Hedge fund managers have been able to get away with millions of dollars of tax free money thanks to a loophole that is just now about to be closed. The Senate plans to dramatically limit hedge fund managers' ability to put off paying their taxes by introducing a bill that would prevent them from using offshore havens to defer taxes on large amounts of income.

The proposed legislation would cap the amount of compensation that managers can defer each year to the same amount other tax payers are permitted to place in 401(k) and IRAs - $19,500 per year. This compares to the current law that enables them to put off income taxes for years by investing them in their funds and letting it grow tax-free in the meantime!

This new piece of legislation comes just months after another tax proposal that would raise taxes on "carried interest" paid by managers of private equity, hedge funds, VC funds and some real estate deals. The carried interest would be taxed as income as opposed to as capital gains on the investment. Both of these pieces of legislation are considered long-overdue by many and should provide a nice boost to tax revenues.