Toomey: Carried Interest Likely To Be Addressed In Senate Tax Plan

Nov 10 2017 | 10:13pm ET

The much-maligned tax treatment of carried interest for investment fund managers, currently absent from the Senate’s current tax reform proposal, is likely to be addressed in any final plan, Pennsylvania Republican senator Pat Toomey said on Friday. 

Toomey made the remarks during an interview with Bloomberg TV.  “I expect that some amendment to make…changes on the current policy on carried interest will probably prevail,” he said. Toomey is a member of the Senate’s tax-writing committee. 

Carried interest allows a portion of an investment firm’s return paid to managers, such as performance fees, to be taxed as capital gains instead of ordinary income. Critics have assailed the loophole as a symbol of a distorted tax system that exacerbates income inequality, and the practice was a major target during President Donald Trump’s presidential campaign. However, the tax reform he released in September didn’t address carried interest, and the tax overhaul proposed by the House of Representatives limits the benefit to gains from assets held for at least three years – essentially assuring profits generated from private equity investments will continue to be treated favorably.

Tax reform has been a major legislative priority for the current Congress and its passage is often cited as one reason for the inexorable rise in equity markets this year. During the interview, Toomey added that he thought tax reform legislation could be passed before the end of the year.

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