The Ending the Carried Interest Loophole Act closes a tax provision that allows investment fund managers to pay lower capital gains tax rates on profits they earn from managing partnerships, commonly known as "carried interest." Under the bill, investment managers who receive partnership interests as compensation must immediately pay ordinary income taxes on the full fair market value of those interests rather than deferring taxes or receiving preferential treatment. The bill calculates a "deemed compensation amount" based on the partnership's invested capital plus a specified interest rate to determine the taxable value, and requires accelerated payment if the interest is sold within ten years. These provisions take effect for partnership interests received after the bill's enactment and apply to taxpayers' tax years beginning after that date, while the Treasury Department is directed to issue regulations addressing complex partnership structures to prevent tax avoidance strategies.
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