A Democratic bill with 13 Democratic cosponsors · See all 14 cosponsors
Last activity — Read twice and referred to the Committee on Finance.
In committee
Introduced and handed to a committee in the chamber it started in.
The committee holds it, and most bills are never heard from again. A hearing or a committee vote would be news; silence is the usual outcome, and it kills the bill without anyone voting against it.
Its path through Congress
- Introduced
- In Committee
What this bill would do
The Carried Interest Fairness Act of 2025 aims to amend the Internal Revenue Code of 1986 regarding how personal service income is taxed in pass-thru entities. It introduces specific rules for partners providing investment management services to partnerships. Under this bill, certain gains and losses from investment services partnership interests would be treated as ordinary income and loss rather than capital gains. It also modifies how partnership interests transferred in connection with services are valued and taxed. Additionally, the act implements special rules for distributions and dispositions of these specific interests.
Yes
- Scored +5
Does this raise taxes on the highest earners?
The bill raises taxes on high earners by treating carried interest and certain partnership gains as ordinary income rather than capital gains.
- Scored +1
Would union members be better off under this?
The bill targets specific high-earning investment roles, potentially aligning tax treatment more closely with labor income.
- Scored +1
Does this make the government pay for what it commits to?
The bill may increase federal revenue by taxing investment management income at higher ordinary income rates.
The opposite
- Scored -5
Would high-income households be better off under this?
High income households involved in investment management will face higher tax rates on their partnership income.
- Scored -3
Would business owners be better off under this?
Partners in investment services partnerships will see their capital gains recharacterized as ordinary income.
- Scored -2
Does this raise the taxes companies pay?
The bill increases the tax burden on investment management service providers by recharacterizing capital gains as ordinary income.
Who it would affect, and how
Potential Positive Impacts for People
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Recharacterization of Gains: For certain investment services partnership interests, net capital gains would be treated as ordinary income (Section 3(a)(1)(A)).
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Recharacterization of Losses: Net capital losses for these specific interests could be treated as ordinary losses, subject to certain limitations (Section 3(a)(1)(B)).
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Treatment of Dispositions: Any gain realized on the disposition of an investment services partnership interest would be treated as ordinary income (Section 3(b)(1)(A)).
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Tax Treatment of Distributions: Gains recognized from a distribution of partnership property related to an investment services partnership interest would be treated as ordinary income (Section 3(b)(4)(B)).
Potential Negative Impacts for People
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Modification of Partnership Interest Valuation: When a partnership interest is transferred in connection with providing services, its fair market value is treated as the amount the partner would receive if the partnership sold all assets and distributed proceeds in liquidation (Section 2(a)(A)).
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Dividend Treatment: Dividends allocated to an investment services partnership interest will not be treated as qualified dividend income (Section 3(a)(5)).
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Small Business Stock Restrictions: The rule regarding qualified small business stock would not apply to any gain from the sale or exchange of such stock allocated to an investment services partnership interest (Section 3(a)(6)).
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Increased Penalties: An increased penalty of 40 percent may apply to underpayments related to the avoidance of these sections (Section 3(d)(2)(A)).
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Strict Reasonable Cause Standards: The "reasonable cause" exception for certain underpayments is modified to require that the taxpayer has adequate disclosure, substantial authority, and a reasonable belief that the treatment was more likely than not the proper treatment (Section 3(d)(3)(A)).
Groups and Interests Ranking
Every group the model scored this bill for, from -10 to +10. Tap or hover a score for the reason it gave.
- Demographic And Interest Groups
- Would union members be better off under this? — The bill targets specific high-earning investment roles, potentially aligning tax treatment more closely with labor income. Would high-income households be better off under this? — High income households involved in investment management will face higher tax rates on their partnership income. Would business owners be better off under this? — Partners in investment services partnerships will see their capital gains recharacterized as ordinary income.
- Economy And Finance
- Does this raise taxes on the highest earners? — The bill raises taxes on high earners by treating carried interest and certain partnership gains as ordinary income rather than capital gains. Does this make the government pay for what it commits to? — The bill may increase federal revenue by taxing investment management income at higher ordinary income rates. Does this raise the taxes companies pay? — The bill increases the tax burden on investment management service providers by recharacterizing capital gains as ordinary income.
- 4/1/2025
- 1 Cosponsor added.
- 2/6/2025
- Read twice and referred to the Committee on Finance.
- 13 Cosponsors added.
- Introduced in Senate
5 bills Congress.gov lists as related to this one — companions in the other chamber, earlier versions, and bills this one absorbed or was folded into.
Cory BookerDemocrat · New Jersey
Mazie HironoDemocrat · Hawaii
Amy KlobucharDemocrat · Minnesota
Timothy KaineDemocrat · Virginia
Ben LujánDemocrat · New Mexico
Edward MarkeyDemocrat · Massachusetts
Patty MurrayDemocrat · Washington
Jeff MerkleyDemocrat · Oregon
John ReedDemocrat · Rhode Island
Bernie SandersIndependent · Vermont
Brian SchatzDemocrat · Hawaii
Chris Van HollenDemocrat · Maryland
Peter WelchDemocrat · Vermont
Elizabeth WarrenDemocrat · Massachusetts