I 

118TH CONGRESS 

2D SESSION H. R. 9985 

To subject certain private funds to joint and several liability with respect 

to the liabilities of firms acquired and controlled by those funds, and 

for other purposes. 

IN THE HOUSE OF REPRESENTATIVES 

OCTOBER 11, 2024 

Mr. POCAN (for himself, Ms. JAYAPAL, Mr. GRIJALVA, Mr. LARSEN of Washington, Ms. LEE of California, Ms. NORTON, Mrs. RAMIREZ, Ms. SCHAKOWSKY, and Ms. OCASIO-CORTEZ) introduced the following bill; which 

was referred to the Committee on Ways and Means, and in addition to 

the Committees on Financial Services, the Judiciary, and Education and 

the Workforce, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned 

A BILL 

To subject certain private funds to joint and several liability 

with respect to the liabilities of firms acquired and controlled by those funds, and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 

4 (a) SHORT TITLE.—This Act may be cited as the 

5 ‘‘Stop Wall Street Looting Act’’. 


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1 (b) TABLE OF CONTENTS.—The table of contents for 

2 this Act is as follows: 

Sec. 1. Short title; table of contents. 

Sec. 2. Findings. 

Sec. 3. Definitions. 

TITLE I—CORPORATE RESPONSIBILITY 

Sec. 101. Joint and several liability for controlling private funds and holders of 

active interests in controlling private funds. 

Sec. 102. Indemnification void as against public policy. 

TITLE II—ANTI-LOOTING 

Sec. 201. Limitations on post-acquisition dividends, distributions, redemptions, 

buybacks, and outsourcing. 

Sec. 202. Prevention of fraudulent transfers. 

Sec. 203. Surtax on certain amounts received by investment firms from controlled target firms. 

Sec. 204. Limitation on deduction for business interest of certain businesses 

owned by private funds. 

Sec. 205. Guardrails around accessing public funds. 

Sec. 206. Prohibiting payments from Federal health care programs to entities 

that sell assets to or use assets as collateral for a loan with 

a real estate investment trust. 

Sec. 207. Repeal of special rule for taxable REIT subsidiaries with interests in 

certain health care property. 

Sec. 208. Elimination of qualified REIT dividends from qualified business income. 

Sec. 209. Protections for striking workers. 

TITLE III—PROTECTING WORKERS WHEN COMPANIES GO 

BANKRUPT 

Sec. 301. Increased priority for wages. 

Sec. 302. Priority for severance pay and contributions to employee welfare benefit plans. 

Sec. 303. Priority for violations of Federal and State laws. 

Sec. 304. Limitation on executive compensation enhancements. 

Sec. 305. Prohibition against special compensation payments. 

Sec. 306. Executive compensation upon exit from bankruptcy. 

Sec. 307. Collateral surcharge for employee obligations. 

Sec. 308. Voidability of preferential compensation transfers. 

Sec. 309. Protection for employees in a sale of assets. 

Sec. 310. Protection of gift card purchasers. 

Sec. 311. Commercial real estate. 

TITLE IV—CLOSING TAX LOOPHOLES 

Sec. 401. Amendment of 1986 Code. 

Sec. 402. Partnership interests transferred in connection with performance of 

services. 

Sec. 403. Special rules for partners providing investment management services 

to partnerships. 


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TITLE V—INVESTOR PROTECTION AND MARKET TRANSPARENCY 

Sec. 501. Disclosure of fees and returns. 

Sec. 502. Fiduciary obligations. 

Sec. 503. Disclosures relating to the marketing of private equity funds. 

Sec. 504. Greater visibility into non-bank direct lending and private credit. 

TITLE VI—RESTRICTIONS ON SECURITIZING RISKY CORPORATE 

DEBT 

Sec. 601. Risk retention requirements for securitization of corporate debt. 

TITLE VII—MISCELLANEOUS 

Sec. 701. Anti-evasion. 

Sec. 702. Severability. 

1 SEC. 2. FINDINGS. 

2 Congress finds the following: 

3 (1) During the 20-year period preceding the 

4 date of enactment of this Act, activity by private eq5 uity funds has exploded. 

6 (2) Millions of people in communities across the 

7 United States rely on companies that are owned by 

8 private equity funds, including nearly 12,000,000 in9 dividuals who work for companies owned by those 

10 funds. For millions of additional individuals, a pri11 vate investment fund acts as a landlord, a lender, or 

12 an owner of a local grocery store, newspaper, or hos13 pital. Many pension funds are also investors in pri14 vate investment funds. 

15 (3) Private investment funds have taken con16 trolling stakes in companies in a wide variety of in17 dustries, including the financial services, real estate, 

18 media, and healthcare industries, but some of the 


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1 largest impacts from private investment funds have 

2 been in the retail sector. In the 10 years preceding 

3 the date of enactment of this Act, cases have been 

4 commenced under title 11, United States Code, with 

5 respect to dozens of retailers in the United States, 

6 including Sears, Toys ‘‘R’’ Us, Shopko, Payless 

7 ShoeSource, Charlotte Russe, Bon-Ton, Nine West, 

8 David’s Bridal, Claire’s, J. Crew, Neiman Marcus, 

9 Guitar Center, Art Van Furniture, and Southeastern 

10 Grocers, which was the parent company for BI–LO 

11 and Winn-Dixie. 

12 (4) Private investment funds have also targeted 

13 entities that serve low-income or vulnerable popu14 lations, including affordable housing developments, 

15 for-profit colleges, payday lenders, medical providers, 

16 and nursing homes. 

17 (5) While private investment funds often pur18 port to take over struggling companies and make 

19 those companies viable, the opposite is often true. 

20 Leveraged buyouts impose enormous debt loads on 

21 otherwise viable companies and then strip those 

22 companies of assets, hobbling the operations of those 

23 companies and preventing them from making nec24 essary investments for future growth. If an invest25 ment goes well, the fund reaps most of the rewards, 


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1 but if the investment does not go well, workers and 

2 customers of the company, and the community rely3 ing on the company, suffer. 

4 (6) Regardless of the performance of a private 

5 investment fund, the managers of the fund often 

6 make profits through fees, dividends, and other fi7 nancial engineering. Private funds should have a 

8 stake in the outcome of their investments, enjoying 

9 returns if those investments are successful but ab10 sorbing losses if those investments fail. 

11 (7) When a case is commenced under title 11, 

12 United States Code, with respect to a portfolio com13 pany, workers not only lose jobs, but also lose wages 

14 and benefits that are owed, severance pay that has 

15 been promised, and pensions that have been earned. 

16 Workers should not be sent to the back of the line 

17 behind other creditors if, through no fault of those 

18 workers, an investment fails. 

19 (8) The performance of private investment 

20 funds is often cloaked in secrecy. Those funds have 

21 full control over the information that the funds dis22 close to investors, which allows the funds to manu23 facture their own performance metrics and makes it 

24 difficult for an investor to compare the returns to 

25 other investment options. Funds also increasingly reVerDate Sep 11 2014 22:35 Oct 24, 2024 Jkt 059200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H9985.IH H9985

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1 quire investors to waive the fiduciary obligations ap2 plicable to the funds. Investors should have the in3 formation and bargaining power to take control over 

4 their own investments. 

5 (9) An increasing amount of risky debt is being 

6 introduced into the market and the quality of that 

7 debt is deteriorating, raising concerns with regu8 lators and lawmakers about systemic risk. The insti9 tutions that make and securitize risky loans collect 

10 large fees and then pass on risk to unwitting inves11 tors. The financial system should not bear all of the 

12 risk while lenders and securitizers reap the rewards. 

13 (10) The Federal Government should— 

14 (A) protect workers, companies, con15 sumers, and investors in the United States; and 

16 (B) put an end to the practice of looting 

17 economically viable companies for the enrich18 ment of private investment fund managers. 

19 SEC. 3. DEFINITIONS. 

20 Except as otherwise expressly provided, in this Act: 

21 (1) AFFILIATE.—The term ‘‘affiliate’’ means— 

22 (A) a person that directly or indirectly 

23 owns, controls, or holds with power to vote, 5 

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1 rities of another entity, other than a person 

2 that holds such securities— 

3 (i) in a fiduciary or agency capacity 

4 without sole discretionary power to vote 

5 such securities; or 

6 (ii) solely to secure a debt, if such en7 tity has not in fact exercised such power to 

8 vote; 

9 (B) a corporation, 5 percent or more of 

10 whose outstanding voting securities are directly 

11 or indirectly owned, controlled, or held with 

12 power to vote, by another entity (referred to in 

13 this subparagraph as a ‘‘covered entity’’), or by 

14 an entity that directly or indirectly owns, con15 trols, or holds with power to vote, 5 percent or 

16 more of the outstanding voting securities of the 

17 covered entity, other than an entity that holds 

18 such securities— 

19 (i) in a fiduciary or agency capacity 

20 without sole discretionary power to vote 

21 such securities; or 

22 (ii) solely to secure a debt, if such en23 tity has not in fact exercised such power to 

24 vote; 


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1 (C) a person whose business is operated 

2 under a lease or operating agreement by an3 other entity, or person substantially all of whose 

4 property is operated under an operating agree5 ment with that other entity; or 

6 (D) an entity that operates the business or 

7 substantially all of the property of another enti8 ty under a lease or operating agreement. 

9 (2) CAPITAL DISTRIBUTION.—The term ‘‘cap10 ital distribution’’ means— 

11 (A) a cash or share dividend; 

12 (B) a share repurchase; 

13 (C) a share redemption; 

14 (D) a share buyback; 

15 (E) a payment of interest or fee on a share 

16 of stock; and 

17 (F) any other transaction similar to a 

18 transaction described in any of subparagraphs 

19 (A) through (E). 

20 (3) CHANGE IN CONTROL.—The term ‘‘change 

21 in control’’ means a change in a legal right with re22 spect to— 

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1 poration that engages in interstate commerce; 

2 or 

3 (B) any lesser per centum of any class of 

4 voting securities of a corporation that engages 

5 in interstate commerce that is sufficient to 

6 make the acquirer of such an interest a person 

7 that has the ability to direct the actions of that 

8 corporation. 

9 (4) CHANGE IN CONTROL TRANSACTION.—The 

10 term ‘‘change in control transaction’’ means a trans11 action, or a set of related transactions, that effec12 tuates a change in control. 

13 (5) COMMISSION.—The term ‘‘Commission’’ 

14 means the Securities and Exchange Commission. 

15 (6) CONTROL PERSON.—The term ‘‘control per16 son’’— 

17 (A) means— 

18 (i) a person— 

19 (I) that directly or indirectly 

20 owns, controls, or holds with power to 

21 vote, including through coordination 

22 with other persons, 5 percent or more 

23 of the outstanding voting interests of 

24 a corporation; or 


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1 (II) that operates the business or 

2 substantially all of the property of a 

3 corporation under a lease or an oper4 ating or management agreement; 

5 (ii) a corporation, other than a target 

6 firm, that has 5 percent or more of its out7 standing voting interests directly or indi8 rectly owned, controlled, or held with 

9 power to vote by a person that directly or 

10 indirectly owns, controls, or holds with 

11 power to vote, including through coordina12 tion with other persons, 5 percent or more 

13 of the outstanding voting interests of an14 other corporation; or 

15 (iii) a person that otherwise has the 

16 ability to direct the actions of a corpora17 tion; and 

18 (B) does not include a person that— 

19 (i)(I) is a limited partner with respect 

20 to a controlling private fund that is a part21 nership; 

22 (II) does not participate in the direc23 tion of the management or policy of a cor24 poration; and 


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1 (III) is not an insider with respect to 

2 the controlling private fund described in 

3 subclause (I); 

4 (ii) is a pension fund or employee wel5 fare benefit plan, if neither the fund nor 

6 plan (as applicable), nor any beneficiary or 

7 affiliate of the benefit or plan, is an insider 

8 with respect to a controlling private fund; 

9 or 

10 (iii) holds the voting interests of a 

11 corporation solely— 

12 (I) in a fiduciary or agency ca13 pacity without sole discretionary 

14 power to vote the securities; or 

15 (II) to secure a debt, if the per16 son has not— 

17 (aa) exercised the power to 

18 vote; or 

19 (bb) exercised any other gov20 ernance rights with respect to the 

21 corporation. 

22 (7) CONTROLLING PRIVATE FUND.—The term 

23 ‘‘controlling private fund’’ means a private fund 

24 that, directly or through an affiliate, becomes a con25 trol person with respect to a target firm through the 


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1 change in control transaction with respect to the tar2 get firm. 

3 (8) CORPORATION.—The term ‘‘corporation’’ 

4 means— 

5 (A) a joint-stock company; 

6 (B) a company or partnership association 

7 organized under a law that makes only the cap8 ital subscribed or callable up to a specified 

9 amount responsible for the debts of the associa10 tion, including a limited partnership and a lim11 ited liability company; 

12 (C) a trust; and 

13 (D) an association having a power or privi14 lege that a private corporation, but not an indi15 vidual or a partnership, possesses. 

16 (9) EMPLOYEE WELFARE BENEFIT PLAN.—The 

17 term ‘‘employee welfare benefit plan’’ has the mean18 ing given the term in section 3 of the Employee Re19 tirement Income Security Act of 1974 (29 U.S.C. 

20 1002). 

21 (10) HOLDER OF AN ACTIVE INTEREST.—The 

22 term ‘‘holder of an active interest’’— 

23 (A) subject to subparagraph (B)(ii), 

24 means— 


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1 (i) a person that directly or indirectly 

2 has the right to participate in the govern3 ance of a controlling private fund, without 

4 regard to the form or source of that right; 

5 and 

6 (ii) any insider with respect to a con7 trolling private fund; and 

8 (B) does not include— 

9 (i) a person that— 

10 (I) holds an economic interest 

11 solely to secure a debt, if that person 

12 does not exercise any voting or other 

13 governance right with respect to the 

14 interest; 

15 (II)(aa) is a limited partner with 

16 respect to a controlling private fund 

17 that is a partnership; 

18 (bb) does not participate in the 

19 direction of the management or policy 

20 of a corporation; and 

21 (cc) is not an insider with respect 

22 to the controlling private fund de23 scribed in item (aa); or 

24 (III) is a pension fund or em25 ployee welfare benefit plan, if neither 


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1 the pension fund nor employee welfare 

2 benefit plan (as applicable), nor any 

3 affiliate or beneficiary of the pension 

4 fund or employee welfare benefit plan, 

5 is an insider with respect to, or affil6 iate of, a controlling private fund; or 

7 (ii) if the source of the right described 

8 in subparagraph (A)(i) is a security— 

9 (I) a person that is engaged in 

10 business as an underwriter of securi11 ties and that acquires that security 

12 through the good faith participation 

13 of the person in a firm commitment 

14 underwriting registered under the Se15 curities Act of 1933 (15 U.S.C. 77a 

16 et seq.), until the date that is 40 days 

17 after the date on which that acquisi18 tion occurs; or 

19 (II) a member of a national secu20 rities exchange solely because that 

21 member is the record holder of that 

22 security and, under the rules of that 

23 exchange— 


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1 (aa) may direct the vote of 

2 that security, without instruction, 

3 on— 

4 (AA) other than con5 tested matters; or 

6 (BB) matters that may 

7 substantially affect the 

8 rights or privileges of the 

9 holders of the security to be 

10 voted; and 

11 (bb) is otherwise precluded 

12 from voting without instruction. 

13 (11) INSIDER.—The term ‘‘insider’’ means 

14 any— 

15 (A) director of a corporation; 

16 (B) officer of a corporation; 

17 (C) managing agent of a corporation; 

18 (D) control person with respect to a cor19 poration; 

20 (E) affiliate of a corporation; 

21 (F) general partner of a corporation that 

22 is a partnership; 

23 (G) consultant or contractor retained by a 

24 corporation; 


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1 (H) affiliate, relative, or agent of a person 

2 described in any of subparagraphs (A) through 

3 (F); or 

4 (I) affiliate, relative, or agent of a person 

5 described in subparagraph (H). 

6 (12) INVESTMENT ADVISER.—The term ‘‘in7 vestment adviser’’ has the meaning given the term 

8 in section 202(a) of the Investment Advisers Act of 

9 1940 (15 U.S.C. 80b–2(a)). 

10 (13) ISSUER.—The term ‘‘issuer’’ has the 

11 meaning given the term in section 3(a) of the Secu12 rities Exchange Act of 1934 (15 U.S.C. 78c(a)). 

13 (14) NATIONAL SECURITIES EXCHANGE.—The 

14 term ‘‘national securities exchange’’ means an ex15 change that is registered as a national securities ex16 change under section 6 of the Securities Exchange 

17 Act of 1934 (15 U.S.C. 78f). 

18 (15) PENSION FUND.—The term ‘‘pension 

19 fund’’ has the meaning given the term ‘‘pension 

20 plan’’ in section 3 of the Employee Retirement Secu21 rity Act of 1974 (29 U.S.C. 1002). 

