The Inflation Reduction Act of 2022 and “Carried Interest”

In the news is “carried interest”, which is taxed at a lower 20% capital gains rate, rather than the top 37% marginal tax rate that applies to ordinary income. The special rate on carried interest owes its continued existence in the tax code to Arizona Senator Kyrsten Sinema, who championed its continuation, not elimination, in return for her vote, helping secure passage of the Inflation Reduction Act of 2022, as recently signed by President Biden. Special tax treatment of carried interest is incentive to hedge fund partners, venture capitalists, and real estate partners to invest in longer-term and riskier projects that might be viewed less-favorably if those profits were taxed at the ordinary income tax rate.

Read now »

Related Content 

• Inflation Reduction Act of 2022
  This far-reaching new law on health, energy, and climate includes tax credits, a minimum corporate tax, and more, as set forth in this Congressional Research Summary (dated Aug. 9, 2022, which includes pre-enactment “Closing the Carried Interest Loophole” provisions (Section 10201) that were eliminated from the final bill).

• Tax Home and the Rise of Telecommuters
  The tax treatment for travel expenses differs for commutes and business trips, so employers need to consider the issue before reimbursing employees for those expenses.

• Profits Interests in Partnerships and LLCs
  Learn more about profits interest in a partnership, how to value the profits interest, and the elective safe harbor for profits interests. Also included is a discussion of capital interests and how to value the capital interest.

Legal Developments

• Post-Dobbs, May Abortions Be Reimbursed on a Tax-Free Basis from a Health FSA, an HRA, or an HSA?
  Read this guidance on usage of health savings plan funds for abortion care.

• Action Items Plan Sponsors Should Consider in the Wake of the U.S. Supreme Court Dobbs Decision on Abortion
  Get insights on next steps employers sponsoring group health plans should consider following the Dobbs decision.

Practical Guidance Updates 
Featuring the latest updates from your Practical Guidance account.      

• Tax Key Legal Developments Tracker (Federal)
  Stay informed on new developments: 
  • Employment. IRS provides indexing adjustments for certain provisions under R.C. § 36B. Rev. Proc. 2022-34.
  • Individual Income Tax. IRS issues revenue procedure, superseding Proc. 2017-34,  and providing a simplified method for certain taxpayers to obtain an extension of time under § 301.9100-3 of the Procedure and Administration Regulations to make a “portability” election under I.R.C. § 2010(c)(5)(A). Rev. Proc. 2022-32.
• Document alerts allow you to stay current on legal developments that affect your practice. Find out how to set up your document alerts. 
• Check out the new Practical Guidance Author Center! Learn about the 1500+ leading attorney authors contributing to our 21 practice areas, and find out how you can Become a Practical Guidance Author.
• Share fundamental guidance with your firm’s summer associates to help them sharpen their research and writing skills, get the inside scoop on summer associate survival, and hit the ground running in the tax practice area. Review the resources in the Summer Associate Resource Kit: Tax.
• The Practical Guidance Journal Summer 2022 Edition features guidance on wage and hour issues related to remote and hybrid work.
• Listen up! Practical Guidance Podcast: NFTs: Copyright Infringement, Regulation, and Regulation Podcast. Hear from Holland & Knight’s Daniel Barsky as he discusses NFTs (non-fungible tokens) which have become all the rage. From a recent copyright lawsuit over Quentin Tarantino's NFT of unreleased Pulp Fiction materials, to the micro-investment possibilities in Banksy’s artwork, NFTs are in the news and do not appear to be going away. See all of our podcasts in the Practical Guidance Podcasts Resource Kit.

• New and Recently Updated Practical Guidance Content
  • Dobbs v. Jackson Women’s Health Organization Resource Kit
  • Relocating Abroad? Don’t Forget the Tax Issues Video
  • Unauthorized Disclosure of Taxpayer Information (IRC Sections 6103 and 7431)
  • IRC Section 367 and Cross-Border Transfers
  • Outbound Taxation Fundamentals
  • Foreign Currency Transactions and Tax Consequences

Experience results today with practical guidance, legal research, and data-driven insights—all in one place.

Experience Lexis+