Week of May 17 – to – May 21, 2010
Could the House help siphon off the venture capital dollars, which over the past few years have helped sustain cutting-edge renewable energy companies? As Congress pushed this week to pass legislation that would tax the gains partners at private equity and venture capital funds earn for their investors, also known as carried interest, the private capital industry was fighting back. Lobbyists in Washington warned that the tax hike would swamp growth of startups developing much-needed technologies. As is carried interests are taxed at the low, 15 percent capital gains rate. Congress wants to change that (and it’s looking more and more like it will) and tax these profits at the higher 35 percent income tax rate.
On the specifics of the legislation being debated in Congress, PeHUB Editor Dan Primack notes that under the House bill 25 percent of carried interest would be taxed as capital gains and the remaining 75 percent as ordinary income. The new tax regime would not go into effect until the beginning of 2013.