Senate Democrats have a provision in forthcoming US climate and tax legislation that would allow the carried rate interest loophole to be closed or at least narrowed, according to a report the New York Times.

Senate Democrats have a provision in forthcoming US climate and tax legislation that would allow the carried rate interest loophole to be closed or at least narrowed, according to a report the New York Times.

The news has been welcomed by the private equity and hedge fund industries with fund managers in both sectors among those who benefit from the 'quirk' in the existing US tax code that allows them to pay lower tax rates on some of their earnings than salaried staff. The proposed change was expected to raise an additional $14 billion in annual tax revenue. 

While the decision to maintain the status quo has been welcomed by the Managed Funds Association and lobby group the American Investment council not all in the hedge fund industry are suportive. Bill Ackman, the high-profile founder of New York hedge fund Pershing Square Capital Management has gone on record saying that the loophole is a "stain on the tax code.”