![]() As “substantially all” is currently undefined under the legislation, this could raise significant issues for private funds making investments on an opportunistic basis over time. Such five year holding period would begin on the later of (i) the date that a sponsor/carry participant acquired “substantially all” of its partnership interest, and (ii) the date that the fund acquired “substantially all” of its assets. Although the current 725 page bill will need to work its way through budget reconciliation and could change meaningfully at any point in the process, this post will highlight some of the key tax takeaways for private fund sponsors based on the bill as currently drafted.įirst, the current three year holding period required to achieve long-term capital gain treatment for carried interest payable in connection with a disposition of a fund investment would be replaced with at least a five year holding period requirement (subject to certain limited exceptions, including a notable exception for certain real estate sponsors that allows for a three year holding period for long-term capital gain treatment). ![]() The significant tax changes to the treatment of carried interest introduced in this bill track the mark-up of the “Build Back Better” Act that came out of the House Committee on Ways and Means last September 2021. President Biden issued a statement of support shortly after its announcement. ![]() On July 27, 2022, Senate Majority Leader Chuck Schumer and Senator Joe Manchin reached a deal on new legislation entitled the “ Inflation Reduction Act of 2022” to be added to the fiscal year 2022 budget reconciliation bill.
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