II 

115TH CONGRESS 

1ST SESSION S. 707 

To amend the Internal Revenue Code of 1986 to ensure that pass-through 

businesses do not pay tax at a higher rate than corporations. 

IN THE SENATE OF THE UNITED STATES 

MARCH 23, 2017 

Ms. COLLINS (for herself and Mr. NELSON) introduced the following bill; 

which was read twice and referred to the Committee on Finance 

A BILL 

To amend the Internal Revenue Code of 1986 to ensure 

that pass-through businesses do not pay tax at a higher 

rate than corporations. 

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. 

4 This Act may be cited as the ‘‘Main Street Fairness 

5 Act’’. 

6 SEC. 2. BUSINESS INCOME OF PASS-THROUGH ENTITIES 

7 AND INDIVIDUALS. 

8 (a) QUALIFIED BUSINESS INCOME TAXED AT COR9 PORATE RATE.—Section 1 of the Internal Revenue Code 

10 of 1986 is amended by redesignating subsection (i) as subVerDate Sep 11 2014 00:12 Mar 28, 2017 Jkt 069200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S707.IS S707

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1 section (j) and by inserting after subsection (h) the fol2 lowing: 

3 ‘‘(i) QUALIFIED BUSINESS INCOME.— 

4 ‘‘(1) IN GENERAL.—If a taxpayer has qualified 

5 business income for any taxable year, the tax im6 posed by this section for such taxable year shall not 

7 exceed the sum of— 

8 ‘‘(A) a tax computed at the rates and in 

9 the same manner as if this subsection had not 

10 been enacted on the greater of— 

11 ‘‘(i) taxable income reduced by the 

12 sum of net capital gain plus qualified busi13 ness income, or 

14 ‘‘(ii) the amount determined under 

15 clause (i) plus so much of qualified busi16 ness income that, when added together, 

17 would not be taxed at a rate greater than 

18 the maximum rate in effect under section 

19 11(b), 

20 ‘‘(B) tax on qualified business income re21 duced by the amount of qualified business in22 come on which a tax is determined under sub23 paragraph (A) (if any), determined under sec24 tion 11 for the taxable year by treating qualiVerDate Sep 11 2014 00:12 Mar 28, 2017 Jkt 069200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S707.IS S707

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1 fied business income as taxable income of a cor2 poration, plus 

3 ‘‘(C) a tax on net capital gain, computed 

4 as if subsection (h) imposed a tax on net capital 

5 gain. 

6 ‘‘(2) QUALIFIED BUSINESS INCOME DEFINED.— 

7 For purposes of this subsection— 

8 ‘‘(A) QUALIFIED BUSINESS INCOME.—The 

9 term ‘qualified business income’ means all items 

10 of income, deduction, loss, or credit properly at11 tributable to the taxpayer from the active con12 duct of a trade or business in which— 

13 ‘‘(i) in the case of a partnership, the 

14 taxpayer holds a capital or profits interest, 

15 ‘‘(ii) in the case of an S corporation, 

16 the taxpayer is a shareholder, 

17 ‘‘(iii) in the case of a sole proprietor18 ship or an entity otherwise disregarded as 

19 separate from its sole owner, the taxpayer 

20 is the sole owner, and 

21 ‘‘(iv) in the case of a trust or estate, 

22 the taxpayer is a beneficiary. 

23 ‘‘(B) NET CAPITAL GAIN.—Such term shall 

24 not include any item taken into account in de25 termining net capital gain. 


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1 ‘‘(C) EXCEPTION FOR FINANCIAL SERV2 ICES INCOME OF PARTNERSHIPS.—In the case 

3 of a taxpayer who holds a capital or profits in4 terest in a partnership, such term does not in5 clude financial services income (as defined in 

6 section 904(d)(2)(D)). 

7 ‘‘(3) LIMITATION.—Paragraph (1) shall only 

8 apply to a taxable year in which the maximum rate 

9 of tax under this section exceeds the maximum rate 

10 of tax under section 11. 

11 ‘‘(4) NET CAPITAL GAIN.—For purposes of this 

12 subsection, the term ‘net capital gain’ has the mean13 ing given to such term by subsection (h). 

14 ‘‘(5) REGULATIONS.—The Secretary shall issue 

15 such regulations or other guidance as may be nec16 essary to carry out the purposes of this subsection.’’. 

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

18 this section shall apply to taxable years beginning after 

19 the date of the enactment of this Act. 

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