Current News | Diminished Prospects for Carried Interest
Carried interests are a useful tool for partnerships to compensate highly talented employees in a tax efficient way - as capital gain. This rule allows granting a profits only partnership interest to the employee, and then after service that merits a significant compensation event, the partnership can repurchase the interest from the employee and she only pays capital gain on the sale of the partnership interest.
These tools are coming under significant fire, with the charge being lead by President Obama. The President has made this a targeted "tax loophole" that he will be seeking to close through the budgeting process. He previously had specifically mentioned this loophole in a CBS television interview on Sunday, so clearly he wants to make an example of hedge fund managers and others who have benefited from this Congressionally designed compensation component. Of course Carried Interest has been up for debate for 10+ years, with a who's who list of Senate and House members calling for its repeal. Of course one of the loudest was Senator Carl Levin of Michigan.
It does appear, however, that the President's populist campaign has generated sufficient critical mass to potentially get something through Congress this time. Stay tuned and we will keep you up to date on the status of this and other Congressional actions that may affect you.
Jason Redman