22 (16) PRIVATE FUND.—The term ‘‘private fund’’ 

23 means a corporation that— 

24 (A) would be considered an investment 

25 company under section 3 of the Investment 


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1 Company Act of 1940 (15 U.S.C. 80a–3) but 

2 for the application of paragraph (1) or (7) of 

3 subsection (c) of such section 3; 

4 (B) is not a venture capital fund, as de5 fined in section 275.203(l)–1 of title 17, Code 

6 of Federal Regulations, as in effect on the date 

7 of enactment of this Act; and 

8 (C) is not an institution selected under sec9 tion 107 of the Community Development Bank10 ing and Financial Institutions Act of 1994 (12 

11 U.S.C. 4706). 

12 (17) RELATIVE.—The term ‘‘relative’’ means 

13 an individual related by affinity or consanguinity 

14 within the third degree as determined by the com15 mon law, or individual in a step or adoptive relation16 ship within such third degree. 

17 (18) SECURITY.—The term ‘‘security’’ has the 

18 meaning given the term in section 2(a) of the Secu19 rities Act of 1933 (15 U.S.C. 77b(a)). 

20 (19) TARGET FIRM.—The term ‘‘target firm’’ 

21 means a corporation that is acquired in a change in 

22 control transaction. 


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1 TITLE I—CORPORATE 

2 RESPONSIBILITY 

3 SEC. 101. JOINT AND SEVERAL LIABILITY FOR CONTROL4 LING PRIVATE FUNDS AND HOLDERS OF AC5 TIVE INTERESTS IN CONTROLLING PRIVATE 

6 FUNDS. 

7 (a) IN GENERAL.—Notwithstanding any other provi8 sion of law, or the terms of any contract or agreement, 

9 a controlling private fund, and any holder of an active in10 terest with respect to a controlling private fund, shall be 

11 jointly and severally liable for all liabilities of each target 

12 firm for which the controlling private fund is a control 

13 person, and for all liabilities of any affiliate of each such 

14 target firm, including— 

15 (1) any debt incurred by the target firm or an 

16 affiliate of the target firm, including as part of the 

17 acquisition of the target firm by the controlling pri18 vate fund; 

19 (2) any Federal or State civil monetary penalty, 

20 or obligation under a settlement or consent order 

21 with a Federal or State governmental agency or in22 strumentality, including a consumer restitution obli23 gation, for which the target firm, or an affiliate of 

24 the target firm, is liable; 


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1 (3) any liability resulting from a violation of 

2 section 3 of the Worker Adjustment and Retraining 

3 Notification Act (29 U.S.C. 2102) by the target firm 

4 or an affiliate of the target firm; 

5 (4) any withdrawal liability determined under 

6 part 1 of subtitle E of title IV of the Employee Re7 tirement Income Security Act of 1974 (29 U.S.C. 

8 1381 et seq.) that is incurred by the target firm or 

9 an affiliate of the target firm; and 

10 (5) any claim for unfunded benefit liabilities 

11 owed to the Pension Benefit Guaranty Corporation 

12 under subtitle D of title IV of the Employee Retire13 ment Income Security Act of 1974 (29 U.S.C. 1361 

14 et seq.) with respect to the termination of a pension 

15 plan sponsored by the target firm or an affiliate of 

16 the target firm. 

17 (b) RULE OF CONSTRUCTION.—Nothing in this sec18 tion may be construed to diminish existing, as of the date 

19 of enactment of this Act, controlled group liability under 

20 the Employee Retirement Income Security Act of 1974 

21 (29 U.S.C. 1001 et seq.). 


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1 SEC. 102. INDEMNIFICATION VOID AS AGAINST PUBLIC 

2 POLICY. 

3 It shall be void as against public policy for a target 

4 firm, or an affiliate of a target firm, to indemnify a con5 trolling private fund with respect to— 

6 (1) the target firm; 

7 (2) any affiliate of the target firm; or 

8 (3) any person that is the holder of an active 

9 interest in the controlling private fund with respect 

10 to the liabilities of that person under section 101. 

11 TITLE II—ANTI-LOOTING 

12 SEC. 201. LIMITATIONS ON POST-ACQUISITION DIVIDENDS, 

13 DISTRIBUTIONS, REDEMPTIONS, BUYBACKS, 

14 AND OUTSOURCING. 

15 (a) IN GENERAL.—No target firm may, directly or 

16 indirectly, after the closing date of a change in control 

17 transaction that results in a private fund becoming a con18 trolling private fund with respect to the target firm— 

19 (1) for a 4-year period, make a capital distribu20 tion or similarly reduce the equity capital of the tar21 get firm; 

22 (2) make a capital distribution greater than 10 

23 percent of the sum of all financial obligations of the 

24 target firm for each of the previous 2 years or simi25 larly reduce the equity capital of the target firm; 


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1 (3) incur an obligation that commits the target 

2 firm to making a capital distribution of greater than 

3 10 percent of the new sum of all financial obliga4 tions of the firm or a similar reduction of the equity 

5 capital of the target firm for each of the following 

6 2 years; or 

7 (4) order a plant closing or mass layoff (as de8 fined in section 2(a) of the Worker Adjustment and 

9 Retraining Notification Act (29 U.S.C. 2101(a))) 

10 and relocate the trade or business conducted by the 

11 employees in the United States to one or more facili12 ties outside the United States, in accordance with 

13 regulations issued by the Secretary of Labor. 

14 (b) VOID.—Any transfer made or obligation incurred 

15 by a target firm or an affiliate with respect to a target 

16 firm in violation of subsection (a) shall be void. 

17 (c) JOINT AND SEVERAL LIABILITY FOR AIDERS AND

18 ABETTORS.—Any controlling private fund, any holder of 

19 an active interest in a controlling private fund, or any af20 filiate of a target firm that aids, abets, facilitates, sup21 ports, or instructs a target firm’s violation of subsection 

22 (a) shall be jointly and severally liable under this sub23 section for any transfer made or obligation incurred, in24 cluding for reasonable attorney’s fees and costs awarded 

25 to a plaintiff under subsection (d)(2). 


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1 (d) CAUSE OF ACTION.— 

2 (1) IN GENERAL.—Any employee or creditor, or 

3 representative of an employee or creditor, of a target 

4 firm that is a debtor under title 11, United States 

5 Code, or of an affiliate of a target firm that is such 

6 a debtor, may bring an action in an appropriate dis7 trict court of the United States against the direct or 

8 indirect transferee or obligee or beneficiary of the 

9 transfer or obligation to void the transfer or obliga10 tion and recover any transferred property for the 

11 target firm. 

12 (2) AWARD.—In a successful action to recover 

13 a transfer, the court shall also award the plaintiff 

14 reasonable attorney’s fees and costs. 

15 SEC. 202. PREVENTION OF FRAUDULENT TRANSFERS. 

16 (a) LIMITATION ON SAFE HARBORS.—Section 546(e) 

17 of title 11, United States Code, is amended by inserting 

18 after ‘‘548(b) of this title,’’ the following: ‘‘and except in 

19 the case of a transfer made in connection with a change 

20 in control transaction, as defined in section 3 of the Stop 

21 Wall Street Looting Act, or during the protected period, 

22 as defined in section 548(f) of this title,’’. 

23 (b) PRESUMPTION OF INSOLVENCY IN TRANSFERS

24 UNDERTAKEN IN CONNECTION WITH CHANGE IN CON25 TROL TRANSACTIONS.—Section 548 of title 11, United 


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1 States Code, is amended by adding at the end the fol2 lowing: 

3 ‘‘(f)(1) In this subsection— 

4 ‘‘(A) the terms ‘change in control trans5 action’, ‘control person’, and ‘target firm’ have 

6 the meanings given those terms in section 3 of 

7 the Stop Wall Street Looting Act; and 

8 ‘‘(B) the term ‘protected period’ means the 

9 shorter of— 

10 ‘‘(i) the 15-year period beginning on 

11 the date on which a change in control 

12 transaction closed; or 

13 ‘‘(ii) the period beginning on the date 

14 on which a change in control transaction 

15 closed and ending on the earliest subse16 quent date on which a public offering of a 

17 controlling share of the common equity se18 curities of the target firm occurs. 

19 ‘‘(2) For purposes of this section, if the debtor 

20 is a target firm, the debtor is presumed to have 

21 made a transfer or incurred an obligation described 

22 in subparagraphs (A) and (B) of subsection (a)(1) 

23 if— 

24 ‘‘(A) the transfer was made to or obliga25 tion was incurred by the debtor or an affiliate 


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1 in connection with a change in control trans2 action; or 

3 ‘‘(B) during a protected period— 

4 ‘‘(i) the transfer was made by the 

5 debtor or an affiliate to a control person, 

6 an affiliate, or an insider; or 

7 ‘‘(ii) the obligation was incurred by 

8 the debtor or an affiliate from a control 

9 person, an affiliate, or an insider. 

10 ‘‘(3) For the purposes of this section, a court 

11 shall, in analyzing related transactions, link together 

12 as a single transaction any interrelated yet formally 

13 distinct steps in an integrated transaction (com14 monly known as the ‘step transaction doctrine’).’’. 

15 (c) STATUTE OF LIMITATIONS.— 

16 (1) TITLE 11.—Section 548 of title 11, United 

17 States Code, is amended— 

18 (A) in subsection (a)(1), by striking para19 graph ‘‘that was made or incurred on or within 

20 15 years before the date of the filing of the pe21 tition’’ and inserting ‘‘that was made or in22 curred during the period described in subsection 

23 (g)’’; and 

24 (B) adding at the end the following: 


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1 ‘‘(g) The trustee may avoid under subsection (a) a 

2 transfer of an interest of the debtor in property or any 

3 obligation incurred by the debtor on or within— 

4 ‘‘(1) 15 years before the date of the filing of 

5 the petition if the transfer was made or obligation 

6 incurred in connection with a change in control 

7 transaction, as defined in section 3 of the Stop Wall 

8 Street Looting Act; or 

9 ‘‘(2) 15 years before the date of the filing of 

10 the petition for all other transfers and obligations.’’. 

11 (2) TITLE 28.—Section 3306(b) of title 28, 

12 United States Code, is amended— 

13 (A) in paragraph (2), by striking ‘‘or’’ at 

14 the end; 

15 (B) in paragraph (3), by striking the pe16 riod at the end and inserting ‘‘; or’’; and 

17 (C) by adding at the end the following: 

18 ‘‘(4) within 15 years after the transfer was 

19 made or the obligation was incurred, if the transfer 

20 was made or the obligation was incurred— 

21 ‘‘(A) in connection with a change in con22 trol transaction, as defined in section 3 of the 

23 Stop Wall Street Looting Act; or 

24 ‘‘(B) during a protected period, as defined 

25 in section 548(f) of title 11.’’. 


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1 (d) POWERS AND DUTIES OF COMMITTEES.—Section 

2 1103(c) of title 11, United States Code, is amended— 

3 (1) by redesignating paragraphs (3) through 

4 (5) as paragraphs (4) through (6), respectively; and 

5 (2) by inserting after paragraph (2) the fol6 lowing: 

7 ‘‘(3) upon motion, undertake an examination of 

8 a director, officer, general partner, or person in con9 trol of the debtor regarding potential conflicts of in10 terest;’’. 

11 (e) ELIMINATION OF SHAM INDEPENDENT DIREC12 TORS.—Section 1107 of title 11, United States Code, is 

13 amended— 

14 (1) in subsection (a), by striking ‘‘Subject to’’ 

15 and inserting, ‘‘Except as provided in subsection (c), 

16 subject to’’; and 

17 (2) by adding at the end the following: 

18 ‘‘(c) Notwithstanding subsection (a), if a debtor in 

19 possession is serving in a case under this title, a committee 

20 of creditors appointed under section 1102 of this title shall 

21 have the exclusive right of a trustee serving in a case 

22 under this chapter to bring or settle on behalf of the es23 tate— 

24 ‘‘(1) an action under section 544, 547, 548, or 

25 553 to avoid a transfer made or obligation incurred 


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1 by the debtor in connection with a change of control 

2 transaction, as defined in section 3 of the Stop Wall 

3 Street Looting Act; or 

4 ‘‘(2) an action against an insider, a former in5 sider, or an agent or aider and abettor of an insider 

6 or former insider.’’. 

7 SEC. 203. SURTAX ON CERTAIN AMOUNTS RECEIVED BY IN8 VESTMENT FIRMS FROM CONTROLLED TAR9 GET FIRMS. 

10 (a) IMPOSITION OF TAX.—Subchapter A of chapter 

11 1 of the Internal Revenue Code of 1986 is amended by 

12 adding at the end the following new part: 

13 ‘‘PART VIII—SURTAX ON CERTAIN AMOUNTS 

14 RECEIVED BY INVESTMENT FIRMS 

‘‘Sec. 59B. Surtax on certain amounts received by investment firms from controlled target firms. 

15 ‘‘SEC. 59B. SURTAX ON CERTAIN AMOUNTS RECEIVED BY 

16 INVESTMENT FIRMS FROM CONTROLLED 

17 TARGET FIRMS. 

18 ‘‘(a) IMPOSITION OF TAX.— 

19 ‘‘(1) IN GENERAL.—If one or more applicable 

20 payments are included in the gross income of a tax21 payer for any taxable year, then there is hereby im22 posed on the taxpayer for the taxable year a tax 

23 equal to the applicable percentage of the aggregate 


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1 amount of such payments. Such tax shall be in addi2 tion to any other tax imposed by this subtitle. 

3 ‘‘(2) APPLICABLE PERCENTAGE.—For purposes 

4 of this subsection, the term ‘applicable percentage’ 

5 means 100 percent, minus the highest rate of tax 

6 under section 1 or 11 (whichever is applicable) for 

7 the taxable year. 

8 ‘‘(b) APPLICABLE PAYMENT.—For purposes of this 

9 section— 

10 ‘‘(1) IN GENERAL.—The term ‘applicable pay11 ment’ means any amount paid or incurred by an ap12 plicable entity (or any person related within the 

13 meaning of section 267(b) or 707(b) to such entity) 

14 to any other person which, at the time such amount 

15 is paid or incurred, is an applicable controlling enti16 ty. An amount shall be treated as an applicable pay17 ment without regard to whether it is paid or in18 curred to the taxpayer including it in gross income 

19 and to which subsection (a) applies. 

20 ‘‘(2) EXCEPTIONS.—Such term shall not in21 clude any of the following: 

22 ‘‘(A) INTEREST.—Any amount paid or in23 curred which is treated as interest for purposes 

24 of this chapter. 


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1 ‘‘(B) DISTRIBUTIONS OF PROPERTY WITH

2 RESPECT TO STOCK.—Any distribution of prop3 erty (as defined in section 317(a)) to which sec4 tion 301(a) applies. 

5 ‘‘(c) DEFINITIONS RELATING TO ENTITIES.—For 

6 purposes of this section— 

7 ‘‘(1) APPLICABLE ENTITY.—The term ‘applica8 ble entity’ means any person— 

9 ‘‘(A) which is engaged in the active con10 duct of a trade or business, and 

11 ‘‘(B) with respect to which any other per12 son conducts activities in connection with an 

13 applicable trade or business. 

14 ‘‘(2) APPLICABLE CONTROLLING ENTITY.—The 

15 term ‘applicable controlling entity’ means, with re16 spect to any applicable entity, any person— 

17 ‘‘(A) which is engaged in an applicable 

18 trade or business some or all of the activities of 

19 which are conducted in connection with the ap20 plicable entity, and 

21 ‘‘(B) which controls (or is related within 

22 the meaning of section 267(b) or 707(b) to a 

23 person which controls) the applicable entity. 

24 ‘‘(3) APPLICABLE TRADE OR BUSINESS.—The 

25 term ‘applicable trade or business’ means any activVerDate Sep 11 2014 22:35 Oct 24, 2024 Jkt 059200 PO 00000 Frm 00029 Fmt 6652 Sfmt 6201 E:\BILLS\H9985.IH H9985

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1 ity conducted on a regular, continuous, and substan2 tial basis which, regardless of whether the activity is 

3 conducted in one or more entities, consists, in whole 

4 or in part, of— 

5 ‘‘(A) raising or returning capital, and 

6 ‘‘(B) either— 

7 ‘‘(i) investing in or disposing of speci8 fied assets (or identifying specified assets 

9 for such investing or disposition), or 

10 ‘‘(ii) developing specified assets. 

11 ‘‘(4) SPECIFIED ASSET.—The term ‘specified 

12 asset’ means— 

13 ‘‘(A) securities (as defined in section 

14 475(c)(2) but without regard to the phrase 

15 ‘widely held or publicly traded’ in subparagraph 

16 (B) thereof and without regard to the last sen17 tence thereof), and 

18 ‘‘(B) real estate held for rental or invest19 ment. 

20 ‘‘(d) RULES AND DEFINITIONS RELATING TO OWN21 ERSHIP ATTRIBUTION AND CONTROL.—For purposes of 

22 this section— 

23 ‘‘(1) CONSTRUCTIVE OWNERSHIP RULES USED

24 IN DETERMINING RELATED PARTY.—In determining 

25 whether persons are related within the meaning of 


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1 section 267(b) or 707(b), the constructive ownership 

2 rules of section 318 shall apply in lieu of the con3 structive ownership rules which would otherwise 

4 apply, except that in applying such rules the term 

5 ‘stock’ shall include capital, profits, or other bene6 ficial interests in persons other than corporations. 

