As we noted in an alert sent to you last month, President Obama had voiced support as a candidate for taxing carried interest received by investment managers of private equity and hedge funds as ordinary income. On Thursday, February 26, 2009, President Obama released his budget proposal for 2010 which included a proposal to tax carried interest as ordinary income effective beginning in 2011. It is important to understand that there is only a budget proposal at this time. Any restructuring in anticipation of legislative change before actual legislation is introduced could lock fund sponsors into adverse tax effects. Please read here and here for more information on the tax proposal and potential approaches for minimizing the impact if the initiative is enacted.