Governor Paterson has sent the Legislature a chapter amendment that would delete a proposed new hedge fund tax from the state’s pending 2010-11 revenue bill.   By approving the chapter amendment, which is expected to happen today, the state Assembly can erase the tax without voting all over again on the revenue measure it passed July 1.  The state Senate would have to approve the entire bill and the amendment before the revenue package could go to Paterson for his signature.

A new tax on the carried interest income of hedge fund partners who live in other states was approved as part of the revenue bill passed in the Assembly last month.   In addition to removing the hedge fund tax, the chapter amendment would clarify a tax on the incomes of non-resident partners in New York Subchapter S firms, and make a technical change to a provision allocating the state film credit.

The submission of the amendment deleting the hedge fund tax comes a day after Connecticut Gov. Jodi Rell hosted a dinner for leaders of the New York Hedge Fund Roundtable, and a week after Speaker Sheldon Silver first indicated he would rethink the tax.

** P.S. — The hedge fund tax was supposed to raise $50 million in the coming year.   There was no immediate indication of whether the Governor or Legislature have an alternative spending cut or revenue raiser in mind to cover that amount.  But when you’re talking about a $134 billion budget that’s probably way out of balance even assuming passage of the entire revenue bill, what’s another $50 million?