II 

117TH CONGRESS 

1ST SESSION S. 3022 

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 SENATE OF THE UNITED STATES 

OCTOBER 20, 2021 

Ms. WARREN (for herself, Ms. BALDWIN, Mr. BROWN, Mr. SANDERS, and Mr. 

MERKLEY) introduced the following bill; which was read twice and referred to the Committee on Finance 

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’’. 

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

7 this Act is as follows: 

Sec. 1. Short title; table of contents. 

Sec. 2. Findings. 

Sec. 3. Definitions. 


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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. 

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 THE CARRIED INTEREST LOOPHOLE 

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. 

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. 

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. 


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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 

19 largest impacts from private investment funds have 

20 been in the retail sector. In the 5 years preceding 

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

22 commenced under title 11, United States Code, with 

23 respect to dozens of retailers in the United States, 

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

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

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


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1 Guitar Center, Art Van Furniture, and Southeastern 

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

3 and Winn-Dixie. 

4 (4) Private investment funds have also targeted 

5 entities that serve low-income or vulnerable popu6 lations, including affordable housing developments, 

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

8 and nursing homes. 

9 (5) While private investment funds often pur10 port to take over struggling companies and make 

11 those companies viable, the opposite is often true. 

12 Leveraged buyouts impose enormous debt loads on 

13 otherwise viable companies and then strip those 

14 companies of assets, hobbling the operations of those 

15 companies and preventing them from making nec16 essary investments for future growth. If an invest17 ment goes well, the fund reaps most of the rewards, 

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

19 customers of the company, and the community rely20 ing on the company, suffer. 

21 (6) Regardless of the performance of a private 

22 investment fund, the managers of the fund often 

23 make profits through fees, dividends, and other fi24 nancial engineering. Private funds should have a 

25 stake in the outcome of their investments, enjoying 


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1 returns if those investments are successful but ab2 sorbing losses if those investments fail. 

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

4 United States Code, with respect to a portfolio com5 pany, workers not only lose jobs, but also lose wages 

6 and benefits that are owed, severance pay that has 

7 been promised, and pensions that have been earned. 

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

9 behind other creditors if, through no fault of those 

10 workers, an investment fails. 

11 (8) The performance of private investment 

12 funds is often cloaked in secrecy. Those funds have 

13 full control over the information that the funds dis14 close to investors, which allows the funds to manu15 facture their own performance metrics and makes it 

16 difficult for an investor to compare the returns to 

17 other investment options. Funds also increasingly re18 quire investors to waive the fiduciary obligations ap19 plicable to the funds. Investors should have the in20 formation and bargaining power to take control over 

21 their own investments. 

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

23 introduced into the market and the quality of that 

24 debt is deteriorating, raising concerns with regu25 lators and lawmakers about systemic risk. The instiVerDate Sep 11 2014 22:09 Oct 22, 2021 Jkt 029200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S3022.IS S3022

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1 tutions that make and securitize risky loans collect 

2 large fees and then pass on risk to unwitting inves3 tors. The financial system should not bear all of the 

4 risk while lenders and securitizers reap the rewards. 

5 (10) The Federal Government should— 

6 (A) protect workers, companies, con7 sumers, and investors in the United States; and 

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

9 economically viable companies for the enrich10 ment of private investment fund managers. 

11 SEC. 3. DEFINITIONS. 

12 Except as otherwise expressly provided, in this Act: 

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

14 (A) a person that directly or indirectly 

15 owns, controls, or holds with power to vote, 20 

16 percent or more of the outstanding voting secu17 rities of another entity, other than a person 

18 that holds 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 (B) a corporation 20 percent or more of 

2 whose outstanding voting securities are directly 

3 or indirectly owned, controlled, or held with 

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

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

6 an entity that directly or indirectly owns, con7 trols, or holds with power to vote, 20 percent or 

8 more of the outstanding voting securities of the 

9 covered entity, other than an entity that holds 

10 such securities— 

11 (i) in a fiduciary or agency capacity 

12 without sole discretionary power to vote 

13 such securities; or 

14 (ii) solely to secure a debt, if such en15 tity has not in fact exercised such power to 

16 vote; 

17 (C) a person whose business is operated 

18 under a lease or operating agreement by an19 other entity, or person substantially all of whose 

20 property is operated under an operating agree21 ment with that other entity; or 

22 (D) an entity that operates the business or 

23 substantially all of the property of another enti24 ty under a lease or operating agreement. 


