Monday, April 6, 2009

Rep. Sander Levin Introduces Bill to Increase Carried Interest Tax Rate

On April 2, 2009, Rep. Sander Levin (D-Mich.) introduced legislation, H.R. 1935 (the "Bill"), that would amend the Internal Revenue Code of 1986 to treat partnership allocations to investment managers (also known as "carried interest") generally as ordinary income rather than capital gains. Carried interest which represents the compensation received by the managers of private equity funds formed as partnerships is currently taxed at the 15% rate applied to long-term capital gains, while ordinary income is currently taxed at a maximum 35% rate.

If enacted, the Bill would also treat gains achieved through the disposition of partnership interests held by the investment managers as ordinary income.

Similar legislation was introduced by Levin in 2007 (H.R. 2834).