YA Global Heads to Appeals Court Over Tax Dispute

Deal News | May 12, 2025 | Foley & Lardner LLP

YA Global Investments, LP, a Cayman Islands-based fund, has filed an appeal to the U.S. Court of Appeals for the Third Circuit following a U.S. Tax Court ruling in November 2023. The Tax Court found that the fund was engaged in a U.S. trade or business through an agency relationship with its U.S. investment manager, Yorkville Advisors. Consequently, the fund was deemed to have failed in withholding tax on income connected with its U.S. trade or business, which was eligible to its non-U.S. partners. Additionally, the court determined the fund was a dealer in securities as per Section 475 mark-to-market rules. This appeal revisits key issues such as agency principles, characterization of U.S. trade or business, and the applicability of Section 475 definitions. The Tax Court's decision has potential ramifications for sponsors of credit funds with non-U.S. investors, who are closely monitoring the outcome.

Sectors

Private Equity and Investment Management
Legal Services
Tax and Accounting

Geography

United States – YA Global Investments is involved in a U.S.-based tax court ruling and appeal process.
Cayman Islands – The fund involved, YA Global Investments, is a Cayman Islands entity engaging in U.S. business activities.

Industry

Private Equity and Investment Management – The article involves a private equity fund, YA Global Investments, and its investment management activities with Yorkville Advisors.
Legal Services – The article discusses legal proceedings, including an appeal process in the U.S. legal system, involving tax litigation.
Tax and Accounting – Tax-related issues concerning the operation of an offshore fund in the U.S. are central to this article.

Financials

Not specified – The article does not provide specific financial figures regarding the tax liability or other related monetary details.

Participants

Name	Role	Type	Description
YA Global Investments, LP	Target Company	Company	A Cayman Islands-based fund appealing a U.S. Tax Court ruling related to its trade or business activities in the U.S.
U.S. Court of Appeals for the Third Circuit	Legal Body	Government	The court receiving the appeal from YA Global Investments regarding the Tax Court's decision.
U.S. Tax Court	Legal Body	Government	The court that originally ruled against YA Global Investments concerning their U.S. business activities and tax obligations.
Yorkville Advisors	Investment Manager	Company	The U.S. investment manager involved in the operations of YA Global Investments that were deemed effectively connected income.