Carried-Interest Tax Loophole On Last Legs?

Apr 27 2010 | 2:35am ET

A top U.S. lawmaker is expressing confidence that Congress will close the so-called carried-interest tax loophole this year, potentially increasing taxes on hedge fund and private equity managers by billions.

Rep. Sander Levin (D-Mich.), the head of the House Ways and Means Committee, said the need to find new revenues has added impetus to the push to tax performance fees as ordinary income, rather than capital gains. The measure has been passed three times by the House of Representatives and is backed by President Barack Obama, but the Senate has yet to act on it.

But Levin said that is changing: House Democrats have been meeting with his Senate counterparty, Sen. Max Baucus (D-Mont.), and the head of the Senate Finance Committee has been more open to closing the loophole.

If it does pass, fund managers would pay the ordinary income tax rate of up to 35% on their performance fees, rather than the 15% capital gains rate.

“Why should the real estate manager of investment spay 15% or 20% and the waiter pay regular income tax?” Levin asked Reuters.

And that may only be the beginning of higher taxes on hedge fund managers and other high earners, according to Levin. The tax-writing chief predicted that the tax on dividends would rise from 15% to nearly 40%.

In Depth

Financial Industry Blockchain Consortium R3 To Open-Source Platform Code

Oct 20 2016 | 9:03pm ET

Bitcoin's blockchain technology has spawned a flurry of activity among fintech startups...


U.S. Trust's Beard: The Rapid Growth of the Art Lending Industry

Oct 7 2016 | 10:55pm ET

Alternative investment managers have emerged as some of the most significant art...

Guest Contributor

Hedge Fund Marketing – Tips for Your Initial Sales Meeting

Sep 29 2016 | 5:46pm ET

There are two main goals a hedge fund should have for an initial in-person sales...