HedgeCo.net - U.S. Representative Sander Levin (D-MI), was joined by Chairmen 

Charles Rangel and Barney Frank as well as Ways and Means Committee Members 

Reps. Pete Stark, Jim McDermott, John Lewis, Richard Neal, Earl Pomeroy, Stephanie 

Tubbs Jones, John Larson, Rahm Emanuel, Earl Blumenauer, Ron Kind, and Bill 

Pascrell in introducing legislation today that would ensure that investment fund 

managers who take a share of the funds' profits as compensation for investment 

management services, known as "carried interest" would be taxed at an appropriate

 ordinary income tax rate. 

Currently, the managers of private investment partnerships are able to receive 

compensation for these services at the much lower 15% capital gains tax rate rather 

that the ordinary income tax rate by virtue of their fund's partnership structure.  

"Congress must ensure that our tax code is fair. We have to be sure that the lower 

capital gains tax rate is not being inappropriately substituted for the tax rate on wages 

and earnings," said Rep. Levin. 

"Investment fund employees should not pay a lower rate of tax on their compensation

 for services than other Americans," continued Rep. Levin. "These investment 

managers are being paid to provide a service to their limited partners and fairness

 requires they be taxed at the rates applicable to service income just as any other 

American worker." 

The legislation clarifies that any income received from a partnership, capital or 

otherwise, in compensation for services is ordinary income for tax purposes. As a 

result, the managers of investment partnerships who receive a carried interest as 

compensation will pay regular income tax rates rather than capital gains rates on that 

compensation. The capital gains rate will continue to apply to the extent that the 

managers' income represents a reasonable return on capital they have actually 

invested in the partnership.