Levin and Obama contend that carried interest should be taxed like ordinary income, because it is payment for services rather than a return of capital. They have failed to get the proposal through Congress, even when Democrats controlled the House of Representatives, the Senate and the White House.

The administration's fiscal 2013 budget and Levin's newest bill include language that says owners of private equity firms should be treated the same as other taxpayers who start and later sell stakes in their business. Earlier versions of the plans singled out investment managers, subjecting them to a regular income tax rate on profits from stake sales while taxpayers who sold other kinds of businesses could still pay the more favorable capital gains rate.

Levin has said the feature would provide a backstop should private equity owners try to skirt higher taxes by selling stakes in their firms.

"While the legislation seeks to tax all income earned for managing other people's money at the same ordinary tax rates paid by all other Americans, it also aims to treat investment managers in a manner consistent with other taxpayers who start and eventually sell a business," Levin said in a statement.

The administration "remains committed" to working with Congress on the enterprise value issue, the Treasury Department wrote in its explanation of revenue proposals that was released Feb. 13. The goal should be "more consistent treatment with the sales of other types of businesses."

The industry's main advocacy group said the new developments don't go far enough.

Multiple Attempts

"There have been multiple attempts to address the enterprise value provision within a series of carried interest tax increase proposals," Steve Judge, president of the Washington-based Private Equity Growth Capital Council, said in a statement. "To date no legislation has been introduced that effectively eliminates a punitive tax increase singling out only private equity, venture capital and real estate partnerships."

Levin has been trying to increase taxes on buyout firms' carried interest since 2007. Since then, the president has included similar language in his jobs plan as well as his budget and the administration has repeatedly used it as part of an argument for what it calls tax fairness.

Carried interest's tax treatment has drawn more attention because of Republican presidential candidate Mitt Romney's former career as a buyout executive. Romney co-founded private equity firm Bain Capital LLC in 1984, and even after retiring from the Boston-based firm in 1999, he still receives carried interest from various Bain funds as part of an exit package. The carried interest tax breaks helped drive his 2010 effective tax rate to below 14 percent.