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Bill > S781

US S781

US S781
Carried Interest Fairness Act of 2019

summary

Introduced
03/13/2019
In Committee
03/13/2019
Crossed Over
Passed
Dead
12/31/2020

Introduced Session

116th Congress

Bill Summary

A bill to amend the Internal Revenue Code of 1986 to provide for the proper tax treatment of personal service income earned in pass-thru entities. This bill modifies the tax treatment of carried interest, which is compensation that is typically received by a partner of a private equity or hedge fund and is based on a share of the fund's profits. (Under current law, carried interest is taxed as investment income rather than at ordinary income tax rates.) This bill includes provisions that set forth a special rule for the inclusion in gross income of partnership interests transferred in connection with the performance of services, treat as ordinary income the net capital gain with respect to an investment services partnership interest except to the extent such gain is attributable to a partner's qualified capital interest, exempt income from investment services partnership interests from treatment as qualifying income of a publicly traded partnership, exempt certain family partnerships from the application of this bill, increase the penalty for underpayments of tax resulting from failure to treat income from an investment services partnership interest as ordinary income, and include income and loss from an investment services partnership interest for purposes of determining net earnings from self-employment and applicable self-employment taxes. The bill defines "investment services partnership interest" as any interest in a partnership held by a person who provides services to a partnership by (1) advising the partnership about investing in, purchasing, or selling specified assets; (2) managing, acquiring, or disposing of specified assets; or (3) arranging financing with respect to acquiring specified assets.

AI Summary

This bill amends the Internal Revenue Code to modify the tax treatment of "carried interest," which is compensation that is typically received by a partner of a private equity or hedge fund and is based on a share of the fund's profits. Under current law, carried interest is taxed as investment income rather than at ordinary income tax rates. The bill includes provisions that: - Set forth a special rule for the inclusion in gross income of partnership interests transferred in connection with the performance of services - Treat as ordinary income the net capital gain with respect to an investment services partnership interest, except to the extent such gain is attributable to a partner's qualified capital interest - Exempt income from investment services partnership interests from treatment as qualifying income of a publicly traded partnership - Exempt certain family partnerships from the application of this bill - Increase the penalty for underpayments of tax resulting from failure to treat income from an investment services partnership interest as ordinary income - Include income and loss from an investment services partnership interest for purposes of determining net earnings from self-employment and applicable self-employment taxes. The bill defines an "investment services partnership interest" as any interest in a partnership held by a person who provides services to the partnership by advising, managing, acquiring, disposing of, or arranging financing for specified assets.

Committee Categories

Budget and Finance

Sponsors (15)

Last Action

Read twice and referred to the Committee on Finance. (on 03/13/2019)
(4 Companion Bills)

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