US SB445

Reclassifies "carried interest" income earned by investment fund managers (such as private equity and hedge fund managers) from capital gains to ordinary income, subjecting it to higher tax rates

Net capital gains allocated to "investment services partnership interests" would be treated as ordinary income rather than receiving preferential long-term capital gains treatment currently capped at 20%

Applies to partners providing investment management services including advising on investments, managing or disposing of assets, and arranging financing for investment partnerships

Creates exceptions for "qualified capital interests" where partners have contributed actual capital to the fund and receive returns proportional to other non-service-providing investors

Includes self-employment tax provisions requiring investment services partnership income to count toward net earnings from self-employment, and imposes a 40% penalty on underpayments related to avoidance of these rules