IRS Says S Corps Subject to Carried Interest Restrictions (1)

IRS rules that would restrict the ability of private equity and hedge fund managers to lock in a lower tax rate for some of their pay maintain a narrow reading of an exception for corporations.

The tax law increased to three years the amount of time that an investment must be held for the fund managers to get the preferential rate. Known as carried interest, it lets fund managers have much of their income taxed at 23.8% rather than at the top tax rate of 37%.

• Lawmakers exempted corporations from the longer holding period. Some saw that term ...