Carried Interest Tax Hike Dead Again?

Oct 1 2010 | 3:36am ET

Its obituary has been written many times, only for the proposed tax increase on performance fees earned by alternative investment fund managers to rise from the dead. But, for the time being, another obituary is in order.

Lawmakers yesterday left Washington, D.C., without passing a provision that would close the so-called “carried interest” loophole. Under said loophole, hedge and private equity fund managers pay only the capital gains rate on their share of their funds’ profits, rather than the ordinary income rate, which is more than twice as high.

Democrats have sought to pass the measure for several years, and Treasury Secretary Timothy Geithner threw his weight behind the proposal earlier this year. But despite concessions made in the Senate version of the bill, Republicans held fast against it, killing it once again.

It is considered unlikely that Congressional leaders would seek to force the tax hike through after November’s election, when Republicans are expected to make broad gains.


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