Sen. Sinema Receives Carried Interest Deferral From Senate Democrats Reconciliation Bill
The bill originally contained a provision titled “Closing the Carried Interest Loophole.” Currently, the carried interest deduction treats income received by the general partner of a private fund as capital gains, subject to a lower tax rate – capped at 20% for long-term gains – as opposed to the highest individual income tax bracket – 37%. .
The proposed law would increase the period that mutual funds must hold assets from three years to five years and adjust at the beginning of the holding period. The provision would only apply to people making at least $400,000 per year.
But after negotiations with Sen. Kyrsten Sinema, D-Ariz., the carried interest provision was removed, she announced Thursday.
Trade associations representing private equity and hedge fund managers welcomed the cut.
“We are pleased with the bipartisan recognition of the role private capital plays in growing businesses and the economy,” said Bryan Corbett, president and CEO of the Managed Funds Association, in a statement.
Drew Maloney, President and CEO of the American Investment Council, added in a separate statement, “The private equity industry directly employs over 11 million Americans, powers thousands of small businesses and delivers the highest retirement returns. We encourage Congress to continue supporting private capital investment in every state of our country.”
The Anti-Inflation Act would also set a minimum corporate tax rate of 15%, which Democrats project would bring in $313 billion over the next decade. But the agreement reached to bring Ms Sinema on board would reduce the proposed 15% minimum corporate tax rate by creating an exemption from depreciation tax deductions, according to Bloomberg.
To make up for lost income from the change in the minimum corporate tax rate and the removal of the carried interest provision, a 1% consumption tax would be levied on share buybacks, Bloomberg reported.
Neil Bradley, executive vice president and chief policy officer of the U.S. Chamber of Commerce, said in a statement that “the new excise tax on share buybacks will only distort the efficient movement of capital to where it can be best used, and diminish the value of people’s retirement savings.” American.”
Democrats plan to introduce the final version of the bill and begin the voting process on Saturday, Mr. Schumer said in a statement. He and his colleagues are aiming to pass the bill by reconciliation in the Senate, requiring a simple majority instead of the usual 60 votes. But the Senate is split 50-50, so Democrats will need all members to support the bill and cast their ballot in person, allowing Vice President Kamala Harris to cast the casting vote.
Then the Democrats in the House of Representatives, who have a narrow majority, must also pass the law before President Joe Biden can enact it.
Bloomberg contributed to this story.