Leveraged buyout and venture capital firms are steaming over a new carve-out provision for family farms inserted at the last minute into the carried interest tax hike that passed the House at the end of last month.
The provision appears to exempt farmers who have organized their business as investment partnerships from paying ordinary income tax on the money they take from the partnership. The new bill, of course, will treat most carried interest as income for tax purposes instead of capital gains. Private equity and VC firms say the exemption is unfair and Congress is merely cherry picking certain industries to raise taxes on. Continue reading »
For over three years, the private equity industry’s main lobbying group successfully fought against moves to increase taxes on carried interest. Then, Max Baucus and Sander Levin had to go screw it all up yesterday by slipping carried interest legislation into a big tax and spending bill.
That didn’t go unnoticed by the Private Equity Council’s president Doug Lowenstein, who issued a tersely-worded statement yesterday:
“At this time of great market uncertainty, now is not the time to upend more than 50 years of partnership tax law characterizing carried interest as a capital gain,” he said. “This punitive, 157 percent tax hike on growth investment by real estate, venture, private equity and other firms will hurt those companies that are most desperately in need of capital to sustain or create jobs and drive growth.” Continue reading »
A new proposal to tax carried interest as ordinary income was just attached to a larger tax and spending bill that could be voted on by the House as early as tomorrow.
The bill would have a huge impact on private equity, venture capital and other private partnerships that rely on carried interest as their main source of income. The move would also impact some hedge funds that pay significant long-term capital gains. Washington has been toying with the tax increase for nearly three years, but the the current bill, sponsored by Sen. Max Baucus and Rep. Sander Levin, marks the first time the Senate and the House have come together on the issue. Continue reading »
New York’s City Council is backing a plan to raise a $200 million per year tax on the investment income of hedge fund managers and private equity partners. Such a tax increase would have to be approved by lawmakers in Albany, but the council’s support makes it more likely to garner approval there, the New York Sun is reporting.
The new tax is meant to repair holes in the city’s budget, created in part by the downturn on Wall Street. As layoffs pile up and bonuses expectations diminish, the city is facing a dramatic fall in revenue. Of course, raising taxes on hedge fund managers and private equity partners is likely to drive them out of the city, according to critics.
The move is part of a broader push by lawmakers from Albany to Washington DC to tax “carried interest” as income rather than capital gains. Currently the city taxes management fees they at the 4% unincorporated business tax but that tax currently does not cover “carried interest.”
At least one group can expect to benefit from this tax threat: owners of commercial real estate and their agents in Connecticut.
Council Gets Set To Press a Tax on Hedge Funds [New York Sun]
