Carried Interest Fairness Act of 2025
Official title: A bill to amend the Internal Revenue Code of 1986 to provide for the proper tax treatment of personal service income earned in pass-thru entities.
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Read twice and referred to the Committee on Finance.
Carried Interest Fairness Act of 2025
This bill taxes income from carried interest at ordinary income tax rates and makes other changes related to carried interest. (Some exceptions apply.)
As background, a general partner in a private equity firm or hedge fund (typically structured as a partnership) generally receives a share of the profits from the assets managed by the general partner (known as carried interest). Under current law, carried interest is characterized (for federal tax purposes) as an interest in a partnership’s capital and, thus, taxed at capital gains tax rates (which may be lower than the applicable ordinary income tax rates).
Under the bill, net capital gain and loss attributable to carried interest is recharacterized as ordinary income and loss and, thus, taxed at ordinary income tax rates. (Some exceptions apply.)
The bill also treats as ordinary the money (or fair market value of property) received by a partner in a sale or exchange of carried interest. (Thus, the bill extends what is known as the hot asset rule to include carried interest.)
Further, the bill deems distributions of carried interest by a partnership in exchange for interest in other partnership property a sale or exchange of such property and, thus, requires the partner to recognize ordinary gain on the distributed carried interest.
Finally, the bill imposes self-employment taxes on carried interest income.
- Introduced in Senate Formatted Text PDF Formatted XML
- NEW VENTURE FUND
- AMERICAN FEDERATION OF TEACHERS
- NATIONAL VENTURE CAPITAL ASSOCIATION
- MANAGED FUNDS ASSOCIATION
- INTERNATIONAL COUNCIL OF SHOPPING CENTERS
- AMERICANS FOR FINANCIAL REFORM
Bodies those filers lobbied
- HOUSE OF REPRESENTATIVES
- SENATE
- Treasury, Dept of
- White House Office
- Centers For Medicare and Medicaid Services (CMS)
- Securities & Exchange Commission (SEC)
- Commodity Futures Trading Commission (CFTC)
- Internal Revenue Service (IRS)
Cite this page
U.S. Congress. (2026). S. 445: Carried Interest Fairness Act of 2025. 119th Congress. Open America. https://openamerica.io/bill/119-S-445/
"S. 445: Carried Interest Fairness Act of 2025." 119th Congress, 2026, Open America, https://openamerica.io/bill/119-S-445/.
S. 445, 119th Cong. (2026), https://openamerica.io/bill/119-S-445/.
[S. 445: Carried Interest Fairness Act of 2025](https://openamerica.io/bill/119-S-445/)