berenson, and board president Todd Sisitsky. Prior to the rush of TPG executive donations in October, only two employees of the firm had ever donated to Sinema.
Another new FEC filing, from the senator’s leadership PAC “Getting Stuff Done,” reveals it made an “event catering” payment to Three Sticks Wines on October 26, just days after the TPG employee donations came rolling in. That payment was the seventh payment Sinema’s PAC or campaign made to Three Sticks Wines since May 2021, all for “event catering” or “meeting expenses.”
These new TPG employee donations were received several weeks after Sinema forced Senate Majority Leader Chuck Schumer over the summer to remove language from the Inflation Reduction Act that would have made it harder for private equity and hedge fund managers to claim carried interest tax rates on profit from funds they manage by extending the period they have to hold the investments from three years to five years. Sinema demanded that the change, which would have cost the industry’s executives an estimated $14 billion over ten years, was removed from the bill or she would not vote for it. Since Democrats could not spare a single vote in passing the bill, Schumer was forced to cut the provision in order to get Sinema’s vote on the overall package.
In total, Sinema has hauled in at least $526,000 from donors in the private equity, hedge fund, and venture capital industries in the months after killing the proposed changes to tax rules last year, according to Sludge’s review of FEC information. A pair of FEC reports show that Sinema’s joint fundraising committee raised more than $95,000 from private equity industry donors in October and November, and that Sinema’s PAC took in an additional $10,000 from VC executives during that period, adding to the $421,000 in donations previously identified to Sinema from donors who stand to benefit from the tax provisions.
Other private equity donors to Sinema in November included two co-founders of the Chicago-based firm Linden Capital Partners, totaling $17,400, and Alexander Katz, managing director of Blackstone.
Maintaining the carried interest loophole has been the goal of a massive lobbying campaign by the private equity industry, including through lobbying done by a trade association of which TPG Capital is a member. The American Investment Council, which counts TPG among its top tier of principal and general members, spent $1.6 million on lobbying the federal government in the first three quarters of 2022. Of the 21 quarterly lobbying reports filed so far by the American Investment Council and its employed lobbying firms in 2022, 12 disclose lobbying on the term “carried interest.”
TPG Capital spent $340,000 lobbying last year on “Tax, legislative and regulatory issues of interest to the company, its partners and investors” using global law firm Hogan Lovells, with lobbyists including partner Aaron Cutler, a former senior advisor for Policy and Outreach for House Majority Leader Eric Cantor (R-Va).
Through the carried interest loophole, investment managers are able to pay the long-term capital gains tax rate of 20% rather than the standard income tax rate of up to 37%. The long-term capital gains rate is typically paid by people who have received returns from investments, but the loophole lets the fund managers use it even when they have not invested their own money.
Anyone interested in sampling the winery products favored by Sinema’s PAC should be prepared to run up a tab. Three Sticks’ wines are mostly reserved for members of its wine club, which costs $455 and up. The El General membership, for $910 a year, entitles one to twelve bottles of wine, a mix of Pinots and Chardonnays. The only wines currently available for public sale on the Three Sticks website are two 2020 Chardonnays, which can be had for $70 a bottle plus shipping. At the winery’s Vallejo-Casteñada Adobe property, non-member guests can shell out $110 for a food and wine pairing by the estate.