Impact on draft law that ends IRA funds in syndication deals

[Evan Loader]

With the current draft legislation under consideration in the House Ways and Means committee, specifically section 138312 that will end the ability of IRAs to invest in private offerings targeting accredited investors (yes, that means syndications through Regulation D so either 506b or 506c which affects accredited and non-accredited sophisticated investors), how do LP investors & sponsors out there plan to handle this provision if it passes both chambers and is signed into law?

Sponsors –

By potentially losing this giant pool of IRA capital, how much of an impact will this have on your ability to raise capital for future deals?

How will you handle the provision that requires those with IRA funds already invested in current deals to divest them within 2 years?

Is the potential passing of this legislation already changing your approach to accepting IRA funds in deals?

LP investors –

Even if you are not using IRA funds to invest in deals, this still will affect deals you are invested in since at least some of your co-investors in deals are using IRA funds.

Personally, that's now going to be one of my first discussion questions when vetting deals and sponsors. I am concerned that current deals in execution could face a forced early exit or recapitalization event to replace IRA investors. To mitigate that risk in future syndication investments, I want to know how this will be handled.

For reference if you want to see the draft legislation - 

https://waysandmeans.house.gov/sites/democrats.waysandmeans.house.gov/files/documents/SubtitleISxS.pdf