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This bill would reform the tax code by requiring managing partners (big wigs) at hedge funds and private equity firms to pay income taxes rather than long-term capital gains taxes as they earn money from “carried interest.” Basically, higher taxes than they're used to.

What's carried interest you ask? Current law allows investment funds to be structured as a partnership by the managers, who may invest in the business and keep some of the fund’s profits as compensation.

When the fund’s profits are long-term capital gains from investments, managers pay capital gains taxes — either 15 or 20 percent — rather than ordinary income taxes which may be up to 39.6 percent depending on their income level.

This legislation would require the carried interest income of managing partners be taxed as ordinary income rather than a capital gain. Penalties for underpayment would be increased. The bill would apply to any member of a partnership that provides the following services:

Advising the partnership about investing in, purchasing, or selling specific assets;
Managing, acquiring, or disposing of the partnership’s assets;
Arranging financing related to acquiring those assets.

","official_title":"A bill to amend the Internal Revenue Code of 1986 to provide for the proper tax treatment of personal service income earned in pass-thru entities.","short_title":"Carried Interest Fairness Act of 2015","popular_title":null,"short_summary":"Carried Interest Fairness Act of 2015 \n\nAmends the Internal Revenue Code to: (1) set forth a special rule for the inclusion in gross income of partnership interests transferred in connection with the performance of services, (2) treat as ordinary income the net capital gain with respect to an investment services partnership interest except to the extent such gain is attributable to a partner's qualified capital interest, (3) exempt income from investment services partnership interests from treatment as qualifying income of a publicly traded partnership, (4) exempt certain family partnerships from the application of this Act; (5) increase the penalty for underpayments of tax resulting from failure to treat income from an investment services partnership interest as ordinary income, and (6) include income and loss from an investment services partnership interest for purposes of determining net earnings from self-employment and applicable self-employment taxes.\n\nDefines \"investment services...","summarized":true,"cost":null,"cost_commentary":"A CBO cost estimate is unavailable.","impact":"Managing partners at hedge funds or private equity firms; and the IRS.","argument_for":"The carried interest loophole benefits the wealthiest, most politically connected Americans who use it to pay a lower effective tax rate than many ordinary hard-working Americans. 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Eliminating Tax Advantages for Investment Fund Managers