7 ‘‘(2) CONTROL.— 

8 ‘‘(A) CORPORATIONS.—In the case of a 

9 corporation, the term ‘control’ has the meaning 

10 given such term by section 304(c) (without re11 gard to paragraph (3)(B) thereof). 

12 ‘‘(B) OTHER ENTITIES.—In the case of a 

13 person other than a corporation, such term 

14 means the ownership, directly or indirectly, of 

15 at least 50 percent of the capital, profits, or 

16 other beneficial interests in the person. 

17 ‘‘(e) REGULATIONS.—The Secretary shall prescribe 

18 such regulations or other guidance as may be necessary 

19 or appropriate to carry out the provisions of this section, 

20 including regulations— 

21 ‘‘(1) providing for such adjustments to the ap22 plication of this section as are necessary to prevent 

23 the avoidance of the purposes of this section, includ24 ing through the use of unrelated persons, or conduit 

25 transactions, and 


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1 ‘‘(2) modifying the constructive ownership rules 

2 under section 318 to the extent necessary to apply 

3 such rules to capital, profits, or other beneficial in4 terests as well as stock.’’. 

5 (b) DISALLOWANCE OF CREDITS AGAINST TAX.— 

6 Subparagraph (B) of section 26(b)(2) of the Internal Rev7 enue Code of 1986 is amended by inserting ‘‘or section 

8 59B (relating to surtax on certain amounts received by 

9 investment firms from controlled target firms)’’ after 

10 ‘‘anti-abuse tax)’’. 

11 (c) CONFORMING AMENDMENTS.— 

12 (1) The table of parts for subchapter A of chap13 ter 1 of the Internal Revenue Code of 1986 is 

14 amended by adding after the item relating to part 

15 VII the following new item: 

‘‘PART VIII. SURTAX ON CERTAIN AMOUNTS RECEIVED BY INVESTMENT

FIRMS’’. 

16 (2) Section 871(b)(1) of such Code is amended 

17 by inserting ‘‘, and as provided in section 59B on 

18 applicable payments included in gross income which 

19 are effectively connected with the conduct of a trade 

20 or business within the United States’’ before the pe21 riod. 

22 (3) Section 882(a)(1) of such Code is amend23 ed— 


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1 (A) by striking ‘‘59A,’’ and inserting 

2 ‘‘59A’’; and 

3 (B) by inserting ‘‘, and as provided in sec4 tion 59B on applicable payments included in 

5 gross income which are effectively connected 

6 with the conduct of a trade or business within 

7 the United States’’ before the period. 

8 (4) Subparagraph (A) of section 6425(c)(1) of 

9 such Code is amended by striking ‘‘plus’’ at the end 

10 of clause (i), by striking ‘‘plus’’ at the end of clause 

11 (ii), by striking ‘‘over’’ at the end of clause (iii) and 

12 inserting ‘‘and’’, and by adding at the end the fol13 lowing new clause: 

14 ‘‘(iv) the tax imposed by section 59B, 

15 over’’. 

16 (5) Paragraph (1) of section 6654(f) of such 

17 Code is amended by striking ‘‘tax’’ each place it ap18 pears and inserting ‘‘taxes’’. 

19 (6) Subparagraph (A) of section 6655(g)(1) of 

20 such Code is amended by striking ‘‘plus’’ at the end 

21 of clause (iii), by redesignating clause (iv) as clause 

22 (v), and by inserting after clause (iii) the following 

23 new clause: 

24 ‘‘(iv) the tax imposed by section 59B, 

25 and’’. 


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1 (d) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to applicable payments (as defined 

3 in section 59B(b) of the Internal Revenue Code of 1986, 

4 as added by this section) paid or accrued on or after the 

5 date of the enactment of this Act. 

6 SEC. 204. LIMITATION ON DEDUCTION FOR BUSINESS IN7 TEREST OF CERTAIN BUSINESSES OWNED BY 

8 PRIVATE FUNDS. 

9 (a) IN GENERAL.—Section 163(j) of the Internal 

10 Revenue Code of 1986 is amended by redesignating para11 graph (11) as paragraph (12) and by inserting after para12 graph (10) the following new paragraph: 

13 ‘‘(11) MODIFICATION OF LIMITATION FOR CER14 TAIN BUSINESSES OWNED BY PRIVATE FIRMS.— 

15 ‘‘(A) IN GENERAL.—In the case of a tax16 payer which is an applicable entity controlled by 

17 an applicable controlling entity (or any person 

18 related within the meaning of section 267(b) or 

19 707(b) to such entity) at any time during the 

20 taxable year— 

21 ‘‘(i) if the ratio of debt to equity of 

22 the taxpayer as of the close of the taxable 

23 year (or on any other day during the tax24 able year as the Secretary may prescribe in 

25 regulations) exceeds 1, then paragraph (1) 


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1 shall be applied by substituting a percent2 age that the Secretary determines appro3 priate (and which shall be not less than 30 

4 percent) for ‘30 percent’, and 

5 ‘‘(ii) in the case of the election under 

6 paragraph (7)(B) to treat any trade or 

7 business of the taxpayer as an electing real 

8 property trade or business— 

9 ‘‘(I) the taxpayer may not make 

10 any such election during such taxable 

11 year, and 

12 ‘‘(II) any such election of the 

13 taxpayer in effect as of the close of 

14 the taxable year preceding such tax15 able year with respect to a trade or 

16 business shall be revoked, effective for 

17 such taxable year and all succeeding 

18 taxable years. 

19 ‘‘(B) RATIO OF DEBT TO EQUITY.—For 

20 purposes of this paragraph, the term ‘ratio of 

21 debt to equity’ means, with respect to any tax22 payer, the ratio which the total indebtedness of 

23 the taxpayer bears to the sum of the taxpayer’s 

24 money and all other assets reduced (but not 


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1 below zero) by such total indebtedness. For 

2 purposes of the preceding sentence— 

3 ‘‘(i) the amount taken into account 

4 with respect to any asset shall be the ad5 justed basis thereof for purposes of deter6 mining gain, 

7 ‘‘(ii) the amount taken into account 

8 with respect to any indebtedness with 

9 original issue discount shall be its issue 

10 price plus the portion of the original issue 

11 discount previously accrued as determined 

12 under the rules of section 1272 (deter13 mined without regard to subsection (a)(7) 

14 or (b)(4) thereof), and 

15 ‘‘(iii) there shall be such other adjust16 ments as the Secretary may by regulations 

17 prescribe. 

18 ‘‘(C) COORDINATION WITH DEPRECIATION

19 RULES.—If the alternative depreciation system 

20 under section 168(g) applies to property by rea21 son of an election under paragraph (7)(B) 

22 which is revoked under subparagraph 

23 (A)(ii)(II), then the depreciation deduction 

24 under section 167(a) with respect to such prop25 erty for the taxable year of revocation and all 


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1 succeeding taxable years shall be determined 

2 under section 168 in the same manner as if 

3 such revocation were a change in use of the 

4 property under section 168(i)(5) and the regu5 lations thereunder. 

6 ‘‘(D) DEFINITIONS AND RULES.—For pur7 poses of this paragraph— 

8 ‘‘(i) any term used in this paragraph 

9 which is also used in section 59B shall 

10 have the same meaning as when used in 

11 such section, and 

12 ‘‘(ii) the constructive ownership rules 

13 of section 318 shall apply in the same 

14 manner as such rules apply for purposes of 

15 section 59B.’’. 

16 (b) EFFECTIVE DATES.— 

17 (1) IN GENERAL.—The amendments made by 

18 this section shall apply to taxable years beginning on 

19 or after the date of enactment of this Act. 

20 (2) REVOCATION OF ELECTIONS.—Subpara21 graphs (A)(ii)(II) and (C) of section 163(j)(11) of 

22 the Internal Revenue Code of 1986, as added by this 

23 section, shall apply to taxable years beginning on or 

24 after the date of enactment of this Act, with respect 


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1 to elections under section 163(j)(7)(B) of such Code 

2 made before, on, or after such date. 

3 SEC. 205. GUARDRAILS AROUND ACCESSING PUBLIC 

4 FUNDS. 

5 The Investment Company Act of 1940 (15 U.S.C. 

6 80a–1 et seq.) is amended by adding at the end the fol7 lowing: 

8 ‘‘SEC. 66. DISCLOSURES. 

9 ‘‘Any person described in paragraph (1) or (7) of sec10 tion 3(c) that receives funds from a Federal or State agen11 cy— 

12 ‘‘(1) shall publicly disclose— 

13 ‘‘(A) the total funds received from the 

14 agency; 

15 ‘‘(B) the workforce demographics of the 

16 person; 

17 ‘‘(C) the amount of loans, grants, or other 

18 benefits provided; 

19 ‘‘(D) the use of the proceeds; 

20 ‘‘(E) how many jobs were saved or wages 

21 preserved; 

22 ‘‘(F) any loans forgiven or discharged; 

23 ‘‘(G) the beneficial owners of the person; 


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1 ‘‘(H) the pay ratio between the chief exec2 utive officer and the median pay of employees; 

3 and 

4 ‘‘(2) may not, during the 2-year period begin5 ning on the date on which the person receives the 

6 funds— 

7 ‘‘(A) acquire any company; or 

8 ‘‘(B) make any distribution to a share9 holder of the person.’’. 

10 SEC. 206. PROHIBITING PAYMENTS FROM FEDERAL 

11 HEALTH CARE PROGRAMS TO ENTITIES THAT 

12 SELL ASSETS TO OR USE ASSETS AS COLLAT13 ERAL FOR A LOAN WITH A REAL ESTATE IN14 VESTMENT TRUST. 

15 Section 1128(a) of the Social Security Act (42 U.S.C. 

16 1320a–7(a)) is amended by adding at the end the fol17 lowing new paragraph: 

18 ‘‘(5) SELLING ASSETS TO OR USING ASSETS AS

19 COLLATERAL FOR A LOAN WITH A REAL ESTATE IN20 VESTMENT TRUST.— 

21 ‘‘(A) IN GENERAL.—Any individual or en22 tity that, on or after the date of enactment of 

23 this paragraph, sells any assets to, or newly 

24 pledges any assets as collateral for a loan with, 

25 a real estate investment trust (as defined in 


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1 section 856(a) of the Internal Revenue Code of 

2 1986). 

3 ‘‘(B) CLARIFICATION.—Subparagraph (A) 

4 shall not apply in the case where an individual 

5 or entity agreed to pledge an asset as collateral 

6 for a loan with a real estate investment trust 

7 prior to the date of enactment of this para8 graph, including with respect to any future 

9 agreement between the individual or entity and 

10 the real estate investment trust regarding that 

11 same asset.’’. 

12 SEC. 207. REPEAL OF SPECIAL RULE FOR TAXABLE REIT 

13 SUBSIDIARIES WITH INTERESTS IN CERTAIN 

14 HEALTH CARE PROPERTY. 

15 (a) IN GENERAL.—Section 856(d)(8)(B) of the Inter16 nal Revenue Code of 1986 is amended— 

17 (1) by striking ‘‘or a qualified health care prop18 erty (as defined in subsection (e)(6)(D)(i))’’, and 

19 (2) by striking ‘‘qualified health care property 

20 or’’. 

21 (b) CONFORMING AMENDMENTS.—Section 856(d)(9) 

22 of such Code is amended— 

23 (1) in subparagraph (A)— 


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1 (A) by striking ‘‘or a qualified health care 

2 property (as defined in subsection 

3 (e)(6)(D)(i))’’, 

4 (B) by striking ‘‘or qualified health care 

5 property’’, and 

6 (C) by striking ‘‘or qualified health care 

7 properties’’, and 

8 (2) in subparagraph (B)— 

9 (A) by striking ‘‘or qualified health care 

10 property (as so defined)’’, and 

11 (B) by striking ‘‘or qualified health care 

12 property’’ each place it appears in clauses (i), 

13 (ii), and (iii)(II). 

14 (c) EFFECTIVE DATE.—The amendments made by 

15 this section shall apply to taxable years beginning after 

16 the date of the enactment of this Act. 

17 SEC. 208. ELIMINATION OF QUALIFIED REIT DIVIDENDS 

18 FROM QUALIFIED BUSINESS INCOME. 

19 (a) IN GENERAL.—Paragraph (1) of section 199A(b) 

20 of the Internal Revenue Code of 1986 is amended to read 

21 as follows: 

22 ‘‘(1) IN GENERAL.—The term ‘combined quali23 fied business income amount’ means, with respect to 

24 any taxable year, an amount equal to the sum of the 

25 amounts determined under paragraph (2) for each 


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1 qualified trade or business carried on by the tax2 payer.’’. 

3 (b) CONFORMING AMENDMENTS.— 

4 (1) Section 199A(c)(1) of such Code is amend5 ed by striking the last sentence. 

6 (2) Section 199A(e) of such Code is amended 

7 by striking paragraph (3) and by redesignating 

8 paragraph (4) as paragraph (3). 

9 (c) EFFECTIVE DATE.—The amendments made by 

10 this section shall apply to taxable years beginning after 

11 the date of the enactment of this Act. 

12 SEC. 209. PROTECTIONS FOR STRIKING WORKERS. 

13 (a) IN GENERAL.—Section 8 of the National Labor 

14 Relations Act (29 U.S.C. 158) is amended— 

15 (1) in subsection (a)— 

16 (A) in paragraph (5), by striking the pe17 riod and inserting ‘‘;’’; and 

18 (B) by adding at the end the following: 

19 ‘‘(6) to promise, threaten, or take any action— 

20 ‘‘(A) to permanently replace an employee 

21 who participates in a strike as defined by sec22 tion 501(2) of the Labor Management Rela23 tions Act, 1947 (29 U.S.C. 142(2)); 

24 ‘‘(B) to discriminate against an employee 

25 who is working or has unconditionally offered to 


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1 return to work for the employer because the 

2 employee supported or participated in such a 

3 strike; or 

4 ‘‘(C) to lockout, suspend, or otherwise 

5 withhold employment from employees in order 

6 to influence the position of such employees or 

7 the representative of such employees in collec8 tive bargaining prior to a strike; and 

9 ‘‘(7) to communicate or misrepresent to an em10 ployee under section 2(3) that such employee is ex11 cluded from the definition of employee under section 

12 2(3).’’; 

13 (2) in subsection (b)— 

14 (A) by striking paragraphs (4) and (7); 

15 (B) by redesignating paragraphs (5) and 

16 (6) as paragraphs (4) and (5), respectively; 

17 (C) in paragraph (4), as so redesignated, 

18 by striking ‘‘affected;’’ and inserting ‘‘affected; 

19 and’’; and 

20 (D) in paragraph (5), as so redesignated, 

21 by striking ‘‘; and’’ and inserting a period; 

22 (3) in subsection (c), by striking the period at 

23 the end and inserting the following: ‘‘: Provided, 

24 That it shall be an unfair labor practice under sub25 section (a)(1) for any employer to require or coerce 


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1 an employee to attend or participate in such employ2 er’s campaign activities unrelated to the employee’s 

3 job duties, including activities that are subject to the 

4 requirements under section 203(b) of the Labor5 Management Reporting and Disclosure Act of 1959 

6 (29 U.S.C. 433(b)).’’; and 

7 (4) in subsection (d), in the matter preceding 

8 paragraph (1), by inserting ‘‘and to maintain cur9 rent wages, hours, and terms and conditions of em10 ployment pending an agreement’’ after ‘‘arising 

11 thereunder’’. 

12 (b) CONFORMING AMENDMENTS.—The National 

13 Labor Relations Act is amended— 

14 (1) in section 8(e) (29 U.S.C. 158(e)), by strik15 ing ‘‘and section 8(b)(4)(B)’’; and 

16 (2) in section 10 (29 U.S.C. 160)— 

17 (A) by repealing subsection (k); and 

18 (B) in subsection (l)— 

19 (i) by striking ‘‘of paragraph’’ and all 

20 that follows through ‘‘the preliminary’’ and 

21 inserting ‘‘of section 8(e), the prelimi22 nary’’; 

23 (ii) by striking the second proviso; 

24 and 

25 (iii) by striking the final sentence. 


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1 TITLE III—PROTECTING WORK2 ERS WHEN COMPANIES GO 

3 BANKRUPT 

4 SEC. 301. INCREASED PRIORITY FOR WAGES. 

5 Section 507(a) of title 11, United States Code, is 

6 amended— 

7 (1) in paragraph (4)— 

8 (A) by redesignating subparagraphs (A) 

9 and (B) as clauses (i) and (ii), respectively; 

10 (B) in the matter preceding clause (i), as 

11 so redesignated, by inserting ‘‘(A)’’ before 

12 ‘‘Fourth’’; 

13 (C) in subparagraph (A), as so designated, 

14 in the matter preceding clause (i), as so redes15 ignated— 

16 (i) by striking ‘‘$10,000’’ and insert17 ing ‘‘$20,000’’; 

18 (ii) by striking ‘‘within 180 days’’; 

19 and 

20 (iii) by striking ‘‘or the date of the 

21 cessation of the debtor’s business, which22 ever occurs first’’; and 

23 (D) by adding at the end the following: 

24 ‘‘(B) Severance pay described in subparagraph 

25 (A)(i) shall be deemed earned in full upon the layoff 


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1 or termination of employment of the individual to 

2 whom the severance pay is owed.’’; and 

3 (2) in paragraph (5)— 

4 (A) in subparagraph (A)— 

5 (i) by striking ‘‘within 180 days’’; and 

6 (ii) by striking ‘‘or the date of the 

7 cessation of the debtor’s business, which8 ever occurs first’’; and 

9 (B) by striking subparagraph (B) and in10 serting the following: 

11 ‘‘(B) for each such plan, to the extent of 

12 the number of employees covered by each such 

13 plan multiplied by $20,000.’’. 

