“Congress Works to Close Carried Interest ‘Loophole’”
In recent months, Congress has been working to close the so-called “loophole” on carried interest income earned by investment fund managers. On May 28, 2010, the U.S. House of Representatives passed the American Jobs and Closing Tax Loopholes Act of 2010 (the “House Bill”). During the past few weeks, the U.S. Senate has been adding substitute amendments to the House Bill (the “Senate Substitutes”) in apparent attempts to gain a consensus for a Senate version to pass on the floor with the 60 votes needed to invoke cloture. The bill has been placed on hold in the Senate, but it will likely be resurrected.
This Stroock Special Bulletin provides an overview of the proposed legislation, including various anti-avoidance provisions in the legislation as well as differences between the House Bill and the Senate Substitutes, and discusses the recent resolution of an issue that would have been particularly onerous for certain partnerships owned pro rata by all their partners.