On May 22, 2025, the House of Representatives passed H.R. 1, the budget reconciliation bill known as the One Big Beautiful Bill Act (the Tax Bill). This bill proposes significant amendments to the Internal Revenue Code, affecting individuals and businesses alike. The following is a summary of key tax provisions relevant to the investment funds industry and sponsors.
The Tax Bill is currently under consideration in the Senate, where changes may be made, and updates will continue as it progresses through Congress.
Key Points
- No provisions for the taxation of carried interests were included in the Tax Bill, maintaining current tax benefits for fund sponsors.
- Section 199A deduction would be expanded from 20% to 23% and made permanent, broadening its application to include dividends from business development companies.
- Interest deduction limitations under Section 163(j) would be temporarily relaxed, allowing for more advantageous tax calculations.
- New provisions would impose increased taxes on certain income allocated to foreign taxpayers from specific countries deemed discriminatory.
- Excise taxes on private university endowments and foundations would be increased, with a new tiered tax rate structure introduced.
- Miscellaneous itemized deduction limits would be permanently repealed, disallowing deductions for management fees and other expenses for investors in funds.
Why should I read this?
This article breaks down the intricate tax changes that could dramatically impact investment funds and their sponsors. If you’re keen on how these new provisions could influence your financial strategies or fund management, you won’t want to miss the details here. The implications could be substantial, so we’ve done the reading for you—now you can focus on your next move!