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1 (2) CAPITAL DISTRIBUTION.—The term ‘‘cap2 ital distribution’’ means— 

3 (A) a cash or share dividend; 

4 (B) a share repurchase; 

5 (C) a share redemption; 

6 (D) a share buyback; 

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

8 of stock; and 

9 (F) any other transaction similar to a 

10 transaction described in any of subparagraphs 

11 (A) through (E). 

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

13 in control’’ means a change in a legal right with re14 spect to— 

15 (A) the power to vote more than 50 per 

16 centum of any class of voting securities of a 

17 corporation that engages in interstate com18 merce; or 

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

20 voting securities of a corporation that engages 

21 in interstate commerce that is sufficient to 

22 make the acquirer of such an interest a person 

23 that has the ability to direct the actions of that 

24 corporation. 


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1 (4) CHANGE IN CONTROL TRANSACTION.—The 

2 term ‘‘change in control transaction’’ means a trans3 action, or a set of related transactions, that effec4 tuates a change in control. 

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

6 means the Securities and Exchange Commission. 

7 (6) CONTROL PERSON.—The term ‘‘control per8 son’’— 

9 (A) means— 

10 (i) a person— 

11 (I) that directly or indirectly 

12 owns, controls, or holds with power to 

13 vote, including through coordination 

14 with other persons, 20 percent or 

15 more of the outstanding voting inter16 ests of a corporation; or 

17 (II) that operates the business or 

18 substantially all of the property of a 

19 corporation under a lease or an oper20 ating or management agreement; 

21 (ii) a corporation, other than a target 

22 firm, that has 20 percent or more of its 

23 outstanding voting interests directly or in24 directly owned, controlled, or held with 

25 power to vote by a person that directly or 


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1 indirectly owns, controls, or holds with 

2 power to vote, including through coordina3 tion with other persons, 20 percent or 

4 more of the outstanding voting interests of 

5 another corporation; or 

6 (iii) a person that otherwise has the 

7 ability to direct the actions of a corpora8 tion; and 

9 (B) does not include a person that— 

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

11 to a controlling private fund that is a part12 nership; 

13 (II) does not participate in the direc14 tion of the management or policy of a cor15 poration; and 

16 (III) is not an insider with respect to 

17 the controlling private fund described in 

18 subclause (I); 

19 (ii) is a pension fund or employee wel20 fare benefit plan, if neither the fund nor 

21 plan (as applicable), nor any beneficiary or 

22 affiliate of the benefit or plan, is an insider 

23 with respect to a controlling private fund; 

24 or 


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1 (iii) holds the voting interests of a 

2 corporation solely— 

3 (I) in a fiduciary or agency ca4 pacity without sole discretionary 

5 power to vote the securities; or 

6 (II) to secure a debt, if the per7 son has not— 

8 (aa) exercised the power to 

9 vote; or 

10 (bb) exercised any other gov11 ernance rights with respect to the 

12 corporation. 

13 (7) CONTROLLING PRIVATE FUND.—The term 

14 ‘‘controlling private fund’’ means a private fund 

15 that, directly or through an affiliate, becomes a con16 trol person with respect to a target firm through the 

17 change in control transaction with respect to the tar18 get firm. 

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

20 means— 

21 (A) a joint-stock company; 

22 (B) a company or partnership association 

23 organized under a law that makes only the cap24 ital subscribed or callable up to a specified 

25 amount responsible for the debts of the associaVerDate Sep 11 2014 22:09 Oct 22, 2021 Jkt 029200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S3022.IS S3022

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1 tion, including a limited partnership and a lim2 ited liability company; 

3 (C) a trust; and 

4 (D) an association having a power or privi5 lege that a private corporation, but not an indi6 vidual or a partnership, possesses. 

7 (9) EMPLOYEE WELFARE BENEFIT PLAN.—The 

8 term ‘‘employee welfare benefit plan’’ has the mean9 ing given the term in section 3 of the Employee Re10 tirement Income Security Act of 1974 (29 U.S.C. 

11 1002). 

