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 seeks to address the tax treatment of personal service income generated within 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 to address 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) follows rules similar to those in subsection (b)(2). The 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) regarding special rules for partners providing investment management services to partnerships. For investment services partnership interests, amounts equal to the net capital gain are treated as ordinary income, and subject to limitations, amounts equal to the net capital loss are treated as an ordinary loss. The recharacterization of losses is limited to recharacterized gains from preceding partnership taxable years. Gains and losses on the disposition of an investment services partnership interest are generally treated as ordinary income or loss. Section 1402 of the Internal Revenue Code is amended to include investment services partnership income or loss in determining net earnings from self-employment. Section 702(a) is amended to include any amount treated as ordinary income or loss under section 710 in the list of items to be accounted for.

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Carried Interest Fairness Act of 2025

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

Author: Tammy Baldwin (D-WI)

TL;DR (AI)

This bill modifies the tax treatment of partnership interests transferred in connection with services, treating the fair market value as income and aligning recipient elections with existing rules.
It recharacterizes certain gains and losses from investment management services provided to partnerships as ordinary income or loss, limiting loss deductions to prior gains.
The bill includes investment management partnership income or loss when calculating net earnings from self-employment and requires accounting for related ordinary income or loss items.

119th Congressin committeeHR. 1091(In Committee)Official page

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Other Sections

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

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