NAV Tax Services Team Expertly Handles Transition of Services, Fund Spin-Off, and Complex Tax Issues

First Light’s prior tax preparer forwarded only basic tax documents that did not include tax work papers to support book/tax disparity reconciliation.

Tax lot reports from the broker and the prior tax services provider had differences which NAV invested significant time to resolve. The team ultimately created a separate set of tax books maintained within the NAV system to more accurately track tax lots.

“NAV handled a very challenging transition smoothly,” Peterson said. “They worked hard to develop a logical, workable solution to monitor tax lots with accuracy and accountability.”

First Light recently lifted a fund out of its flagship fund, and subsequently merged it back into the flagship fund two years later.

After the initial transition, NAV’s tax team handled a range of complex adjustments to account for the spin-off, including identifying and reconciling disparities between accounting and tax books, carrying over adjustments from the prior tax preparer, and identifying differences in prior administrator and broker tax lots and maintaining them as separate entities in NAV’s proprietary software.

“The work NAV did related to the spin-off — tracking older tax lots until they were sold and competently handling the interest adjustment for multiple Applicable Partnership Interest (API) stakeholders — made identifying any disparities and the merger back to the flagship fund much smoother to accomplish,” Peterson said.

Investors rely on the timely distribution of K-1s for preparation of their personal tax returns.

NAV delivered tax returns and K-1s to First Light for review within 10 business days after receipt of the last required piece of information.

“NAV provides quick turnaround time for K-1 preparation and distribution,” Peterson said. “Within a day of our review and approval, NAV distributes the documents to investors. The timeliness of K-1s has dramatically reduced what has historically been a high volume of inquiries to our investor service team each year.”

With the complexity of tax regulations surrounding alternative asset funds, First Light execs and investors often contact the NAV team with highly detailed inquiries.

NAV’s expert team is responsive to both fund manager and investor queries.

“Our investors’ questions are addressed quickly and accurately, with NAV team members offering prompt and up-to-date information,” Peterson said. “On the fund management side, in one instance I asked them to run a quick simulation to help us evaluate the tax impact of various trading strategies and they were able to deliver the information we needed to support data-backed decisions.”