14 SEC. 302. PRIORITY FOR SEVERANCE PAY AND CONTRIBU15 TIONS TO EMPLOYEE WELFARE BENEFIT 

16 PLANS. 

17 Section 503(b) of title 11, United States Code, is 

18 amended— 

19 (1) in paragraph (8)(B), by striking ‘‘and’’ at 

20 the end; 

21 (2) in paragraph (9), by striking the period and 

22 inserting a semicolon; and 

23 (3) by adding at the end the following: 

24 ‘‘(10) severance pay owed to employees of the 

25 debtor (other than to an insider of the debtor or a 


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1 senior executive officer of the debtor), under a plan, 

2 program, or policy generally applicable to employees 

3 of the debtor (but not under an individual contract 

4 of employment), or owed pursuant to a collective 

5 bargaining agreement, for layoff or termination on 

6 or after the date of the filing of the petition, which 

7 pay shall be deemed earned in full upon such layoff 

8 or termination of employment; and 

9 ‘‘(11) any contribution due on or after the date 

10 of the filing of the petition under an employee wel11 fare benefit plan, as defined in section 3 of the Stop 

12 Wall Street Looting Act.’’. 

13 SEC. 303. PRIORITY FOR VIOLATIONS OF FEDERAL AND 

14 STATE LAWS. 

15 (a) ALLOWANCE OF ADMINISTRATIVE EXPENSES IN

16 BANKRUPTCY CASES.—Section 503(b)(1)(A)(ii) of title 

17 11, United States Code, is amended by inserting after 

18 ‘‘(ii)’’ the following: ‘‘any back pay, civil penalty, or dam19 ages for a violation of any Federal or State labor and em20 ployment law, including the Worker Adjustment and Re21 training Notification Act (29 U.S.C. 2101 et seq.) and any 

22 comparable State law, and’’. 

23 (b) ADMINISTRATION AND ENFORCEMENT OF WORK24 ER ADJUSTMENT AND RETRAINING NOTIFICATION RE25 QUIREMENTS.—Section 5(a)(1) of the Worker Adjustment 


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1 and Retraining Notification Act (29 U.S.C. 2104(a)(1)) 

2 is amended, in the matter following subparagraph (B)— 

3 (1) by inserting ‘‘which for purposes of this 

4 sentence shall consist of the days, in the notification 

5 period, that are or that follow the date of the pro6 hibited closing or layoff under this Act,’’ after ‘‘pe7 riod of the violation,’’; and 

8 (2) by inserting ‘‘calendar’’ after ‘‘60’’. 

9 SEC. 304. LIMITATION ON EXECUTIVE COMPENSATION EN10 HANCEMENTS. 

11 Section 503(c) of title 11, United States Code, is 

12 amended— 

13 (1) in the matter preceding paragraph (1), by 

14 inserting ‘‘and subject to section 363(b)(3),’’ after 

15 ‘‘Notwithstanding subsection (b),’’; 

16 (2) in paragraph (1), in the matter preceding 

17 subparagraph (A)— 

18 (A) by inserting ‘‘, a senior executive offi19 cer of the debtor, or any of the 20 next most 

20 highly compensated employees of the debtor, de21 partment or division managers of the debtor, or 

22 consultants providing services to the debtor (re23 gardless of whether the executive officer, em24 ployee, manager, or consultant is an insider)’’ 

25 after ‘‘insider of the debtor’’; 


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1 (B) by inserting ‘‘or for the payment of 

2 performance or incentive compensation, a bonus 

3 of any kind, or any other financial return de4 signed to replace or enhance incentive, stock, or 

5 other compensation in effect before the date of 

6 the commencement of the case,’’ after ‘‘remain 

7 with the debtor’s business,’’; and 

8 (C) by inserting ‘‘clear and convincing’’ be9 fore ‘‘evidence in the record’’; 

10 (3) in paragraph (2), in the matter preceding 

11 subparagraph (A), by inserting ‘‘, a senior executive 

12 officer of the debtor, or any of the 20 next most 

13 highly compensated employees of the debtor, depart14 ment or division managers of the debtor, or consult15 ants providing services to the debtor (regardless of 

16 whether the executive officer, employee, manager, or 

17 consultant is an insider)’’ after ‘‘an insider of the 

18 debtor’’; and 

19 (4) by striking paragraph (3) and inserting the 

20 following: 

21 ‘‘(3) any other transfer or obligation to or for 

22 the benefit of an insider of the debtor, a senior exec23 utive officer of the debtor, or any of the 20 next 

24 most highly compensated employees of the debtor, 

25 department or division managers of the debtor, or 


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1 consultants providing services to the debtor (regard2 less of whether the executive officer, employee, man3 ager, or consultant is an insider), absent a finding 

4 by the court, based upon clear and convincing evi5 dence in the record, and without deference to a re6 quest by the debtor for such payment, that— 

7 ‘‘(A) because of the essential and particu8 larized nature of the services provided by the 

9 insider, executive officer, employee, manager, or 

10 consultant, the transfer or obligation is essen11 tial to— 

12 ‘‘(i) the survival of the business of the 

13 debtor; or 

14 ‘‘(ii) in a case in which some or all of 

15 the assets of the debtor are liquidated, the 

16 orderly liquidation of the assets; 

17 ‘‘(B) in the case of a transfer or obligation 

18 under an incentive program, the transfer or ob19 ligation is part of a workforce incentive pro20 gram generally applicable to the nonmanage21 ment workforce of the debtor; and 

22 ‘‘(C) the cost of the transfer or obliga23 tion— 

24 ‘‘(i) is reasonable; 


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1 ‘‘(ii) is not excessive in the context of 

2 the financial circumstances of the debtor; 

3 and 

4 ‘‘(iii) is not disproportionate in light 

5 of any economic loss incurred by the non6 management workforce of the debtor dur7 ing the case.’’. 

8 SEC. 305. PROHIBITION AGAINST SPECIAL COMPENSATION 

9 PAYMENTS. 

10 Section 363 of title 11, United States Code, is 

11 amended— 

12 (1) in subsection (b), by adding at the end the 

13 following: 

14 ‘‘(3) No plan, program, or other transfer or obliga15 tion to or for the benefit of an insider of the debtor, a 

16 senior executive officer of the debtor, or any of the 20 

17 next most highly compensated employees of the debtor, de18 partment or division managers of the debtor, or consult19 ants providing services to the debtor (regardless of wheth20 er the executive officer, employee, manager, or consultant 

21 is an insider) shall be approved if the debtor has, on or 

22 after the date that is 1 year before the date of the filing 

23 of the petition— 


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1 ‘‘(A) discontinued any plan, program, policy or 

2 practice of paying severance pay to the nonmanage3 ment workforce of the debtor; or 

4 ‘‘(B) modified any plan, program, policy, or 

5 practice described in subparagraph (A) in order to 

6 reduce benefits under the plan, program, policy or 

7 practice.’’; and 

8 (2) in subsection (c)(1), by inserting before the 

9 period at the end the following: ‘‘, except that, for 

10 any transaction that constitutes a transfer or obliga11 tion subject to section 503(c), the trustee shall be 

12 required to obtain the prior approval of the court 

13 after notice and an opportunity for a hearing’’. 

14 SEC. 306. EXECUTIVE COMPENSATION UPON EXIT FROM 

15 BANKRUPTCY. 

16 Section 1129(a) of title 11, United States Code, is 

17 amended— 

18 (1) in paragraph (4), by adding at the end the 

19 following: ‘‘Except for compensation subject to re20 view under paragraph (5), any payment or other dis21 tribution under the plan to or for the benefit of an 

22 insider of the debtor, a senior executive officer of the 

23 debtor, or any of the 20 next most highly com24 pensated employees of the debtor, department or di25 vision managers of the debtor, or consultants proVerDate Sep 11 2014 22:35 Oct 24, 2024 Jkt 059200 PO 00000 Frm 00052 Fmt 6652 Sfmt 6201 E:\BILLS\H9985.IH H9985

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1 viding services to the debtor (regardless of whether 

2 the executive officer, employee, manager, or consult3 ant is an insider), shall not be approved by the court 

4 except as part of a program of payments or distribu5 tions generally applicable to employees of the debtor, 

6 and only to the extent that the court determines 

7 that the payment or other distribution is not exces8 sive or disproportionate in comparison to payments 

9 or other distributions to the nonmanagement work10 force of the debtor.’’; and 

11 (2) in paragraph (5)— 

12 (A) in subparagraph (A)(ii), by striking 

13 ‘‘and’’ at the end; 

14 (B) in subparagraph (B), by striking the 

15 period at the end and inserting ‘‘; and’’; and 

16 (C) by adding at the end the following: 

17 ‘‘(C) the compensation disclosed pursuant to 

18 subparagraph (B) has been approved by, or is sub19 ject to the approval of, the court as— 

20 ‘‘(i) reasonable in comparison to compensa21 tion paid to individuals holding comparable po22 sitions at comparable companies in the same in23 dustry; and 


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1 ‘‘(ii) not disproportionate in light of any 

2 economic concession made by the nonmanage3 ment workforce of the debtor during the case.’’. 

4 SEC. 307. COLLATERAL SURCHARGE FOR EMPLOYEE OBLI5 GATIONS. 

6 Section 506(c) of title 11, United States Code, is 

7 amended— 

8 (1) by inserting ‘‘(1)’’ before ‘‘The trustee’’; 

9 and 

10 (2) by adding at the end the following: 

11 ‘‘(2) If one or more employees of the debtor have not 

12 received wages, accrued vacation, severance, or any other 

13 compensation owed under a plan, program, policy, or prac14 tice of the debtor, or pursuant to the terms of a collective 

15 bargaining agreement, for services rendered on or after 

16 the date of the commencement of the case, or the debtor 

17 has not made a contribution due under an employee wel18 fare benefit plan, as defined in section 3 of the Stop Wall 

19 Street Looting Act, on or after the date of the commence20 ment of the case, such unpaid obligations shall be— 

21 ‘‘(A) deemed— 

22 ‘‘(i) reasonable, necessary costs and ex23 penses of preserving, or disposing of, property 

24 securing an allowed secured claim; and 


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1 ‘‘(ii) benefiting the holder of the allowed 

2 secured claim; and 

3 ‘‘(B) recovered by the trustee for payment to 

4 the employees or the employee welfare benefit plan, 

5 as defined in section 3 of the Stop Wall Street 

6 Looting Act, as applicable, even if the trustee, or a 

7 predecessor or successor in interest, has otherwise 

8 waived the provisions of this subsection under an 

9 agreement with the holder of the allowed secured 

10 claim or a successor or predecessor in interest of the 

11 holder of the allowed secured claim.’’. 

12 SEC. 308. VOIDABILITY OF PREFERENTIAL COMPENSATION 

13 TRANSFERS. 

14 Section 547 of title 11, United States Code, is 

15 amended by adding at the end the following: 

16 ‘‘(j)(1) The trustee may avoid a transfer to or for 

17 the benefit of an insider of the debtor, a senior executive 

18 officer of the debtor, or any of the 20 next most highly 

19 compensated employees of the debtor, department or divi20 sion managers of the debtor, or consultants providing serv21 ices to the debtor (regardless of whether the executive offi22 cer, employee, manager, or consultant is an insider), 

23 that— 


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1 ‘‘(A) is made or incurred under a retention, 

2 bonus, or incentive plan devised before the date of 

3 the filing of the petition; and 

4 ‘‘(B) does not meet the requirements under sec5 tion 363(b)(3) or 503(c). 

6 ‘‘(2) Subsection (c) shall not constitute a defense 

7 against the recovery of a transfer under paragraph (1) of 

8 this subsection. 

9 ‘‘(3)(A) The trustee, or a committee appointed under 

10 section 1102, may commence an action to recover a trans11 fer under paragraph (1) of this subsection. 

12 ‘‘(B) If neither the trustee nor a committee com13 mences an action to recover a transfer under subpara14 graph (A) before the date of the commencement of a hear15 ing on the confirmation of a plan, any party in interest 

16 may apply to the court for authority to recover the trans17 fer for the benefit of the estate, in which case the costs 

18 of recovery shall be borne by the estate.’’. 

19 SEC. 309. PROTECTION FOR EMPLOYEES IN A SALE OF AS20 SETS. 

21 (a) REQUIREMENT RELATING TO PRESERVING JOBS

22 AND MAINTAINING TERMS AND CONDITIONS RELATING

23 TO EMPLOYMENT.—Section 363 of title 11, United States 

24 Code, is amended by adding at the end the following: 


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1 ‘‘(q)(1) In approving a sale or lease of property of 

2 the estate under this section, or under a plan under chap3 ter 11, the court shall give substantial weight to the extent 

4 to which a prospective purchaser or lessee, respectively, 

5 of the property will— 

6 ‘‘(A) preserve the jobs of the workforce of the 

7 debtor; and 

8 ‘‘(B) maintain the terms and conditions of em9 ployment of the workforce of the debtor. 

10 ‘‘(2) If there are two or more offers to purchase or 

11 lease property of the estate under this section, or under 

12 a plan under chapter 11, that qualify under the procedures 

13 for the sale or lease, respectively, approved by the court, 

14 the court shall approve the offer that best— 

15 ‘‘(A) preserves the jobs of the workforce of the 

16 debtor; and 

17 ‘‘(B) maintains the terms and conditions of em18 ployment of the workforce of the debtor. 

19 ‘‘(r)(1) Any party seeking to purchase or lease prop20 erty of the estate under this section, or under a plan under 

21 chapter 11, shall represent to the court the effect of such 

22 a transaction with respect to— 

23 ‘‘(A) the preservation of the jobs of the work24 force of the debtor; and 


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1 ‘‘(B) the maintenance of the terms and condi2 tions of employment of the workforce of the debtor. 

3 ‘‘(2) The court shall expressly include in an order ap4 proving a purchase or lease of property of the estate under 

5 this section, or under a plan under chapter 11, any rep6 resentation made by a purchaser or lessee of the property 

7 under paragraph (1). 

8 ‘‘(3) With respect to a purchase or lease of property 

9 of the estate under this section, or under a plan under 

10 chapter 11— 

11 ‘‘(A) the court shall have jurisdiction over the 

12 purchaser or lessee of the property in order to en13 force the terms of the order approving the purchase 

14 or lease; 

15 ‘‘(B) the purchaser or lessee shall promptly dis16 close to the court any material noncompliance with 

17 the terms of the order described in subparagraph 

18 (A) and explain the basis for such noncompliance; 

19 and 

20 ‘‘(C) with respect to material noncompliance de21 scribed in subparagraph (B), the court may impose 

22 any appropriate remedy, including injunctive relief, 

23 to address the noncompliance.’’. 

24 (b) PLANS UNDER CHAPTER 11.— 


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1 (1) CONTENTS OF PLAN.—Section 1123(b)(4) 

2 of title 11, United States Code, is amended by in3 serting ‘‘, which sale shall be subject to the require4 ments under subsections (q) and (r) of section 363 

5 of this title,’’ after ‘‘property of the estate’’. 

6 (2) CONFIRMATION OF PLAN.—Section 1129(a) 

7 of title 11, United States Code, is amended by add8 ing at the end the following: 

9 ‘‘(17) If the plan provides for the sale of all or 

10 substantially all of the property of the estate, the 

11 sale meets the requirements under subsections (q) 

12 and (r) of section 363 of this title.’’. 

13 SEC. 310. PROTECTION OF GIFT CARD PURCHASERS. 

14 (a) DEFINITION OF GIFT CARD.—Section 101(a) of 

15 title 11, United States Code, is amended by inserting after 

16 paragraph (26) the following: 

17 ‘‘(26A) The term ‘gift card’ means a paper or 

18 electronic promise, plastic card, or other payment 

19 code or device that is— 

20 ‘‘(A) redeemable at— 

21 ‘‘(i) a single merchant; or 

22 ‘‘(ii) an affiliated group of merchants 

23 that share the same name, mark, or logo; 

24 ‘‘(B) issued in a specified amount, regard25 less of whether that amount may be increased 


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1 in value or reloaded at the request of the hold2 er; 

3 ‘‘(C) purchased on a prepaid basis in ex4 change for payment; and 

5 ‘‘(D) honored by the single merchant or af6 filiated group of merchants described in sub7 paragraph (A) upon presentation for goods or 

8 services.’’. 

