The House of Representatives today passed HR 4213. The bill contains a provision that would change the tax status of venture capital carried interest from capital gains to ordinary income, with the purpose of paying for year-end tax extensions.
The current capital gains tax structure is fundamental to the venture capital and private equity business model, and this change would be quite detrimental to the business. Mark Heesen, president of the National Venture Capital Association, said in a statement “Increasing the taxes of long term investors whose commitment to building companies and creating jobs has been proven for decades is counter productive to the one goal on which our country should be focused – economic recovery”
Unfortunately, Democrats have control of the House of Representatives, Senate, and White House. Based on statements senior Democratic political leaders have made it is likely that venture capital and private equity investors will soon be paying the ordinary income rate on carried interest instead of the capital gains rate.
Nick Deflorian
Group 2
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