House Bill Links Tax to AMT Abolition

WASHINGTON, DC-Congressional plans to tax private equity carried interest as regular income–a measure that would have a huge impact on real estate partnerships as well–are slowly moving forward. Yesterday, Ways and Means Committee Chairman Rep. Charles B. Rangel introduced a comprehensive tax plan that would, among other measures, more than double, to 35%, the tax rate on carried interest. Currently, it is taxed at 15%. Carried interest is the percentage of a fund, JV or limited partnership’s profits that a general partner takes as compensation. Such profits are taxed at capital gains rates as opposed to ordinary income, which can be as much as 35%.

Not surprisingly, representatives from the real estate and financial communities have voiced strong protest against the proposal. The Building Owners and Managers Association (BOMA) International, for instance, says that taxing returns from carried interests at ordinary income rates will disrupt the investment relationship between entrepreneurs and their capital finance partners.