9 (b) CONSUMER DEPOSIT.—Section 507(a) of title 11, 

10 United States Code, is amended by striking paragraph (7) 

11 and inserting the following: 

12 ‘‘(7) Seventh, allowed unsecured claims of indi13 viduals, to the extent of $1,800 for each such indi14 vidual, arising from the deposit, before the com15 mencement of the case, of money in connection 

16 with— 

17 ‘‘(A) the purchase, lease, or rental of prop18 erty; 

19 ‘‘(B) the purchase of services, for the per20 sonal, family, or household use of such individ21 uals, that were not delivered or provided; or 

22 ‘‘(C) the purchase of a gift card with re23 spect to which funds exist that have not been 

24 redeemed.’’. 


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1 SEC. 311. COMMERCIAL REAL ESTATE. 

2 Section 365(d) of title 11, United States Code, is 

3 amended— 

4 (1) by striking paragraph (4); and 

5 (2) by redesignating paragraph (5) as para6 graph (4). 

7 TITLE IV—CLOSING TAX 

8 LOOPHOLES 

9 SEC. 401. AMENDMENT OF 1986 CODE. 

10 Except as otherwise expressly provided, whenever in 

11 this title an amendment or repeal is expressed in terms 

12 of an amendment to, or repeal of, a section or other provi13 sion, the reference shall be considered to be made to a 

14 section or other provision of the Internal Revenue Code 

15 of 1986. 

16 SEC. 402. PARTNERSHIP INTERESTS TRANSFERRED IN 

17 CONNECTION WITH PERFORMANCE OF SERV18 ICES. 

19 (a) MODIFICATION TO ELECTION TO INCLUDE PART20 NERSHIP INTEREST IN GROSS INCOME IN YEAR OF

21 TRANSFER.—Subsection (c) of section 83 is amended by 

22 redesignating paragraph (4) as paragraph (5) and by in23 serting after paragraph (3) the following new paragraph: 

24 ‘‘(4) PARTNERSHIP INTERESTS.—Except as 

25 provided by the Secretary— 


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1 ‘‘(A) IN GENERAL.—In the case of any 

2 transfer of an interest in a partnership in con3 nection with the provision of services to (or for 

4 the benefit of) such partnership— 

5 ‘‘(i) the fair market value of such in6 terest shall be treated for purposes of this 

7 section as being equal to the amount of the 

8 distribution which the partner would re9 ceive if the partnership sold (at the time of 

10 the transfer) all of its assets at fair market 

11 value and distributed the proceeds of such 

12 sale (reduced by the liabilities of the part13 nership) to its partners in liquidation of 

14 the partnership, and 

15 ‘‘(ii) the person receiving such interest 

16 shall be treated as having made the elec17 tion under subsection (b)(1) unless such 

18 person makes an election under this para19 graph to have such subsection not apply. 

20 ‘‘(B) ELECTION.—The election under sub21 paragraph (A)(ii) shall be made under rules 

22 similar to the rules of subsection (b)(2).’’. 

23 (b) EFFECTIVE DATE.—The amendments made by 

24 this section shall apply to interests in partnerships trans25 ferred after the date of enactment of this Act. 


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1 SEC. 403. SPECIAL RULES FOR PARTNERS PROVIDING IN2 VESTMENT MANAGEMENT SERVICES TO 

3 PARTNERSHIPS. 

4 (a) IN GENERAL.—Part I of subchapter K of chapter 

5 1 is amended by adding at the end the following new sec6 tion: 

7 ‘‘SEC. 710. SPECIAL RULES FOR PARTNERS PROVIDING IN8 VESTMENT MANAGEMENT SERVICES TO 

9 PARTNERSHIPS. 

10 ‘‘(a) TREATMENT OF DISTRIBUTIVE SHARE OF

11 PARTNERSHIP ITEMS.—For purposes of this title, in the 

12 case of an investment services partnership interest— 

13 ‘‘(1) IN GENERAL.—Notwithstanding section 

14 702(b)— 

15 ‘‘(A) an amount equal to the net capital 

16 gain with respect to such interest for any part17 nership taxable year shall be treated as ordi18 nary income, and 

19 ‘‘(B) subject to the limitation of paragraph 

20 (2), an amount equal to the net capital loss 

21 with respect to such interest for any partner22 ship taxable year shall be treated as an ordi23 nary loss. 

24 ‘‘(2) RECHARACTERIZATION OF LOSSES LIM25 ITED TO RECHARACTERIZED GAINS.—The amount 

26 treated as ordinary loss under paragraph (1)(B) for 


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1 any taxable year shall not exceed the excess (if any) 

2 of— 

3 ‘‘(A) the aggregate amount treated as ordi4 nary income under paragraph (1)(A) with re5 spect to the investment services partnership in6 terest for all preceding partnership taxable 

7 years to which this section applies, over 

8 ‘‘(B) the aggregate amount treated as or9 dinary loss under paragraph (1)(B) with re10 spect to such interest for all preceding partner11 ship taxable years to which this section applies. 

12 ‘‘(3) ALLOCATION TO ITEMS OF GAIN AND

13 LOSS.— 

14 ‘‘(A) NET CAPITAL GAIN.—The amount 

15 treated as ordinary income under paragraph 

16 (1)(A) shall be allocated ratably among the 

17 items of long-term capital gain taken into ac18 count in determining such net capital gain. 

19 ‘‘(B) NET CAPITAL LOSS.—The amount 

20 treated as ordinary loss under paragraph (1)(B) 

21 shall be allocated ratably among the items of 

22 long-term capital loss and short-term capital 

23 loss taken into account in determining such net 

24 capital loss. 


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1 ‘‘(4) TERMS RELATING TO CAPITAL GAINS AND

2 LOSSES.—For purposes of this section— 

3 ‘‘(A) IN GENERAL.—Net capital gain, long4 term capital gain, and long-term capital loss, 

5 with respect to any investment services partner6 ship interest for any taxable year, shall be de7 termined under section 1222, except that such 

8 section shall be applied— 

9 ‘‘(i) without regard to the recharacter10 ization of any item as ordinary income or 

11 ordinary loss under this section, 

12 ‘‘(ii) by only taking into account items 

13 of gain and loss taken into account by the 

14 holder of such interest under section 702 

15 (other than subsection (a)(9) thereof) with 

16 respect to such interest for such taxable 

17 year, and 

18 ‘‘(iii) by treating property which is 

19 taken into account in determining gains 

20 and losses to which section 1231 applies as 

21 capital assets held for more than 1 year. 

22 ‘‘(B) NET CAPITAL LOSS.—The term ‘net 

23 capital loss’ means the excess of the losses from 

24 sales or exchanges of capital assets over the 

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1 lar to the rules of clauses (i) through (iii) of 

2 subparagraph (A) shall apply for purposes of 

3 the preceding sentence. 

4 ‘‘(5) SPECIAL RULE FOR DIVIDENDS.—Any div5 idend allocated with respect to any investment serv6 ices partnership interest shall not be treated as 

7 qualified dividend income for purposes of section 

8 1(h). 

9 ‘‘(6) SPECIAL RULE FOR QUALIFIED SMALL

10 BUSINESS STOCK.—Section 1202 shall not apply to 

11 any gain from the sale or exchange of qualified small 

12 business stock (as defined in section 1202(c)) allo13 cated with respect to any investment services part14 nership interest. 

15 ‘‘(b) DISPOSITIONS OF PARTNERSHIP INTERESTS.— 

16 ‘‘(1) GAIN.— 

17 ‘‘(A) IN GENERAL.—Any gain on the dis18 position of an investment services partnership 

19 interest shall be— 

20 ‘‘(i) treated as ordinary income, and 

21 ‘‘(ii) recognized notwithstanding any 

22 other provision of this subtitle. 

23 ‘‘(B) GIFT AND TRANSFERS AT DEATH.— 

24 In the case of a disposition of an investment 


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1 services partnership interest by gift or by rea2 son of death of the taxpayer— 

3 ‘‘(i) subparagraph (A) shall not apply, 

4 ‘‘(ii) such interest shall be treated as 

5 an investment services partnership interest 

6 in the hands of the person acquiring such 

7 interest, and 

8 ‘‘(iii) any amount that would have 

9 been treated as ordinary income under this 

10 subsection had the decedent sold such in11 terest immediately before death shall be 

12 treated as an item of income in respect of 

13 a decedent under section 691. 

14 ‘‘(2) LOSS.—Any loss on the disposition of an 

15 investment services partnership interest shall be 

16 treated as an ordinary loss to the extent of the ex17 cess (if any) of— 

18 ‘‘(A) the aggregate amount treated as ordi19 nary income under subsection (a) with respect 

20 to such interest for all partnership taxable 

21 years to which this section applies, over 

22 ‘‘(B) the aggregate amount treated as or23 dinary loss under subsection (a) with respect to 

24 such interest for all partnership taxable years 

25 to which this section applies. 


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1 ‘‘(3) ELECTION WITH RESPECT TO CERTAIN EX2 CHANGES.—Paragraph (1)(A)(ii) shall not apply to 

3 the contribution of an investment services partner4 ship interest to a partnership in exchange for an in5 terest in such partnership if— 

6 ‘‘(A) the taxpayer makes an irrevocable 

7 election to treat the partnership interest re8 ceived in the exchange as an investment serv9 ices partnership interest, and 

10 ‘‘(B) the taxpayer agrees to comply with 

11 such reporting and recordkeeping requirements 

12 as the Secretary may prescribe. 

13 ‘‘(4) DISTRIBUTIONS OF PARTNERSHIP PROP14 ERTY.— 

15 ‘‘(A) IN GENERAL.—In the case of any dis16 tribution of property by a partnership with re17 spect to any investment services partnership in18 terest held by a partner, the partner receiving 

19 such property shall recognize gain equal to the 

20 excess (if any) of— 

21 ‘‘(i) the fair market value of such 

22 property at the time of such distribution, 

23 over 

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1 mined without regard to subparagraph 

2 (C)). 

3 ‘‘(B) TREATMENT OF GAIN AS ORDINARY

4 INCOME.—Any gain recognized by such partner 

5 under subparagraph (A) shall be treated as or6 dinary income to the same extent and in the 

7 same manner as the increase in such partner’s 

8 distributive share of the taxable income of the 

9 partnership would be treated under subsection 

10 (a) if, immediately prior to the distribution, the 

11 partnership had sold the distributed property at 

12 fair market value and all of the gain from such 

13 disposition were allocated to such partner. For 

14 purposes of applying subsection (a)(2), any gain 

15 treated as ordinary income under this subpara16 graph shall be treated as an amount treated as 

17 ordinary income under subsection (a)(1)(A). 

18 ‘‘(C) ADJUSTMENT OF BASIS.—In the case 

19 a distribution to which subparagraph (A) ap20 plies, the basis of the distributed property in 

21 the hands of the distributee partner shall be the 

22 fair market value of such property. 

23 ‘‘(D) SPECIAL RULES WITH RESPECT TO

24 MERGERS AND DIVISIONS.—In the case of a 

25 taxpayer which satisfies requirements similar to 


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1 the requirements of subparagraphs (A) and (B) 

2 of paragraph (3), this paragraph and paragraph 

3 (1)(A)(ii) shall not apply to the distribution of 

4 a partnership interest if such distribution is in 

5 connection with a contribution (or deemed con6 tribution) of any property of the partnership to 

7 which section 721 applies pursuant to a trans8 action described in section 708(b)(2). 

9 ‘‘(c) INVESTMENT SERVICES PARTNERSHIP INTER10 EST.—For purposes of this section— 

11 ‘‘(1) IN GENERAL.—The term ‘investment serv12 ices partnership interest’ means any interest in an 

13 investment partnership acquired or held by any per14 son in connection with the conduct of a trade or 

15 business described in paragraph (2) by such person 

16 (or any person related to such person). An interest 

17 in an investment partnership held by any person— 

18 ‘‘(A) shall not be treated as an investment 

19 services partnership interest for any period be20 fore the first date on which it is so held in con21 nection with such a trade or business, 

22 ‘‘(B) shall not cease to be an investment 

23 services partnership interest merely because 

24 such person holds such interest other than in 

25 connection with such a trade or business, and 


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1 ‘‘(C) shall be treated as an investment 

2 services partnership interest if acquired from a 

3 related person in whose hands such interest was 

4 an investment services partnership interest. 

5 ‘‘(2) BUSINESSES TO WHICH THIS SECTION AP6 PLIES.—A trade or business is described in this 

7 paragraph if such trade or business primarily in8 volves the performance of any of the following serv9 ices with respect to assets held (directly or indi10 rectly) by one or more investment partnerships re11 ferred to in paragraph (1): 

12 ‘‘(A) Advising as to the advisability of in13 vesting in, purchasing, or selling any specified 

14 asset. 

15 ‘‘(B) Managing, acquiring, or disposing of 

16 any specified asset. 

17 ‘‘(C) Arranging financing with respect to 

18 acquiring specified assets. 

19 ‘‘(D) Any activity in support of any service 

20 described in subparagraphs (A) through (C). 

21 ‘‘(3) INVESTMENT PARTNERSHIP.— 

22 ‘‘(A) IN GENERAL.—The term ‘investment 

23 partnership’ means any partnership if, at the 

24 end of any two consecutive calendar quarters 


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1 ending after the date of enactment of this sec2 tion— 

3 ‘‘(i) substantially all of the assets of 

4 the partnership are specified assets (deter5 mined without regard to any section 197 

6 intangible within the meaning of section 

7 197(d)), and 

8 ‘‘(ii) less than 75 percent of the cap9 ital of the partnership is attributable to 

10 qualified capital interests which constitute 

11 property held in connection with a trade or 

12 business of the owner of such interest. 

13 ‘‘(B) LOOK-THROUGH OF CERTAIN WHOL14 LY OWNED ENTITIES FOR PURPOSES OF DETER15 MINING ASSETS OF THE PARTNERSHIP.— 

16 ‘‘(i) IN GENERAL.—For purposes of 

17 determining the assets of a partnership 

18 under subparagraph (A)(i)— 

19 ‘‘(I) any interest in a specified 

20 entity shall not be treated as an asset 

21 of such partnership, and 

22 ‘‘(II) such partnership shall be 

23 treated as holding its proportionate 

24 share of each of the assets of such 

25 specified entity. 


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1 ‘‘(ii) SPECIFIED ENTITY.—For pur2 poses of clause (i), the term ‘specified enti3 ty’ means, with respect to any partnership 

4 (hereafter referred to as the upper-tier 

5 partnership), any person which engages in 

6 the same trade or business as the upper7 tier partnership and is— 

8 ‘‘(I) a partnership all of the cap9 ital and profits interests of which are 

10 held directly or indirectly by the 

11 upper-tier partnership, or 

12 ‘‘(II) a foreign corporation which 

13 does not engage in a trade or business 

14 in the United States and all of the 

15 stock of which is held directly or indi16 rectly by the upper-tier partnership. 

17 ‘‘(C) SPECIAL RULES FOR DETERMINING

18 IF PROPERTY HELD IN CONNECTION WITH

19 TRADE OR BUSINESS.— 

20 ‘‘(i) IN GENERAL.—Except as other21 wise provided by the Secretary, solely for 

22 purposes of determining whether any inter23 est in a partnership constitutes property 

24 held in connection with a trade or business 

25 under subparagraph (A)(ii)— 


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1 ‘‘(I) a trade or business of any 

2 person closely related to the owner of 

3 such interest shall be treated as a 

4 trade or business of such owner, 

5 ‘‘(II) such interest shall be treat6 ed as held by a person in connection 

7 with a trade or business during any 

8 taxable year if such interest was so 

9 held by such person during any 3 tax10 able years preceding such taxable 

11 year, and 

12 ‘‘(III) paragraph (5)(B) shall not 

13 apply. 

14 ‘‘(ii) CLOSELY RELATED PERSONS.— 

15 For purposes of clause (i)(I), a person 

16 shall be treated as closely related to an17 other person if, taking into account the 

18 rules of section 267(c), the relationship be19 tween such persons is described in— 

20 ‘‘(I) paragraph (1) or (9) of sec21 tion 267(b), or 

22 ‘‘(II) section 267(b)(4), but solely 

23 in the case of a trust with respect to 

24 which each current beneficiary is the 

25 grantor or a person whose relationship 


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1 to the grantor is described in para2 graph (1) or (9) of section 267(b). 

3 ‘‘(D) ANTI-ABUSE RULES.—The Secretary 

4 may issue regulations or other guidance which 

5 prevent the avoidance of the purposes of sub6 paragraph (A), including regulations or other 

7 guidance which treat convertible and contingent 

8 debt (and other debt having the attributes of 

9 equity) as a capital interest in the partnership. 

10 ‘‘(E) CONTROLLED GROUPS OF ENTI11 TIES.— 

12 ‘‘(i) IN GENERAL.—In the case of a 

13 controlled group of entities, if an interest 

14 in the partnership received in exchange for 

15 a contribution to the capital of the part16 nership by any member of such controlled 

17 group would (in the hands of such mem18 ber) constitute property held in connection 

19 with a trade or business, then any interest 

20 in such partnership held by any member of 

21 such group shall be treated for purposes of 

22 subparagraph (A) as constituting (in the 

23 hands of such member) property held in 

24 connection with a trade or business. 


