equity and hedge funds from a single level of taxation at a 15% rate (or 35% in the case of most hedge funds) to a corporate-level tax of 35%, plus a 15% tax on dividends when distributed. While acknowledging that there are concerns with the current treatment of publicly traded partnerships, Treasury Secretary Paulson has declined to endorse the treatment that would be provided under S. 1624. The House extenders package included a carried interest provision that would apply to publicly traded partnerships beginning in tax years after 31 December 2009. Various private equity and hedge fund managers followed Fortress, the first fund manager to go public as a PTP. The funds include Oaktree, Blackstone Group, Och-Ziff, KKR, Apollo Global Management, and Carlyle Group. "Blocker" corporations Although a partnership structure is advantageous for most investors due to the elimination of an entity-level tax, it is not the desired form for all investors. In particular, foreign investors and domestic tax-exempt organizations both have reasons to prefer to interpose a corporation in the private equity or hedge fund structure. Foreign investors are generally not required to file tax returns unless they have “effectively connected income,” derived from the active conduct of a U.S. trade or business. Passive investment in a corporation does not give rise to a U.S. trade or business. However, active investment management of the type performed by private equity funds or hedge funds typically does. Because partners in a partnership are treated as engaged in whatever business the partnership itself is engaged in, this means that if a foreign investor invests in a hedge fund or private equity fund, it will generally be forced to file a U.S. tax return. To avoid this requirement, a foreign investor will often invest through a blocker corporation (usually located in the Cayman Islands or another offshore jurisdiction). The corporation itself will be required to file U.S. tax returns, and will pay taxes at the normal U.S. corporate tax rate, but the foreign investor will receive only dividends or capital gains from the blocker, and will therefore not be required to file a U.S. return. As an alternative to the “blocker” structure, hedge funds seeking to attract foreign investors can also structure as partnerships, but simply restrict themselves to activities that are not treated as a U.S. trade or business. For example, U.S. tax law provides that trading in securities for the taxpayer’s