Carried Interest Taxes
Carried Interest Taxation on Hedge Funds
In case you missed it last week Obama's new tax plan for 2010 calls for taxation of carried interest as ordinary income more than doubling what many will pay on taxes from such gains. Here is an excerpt from a related article:
Executives at buyout, venture-capital and hedge-fund firms will pay an estimated $24 billion more in taxes over nine years if President Barack Obama gets his way.
Obama’s 2010 budget proposal, released today, proposes raising taxes on the managers by treating carried interest, the portion of profits they take from successful investments, as ordinary income instead of capital gains. That change would boost the tax rate, starting in 2011, to 39.6 percent for most executives from the 15 percent they now pay.
The proposal applies to partnerships that receive a portion of the profits they make for their clients. It will likely reignite a debate begun in 2007 amid the biggest buyout boom in history, when firms including Blackstone Group LP and Och-Ziff Capital Management Group raised their profiles through public stock listings. While the House of Representatives approved the tax change that year, the measure wasn’t taken up by the Senate.
“Obama and his team are up for a fight here,” said George Teixeira, a managing director with accounting firm RSM McGladrey in New York. “They’re missing key components of what these industries do.” source