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1 ‘‘(ii) CONTROLLED GROUP OF ENTI2 TIES.—For purposes of clause (i), the term 

3 ‘controlled group of entities’ means a con4 trolled group of corporations as defined in 

5 section 1563(a)(1), applied without regard 

6 to subsections (a)(4) and (b)(2) of section 

7 1563. A partnership or any other entity 

8 (other than a corporation) shall be treated 

9 as a member of a controlled group of enti10 ties if such entity is controlled (within the 

11 meaning of section 954(d)(3)) by members 

12 of such group (including any entity treated 

13 as a member of such group by reason of 

14 this sentence). 

15 ‘‘(F) SPECIAL RULE FOR CORPORA16 TIONS.—For purposes of this paragraph, in the 

17 case of a corporation, the determination of 

18 whether property is held in connection with a 

19 trade or business shall be determined as if the 

20 taxpayer were an individual. 

21 ‘‘(4) SPECIFIED ASSET.—The term ‘specified 

22 asset’ means securities (as defined in section 

23 475(c)(2) without regard to the last sentence there24 of), real estate held for rental or investment, inter25 ests in partnerships, commodities (as defined in secVerDate Sep 11 2014 22:35 Oct 24, 2024 Jkt 059200 PO 00000 Frm 00076 Fmt 6652 Sfmt 6201 E:\BILLS\H9985.IH H9985

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1 tion 475(e)(2)), cash or cash equivalents, or options 

2 or derivative contracts with respect to any of the 

3 foregoing. 

4 ‘‘(5) RELATED PERSONS.— 

5 ‘‘(A) IN GENERAL.—A person shall be 

6 treated as related to another person if the rela7 tionship between such persons is described in 

8 section 267(b) or 707(b). 

9 ‘‘(B) ATTRIBUTION OF PARTNER SERV10 ICES.—Any service described in paragraph (2) 

11 which is provided by a partner of a partnership 

12 shall be treated as also provided by such part13 nership. 

14 ‘‘(d) EXCEPTION FOR CERTAIN CAPITAL INTER15 ESTS.— 

16 ‘‘(1) IN GENERAL.—In the case of any portion 

17 of an investment services partnership interest which 

18 is a qualified capital interest, all items of gain and 

19 loss (and any dividends) which are allocated to such 

20 qualified capital interest shall not be taken into ac21 count under subsection (a) if— 

22 ‘‘(A) allocations of items are made by the 

23 partnership to such qualified capital interest in 

24 the same manner as such allocations are made 

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1 ners who do not provide any services described 

2 in subsection (c)(2) and who are not related to 

3 the partner holding the qualified capital inter4 est, and 

5 ‘‘(B) the allocations made to such other in6 terests are significant compared to the alloca7 tions made to such qualified capital interest. 

8 ‘‘(2) AUTHORITY TO PROVIDE EXCEPTIONS TO

9 ALLOCATION REQUIREMENTS.—To the extent pro10 vided by the Secretary in regulations or other guid11 ance— 

12 ‘‘(A) ALLOCATIONS TO PORTION OF QUALI13 FIED CAPITAL INTEREST.—Paragraph (1) may 

14 be applied separately with respect to a portion 

15 of a qualified capital interest. 

16 ‘‘(B) NO OR INSIGNIFICANT ALLOCATIONS

17 TO NONSERVICE PROVIDERS.—In any case in 

18 which the requirements of paragraph (1)(B) are 

19 not satisfied, items of gain and loss (and any 

20 dividends) shall not be taken into account under 

21 subsection (a) to the extent that such items are 

22 properly allocable under such regulations or 

23 other guidance to qualified capital interests. 

24 ‘‘(C) ALLOCATIONS TO SERVICE PRO25 VIDERS’ QUALIFIED CAPITAL INTERESTS WHICH


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1 ARE LESS THAN OTHER ALLOCATIONS.—Alloca2 tions shall not be treated as failing to meet the 

3 requirement of paragraph (1)(A) merely be4 cause the allocations to the qualified capital in5 terest represent a lower return than the alloca6 tions made to the other qualified capital inter7 ests referred to in such paragraph. 

8 ‘‘(3) SPECIAL RULE FOR CHANGES IN SERVICES

9 AND CAPITAL CONTRIBUTIONS.—In the case of an 

10 interest in a partnership which was not an invest11 ment services partnership interest and which, by 

12 reason of a change in the services with respect to as13 sets held (directly or indirectly) by the partnership 

14 or by reason of a change in the capital contributions 

15 to such partnership, becomes an investment services 

16 partnership interest, the qualified capital interest of 

17 the holder of such partnership interest immediately 

18 after such change shall not, for purposes of this sub19 section, be less than the fair market value of such 

20 interest (determined immediately before such 

21 change). 

22 ‘‘(4) SPECIAL RULE FOR TIERED PARTNER23 SHIPS.—Except as otherwise provided by the Sec24 retary, in the case of tiered partnerships, all items 

25 which are allocated in a manner which meets the reVerDate Sep 11 2014 22:35 Oct 24, 2024 Jkt 059200 PO 00000 Frm 00079 Fmt 6652 Sfmt 6201 E:\BILLS\H9985.IH H9985

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1 quirements of paragraph (1) to qualified capital in2 terests in a lower-tier partnership shall retain such 

3 character to the extent allocated on the basis of 

4 qualified capital interests in any upper-tier partner5 ship. 

6 ‘‘(5) EXCEPTION FOR NO-SELF-CHARGED

7 CARRY AND MANAGEMENT FEE PROVISIONS.—Ex8 cept as otherwise provided by the Secretary, an in9 terest shall not fail to be treated as satisfying the 

10 requirement of paragraph (1)(A) merely because the 

11 allocations made by the partnership to such interest 

12 do not reflect the cost of services described in sub13 section (c)(2) which are provided (directly or indi14 rectly) to the partnership by the holder of such in15 terest (or a related person). 

16 ‘‘(6) SPECIAL RULE FOR DISPOSITIONS.—In the 

17 case of any investment services partnership interest 

18 any portion of which is a qualified capital interest, 

19 subsection (b) shall not apply to so much of any 

20 gain or loss as bears the same proportion to the en21 tire amount of such gain or loss as— 

22 ‘‘(A) the distributive share of gain or loss 

23 that would have been allocated to the qualified 

24 capital interest (consistent with the require25 ments of paragraph (1)) if the partnership had 


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1 sold all of its assets at fair market value imme2 diately before the disposition, bears to 

3 ‘‘(B) the distributive share of gain or loss 

4 that would have been so allocated to the invest5 ment services partnership interest of which such 

6 qualified capital interest is a part. 

7 ‘‘(7) QUALIFIED CAPITAL INTEREST.—For pur8 poses of this section— 

9 ‘‘(A) IN GENERAL.—The term ‘qualified 

10 capital interest’ means so much of a partner’s 

11 interest in the capital of the partnership as is 

12 attributable to— 

13 ‘‘(i) the fair market value of any 

14 money or other property contributed to the 

15 partnership in exchange for such interest 

16 (determined without regard to section 

17 752(a)), 

18 ‘‘(ii) any amounts which have been in19 cluded in gross income under section 83 

20 with respect to the transfer of such inter21 est, and 

22 ‘‘(iii) the excess (if any) of— 

23 ‘‘(I) any items of income and 

24 gain taken into account under section 

25 702 with respect to such interest, over 


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1 ‘‘(II) any items of deduction and 

2 loss so taken into account. 

3 ‘‘(B) ADJUSTMENT TO QUALIFIED CAPITAL

4 INTEREST.— 

5 ‘‘(i) DISTRIBUTIONS AND LOSSES.— 

6 The qualified capital interest shall be re7 duced by distributions from the partner8 ship with respect to such interest and by 

9 the excess (if any) of the amount described 

10 in subparagraph (A)(iii)(II) over the 

11 amount described in subparagraph 

12 (A)(iii)(I). 

13 ‘‘(ii) SPECIAL RULE FOR CONTRIBU14 TIONS OF PROPERTY.—In the case of any 

15 contribution of property described in sub16 paragraph (A)(i) with respect to which the 

17 fair market value of such property is not 

18 equal to the adjusted basis of such prop19 erty immediately before such contribution, 

20 proper adjustments shall be made to the 

21 qualified capital interest to take into ac22 count such difference consistent with such 

23 regulations or other guidance as the Sec24 retary may provide. 


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1 ‘‘(C) TECHNICAL TERMINATIONS, ETC., 

2 DISREGARDED.—No increase or decrease in the 

3 qualified capital interest of any partner shall re4 sult from a termination, merger, consolidation, 

5 or division described in section 708, or any 

6 similar transaction. 

7 ‘‘(8) TREATMENT OF CERTAIN LOANS.— 

8 ‘‘(A) PROCEEDS OF PARTNERSHIP LOANS

9 NOT TREATED AS QUALIFIED CAPITAL INTER10 EST OF SERVICE PROVIDING PARTNERS.—For 

11 purposes of this subsection, an investment serv12 ices partnership interest shall not be treated as 

13 a qualified capital interest to the extent that 

14 such interest is acquired in connection with the 

15 proceeds of any loan or other advance made or 

16 guaranteed, directly or indirectly, by any other 

17 partner or the partnership (or any person re18 lated to any such other partner or the partner19 ship). The preceding sentence shall not apply to 

20 the extent the loan or other advance is repaid 

21 before the date of enactment of this section un22 less such repayment is made with the proceeds 

23 of a loan or other advance described in the pre24 ceding sentence. 


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1 ‘‘(B) REDUCTION IN ALLOCATIONS TO

2 QUALIFIED CAPITAL INTERESTS FOR LOANS

3 FROM NONSERVICE-PROVIDING PARTNERS TO

4 THE PARTNERSHIP.—For purposes of this sub5 section, any loan or other advance to the part6 nership made or guaranteed, directly or indi7 rectly, by a partner not providing services de8 scribed in subsection (c)(2) to the partnership 

9 (or any person related to such partner) shall be 

10 taken into account in determining the qualified 

11 capital interests of the partners in the partner12 ship. 

13 ‘‘(9) SPECIAL RULE FOR QUALIFIED FAMILY

14 PARTNERSHIPS.— 

15 ‘‘(A) IN GENERAL.—In the case of any 

16 specified family partnership interest, paragraph 

17 (1)(A) shall be applied without regard to the 

18 phrase ‘and who are not related to the partner 

19 holding the qualified capital interest’. 

20 ‘‘(B) SPECIFIED FAMILY PARTNERSHIP IN21 TEREST.—For purposes of this paragraph, the 

22 term ‘specified family partnership interest’ 

23 means any investment services partnership in24 terest if— 


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1 ‘‘(i) such interest is an interest in a 

2 qualified family partnership, 

3 ‘‘(ii) such interest is held by a natural 

4 person or by a trust with respect to which 

5 each beneficiary is a grantor or a person 

6 whose relationship to the grantor is de7 scribed in section 267(b)(1), and 

8 ‘‘(iii) all other interests in such quali9 fied family partnership with respect to 

10 which significant allocations are made 

11 (within the meaning of paragraph (1)(B) 

12 and in comparison to the allocations made 

13 to the interest described in clause (ii)) are 

14 held by persons who— 

15 ‘‘(I) are related to the natural 

16 person or trust referred to in clause 

17 (ii), or 

18 ‘‘(II) provide services described 

19 in subsection (c)(2). 

20 ‘‘(C) QUALIFIED FAMILY PARTNERSHIP.— 

21 For purposes of this paragraph, the term 

22 ‘qualified family partnership’ means any part23 nership if— 

24 ‘‘(i) all of the capital and profits in25 terests of such partnership are held by— 


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1 ‘‘(I) specified family members, 

2 ‘‘(II) any person closely related 

3 (within the meaning of subsection 

4 (c)(3)(C)(ii)) to a specified family 

5 member, or 

6 ‘‘(III) any other person (not de7 scribed in subclause (I) or (II)) if 

8 such interest is an investment services 

9 partnership interest with respect to 

10 such person, and 

11 ‘‘(ii) such partnership does not hold 

12 itself out to the public as an investment 

13 advisor. 

14 ‘‘(D) SPECIFIED FAMILY MEMBERS.—For 

15 purposes of subparagraph (C), individuals shall 

16 be treated as specified family members if such 

17 individuals would be treated as one person 

18 under the rules of section 1361(c)(1) if the ap19 plicable date (within the meaning of subpara20 graph (B)(iii) thereof) were the latest of— 

21 ‘‘(i) the date of the establishment of 

22 the partnership, 

23 ‘‘(ii) the earliest date that the com24 mon ancestor holds a capital or profits in25 terest in the partnership, or 


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1 ‘‘(iii) the date of enactment of this 

2 section. 

3 ‘‘(e) OTHER INCOME AND GAIN IN CONNECTION

4 WITH INVESTMENT MANAGEMENT SERVICES.— 

5 ‘‘(1) IN GENERAL.—If— 

6 ‘‘(A) a person performs (directly or indi7 rectly) investment management services for any 

8 investment entity, 

9 ‘‘(B) such person holds (directly or indi10 rectly) a disqualified interest with respect to 

11 such entity, and 

12 ‘‘(C) the value of such interest (or pay13 ments thereunder) is substantially related to 

14 the amount of income or gain (whether or not 

15 realized) from the assets with respect to which 

16 the investment management services are per17 formed, 

18 any income or gain with respect to such interest 

19 shall be treated as ordinary income. Rules similar to 

20 the rules of subsections (a)(5) and (d) shall apply 

21 for purposes of this subsection. 

22 ‘‘(2) DEFINITIONS.—For purposes of this sub23 section— 

24 ‘‘(A) DISQUALIFIED INTEREST.— 


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1 ‘‘(i) IN GENERAL.—The term ‘dis2 qualified interest’ means, with respect to 

3 any investment entity— 

4 ‘‘(I) any interest in such entity 

5 other than indebtedness, 

6 ‘‘(II) convertible or contingent 

7 debt of such entity, 

8 ‘‘(III) any option or other right 

9 to acquire property described in sub10 clause (I) or (II), and 

11 ‘‘(IV) any derivative instrument 

12 entered into (directly or indirectly) 

13 with such entity or any investor in 

14 such entity. 

15 ‘‘(ii) EXCEPTIONS.—Such term shall 

16 not include— 

17 ‘‘(I) a partnership interest, 

18 ‘‘(II) except as provided by the 

19 Secretary, any interest in a taxable 

20 corporation, and 

21 ‘‘(III) except as provided by the 

22 Secretary, stock in an S corporation. 

23 ‘‘(B) TAXABLE CORPORATION.—The term 

24 ‘taxable corporation’ means— 

25 ‘‘(i) a domestic C corporation, or 


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1 ‘‘(ii) a foreign corporation substan2 tially all of the income of which is— 

3 ‘‘(I) effectively connected with 

4 the conduct of a trade or business in 

5 the United States, or 

6 ‘‘(II) subject to a comprehensive 

7 foreign income tax (as defined in sec8 tion 457A(d)(2)). 

9 ‘‘(C) INVESTMENT MANAGEMENT SERV10 ICES.—The term ‘investment management serv11 ices’ means a substantial quantity of any of the 

12 services described in subsection (c)(2). 

13 ‘‘(D) INVESTMENT ENTITY.—The term ‘in14 vestment entity’ means any entity which, if it 

15 were a partnership, would be an investment 

16 partnership. 

17 ‘‘(f) EXCEPTION FOR DOMESTIC C CORPORATIONS.— 

18 Except as otherwise provided by the Secretary, in the case 

19 of a domestic C corporation— 

20 ‘‘(1) subsections (a) and (b) shall not apply to 

21 any item allocated to such corporation with respect 

22 to any investment services partnership interest (or 

23 to any gain or loss with respect to the disposition of 

24 such an interest), and 

25 ‘‘(2) subsection (e) shall not apply. 


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1 ‘‘(g) REGULATIONS.—The Secretary shall prescribe 

2 such regulations or other guidance as is necessary or ap3 propriate to carry out the purposes of this section, includ4 ing regulations or other guidance to— 

5 ‘‘(1) require such reporting and recordkeeping 

6 by any person in such manner and at such time as 

7 the Secretary may prescribe for purposes of enabling 

8 the partnership to meet the requirements of section 

9 6031 with respect to any item described in section 

10 702(a)(9), 

11 ‘‘(2) provide modifications to the application of 

12 this section (including treating related persons as 

13 not related to one another) to the extent such modi14 fication is consistent with the purposes of this sec15 tion, 

16 ‘‘(3) prevent the avoidance of the purposes of 

17 this section (including through the use of qualified 

18 family partnerships), and 

19 ‘‘(4) coordinate this section with the other pro20 visions of this title. 

21 ‘‘(h) CROSS REFERENCE.—For 40-percent penalty 

22 on certain underpayments due to the avoidance of this sec23 tion, see section 6662.’’. 


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1 (b) APPLICATION OF SECTION 751 TO INDIRECT DIS2 POSITIONS OF INVESTMENT SERVICES PARTNERSHIP IN3 TERESTS.— 

4 (1) IN GENERAL.—Subsection (a) of section 

5 751 is amended by striking ‘‘or’’ at the end of para6 graph (1), by inserting ‘‘or’’ at the end of paragraph 

7 (2), and by inserting after paragraph (2) the fol8 lowing new paragraph: 

9 ‘‘(3) investment services partnership interests 

10 held by the partnership,’’. 

