Proposed regulations pending OIRA review: “Carried interest” under section 1061

“Carried interest” under section 1061

OMB’s Office of Information and Regulatory Affairs (OIRA) has received for review from the U.S. Treasury Department proposed regulations with respect to section 1061—the measures that are often referred to as the “carried interest” rules.

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The 2017 tax law (Pub. L. No. 115-97, the law that is also referred to as the “Tax Cuts and Jobs Act” (TCJA)) added new section 1061 to the Code. Section 1061 addresses the taxation of “applicable partnership interests.” Under the provision, if one or more “applicable partnership interests” were held by a taxpayer at any time during the tax year, some portion of the taxpayer’s long-term capital gain with respect to those interests may be treated as short-term capital gain. At a high level, the provision requires that, to obtain long-term capital gain treatment for applicable partnership interests, the required asset-holding period must be greater than three years.

Treasury regulations that are identified as “major” regulations are subject to review by OMB’s OIRA before being issued, pursuant to Executive Order 13771. According to OIRA, the regulations received for review on June 2, 2020, are identified as:

On the OIRA website, the package is briefly described as: This regulation will provide guidance on the application of newly enacted section 1061 of the Internal Revenue Code.

KPMG observation

OIRA reported in late February 2020 that it had completed its review of proposed regulations concerning the carried interest measures. Read TaxNewsFlash. Those proposed regulations were assigned the same regulatory project number as the proposed regulations currently under OIRA review—that is, RIN: 1545-BO81.

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