PRIA Logo™
119-s-4330119th CongressWALLET

Ending the Carried Interest Loophole Act

Sponsored By: Senator Wyden, Ron [D-OR]

Introduced

Summary

Taxes many service-related partnership interests at their full liquidation value. This bill would rewrite Section 83(c) so that when someone gets a partnership interest for performing services its value is the cash the partnership would pay in a complete taxable liquidation, and recipients are treated as having made an 83(b) election unless they opt out.

Show full summary
  • Fund managers and service partners: Recipients would generally recognize income equal to their share of the partnership's liquidation value when they receive the interest. They are treated as having made an 83(b) election unless they elect out.
  • Partnerships and investors: The recognized amount is added to the recipient's capital account for Subchapter K. For interests that qualify under Section 1299, the amount is treated as the recipient's invested capital, and the bill repeals Section 1061 and creates a new Part VII in Subchapter P to house the rule.
  • Loans and financial instruments: The bill defines "applicable loans" and creates a safe harbor for loans that are fully recourse or fully secured and that require interest at a specified rate. It also lets certain financial instruments and interests in non-partnership entities be treated as partnership interests for these rules.

Personalized for You

How does this bill affect your finances?

Personalize government policy and PRIA will tell you what this bill means for your household, plus every other piece of legislation we track. PRIA reads each provision against your financial profile to show you exactly what matters to your wallet.

Free to download

Bill Overview

Analyzed Economic Effects

3 provisions identified: 0 benefits, 2 costs, 1 mixed.

Annual tax on carried interest

If enacted, holders of certain partnership interests would have to include a yearly "deemed compensation amount" as ordinary income. The amount equals the specified rate (the first segment rate for the first month plus 9 percentage points) times any excess of a partnership-wide invested-capital measure over your interest's invested capital. Partnerships would need to report each partner's deemed compensation amount to partners and the IRS. If you sell part of the interest within 10 years, some of the amount may be accelerated into income on disposition.

Repeal of carried interest rule

If enacted, this bill would repeal Section 1061, the current special rule that treats some partnership gains as long-term capital gains. That repeal would change how certain investment managers and service partners pay tax on partnership gains and could raise taxes for some taxpayers. The repeal would apply to taxable years that begin after the law is enacted when the partnership's taxable year also begins after enactment.

New valuation for service partnership interests

If enacted, the bill would treat the value of a partnership interest you receive for services as the cash you would get if the partnership sold all assets at fair market value, paid liabilities, and liquidated. You would be treated as having made the Section 83(b) election unless you timely elect not to under the new rule. The rule can apply to certain financial instruments and interests in non-partnership entities and includes a safe harbor for loans that are fully recourse or fully secured and carry interest at least equal to a specified rate. These valuation rules would apply to transfers after enactment.

Sponsors & CoSponsors

Sponsor

Wyden, Ron [D-OR]

OR • D

Cosponsors

  • Sen. Whitehouse, Sheldon [D-RI]

    RI • D

    Sponsored 4/16/2026

  • Sen. King, Angus S., Jr. [I-ME]

    ME • I

    Sponsored 4/16/2026

  • Sen. Warren, Elizabeth [D-MA]

    MA • D

    Sponsored 4/16/2026

  • Sen. Sanders, Bernard [I-VT]

    VT • I

    Sponsored 4/16/2026

  • Sen. Smith, Tina [D-MN]

    MN • D

    Sponsored 4/16/2026

  • Sen. Luján, Ben Ray [D-NM]

    NM • D

    Sponsored 4/16/2026

  • Sen. Schatz, Brian [D-HI]

    HI • D

    Sponsored 4/16/2026

  • Sen. Reed, Jack [D-RI]

    RI • D

    Sponsored 4/16/2026

  • Sen. Hirono, Mazie K. [D-HI]

    HI • D

    Sponsored 4/16/2026

  • Sen. Markey, Edward J. [D-MA]

    MA • D

    Sponsored 4/16/2026

  • Sen. Fetterman, John [D-PA]

    PA • D

    Sponsored 4/16/2026

  • Sen. Blumenthal, Richard [D-CT]

    CT • D

    Sponsored 4/16/2026

  • Sen. Van Hollen, Chris [D-MD]

    MD • D

    Sponsored 4/16/2026

  • Sen. Gallego, Ruben [D-AZ]

    AZ • D

    Sponsored 7/30/2026

Roll Call Votes

No roll call votes available for this bill.

View on Congress.gov
Back to Legislation