11 (2) CERTAIN DISTRIBUTIONS TREATED AS

12 SALES OR EXCHANGES.—Subparagraph (A) of sec13 tion 751(b)(1) is amended by striking ‘‘or’’ at the 

14 end of clause (i), by inserting ‘‘or’’ at the end of 

15 clause (ii), and by inserting after clause (ii) the fol16 lowing new clause: 

17 ‘‘(iii) investment services partnership 

18 interests held by the partnership,’’. 

19 (3) APPLICATION OF SPECIAL RULES IN THE

20 CASE OF TIERED PARTNERSHIPS.—Subsection (f) of 

21 section 751 is amended— 

22 (A) by striking ‘‘or’’ at the end of para23 graph (1), by inserting ‘‘or’’ at the end of para24 graph (2), and by inserting after paragraph (2) 

25 the following new paragraph: 


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1 ‘‘(3) an investment services partnership interest 

2 held by the partnership,’’; and 

3 (B) by striking ‘‘partner.’’ and inserting 

4 ‘‘partner (other than a partnership in which it 

5 holds an investment services partnership inter6 est).’’. 

7 (4) INVESTMENT SERVICES PARTNERSHIP IN8 TERESTS; QUALIFIED CAPITAL INTERESTS.—Section 

9 751 is amended by adding at the end the following 

10 new subsection: 

11 ‘‘(g) INVESTMENT SERVICES PARTNERSHIP INTER12 ESTS.—For purposes of this section— 

13 ‘‘(1) IN GENERAL.—The term ‘investment serv14 ices partnership interest’ has the meaning given 

15 such term by section 710(c). 

16 ‘‘(2) ADJUSTMENTS FOR QUALIFIED CAPITAL

17 INTERESTS.—The amount to which subsection (a) 

18 applies by reason of paragraph (3) thereof shall not 

19 include so much of such amount as is attributable 

20 to any portion of the investment services partnership 

21 interest which is a qualified capital interest (deter22 mined under rules similar to the rules of section 

23 710(d)). 

24 ‘‘(3) EXCEPTION FOR PUBLICLY TRADED PART25 NERSHIPS.—Except as otherwise provided by the 


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1 Secretary, in the case of an exchange of an interest 

2 in a publicly traded partnership (as defined in sec3 tion 7704) to which subsection (a) applies— 

4 ‘‘(A) this section shall be applied without 

5 regard to subsections (a)(3), (b)(1)(A)(iii), and 

6 (f)(3), and 

7 ‘‘(B) such partnership shall be treated as 

8 owning its proportionate share of the property 

9 of any other partnership in which it is a part10 ner. 

11 ‘‘(4) RECOGNITION OF GAINS.—Any gain with 

12 respect to which subsection (a) applies by reason of 

13 paragraph (3) thereof shall be recognized notwith14 standing any other provision of this title. 

15 ‘‘(5) COORDINATION WITH INVENTORY

16 ITEMS.—An investment services partnership interest 

17 held by the partnership shall not be treated as an 

18 inventory item of the partnership. 

19 ‘‘(6) PREVENTION OF DOUBLE COUNTING.— 

20 Under regulations or other guidance prescribed by 

21 the Secretary, subsection (a)(3) shall not apply with 

22 respect to any amount to which section 710 applies. 

23 ‘‘(7) VALUATION METHODS.—The Secretary 

24 shall prescribe regulations or other guidance which 

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1 ment services partnership interests for purposes of 

2 this section.’’. 

3 (c) TREATMENT FOR PURPOSES OF SECTION

4 7704.—Subsection (d) of section 7704 is amended by add5 ing at the end the following new paragraph: 

6 ‘‘(6) INCOME FROM CERTAIN CARRIED INTER7 ESTS NOT QUALIFIED.— 

8 ‘‘(A) IN GENERAL.—Specified carried in9 terest income shall not be treated as qualifying 

10 income. 

11 ‘‘(B) SPECIFIED CARRIED INTEREST IN12 COME.—For purposes of this paragraph— 

13 ‘‘(i) IN GENERAL.—The term ‘speci14 fied carried interest income’ means— 

15 ‘‘(I) any item of income or gain 

16 allocated to an investment services 

17 partnership interest (as defined in 

18 section 710(c)) held by the partner19 ship, 

20 ‘‘(II) any gain on the disposition 

21 of an investment services partnership 

22 interest (as so defined) or a partner23 ship interest to which (in the hands of 

24 the partnership) section 751 applies, 

25 and 


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1 ‘‘(III) any income or gain taken 

2 into account by the partnership under 

3 subsection (b)(4) or (e) of section 

4 710. 

5 ‘‘(ii) EXCEPTION FOR QUALIFIED CAP6 ITAL INTERESTS.—A rule similar to the 

7 rule of section 710(d) shall apply for pur8 poses of clause (i). 

9 ‘‘(C) COORDINATION WITH OTHER PROVI10 SIONS.—Subparagraph (A) shall not apply to 

11 any item described in paragraph (1)(E) (or so 

12 much of paragraph (1)(F) as relates to para13 graph (1)(E)). 

14 ‘‘(D) SPECIAL RULES FOR CERTAIN PART15 NERSHIPS.— 

16 ‘‘(i) CERTAIN PARTNERSHIPS OWNED

17 BY REAL ESTATE INVESTMENT TRUSTS.— 

18 Subparagraph (A) shall not apply in the 

19 case of a partnership which meets each of 

20 the following requirements: 

21 ‘‘(I) Such partnership is treated 

22 as publicly traded under this section 

23 solely by reason of interests in such 

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1 terests in a real estate investment 

2 trust which is publicly traded. 

3 ‘‘(II) Fifty percent or more of 

4 the capital and profits interests of 

5 such partnership are owned, directly 

6 or indirectly, at all times during the 

7 taxable year by such real estate in8 vestment trust (determined with the 

9 application of section 267(c)). 

10 ‘‘(III) Such partnership meets 

11 the requirements of paragraphs (2), 

12 (3), and (4) of section 856(c). 

13 ‘‘(ii) CERTAIN PARTNERSHIPS OWN14 ING OTHER PUBLICLY TRADED PARTNER15 SHIPS.—Subparagraph (A) shall not apply 

16 in the case of a partnership which meets 

17 each of the following requirements: 

18 ‘‘(I) Substantially all of the as19 sets of such partnership consist of in20 terests in one or more publicly traded 

21 partnerships (determined without re22 gard to subsection (b)(2)). 

23 ‘‘(II) Substantially all of the in24 come of such partnership is ordinary 


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1 income or section 1231 gain (as de2 fined in section 1231(a)(3)). 

3 ‘‘(E) TRANSITIONAL RULE.—Subpara4 graph (A) shall not apply to any taxable year 

5 of the partnership beginning before the date 

6 which is 10 years after the date of enactment 

7 of this paragraph.’’. 

8 (d) IMPOSITION OF PENALTY ON UNDERPAY9 MENTS.— 

10 (1) IN GENERAL.—Subsection (b) of section 

11 6662 is amended by inserting after paragraph (9) 

12 the following new paragraph: 

13 ‘‘(10) The application of section 710(e) or the 

14 regulations or other guidance prescribed under sec15 tion 710(g) to prevent the avoidance of the purposes 

16 of section 710.’’. 

17 (2) AMOUNT OF PENALTY.— 

18 (A) IN GENERAL.—Section 6662 is amend19 ed by adding at the end the following new sub20 section: 

21 ‘‘(m) INCREASE IN PENALTY IN CASE OF PROPERTY

22 TRANSFERRED FOR INVESTMENT MANAGEMENT SERV23 ICES.—In the case of any portion of an underpayment to 

24 which this section applies by reason of subsection (b)(10), 


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1 subsection (a) shall be applied with respect to such portion 

2 by substituting ‘40 percent’ for ‘20 percent’.’’. 

3 (B) CONFORMING AMENDMENT.—Subpara4 graph (B) of section 6662A(e)(2) is amended 

5 by striking ‘‘or (i)’’ and inserting ‘‘, (i), or 

6 (m)’’. 

7 (3) SPECIAL RULES FOR APPLICATION OF REA8 SONABLE CAUSE EXCEPTION.—Subsection (c) of sec9 tion 6664 is amended— 

10 (A) by redesignating paragraphs (3) and 

11 (4) as paragraphs (4) and (5), respectively; 

12 (B) by striking ‘‘paragraph (3)’’ in para13 graph (5)(A), as so redesignated, and inserting 

14 ‘‘paragraph (4)’’; and 

15 (C) by inserting after paragraph (2) the 

16 following new paragraph: 

17 ‘‘(3) SPECIAL RULE FOR UNDERPAYMENTS AT18 TRIBUTABLE TO INVESTMENT MANAGEMENT SERV19 ICES.— 

20 ‘‘(A) IN GENERAL.—Paragraph (1) shall 

21 not apply to any portion of an underpayment to 

22 which section 6662 applies by reason of sub23 section (b)(10) unless— 


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1 ‘‘(i) the relevant facts affecting the 

2 tax treatment of the item are adequately 

3 disclosed, 

4 ‘‘(ii) there is or was substantial au5 thority for such treatment, and 

6 ‘‘(iii) the taxpayer reasonably believed 

7 that such treatment was more likely than 

8 not the proper treatment. 

9 ‘‘(B) RULES RELATING TO REASONABLE

10 BELIEF.—Rules similar to the rules of sub11 section (d)(4) shall apply for purposes of sub12 paragraph (A)(iii).’’. 

13 (e) INCOME AND LOSS FROM INVESTMENT SERVICES

14 PARTNERSHIP INTERESTS TAKEN INTO ACCOUNT IN DE15 TERMINING NET EARNINGS FROM SELF-EMPLOYMENT.— 

16 (1) INTERNAL REVENUE CODE.— 

17 (A) IN GENERAL.—Section 1402(a) is 

18 amended by striking ‘‘and’’ at the end of para19 graph (16), by striking the period at the end of 

20 paragraph (17) and inserting ‘‘; and’’, and by 

21 inserting after paragraph (17) the following 

22 new paragraph: 

23 ‘‘(18) notwithstanding the preceding provisions 

24 of this subsection, in the case of any individual en25 gaged in the trade or business of providing services 


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1 described in section 710(c)(2) with respect to any 

2 entity, investment services partnership income or 

3 loss (as defined in subsection (m)) of such individual 

4 with respect to such entity shall be taken into ac5 count in determining the net earnings from self-em6 ployment of such individual.’’. 

7 (B) INVESTMENT SERVICES PARTNERSHIP

8 INCOME OR LOSS.—Section 1402 is amended by 

9 adding at the end the following new subsection: 

10 ‘‘(m) INVESTMENT SERVICES PARTNERSHIP INCOME

11 OR LOSS.—For purposes of subsection (a)— 

12 ‘‘(1) IN GENERAL.—The term ‘investment serv13 ices partnership income or loss’ means, with respect 

14 to any investment services partnership interest (as 

15 defined in section 710(c)) or disqualified interest (as 

16 defined in section 710(e)), the net of— 

17 ‘‘(A) the amounts treated as ordinary in18 come or ordinary loss under subsections (b) and 

19 (e) of section 710 with respect to such interest, 

20 ‘‘(B) all items of income, gain, loss, and 

21 deduction allocated to such interest, and 

22 ‘‘(C) the amounts treated as realized from 

23 the sale or exchange of property other than a 

24 capital asset under section 751 with respect to 

25 such interest. 


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1 ‘‘(2) EXCEPTION FOR QUALIFIED CAPITAL IN2 TERESTS.—A rule similar to the rule of section 

3 710(d) shall apply for purposes of applying para4 graph (1)(B).’’. 

5 (2) SOCIAL SECURITY ACT.—Section 211(a) of 

6 the Social Security Act is amended by striking 

7 ‘‘and’’ at the end of paragraph (15), by striking the 

8 period at the end of paragraph (16) and inserting ‘‘; 

9 and’’, and by inserting after paragraph (16) the fol10 lowing new paragraph: 

11 ‘‘(17) Notwithstanding the preceding provisions 

12 of this subsection, in the case of any individual en13 gaged in the trade or business of providing services 

14 described in section 710(c)(2) of the Internal Rev15 enue Code of 1986 with respect to any entity, invest16 ment services partnership income or loss (as defined 

17 in section 1402(m) of such Code) shall be taken into 

18 account in determining the net earnings from self19 employment of such individual.’’. 

20 (f) SEPARATE ACCOUNTING BY PARTNER.—Section 

21 702(a) is amended by striking ‘‘and’’ at the end of para22 graph (7), by striking the period at the end of paragraph 

23 (8) and inserting ‘‘, and’’, and by inserting after para24 graph (8) the following: 


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1 ‘‘(9) any amount treated as ordinary income or 

2 loss under subsection (a), (b), or (e) of section 

3 710.’’. 

4 (g) CONFORMING AMENDMENTS.— 

5 (1) Subsection (d) of section 731 is amended by 

6 inserting ‘‘section 710(b)(4) (relating to distribu7 tions of partnership property),’’ after ‘‘to the extent 

8 otherwise provided by’’. 

9 (2) Section 741 is amended by inserting ‘‘or 

10 section 710 (relating to special rules for partners 

11 providing investment management services to part12 nerships)’’ before the period at the end. 

13 (3) The table of sections for part I of sub14 chapter K of chapter 1 is amended by adding at the 

15 end the following new item: 

‘‘Sec. 710. Special rules for partners providing investment management services 

to partnerships.’’. 

16 (4)(A) Part IV of subchapter O of chapter 1 is 

17 amended by striking section 1061. 

18 (B) The table of sections for part IV of sub19 chapter O of chapter 1 is amended by striking the 

20 item relating to section 1061. 

21 (h) EFFECTIVE DATE.— 

22 (1) IN GENERAL.—Except as otherwise pro23 vided in this subsection, the amendments made by 


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1 this section shall apply to taxable years ending after 

2 the date of enactment of this Act. 

3 (2) PARTNERSHIP TAXABLE YEARS WHICH IN4 CLUDE EFFECTIVE DATE.—In applying section 

5 710(a) of the Internal Revenue Code of 1986 (as 

6 added by this section) in the case of any partnership 

7 taxable year which includes the date of enactment of 

8 this Act, the amount of the net capital gain referred 

9 to in such section shall be treated as being the lesser 

10 of the net capital gain for the entire partnership tax11 able year or the net capital gain determined by only 

12 taking into account items attributable to the portion 

13 of the partnership taxable year which is after such 

14 date. 

15 (3) DISPOSITIONS OF PARTNERSHIP INTER16 ESTS.— 

17 (A) IN GENERAL.—Section 710(b) of such 

18 Code (as added by this section) shall apply to 

19 dispositions and distributions after the date of 

20 enactment of this Act. 

21 (B) INDIRECT DISPOSITIONS.—The amend22 ments made by subsection (b) shall apply to 

23 transactions after the date of enactment of this 

24 Act. 


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1 (4) OTHER INCOME AND GAIN IN CONNECTION

2 WITH INVESTMENT MANAGEMENT SERVICES.—Sec3 tion 710(e) of such Code (as added by this section) 

4 shall take effect on the date of enactment of this 

5 Act. 

6 TITLE V—INVESTOR PROTEC7 TION AND MARKET TRANS8 PARENCY 

9 SEC. 501. DISCLOSURE OF FEES AND RETURNS. 

10 The Investment Company Act of 1940 (15 U.S.C. 

11 80a–1 et seq.), as amended by this Act, is amended by 

12 adding at the end the following: 

13 ‘‘SEC. 67. DISCLOSURE OF FEES AND RETURNS. 

14 ‘‘(a) DEFINITIONS.—In this section— 

15 ‘‘(1) the terms ‘controlling private fund’, ‘pri16 vate fund’, and ‘target firm’ have the meanings 

17 given the terms in section 3 of the Stop Wall Street 

18 Looting Act; and 

19 ‘‘(2) the term ‘expenditure for political activi20 ties’— 

21 ‘‘(A) means— 

22 ‘‘(i) an independent expenditure, as 

23 that term is defined in section 301(17) of 

24 the Federal Election Campaign Act of 

25 1971 (52 U.S.C. 30101(17)); 


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1 ‘‘(ii) a disbursement for an election2 eering communication, as that term is de3 fined in section 304(f)(3) of the Federal 

4 Election Campaign Act of 1971 (52 U.S.C. 

5 30104(f)(3)) or any other public commu6 nication, as defined in section 301(22) of 

7 that Act (52 U.S.C. 30101(22)), that 

8 would be an electioneering communication 

9 if it were a broadcast, cable, or satellite 

10 communication; or 

11 ‘‘(iii) dues or other payments to trade 

12 associations or organizations described in 

13 section 501(c) of the Internal Revenue 

14 Code of 1986 and exempt from tax under 

15 section 501(a) of that Code that are, or 

16 could reasonably be anticipated to be, used 

17 or transferred to another association or or18 ganization for the purposes described in 

19 clause (i) or (ii); and 

20 ‘‘(B) does not include an expenditure for— 

21 ‘‘(i) direct lobbying efforts through 

22 registered lobbyists employed or hired by a 

23 controlling private fund; 

24 ‘‘(ii) communications by a controlling 

25 private fund to— 


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1 ‘‘(I) a partner of the fund or ex2 ecutive or administrative personnel 

3 with respect to the fund; or 

4 ‘‘(II) a family member of any in5 dividual described in subclause (I); or 

6 ‘‘(iii) the establishment and adminis7 tration of contributions to a separate seg8 regated private fund to be utilized for po9 litical purposes by a controlling private 

10 fund. 

