Jenner & Block

Carried Interests: Survived the Tax Act But Angered States Seek Their Own Solution

Carried interests survived the 2017 Tax Cuts and Jobs Act (Tax Act) and the longer three-year hold time seems a small price to pay for continuing the benefits of this important incentive tool.  But the Tax Act also hit residents in high-tax states hard, the same states where many residents derive substantial carried interest income.  Those states are fighting back—proposing “charitable” contribution and employment tax alternatives to avoid low federal limits on individuals’ state tax deductions and considering unincorporated business taxes (New York’s report examining non-income tax approaches to the Tax Act is here).

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