Publications

June 8, 2010

Baucus Releases Revised Carried Interest Legislation

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Summary: On Tuesday, June 8, 2010, Senate Finance Committee Chair Max Baucus released a substitute amendment to the American Jobs and Closing Tax Loopholes Act of 2010, which passed the House of Representatives on May 28, 2010. The amendment includes proposed changes to the taxation of carried interest that differ from the House version. In particular, the Senate amendment provides for a different "blended" rate of tax on carried interest and similar arrangements. For individual taxpayers, once it has been fully phased in by 2013, the proposed legislation would treat 65% of carried interest as ordinary income and the remaining 35% as it is treated under current law (i.e., based on the underlying income of the fund in question). Until 2013, the percentages would be 50% and 50%. The Senate amendment also includes a provision that would tax carried interest from the sale of property held for at least seven years at a blended rate of 55% ordinary income and 45% as taxed under current law. The legislation is generally effective for taxable years after 2010 (which is the same effective date as the version that was passed by the House).