NYAIR Episode 15
State Sourcing Income Rules & Considerations for Hedge Funds and Private Equity Funds
State tax rules for hedge funds and private equity are constantly evolving—and confusion isn’t just for newcomers. In this episode, senior tax expert Gregory Kastner of Baker Tilly unpacks the complex regulatory terrain of state sourcing, apportionment, and compliance, revealing what every fund manager, CFO, or financial sponsor must know to mitigate risk and manage multi-state tax exposure. Don’t let your next filing season catch you off guard.
Featured Guests
Greg Kastner
Senior Tax Manager, Baker Tilly
Greg Kastner is a senior tax manager in the Financial Services division at Baker Tilly, specializing in hedge funds and alternative investment vehicles. With over 21 years of experience—much of it focused on guiding asset managers, high-net-worth individuals, and alternative vehicles—Gregory is a trusted advisor in navigating the changing state and federal tax regulatory landscape. He offers a rare blend of technical expertise and practical insight, helping clients optimize structures to reduce compliance risk and maximize opportunity across multiple jurisdictions.
Robert Akeson
Managing Director Investment Banking at Riverside Management Group
Robert Akeson is a veteran executive with deep expertise in brokerage, prime brokerage, agency execution, and financial technology. As former COO and Co-Head of Prime Brokerage at Mirae Asset Securities (USA), he built best-in-class solutions for hedge funds and institutional investors, and is widely regarded as an innovation leader across capital markets. Now Managing Director at Riverside Management Group, Robert guides fintechs, asset managers, and professional investor platforms, while drawing on years of speaking and teaching at New York’s top financial forums.
Key Insights From This Episode
No Consistency—Every State is Unique
There’s no uniform playbook for state sourcing; approaches differ across states and even between entity types, leading to confusion and potential double taxation.
Partnerships, Blockers, and Apportionment
Structuring funds as partnerships or LLCs doesn’t guarantee tax simplicity: special rules, entity-level taxes, and exceptions like blocker corporations create unique planning needs.
Nexus is Expanding in the Remote Work Era
Remote employees, partner presence, and even virtual activity can create tax nexus—a critical consideration for fund managers with distributed teams or investors.
Shift to Market-Based Sourcing
A growing number of states have moved from the traditional cost-of-performance model to market-based sourcing, requiring income to be allocated where investors reside, not where services are performed.
States Are Getting Aggressive
States like California and New York are ramping up efforts to chase revenue, sometimes requiring filings even when there’s minimal or no local-sourced income, and imposing onerous withholding requirements on partnerships.
Composite Returns—A Double-Edged Sword
Composite returns offer operational relief but often mean higher taxes for investors, as deductions are limited and the highest marginal rate applies.
Access the Full Conversation
Unlock actionable strategies, regulatory context, and risk mitigation frameworks that will help you, your firm, and your clients stay ahead in an increasingly aggressive and fragmented tax landscape. Access the full audio and download the custom insights deck—essential resources for financial services professionals aiming to navigate compliance and build robust, multi-state portfolios.
Soundbites Worth Saving
“There truly isn’t any consistent method being used across states… you can actually end up paying more than 100% of tax on the same income.”
—Gregory Kastner
“The landscape is changing almost monthly; managers must keep abreast of current developments, or risk compliance gaps.”
—Gregory Kastner
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