By NAHB Now
Rep. Bill Pascrell (D-N.J.), along with Reps. Andy Levin (D-Mich.) and Katie Porter (D-Calf.), this week introduced H.R. 1068, the Carried Interest Fairness Act of 2021. The bill would impose a major tax increase on real estate by generally requiring carried interest to be classified as ordinary income rather than a capital gain. Rep. Pascrell has introduced similar legislation in the past.
A carried (or promoted) interest is a profits interest in a business deal that is larger as a share of the total return than the share of the initial equity investment. Under present law, if the income paid out as the carry is a capital gain, then the carry is taxed at capital gains tax rates (in general, up to 23.8%). In 2017, the Tax Cuts and Jobs Act increased the holding period required to qualify for long-term capital gains treatment as a carried interest from one to three years.
