Carried Interest Fairness Act of 2025

The Carried Interest Fairness Act of 2025 would change how certain investment management compensation is taxed by reclassifying net capital gains from "investment services partnership interests" as ordinary income rather than capital gains. This would affect private equity and hedge fund managers who receive carried interest as compensation, changing their tax treatment from capital gains rates to ordinary income rates. The bill creates specific rules that treat net capital gains as ordinary income while limiting capital losses to the amount of previously taxed ordinary income. It also requires that gains from dispositions of these interests be treated as ordinary income, and establishes special rules for qualified capital interests within these partnerships. The legislation would apply to partnerships where individuals provide investment management services related to the partnership's assets.