Friday, May 28, 2010, the U.S. House of Representatives passed the American Jobs and Closing Tax Loopholes Act of 2010 (the “Act”). The Act, if passed by the Senate, would add a variety of new provisions to the Internal Revenue Code (the “Code”) that address certain tax consequences stemming from the receipt and ownership of a partnership interest by a provider of services to the partnership. This Client Alert addresses that portion of new Section 710 of the Code that would be added by the Act that generally recharacterizes as ordinary income “carried interest” that would otherwise be taxed at capital gains rates.
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