Bill > S445

This bill, known as the "Carried Interest Fairness Act of 2025," introduces significant changes to the tax treatment of partnership interests held by individuals providing investment management services. The bill aims to recharacterize certain income and gains from these partnership interests as ordinary income instead of capital gains, which are typically taxed at lower rates. Specifically, for "investment services partnership interests," the bill requires that net capital gains be treated as ordinary income and limits the ability to claim capital losses. The legislation also applies to situations where individuals hold "disqualified interests" in investment entities, requiring that income or gains from such interests be treated as ordinary income if they are substantially related to the performance of investment management services. Additionally, the bill creates new reporting requirements, imposes a 40 percent penalty for underpayments related to avoiding these rules, and modifies how self-employment taxes are calculated for individuals providing investment management services. The changes would generally apply to taxable years ending after the date of enactment, with special provisions for transitional periods and partnership interests held during those times.

Budget and Finance

https://www.congress.gov/bill/119th-congress/senate-bill/445/all-info