When the sweeping Inflation Reduction Act became law in August, one proposed change to a tax provision was removed at the eleventh hour, causing considerable controversy. The provision, called carried interest, is not one that most people can even explain, but it has been a touchstone in the ongoing argument that the IRS code unfairly allows the rich to get richer.
Carried interest refers to the favorable capital gains tax treatment for profits paid to investment managers and partners, particularly in alternative assets such as private equity, hedge funds, and venture capital funds. Typically, 20 percent of the profits of a fund are shared among managers. Because most of their compensation is in the form of carried interest, they pay the lower capital gains tax rate, which tops out at…
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Naples Illustrated (Digital) - 1 Issue, March 2023