A provision in a pending House jobs bill that would require investment partnerships to pay ordinary income tax on carried interest is not likely to be revised despite complaints from lobbyists for investment partnerships, House Ways and Means Committee Chairman Sander Levin, D-Mich., said Tuesday.
“This is a compromise, and I don't foresee any change in it,” Mr. Levin said during a teleconference with reporters.
The provision in the bill, which the House is expected to be voted on as soon as Wednesday, would require the partnerships to treat 75% of carried interest that is not due to a return on capital as ordinary income, taxed at a rate of up to 35%.
Under current law, carried interest in investment partnerships is taxed as a capital gain at 15%.
“This proposal is ill-conceived and will discourage risk taking required to start, grow and save American companies,” according to a statement from the Private Equity Council. “By dramatically boosting the cost of capital, the … proposal will deny investment to firms that most urgently need risk capital to save jobs, survive and grow.”
The legislation, The American Jobs and Closing Tax Loopholes Act of 2010, also provides funding relief for defined benefit plan sponsors, and enhances fee and compensation requirements of service providers to defined contribution plans and participants.