Wyden's Carried Interests Bill

On August 5, 2021, U.S. Senate Finance Committee Chair Ron Wyden (D-Ore.) and Senator Sheldon Whitehouse (D-R.I.) introduced legislation that, if enacted, would tax carried interest recipients annually at ordinary interest rates on "deemed compensation" that may exceed the carried interest recipients' actual economic return. The bill, entitled "Ending the Carried Interest Loophole Act," is substantially similar to one that Wyden proposed in 2019, but arguably has a greater likelihood of being enacted under the current administration.

Background

Historically, carried interests have been a significant part of an investment professional's compensation for providing services to hedge funds, private equity funds, or other investment partnerships. Carried interests are partnership interests issued in exchange for services that entitle the investment professional to some percentage (typically around 20%) of the partnership's net profits after third-party investors in