House Votes To Boost Tax On Carried Interest
Looks like it's the beginning of the end of the fight over increasing taxes on carried interest. The House of Representatives today passed "The Tax Extenders Act of 2009," aka HR 4213. The bill contains a provision that would change the tax status of venture capital carried interest from capital gains to ordinary income, with the purpose of paying for year-end tax extensions. "Increasing the taxes of long term investors whose commitment to building companies and creating jobs has been proven for decades is counter productive to the one goal on which our country should be focused – economic recovery," Mark Heesen, president of the National Venture Capital Association, said in a statement. "The President and Congress have made it clear that to emerge from our financial troubles our country needs jobs and innovation. Taxing VCs who are working with fast growing start-up companies so that large corporations can continue to receive tax breaks is ill conceived policy." With the Dems in charge of both the House and Senate, plus a Democratic President, odds are that VCs will soon be paying the ordinary income rate on carried interest instead of the capital gains rate. The irony, of course, is that after a dearth of liquidity events over the past couple of years, we've recently seen some sizable exits that would provide actual carried interest to be taxed. Merry Christmas, venture capitalists! --Love, Your Uncle Sam
