Congress originally enacted Section 1061 of the Internal Revenue Code as part of the Tax Cuts and Jobs Act of 2017 (Tax Act). Among other changes, Section 1061 restricted the long-term capital gains tax rate to applicable partnership interests related to assets held for more than three years (before the Tax Act, the holding period was one year). Some private fund managers made adjustments to mitigate the effects of the law, including incorporating carried interest waivers into their fund documents and making capital contributions into funds as LPs rather than as GPs. Several years after the first law was enacted, the U.S. Treasury Department and the IRS recently released long-awaited proposed regulations (Proposed Regulations) under Section 1061 to guide private fund practices. To help PE sponsors grasp the most relevant aspects of the Proposed Regulations, the Private Equity Law Report interviewed Edward Dougherty, Deloitte’s national hedge fund leader and a tax partner, about its potential effect on the private funds industry, including the capital interest exception and potential reasons why the government addressed the use of carried interest waivers. See our two-part series on the impact of the Tax Act: “Treatment of Carried Interest and the Business Interest Deduction Limitation” (Oct. 15, 2019); and “Cross-Border Investments, GILTI and the Pass-Through Business Income Deduction” (Oct. 22, 2019). Dougherty will be participating in the upcoming Private Investment Fund Tax and Accounting Forum, a virtual program sponsored by Foundation Research Associates, on November 12‑13, 2020, during which the Proposed Regulations and other topics will be explored in greater detail. For additional information about the program and to register to attend, click here, using the promotional code contained within this article for a $200 discount.