Overview

US proposals which would see carried interest being treated as ordinary income rather than capital gains are at an advanced stage, meaning a likely tax increase from the current 15 per cent to the ordinary income tax level of at least 35 per cent.

Whilst attention in Europe has been focusing on the AIFM directive, the private equity industry in the US is facing its own challenges. Proposals which would see carried interest being treated as ordinary income rather than capital gains are at an advanced stage, meaning a likely tax increase from the current 15 per cent to the ordinary income tax level of at least 35 per cent.

The plans to increase tax on carried interest were part of a wider package of proposals contained in the American Jobs and Closing Tax Loopholes Act, which was passed by the US House of Representatives but failed to garner sufficient support in the Senate in June. Whether the carried interest provisions are picked up in their current form or are reformulated when the Senate next addresses them, it is unlikely that they will be dropped altogether.

To read more click 'View Briefing'