Representative Marie Gluesenkamp Perez (WA-03) and Representative Don Beyer (VA-08) on February 6, 2025, introduced legislation entitled the “Carried Interest Fairness Act of 2025” (the “House Bill”). The House Bill is designed to tax income from carried interests at the same ordinary income rates applicable to wages. On the same date, Senator Tammy Baldwin (WI) introduced a companion bill (with identical text) in the U.S. Senate (the “Senate Bill”). The carried interest provisions included in the House and Senate Bills (collectively referred to as the “Bill”) are summarized below.
Executive Summary
The Bill would alter the taxation of carried interest in a more sweeping fashion than previously enacted legislation by essentially requiring that all income derived from a carried interest be taxable at ordinary income rates. Such income would also be subject to self-employment taxes. Similar to current law, an exception would apply to certain interests in partnership capital. Absent a contrary election, recipients of carried interest that are subject to vesting provisions would include the liquidation value of the interest (reduced by any amount paid for the interest) in income at the time of grant. The Bill would extend this carried interest treatment beyond investment partnership interests to include certain equity (and equity-like) interests in certain non-U.S. corporations, special purpose acquisition companies and S corporations.
Related Professionals
