I was rather skeptical of this due to the absence of specific detail on what was going to be taxed and how.
It seems reform proposals include the idea of taxing a fund manager's share of a fund's annual profits, known as 'carried interest' - a performance bonus in addition to regular management fees, sometimes as high as 20% - as ordinary income. Currently it is booked as capital gains, although the fund manager may not have invested any capital. You can find out if a fund manager is invested in their own fund by reading the 'Statement of Additional Information' (SAI) on their website/prospectus.
Investors in a VC fund would continue to be taxed under capital gains provisions, as they are now. Also, a fund manager's own capital investment in a fund would be continue to be taxed as capital gains; only the amount paid as a performance bonus for success in managing other people's money would be taxed as income. Losses would continue to be offsettable for tax purposes as they are at present, it seems.
http://www.businessweek.com/news/2010-05-13/senators-seek-ve... has some additional information, and http://webcache.googleusercontent.com/search?q=cache:WBne-r3... reprints the relevant language in the house bill.
