Congress considers taxing carried interests at higher rate.(insession)

Legislation has been introduced by Representative Carl Levin that treats carried interests--additional profits received by private equity and hedge fund managers currently considered investment income, and taxed as long-term capital gains--as ordinary income taxable up to 35 percent. This would be a dramatic tax increase from the present law, which taxes capital gains and carried interests at 15 percent. The proposed bill, H.R. 2834, has created concern amongst the real estate community because it is likely to have an adverse impact on most real estate partnerships. In September, the House Ways and Means Committee held its first hearing on carried interests.

The companion bill in the Senate, S. 1624, focuses only on private equity and hedge funds, and applies exclusively to publicly traded partnerships. The issue is likely to continue to be a hot topic, and House and Senate leaders have all promised further discussion.

IREM supports a meaningful differential between tax rates for ordinary income and the tax rates for capital gains.

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