Family Farm Exemption Discovered in Carried Interest Tax Hike

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.
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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.

“It���s a carve-out in the bill, there’s no question about it,” said Mark Heesen, president of the National Venture Capital Association, an Arlington, Virginia-based trade group that is lobbying the Senate for its own exemption. “It shows that they are not being upfront.”

“This would indicate that the issue is not so much about tax policy but to indicate which industries are currently in favor and which are seen to be in disfavor,” Peter Rose, a spokesman for New York-based Blackstone, said of the exemption for farmers.

As the Senate takes up debate on the legislation this week, lobbyists for the private equity industry plan to make an issue of the family farm exemption and VC firms may move to get an exemption of their own.

Blackstone, Venture Firms Protest Tax Break for Family Farmers [Bloomberg]

Earlier: Private Equity Fuming Over Carried Interest Tax Hike

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Private Equity Fuming Over Carried Interest Tax Hike

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.