Tuesday, 3 March 2015
Last updated 3 hours ago
Feb 5 2010 | 12:14pm ET
U.S. Treasury Secretary Timothy Geithner said the White House would fight to close the so-called “carried interest” loophole that taxes alternative investment managers at the capital gains rate on their share of a fund’s profits.
Asked by Sen. Sheldon Whitehouse (D-R.I.) if President Barack Obama, who included the closing of the loophole in his budget this year, was only “nominally” supporting the oft-proposed and oft-rejected measure, Geithner said he and the administration would “fight for it.”
“Even though the measure doesn’t produce a lot of revenue, it’s good economic policy,” Geithner told the Senate Budget Committee of a plan which would increase taxes on hedge fund and private equity managers by $24 billion over the next decade. The secretary said passing the measure would help restore “balance and fairness” to the tax system, and that he would push his British counterparts to adopt a similar measure.
Under the current tax regime, alternative investments managers pay only the lower capital gains rate—currently 15%—on their performance fee income. Obama’s plan would tax it as ordinary income, with a rate that currently tops out at 35% and would increase to 39.6% under Obama’s budget.
Despite the backing of the White House, it is far from certain that the carried-interest provision will pass. Sen. Debbie Stabenow (D-Mich.) last month predicted that it would not be part of the Senate budget bill.
Jan 23 2015 | 1:00pm ET
In our new section, FINtech Focus, we will profile one of these firms each week. While fintech is a broad category, we will be focusing on firms that specifically cater to the alternative investment industry. Read more…