Bloomberg News: Democrats’ Carried-Interest Plan Seen as Harsher Than It First Appeared

September 20, 2021

House Democrats’ plan to limit a favorite tax break for private equity -- but not do away with it entirely as President Joe Biden had proposed -- is more restrictive than it first appeared. The proposal, which is part of a US$3.5 trillion tax and spending package that House leaders say could get a vote by Oct. 1, lengthens the time period investment funds must hold assets to five years, from three years, in order to qualify for a tax break known as carried interest. Yet investment holding periods have become shorter, rather than longer, over time, according to Alex Anderson, a partner at law firm O’Melveny & Myers LLP. He said he’s seeing far more private equity sales after holding portfolio companies for about 3 1/2 to four years. That’s down from the roughly six years that had been considered the rule of thumb for average hold times, he said.

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