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Carried Interest Likely to Change in Senate: Toomey

Senator Chuck Grassley of Iowa also said Thursday that he thought the Senate Finance Committee would deal with changes to carried interest through an amendment to the existing plan.

(Bloomberg)—The carried interest tax break for investment managers is likely to change in the Senate, even though the chamber’s current tax proposal doesn’t call for it, according to Senator Pat Toomey, a Pennsylvania Republican.

“I expect that some amendment to make some changes on the current policy on carried interest will probably prevail,” Toomey, a member of the Senate’s tax-writing committee, said during a Bloomberg TV interview on Friday. “My guess is by the time this is over there will be a change in the policy.”

Carried interest is the portion of an investment fund’s return -- usually 20 percent -- that’s paid to investment managers. Currently, it qualifies for treatment as capital gains, meaning it’s taxed at rates as low as 23.8 percent. The current top rate for individual income taxes is 39.6 percent, though the Senate has called for reducing that rate to 38.5 percent.

Senator Chuck Grassley of Iowa also said Thursday that he thought the Senate Finance Committee would deal with changes to carried interest through an amendment to the existing plan.

Meanwhile, the House’s bill would limit the use of the benefit, which is currently available to private-equity managers, venture capitalists, hedge fund managers and certain real estate investors. It would require that only gains on assets held for at least three years could qualify for the carried interest break. Current law requires just a one-year holding period.

To contact the reporters on this story: Alexis Leondis in Washington at aleondis@bloomberg.net ;Vonnie Quinn in New York at vquinn@bloomberg.net To contact the editor responsible for this story: John Voskuhl at jvoskuhl@bloomberg.net

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