Bill > S4123

This bill, the Carried Interest Fairness Act of 2024, aims to amend the Internal Revenue Code to provide for the proper tax treatment of personal service income earned in pass-through entities. Key provisions include: - Modifying the election to include a partnership interest in gross income in the year of transfer, treating the fair market value of the interest as equal to the partner's share of the partnership's assets. - Creating a new section (Section 710) that applies special rules for partners providing investment management services to partnerships, including treating net capital gain as ordinary income and limiting the ability to characterize losses as ordinary. - Extending the application of Section 751 (regarding the treatment of unrealized receivables and inventory items) to investment services partnership interests. - Excluding certain "specified carried interest income" from qualifying income for purposes of the publicly traded partnership rules under Section 7704. - Imposing a 40% penalty on certain underpayments related to the avoidance of the provisions in Section 710. - Requiring investment services partnership income or loss to be taken into account in determining net earnings from self-employment. The bill aims to address the tax treatment of carried interest, which has been a longstanding area of debate, by subjecting a greater portion of this income to ordinary tax rates.