Although PE sponsors are accustomed to highly complex structures to optimize the tax treatment of each portfolio company their funds acquire, the typical PE fund tends to have a fairly straightforward structure. This is not the case, however, for a PE sponsor that adds an additional private credit strategy. Unlike equity investments in the PE context, direct or indirect lending by private credit funds can introduce unfamiliar tax issues for sponsors to navigate. Among them, non‑U.S. or tax-sensitive investors (together, Tax-Sensitive Investors) in private credit funds may be subject to U.S. income tax on any income effectively connected (ECI) to a “trade or business” (e.g., loan origination) in the U.S. This second article in a two-part series details the ECI risks faced by Tax-Sensitive Investors, while weighing the pros and cons of four of the most common private credit fund structures that can be used to mitigate that tax impact. The first article discussed several factors for PE sponsors to consider before launching an additional private credit strategy, including personnel needs and potential issues with a sponsor’s existing PE funds. See our two-part series “Ropes & Gray Survey and Forum Consider Credit Fund Structures, Leverage, Conflicts of Interest and Challenging Environment”: Part One (Jul. 19, 2018); and Part Two (Jul. 26, 2018).