Fund manager tax bill could hit House floor Friday

WASHINGTON (Reuters) - A proposal to hike taxes on profits earned by investment fund managers will again be reviewed by the U.S. House on Friday, the chairman of the tax-writing panel in that chamber said on Wednesday.

The tax on so-called carried interest, the 20 percent share of profits fund managers reap from managing investors' money, is in a broader bill that renews a set of business and individual tax breaks that enjoy broad backing from Democrats and Republicans.

Many fund managers, some of whom earn in the billions, pay just a 15 percent capital gains tax rate on the share of their profits. If a deal is reached, the bill will move the rate closer to ordinary income, or 35 percent for the highest earners.

The tax change would impact private equity, venture capital, real estate fund and hedge fund managers. Venture capital firms, in particular, have sought an exception but Sander Levin, the Democrat who chairs the Ways and Means Committee in the House of Representatives, reiterated his "no carve-out" stance.

If legislation reaches the full House floor, it presumably reflects provisions Levin believes can pass the Senate. Levin has been in daily talks with Senate Finance Committee Chairman Max Baucus over the tax issue.

The House has in prior years passed a similar measure to increase taxes on fund managers, but it has died in the Senate. Lawmakers have been more confident that the need to boost revenue and public anger aimed at the financial industry give the measure more momentum this time.

The broader legislation, which also extends unemployment and other benefits to help the jobless, has been bogged down by disagreement among Democrats about competing priorities, including funds to pay doctors in the Medicare program, and the escalating cost of the measure.

But Levin said talks are progressing and his goal is to get legislation to the Rules Committee, a procedural requirement, by Thursday. It could then go to the House floor on Friday.

"We hope to be before Rules tomorrow," he said. "That means we have to resolve everything tonight."

(Editing by Bernard Orr)