Private equity executives nationwide collectively breathed a sigh of relief only a few months ago when Sen. Kyrsten Synema (D. Ariz.) held up the passage of the Inflation Reduction Act up until taxation of carried interest as ordinary income was removed.

Carried interest is a right to a profit in an investment to the general partner of a private equity fund, hedge fund or venture capital fund. Executives at these companies often have contractual nondiscretionary rights to receive a portion of the carried interest. These executives anxiously await the end of the cycle, when, they hope, the assets accumulated result in a profit via a disposition or recapitalization, thereby monetizing their carried interest.

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