Bill > HR1091

This bill aims to change the tax treatment of carried interests, which are partnership interests often received by investment managers as compensation for their services. The Carried Interest Fairness Act of 2025 would fundamentally alter how income from these investment partnership interests is taxed, treating much of the income as ordinary income instead of capital gains. Specifically, the bill introduces a new section (Section 710) to the Internal Revenue Code that recharacterizes net capital gains from investment services partnership interests as ordinary income, which is typically taxed at a higher rate. The bill defines an "investment services partnership interest" as an interest held by someone who primarily provides investment-related services like advising, managing, or arranging financing for assets. It also provides some exceptions for "qualified capital interests," which are interests attributable to actual capital contributions, allowing those portions to be taxed more favorably. Additionally, the bill imposes new reporting requirements, changes how such partnership interests are treated for self-employment tax purposes, and introduces penalties for attempts to avoid these new tax rules. The legislation is designed to ensure that investment managers pay taxes more in line with the ordinary income tax rates that other service professionals pay, closing what is often referred to as the "carried interest loophole" in the tax code.

Budget and Finance

https://www.congress.gov/bill/119th-congress/house-bill/1091/all-info