11 ‘‘(b) RULES.—Not later than 1 year after the date 

12 of enactment of this section, the Commission shall issue 

13 final rules that require a controlling private fund to, using 

14 generally accepted accounting principles, annually report 

15 the following information with respect to that controlling 

16 private fund: 

17 ‘‘(1) The name, address, and vintage year of 

18 the fund. 

19 ‘‘(2) The name of each general partner of the 

20 fund. 

21 ‘‘(3) The name of each limited partner of the 

22 fund. 

23 ‘‘(4) A list of each entity with respect to which 

24 the fund owns an equity interest. 


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1 ‘‘(5) In dollars, the total amount of regulatory 

2 assets under management by the fund. 

3 ‘‘(6) In dollars, the total amount of net assets 

4 under management by the fund. 

5 ‘‘(7) The percentage of fund equity contributed 

6 by the general partners of the fund and the percent7 age of fund equity contributed by the limited part8 ners of the fund. 

9 ‘‘(8) Information on the debt owed by the fund, 

10 including— 

11 ‘‘(A) the dollar amount of total debt; 

12 ‘‘(B) the percentage of debt for which the 

13 creditor is a financial institution in the United 

14 States; 

15 ‘‘(C) the percentage of debt for which the 

16 creditor is a financial institution outside of the 

17 United States; 

18 ‘‘(D) the percentage of debt for which the 

19 creditor is an entity that is located in the 

20 United States and is not a financial institution; 

21 and 

22 ‘‘(E) the percentage of debt for which the 

23 creditor is an entity that is located outside of 

24 the United States and is not a financial institu25 tion. 


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1 ‘‘(9) The gross performance of the fund during 

2 the year covered by the report. 

3 ‘‘(10) For the year covered by the report, the 

4 difference obtained by subtracting the financial 

5 gains of the fund by the fees that the general part6 ners of the fund charged to the limited partners of 

7 the fund (commonly referred to as the ‘performance 

8 net of fees’). 

9 ‘‘(11) For the year covered by the report, an 

10 annual financial statement, which shall include in11 come statements, a balance sheet, and cash flow 

12 statements. 

13 ‘‘(12) The average debt-to-equity ratio of each 

14 target firm with respect to the fund and the debt15 to-equity ratio of each such target firm. 

16 ‘‘(13) The total gross asset value of each target 

17 firm with respect to the fund and the gross asset 

18 value of each such target firm. 

19 ‘‘(14) The total amount of debt held by each 

20 target firm with respect to the fund and the total 

21 amount of debt held by each such target firm. 

22 ‘‘(15) The total amount of debt held by each 

23 target firm with respect to the fund that, as of the 

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1 egorized as liabilities, long-term liabilities, and pay2 ment in kind or zero coupon debt. 

3 ‘‘(16) The total number of target firms with re4 spect to the fund that experienced default during the 

5 period covered by the report, including the name of 

6 any such target firm. 

7 ‘‘(17) The total number of the target firms with 

8 respect to the fund with respect to which a case was 

9 commenced under title 11, United States Code, dur10 ing the period covered by the report, including the 

11 name of any such target firm. 

12 ‘‘(18) The percentage of the equity of the fund 

13 that is owned by— 

14 ‘‘(A) citizens of the United States; 

15 ‘‘(B) individuals who are not citizens of the 

16 United States; 

17 ‘‘(C) brokers or dealers; 

18 ‘‘(D) insurance companies; 

19 ‘‘(E) investment companies that are reg20 istered with the Commission under this Act; 

21 ‘‘(F) private funds and other investment 

22 companies not required to be registered with 

23 the Commission; 

24 ‘‘(G) nonprofit organizations; 


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1 ‘‘(H) pension plans maintained by State or 

2 local governments (or an agency or instrumen3 tality of either); 

4 ‘‘(I) pension plans maintained by non5 governmental employers; 

6 ‘‘(J) State or municipal government enti7 ties; 

8 ‘‘(K) banking or thrift institutions; 

9 ‘‘(L) sovereign wealth funds; and 

10 ‘‘(M) other investors. 

11 ‘‘(19) The total dollar amount of aggregate fees 

12 and expenses collected by the fund, the manager of 

13 the fund, or related parties from target firms for 

14 which the fund is a controlling private fund, which 

15 shall— 

16 ‘‘(A) be categorized by the type of fee; and 

17 ‘‘(B) include a description of the purpose 

18 of the fees. 

19 ‘‘(20) The total dollar amount of aggregate fees 

20 and expenses collected by the fund, the manager of 

21 the fund, or related parties from the limited part22 ners of the fund, which shall— 

23 ‘‘(A) be categorized by the type of fee; and 

24 ‘‘(B) include a description of the purpose 

25 of the fees. 


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1 ‘‘(21) The total carried interest claimed by the 

2 fund, the manager of the fund, or related parties 

3 and the total dollar amount of carried interest dis4 tributed to the limited partners of the fund. 

5 ‘‘(22) A description of, during the year covered 

6 by the report, any material changes in risk factors 

7 at the fund level, including— 

8 ‘‘(A) concentration risk; 

9 ‘‘(B) foreign exchange risk; and 

10 ‘‘(C) extra-financial risk, including envi11 ronmental, social, and corporate governance 

12 risk. 

13 ‘‘(23) Disclosures that satisfy the Recommenda14 tions of the Task Force on Climate-related Financial 

15 Disclosures of the Financial Stability Board, as re16 ported in June 2017. 

17 ‘‘(24) A description of the human capital man18 agement practices of the fund, including— 

19 ‘‘(A) fund workforce demographic informa20 tion, including the number of full-time employ21 ees, the number of part-time employees, the 

22 number of contingent workers (including tem23 porary and contract workers), and any policies 

24 or practices of the firm relating to subcon25 tracting, outsourcing, and insourcing; 


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1 ‘‘(B) fund workforce composition, including 

2 data on the diversity of that workforce, includ3 ing the racial and gender composition of that 

4 workforce, and any policies and audits relating 

5 to the diversity of that workforce; 

6 ‘‘(C) any incident of alleged workplace har7 assment during the 5 years preceding the year 

8 in which the report is submitted; and 

9 ‘‘(D) any health or safety incident during 

10 the 5 years preceding the year in which the re11 port is submitted. 

12 ‘‘(25) A description of any expenditure for po13 litical activities made during the year preceding the 

14 year in which the report is submitted, including— 

15 ‘‘(A) the date on which each such expendi16 ture for political activities was made; 

17 ‘‘(B) the amount of each such expenditure 

18 for political activities; 

19 ‘‘(C) if such an expenditure for political ac20 tivities was made in support of, or in opposition 

21 to, a candidate, the name of the candidate, the 

22 office sought by the candidate, and the political 

23 party affiliation of the candidate; 

24 ‘‘(D) a summary of— 


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1 ‘‘(i) each such expenditure for political 

2 activities that is in amount that is not less 

3 than $10,000; and 

4 ‘‘(ii) each expenditure for political ac5 tivities with respect to a particular election 

6 if the total amount of expenditures for po7 litical activities by the firm with respect to 

8 that election is in an amount that is not 

9 less than $10,000; 

10 ‘‘(E) a description of the specific nature of 

11 any expenditure for political activities that the 

12 firm intends to make for the year in which the 

13 report is submitted, to the extent that the spe14 cific nature is known to the firm; and 

15 ‘‘(F) the total amount of expenditures for 

16 political activities that the fund intends to make 

17 for the year in which the report is submitted. 

18 ‘‘(26) For the year preceding the year in which 

19 the report is submitted, the total amount of Federal 

20 support, if any, received by— 

21 ‘‘(A) the fund; and 

22 ‘‘(B) any entity with respect to which the 

23 fund is a beneficial owner, as that term is de24 fined in section 5336(a)(3) of title 31, United 

25 States Code. 


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1 ‘‘(27) Any other information that the Commis2 sion determines is necessary and appropriate for the 

3 protection of investors. 

4 ‘‘(c) PERIODIC REVIEW.—The Commission shall, 

5 with respect to the rules issued under subsection (b)— 

6 ‘‘(1) review the rules once every 5 years; and 

7 ‘‘(2) revise the rules as necessary to ensure that 

8 the disclosures required under the rules reflect con9 temporary (as of the date on which the rules are re10 vised) trends and characteristics with respect to pri11 vate investment markets. 

12 ‘‘(d) PUBLIC AVAILABILITY.—Notwithstanding any 

13 provision of section 204 of the Investment Advisers Act 

14 of 1940 (15 U.S.C. 80b–4), the information disclosed 

15 under the rules issued under subsection (b) shall be made 

16 available to the public.’’. 

17 SEC. 502. FIDUCIARY OBLIGATIONS. 

18 (a) FIDUCIARY DUTIES UNDER ERISA.— 

19 (1) PLAN ASSETS.—Section 401(b)(1) of the 

20 Employee Retirement Income Security Act of 1974 

21 (29 U.S.C. 1101(b)(1)) is amended— 

22 (A) by inserting ‘‘or a private fund (as de23 fined in section 3 of the Stop Wall Street 

24 Looting Act)’’ before ‘‘, the assets’’; and 


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1 (B) by inserting ‘‘or such private fund, as 

2 applicable’’ before the period at the end. 

3 (2) FIDUCIARY OBLIGATIONS OF FUND MAN4 AGERS.—Section 3(21)(A) of such Act (29 U.S.C. 

5 1002(21)) is amended by inserting ‘‘, and, in the 

6 case of a plan which invests in a security issued by 

7 a private fund (as such term is defined in section 3 

8 of the Stop Wall Street Looting Act), includes the 

9 manager of such private fund’’ before the period at 

10 the end. 

11 (b) PROHIBITION AGAINST WAIVING FIDUCIARY DU12 TIES.—Section 211(h) of the Investment Advisers Act of 

13 1940 (15 U.S.C. 80b–11(h)) is amended— 

14 (1) in paragraph (1), by striking ‘‘and’’ at the 

15 end; 

16 (2) in paragraph (2), by striking the period at 

17 the end and inserting ‘‘; and’’; and 

18 (3) by adding at the end the following: 

19 ‘‘(3) promulgate rules that prohibit an invest20 ment adviser from requiring any person to which the 

21 investment adviser provides investment advice, in22 cluding a pension plan (as defined in section 3 of the 

23 Employee Retirement Income Security Act of 1974 

24 (29 U.S.C. 1002)) that is subject to title I of the 

25 Employee Retirement Income Security Act of 1974 


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1 (29 U.S.C. 1001 et seq.), to, as a condition of the 

2 investment adviser providing that advice, sign a con3 tract or other agreement in which that person waives 

4 a fiduciary duty owed by that person to another per5 son.’’. 

6 (c) APPLICABILITY OF BENEFITS.—The general 

7 partner of a controlling private fund that is a partnership 

8 may not provide any term or benefit to any limited partner 

9 of the fund unless the general partner provides that term 

10 or benefit to all limited partners of the fund. 

11 SEC. 503. DISCLOSURES RELATING TO THE MARKETING OF 

12 PRIVATE EQUITY FUNDS. 

13 Any investment adviser to a private fund shall dis14 close to potential investors with respect to the other pri15 vate funds, as defined in section 202(a) of the Investment 

16 Advisers Act of 1940 (15 U.S.C. 80b–2(a)), managed by 

17 that investment adviser (referred to in this section as 

18 ‘‘managed firms’’) the following information: 

19 (1) A list of all managed firms with respect to 

20 the investment adviser, including those managed 

21 firms that, as of the date on which the disclosure is 

22 made— 

23 (A) have active investments; and 

24 (B) have liquidated the assets of the firms. 


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1 (2) For each managed firm listed under para2 graph (1), the following information: 

3 (A) As applicable, the total term of the 

4 listed firm beginning with the commencement of 

5 the commitment period with respect to the firm 

6 and ending on the date on which the firm is 

7 dissolved, including, with respect to a listed 

8 firm that, as of the date on which the disclosure 

9 is made, is actively investing— 

10 (i) the term specified by any limited 

11 partnership agreement; and 

12 (ii) the nature of any provisions that 

13 would allow for the extension of that term. 

14 (B) The performance of the listed firm’s 

15 net of fees, as measured by the public market 

16 equivalent or a similar measure. 

17 (C) A list of target firms with respect to 

18 which the listed firm was a control person, the 

19 nature of the control person relationship, and 

20 the period of that control. 

21 (D) The number of employees at each tar22 get firm identified under subparagraph (C), as 

23 of the date on which the listed firm became a 

24 control person with respect to the target firm, 

25 and the date on which the listed firm ceased to 


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1 be a control person with respect to the target 

2 firm. 

3 (E) A list of target firms with respect to 

4 the listed firm with respect to which a case has 

5 been commenced under title 11, United States 

6 Code. 

7 (F) For each target firm with respect to 

8 the listed firm, and with respect to which the 

9 listed firm is a control person— 

10 (i) a list of actions taken by any State 

11 or local regulatory agency; and 

12 (ii) any legal or regulatory penalties 

13 paid, or settlements entered into, by the 

14 general partners of the target firm or the 

15 target firm itself. 

16 (3) The percentage breakdown of the means 

17 employed by the investment adviser to divest owner18 ship or control of target firms, including— 

19 (A) the sale of target firms to other pri20 vate funds; 

21 (B) the sale of target firms to private enti22 ties, other than private funds; 

23 (C) the sale of target firms to issuers, the 

24 securities of which are traded on a national se25 curities exchange; 


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1 (D) the commencement of cases under title 

2 11, United States Code, with respect to target 

3 firms; and 

4 (E) initial public offerings with respect to 

5 target firms. 

6 SEC. 504. GREATER VISIBILITY INTO NON-BANK DIRECT 

7 LENDING AND PRIVATE CREDIT. 

8 Not later than 180 days after the date of enactment 

9 of this Act, the Commission shall amend the rules of the 

10 Commission to require investment advisers required to 

11 submit the form described in section 279.9 of title 17, 

12 Code of Federal Regulations (commonly known as ‘‘Form 

13 PF’’), or any successor regulation, to report quarterly to 

14 the Commission all— 

15 (a) investments of the private funds advised by that 

16 investment adviser; and 

17 (b) loans made by the applicable investment adviser 

18 during the period covered by the disclosure. 

19 TITLE VI—RESTRICTIONS ON 

20 SECURITIZING RISKY COR21 PORATE DEBT 

22 SEC. 601. RISK RETENTION REQUIREMENTS FOR SECURITI23 ZATION OF CORPORATE DEBT. 

24 Section 15G of the Securities Exchange Act of 1934 

25 (15 U.S.C. 78o–11) is amended— 


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1 (1) in subsection (a)(3)— 

2 (A) in subparagraph (A), by striking ‘‘or’’ 

3 at the end; 

4 (B) in subparagraph (B), by striking 

5 ‘‘and’’ at the end and inserting ‘‘or’’; and 

6 (C) by adding at the end the following: 

7 ‘‘(C) a manager of a collateralized debt ob8 ligation; and’’; 

9 (2) by redesignating subsection (i) as subsection 

10 (j); and 

11 (3) by inserting after subsection (h) the fol12 lowing: 

13 ‘‘(i) RULES OF CONSTRUCTION.—With respect to a 

14 securitizer described in subsection (a)(3)(C)— 

15 ‘‘(1) any provision of this section that requires 

16 that securitizer to retain a portion of the credit risk 

17 for an asset that such securitizer does not hold, or 

18 has never held, shall be construed as requiring that 

19 securitizer to— 

20 ‘‘(A) obtain that portion of the credit risk 

21 for that asset; and 

22 ‘‘(B) retain that portion of the credit risk, 

23 either directly by the securitizer or through a 

24 wholly-owned affiliate of the securitizer; and 


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1 ‘‘(2) any reference in this section to an asset 

2 transferred by the securitizer shall be construed to 

3 include any transfer caused by the securitizer.’’. 

4 TITLE VII—MISCELLANEOUS 

5 SEC. 701. ANTI-EVASION. 

6 It shall be unlawful to conduct any activity, including 

7 by entering into an agreement or contract, engaging in 

8 a transaction, or structuring an entity, to willfully evade 

9 or attempt to evade any provision of this Act. 

10 SEC. 702. SEVERABILITY. 

11 If any provision of this Act or the application of such 

12 a provision to any person or circumstance is held to be 

13 invalid or unconstitutional, the remainder of this Act and 

14 the application of the provisions of this Act to any person 

15 or circumstance shall remain and shall not be affected by 

16 that holding. 

Æ 


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