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12:00 AM
Jul 16, 2007
 |  BioCentury  |  Politics, Policy & Law

Taxing carried interest

The excitement around the IPO of hedge fund Blackstone Group on June 21 was accompanied by anxiety, as three bills were introduced in Congress that seek to change the tax rate applied to profits derived from partnerships offering investment services. Although two of the bills are aimed squarely at publicly traded partnerships, the third piece of proposed legislation could extend to a much broader range of partnerships, including private venture capital firms.

Last week, the Senate Finance Committee started to address the private equity issue, hearing testimony from regulators, the venture capital community and academia.

Two main questions are being debated. The first is whether the carried interest profits of general partners should be categorized as payment for services rather than as a return on capital.

Most hedge funds and VCs are paid about a 2%...

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