H.R. 1091: Carried Interest Fairness Act of 2025

This bill taxes income from carried interest at ordinary income tax rates and makes other changes related to carried interest. (Some exceptions apply.)

As background, a general partner in a private equity firm or hedge fund (typically structured as a partnership) generally receives a share of the profits from the assets managed by the general partner (known as carried interest). Under current law, carried interest is characterized (for federal tax purposes) as an interest in a partnership’s capital and, thus, taxed at capital gains tax rates (which may be lower than the applicable ordinary income tax rates).

Under the bill, net capital gain and loss attributable to carried interest is recharacterized as ordinary income and loss and, thus, taxed at ordinary income tax rates. (Some exceptions apply.)

Written by the Congressional Research Service, Library of Congress.