Here at Dealbreaker, we don’t exactly have a flawless record when it comes to predicting the fate of massive tax overhauls. But we (well, most of us, anyway) have a pretty solid track record at guessing that the carried-interest loophole will persist until the heat-death of the universe, in spite of the obviousness of its unjustness, its near-universal unpopularity with voters and the unusually bipartisan rhetorical condemnation directed toward it.
So while we may have doubted our own well-founded doubts about President Joe Biden’s $3.5 trillion infrastructure, social safety net and tax bill, given that he needs the universal support of Senate Democrats to pass it and he doesn’t have it, we’re feeling more confident than ever that this thing is doomed.
The proposal, which is part of a $3.5 trillion tax and spending package that House leaders say could get a vote by Oct. 1, lengthens the time period investment funds must hold assets to five years, from three years, in order to qualify for a tax break known as carried interest…. “What looks on its face to be five years could actually be eight years,” said Eric Sloan, a partner at law firm Gibson, Dunn & Crutcher who advises private equity firms. “That is a big deal.”
The clock on the investment holding period doesn’t begin until a fund has invested “substantially all” of its committed capital -- a period that can take anywhere from two to four years for many private equity funds.
It would be a big deal if there were a chance in hell it might happen. What’s definitely a big deal is the looming prospect of a government shutdown/default because of the bill of which it is a part.
Democratic leaders said Monday they would attach a suspension of the debt limit through December 2022 to a short-term spending bill…. Many Republicans said Monday they wouldn’t supply any votes for an effort to raise the government’s borrowing limit in protest to Democrats’ plans to move trillions of dollars in new spending through Congress….
Republicans have criticized Democrats for passing a $1.9 trillion Covid-19 relief package earlier this year and for their efforts to squeeze through a $3.5 trillion plan of social-welfare and climate provisions, both without GOP support.
Republicans have urged Democrats to attach the debt-ceiling measure to their $3.5 trillion package, which is moving via a special process called reconciliation that requires just a simple majority in the Senate. That would allow Democrats to adjust the debt ceiling without GOP votes.
The House legislation, unveiled last week, would prevent IRAs from holding investments offered to “accredited investors….” If passed, the rule would apply to all retirement savers. Current owners would have to divest of such IRA holdings by the end of 2023 or lose the account’s tax benefits — potentially sticking them with a big tax bill.
Steven Mnuchin has raised $2.5 billion at his new private equity fund, according to people familiar with the matter, attracting investments from sovereign wealth funds in the Middle East, including Saudi Arabia, where he traveled extensively as Treasury secretary…. Some former Treasury officials have joined Mr. Mnuchin’s new venture. They include Eli Miller, his former chief of staff, and Brian Callanan, who served as general counsel. Joseph F. Dunford, a former chairman of the Joint Chiefs of Staff, is also a senior adviser, and David Friedman, a former U.S. ambassador to Israel, is leading the office in Tel Aviv.
Democrats’ Carried-Interest Plan Seen as Harsher Than It First Appeared [Bloomberg]
House Democrats’ plan would prohibit individual retirement accounts from holding private equity, hedge funds [CNBC]
Mnuchin’s Private Equity Fund Raises $2.5 Billion [NYT]
Democrats Add Debt Limit to Spending Measure, Sparking Showdown With GOP [WSJ]
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