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 »
Private equity firms picking through the proposed tax hike on carried interest have discovered an alarming provision buried in the legislation that will raise taxes when they sell their firms.
The provision means any founder of a hedge fund, PE firm or venture capital firm who sells shares in the firm, even through an IPO, will be taxed at ordinary income rates as high as 39 percent. Right now, those sales are taxes at capital gains rates of 15 percent. This would obviously hit anyone trying to cash out by selling to another firm or going public. 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 »
