Carried Interest Tax, Volcker Rule Introduced Today
Two proposed laws which have been in the works for quite some time were introduced today in both houses of Congress. If passed, the amended carried interest tax and Volcker rule would have serious ramifications for both private equity and hedge funds.
The proposed carried interest tax bill would change the way performance fee income is taxed. Currently, there is a sort of loophole that taxes a managers performance fees at a rate of 15 percent as capital gains, rather than as income, which is taxed at a top rate of 35 percent. The proposed legislation seeks to close this loophole. According to FINalternatives,
The bill would allow some carried interest to continue to be taxed as capital gains. But at least 75% of the rest would have be treated as ordinary income.
The other piece of legislation, introduced by Sens. Jeff Merkley (D-OR) and Carl Levin (D-MI), has amended the Volcker rule to tighten language in order to prohibit banks from participating from the hedge fund and private equity industries. According to FINalternatives, Republicans voted earlier this week to block this bill from passing and “The change would allow the amendment to be added to the overall financial overhaul bill even after the Senate votes to limit debate on and changes to the matter.”
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