Carried Interest Tax Hike Dropped From Tax Bill

Dec 6 2010 | 1:00pm ET

The phoenix that is a tax hike on performance fees has risen, only to fall, almost countless times over the past four years. But for this year—and, in all likelihood, the next two years—it is back to the ashes.

Sen. Max Baucus (D-Mont.) has dropped a provision in the contentious tax cut bill that would have more than doubled taxes on carried interest. Under a loophole in the tax laws, hedge and private equity fund managers pay only the capital gains rate on their share of a fund's profit, rather than the ordinary income rate. The former is currently just 15%, the latter can be as high as 35%.

Instead, the bill will simply include an extension on middle-class tax cuts and the renewal of dozens of business tax breaks without the new taxes on alternative investment fund managers to help offset them.

The House of Representatives, since Democrats took control in 2006, has consistently passed bills closing the carried interest loophole, and the increased taxes have been pushed for by President Barack Obama and Treasury Secretary Timothy Geithner. But the measures have always fallen short in the Senate.

And with Republicans set to take control of the House next month, it's likely that that body won't continue its annual tradition of passing the tax hike. Republicans have consistently opposed raising taxes on carried interest.


In Depth

Q&A: Brevan Howard’s Charlotte Valeur Talks Strategy

Sep 18 2014 | 11:18am ET

Charlotte Valeur chairs the board of Brevan Howard Credit Catalysts, an LSE listed...

Lifestyle

Hedgies Rock Out For Children's Charity

Sep 15 2014 | 8:40am ET

It's that time of year again—when hedgies trade in their spreadsheets for guitars...

Guest Contributor

Volkered: How Financial Sector Reforms are Creating Opportunities for Hedge Funds

Sep 16 2014 | 11:28am ET

New regulations have dramatically curtailed proprietary trading activity in investment...

 

Editor's Note

    Get A Sneak Peak Of The Alpha Pages

    Aug 25 2014 | 11:21am ET

    As many of you know, FINalternatives was recently acquired by the owners of Futures magazine, a firm called The Alpha Pages LLC. Today marks the soft-launch of a new sister site for both publications. As its name suggests, The Alpha Pages will cover all types of alternative investments, going far beyond the more well-known ones such as hedge funds and private equity. Read more…

 

Futures Magazine

September 2014 Cover

The London Whale: Rogue risk management

Credit default swaps brought down the London Whale and cost JPMorgan $6.2 billion. Here is how it happened.

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.