Representative Charles B. Rangel (NY-15) recently introduced the Temporary Tax Relief Act of 2007 (HR 3996) as a temporary “patch” to extend personal credits and exemptions under the Alternative Minimum Tax (AMT) through 2007 to help middle class working families avoid getting hit with higher tax bills for 2007. This bill was amended in committee and now incorporates the provisions of HR 2834, last summer’s stalled “carried interest” bill, which faced serious opposition in the Senate. HR 2834 targeted investment management partnerships, such as private equity and venture capital funds, and sought to deny such partnerships the ability to use carried interest. Traditionally, limited partnerships used the carry to distribute the partnership's capital gains to managing partners. HR 2834 faced stern opposition in strongholds such as New York, the nation’s private equity capital, because it selectively targeted investment managers and allowed the practice to continue in other industries.

HR 3996 may breathe new and immediate life back into the Congressman’s shot at investment managers. By extending credits and exemptions under the AMT for another year, this proposal sets the stage for immediate action on a bill that could potentially benefit millions of middle class tax payers and force the private capital industry to reach a compromise on carried interest.

If would like to discuss these bills further, please contact Manfred Ohrenstein, the managing partner of O&B’s government affairs practice, at (516) 873-6334.