What does Preamble of Carried Interest Fairness Act of 2025 do?

This bill, formally titled 'To amend the Internal Revenue Code of 1986 to provide for the proper tax treatment of personal service income earned in pass-thru entities,' aims to modify the Internal Revenue Code of 1986. The bill's purpose is to address the tax treatment of personal service income received through pass-thru entities.

What does SHORT TITLE; ETC. of Carried Interest Fairness Act of 2025 do?

This Act is formally titled the Carried Interest Fairness Act of 2025. Amendments or repeals within this Act refer to sections or provisions of the Internal Revenue Code of 1986 unless otherwise specified.

What does PARTNERSHIP INTERESTS TRANSFERRED IN CONNECTION WITH of Carried Interest Fairness Act of 2025 do?

This section modifies section 83 of the Internal Revenue Code regarding the election to include partnership interest in gross income. It adds a new paragraph (4) to subsection (c) of section 83 addressing transfers of partnership interests in connection with the provision of services to a partnership. The fair market value of a transferred partnership interest is treated as the amount a partner would receive in a liquidation of the partnership. The recipient of the interest is treated as having made an election under subsection (b)(1) unless they specifically elect otherwise. The election under subparagraph (A)(ii) will follow rules similar to those in subsection (b)(2). These amendments apply to partnership interests transferred after the enactment of this Act.

What does SPECIAL RULES FOR PARTNERS PROVIDING INVESTMENT MANAGEMENT of Carried Interest Fairness Act of 2025 do?

This section amends subchapter K of chapter 1 of the Internal Revenue Code by adding a new section, 710, establishing special rules for partners providing investment management services to partnerships. For investment services partnership interests, a partner's distributive share of net capital gain is treated as ordinary income, and a portion of net capital loss is treated as an ordinary loss, subject to limitations. The amount treated as ordinary loss is limited to the excess of recharacterized gains over recharacterized losses from preceding years. Gains and losses on the disposition of an investment services partnership interest are generally treated as ordinary income or loss. Certain services, such as advising on investments or managing assets, qualify as 'investment services' for the purposes of this section. Section 1402 and 211 of the Social Security Act are amended to take investment services partnership income or loss into account in determining net earnings from self-employment.

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Carried Interest Fairness Act of 2025

Last updated: 2/6/2025 · Introduced: 2/6/2025

Author: Marie Perez (D-WA)

TL;DR (AI)

This bill modifies the Internal Revenue Code to address the tax treatment of income received through pass-thru entities, specifically focusing on partnership interests.
It recharacterizes a partner's distributive share of net capital gain from investment management services as ordinary income, and a portion of net capital loss as an ordinary loss.
The bill treats gains and losses from the disposition of partnership interests related to investment management services as ordinary income or loss, and adjusts Social Security tax calculations accordingly.

119th Congressin committeeHR. 2621(In Committee)Official page

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Other Sections

Includes provisions on preamble, short title; etc., and 2 more.

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