Carried Interest and EB-5

Treasury Secretary Steven Mnuchin hit on tax reform in a speech on Monday, according to Bloomberg. His comments focused on hedge funds use of carried interest as capital gains (vs. ordinary income) and suggested that this would be part of the larger discussion regarding tax reform. However, Mnuchin did take the opportunity reinforce the Trump Administration’s focus on job creation:

“We will close the loophole for hedge funds in carried interest,” Mnuchin said at an event in Louisville, Kentucky, where he appeared alongside Senate Majority Leader Mitch McConnell. “What we are focused on is there are many other types of funds that do create jobs and we want to make sure we don’t discourage investment.”

So what does this mean for the EB-5 program? Largely that the Trump Administration remains focused on job creation and that should be viewed as a positive for EB-5. It also makes a distinction between hedge funds and private funds, suggesting that any change to the tax treatment of carried interest would only impact hedge funds. Meaning that the attractiveness of real estate development, in the project sponsors eyes, should not diminish financially, but it should be noted that “everything is on the table.”

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