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

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

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

15 means— 

16 (i) a person that directly or indirectly 

17 has the right to participate in the govern18 ance of a controlling private fund, without 

19 regard to the form or source of that right; 

20 and 

21 (ii) any insider with respect to a con22 trolling private fund; and 

23 (B) does not include— 

24 (i) a person that— 


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1 (I) holds an economic interest 

2 solely to secure a debt, if that person 

3 does not exercise any voting or other 

4 governance right with respect to the 

5 interest; 

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

7 respect to a controlling private fund 

8 that is a partnership; 

9 (bb) does not participate in the 

10 direction of the management or policy 

11 of a corporation; and 

12 (cc) is not an insider with respect 

13 to the controlling private fund de14 scribed in item (aa); or 

15 (III) is a pension fund or em16 ployee welfare benefit plan, if neither 

17 the pension fund nor employee welfare 

18 benefit plan (as applicable), nor any 

19 affiliate or beneficiary of the pension 

20 fund or employee welfare benefit plan, 

21 is an insider with respect to, or affil22 iate of, a controlling private fund; or 

23 (ii) if the source of the right described 

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


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1 (I) a person that is engaged in 

2 business as an underwriter of securi3 ties and that acquires that security 

4 through the good faith participation 

5 of the person in a firm commitment 

6 underwriting registered under the Se7 curities Act of 1933 (15 U.S.C. 77a 

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

9 after the date on which that acquisi10 tion occurs; or 

11 (II) a member of a national secu12 rities exchange solely because that 

13 member is the record holder of that 

14 security and, under the rules of that 

15 exchange— 

16 (aa) may direct the vote of 

17 that security, without instruction, 

18 on— 

19 (AA) other than con20 tested matters; or 

21 (BB) matters that may 

22 substantially affect the 

23 rights or privileges of the 

24 holders of the security to be 

25 voted; and 


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1 (bb) is otherwise precluded 

2 from voting without instruction. 

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

4 any— 

5 (A) director of a corporation; 

6 (B) officer of a corporation; 

7 (C) managing agent of a corporation; 

8 (D) control person with respect to a cor9 poration; 

10 (E) affiliate of a corporation; 

11 (F) general partner of a corporation that 

12 is a partnership; 

13 (G) consultant or contractor retained by a 

14 corporation; 

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

16 described in any of subparagraphs (A) through 

17 (F); or 

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

19 described in subparagraph (H). 

20 (12) INVESTMENT ADVISER.—The term ‘‘in21 vestment adviser’’ has the meaning given the term 

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

23 1940 (15 U.S.C. 80b–2(a)). 


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

2 meaning given the term in section 3(a) of the Secu3 rities Exchange Act of 1934 (15 U.S.C. 78c(a)). 

4 (14) NATIONAL SECURITIES EXCHANGE.—The 

5 term ‘‘national securities exchange’’ means an ex6 change that is registered as a national securities ex7 change under section 6 of the Securities Exchange 

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

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

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

11 plan’’ in section 3 of the Employee Retirement Secu12 rity Act of 1974 (29 U.S.C. 1002). 

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

14 means a corporation that— 

15 (A) would be considered an investment 

16 company under section 3 of the Investment 

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

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

19 subsection (c) of such section 3; 

20 (B) is not a venture capital fund, as de21 fined in section 275.203(l)–1 of title 17, Code 

22 of Federal Regulations, as in effect on the date 

23 of enactment of this Act; and 

24 (C) is not an institution selected under sec25 tion 107 of the Community Development BankVerDate Sep 11 2014 22:09 Oct 22, 2021 Jkt 029200 PO 00000 Frm 00016 Fmt 6652 Sfmt 6201 E:\BILLS\S3022.IS S3022

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1 ing and Financial Institutions Act of 1994 (12 

2 U.S.C. 4706). 

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

4 an individual related by affinity or consanguinity 

5 within the third degree as determined by the com6 mon law, or individual in a step or adoptive relation7 ship within such third degree. 

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

9 meaning given the term in section 2(a) of the Secu10 rities Act of 1933 (15 U.S.C. 77b(a)). 

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

12 means a corporation that is acquired in a change in 

13 control transaction. 

14 TITLE I—CORPORATE 

15 RESPONSIBILITY 

16 SEC. 101. JOINT AND SEVERAL LIABILITY FOR CONTROL17 LING PRIVATE FUNDS AND HOLDERS OF AC18 TIVE INTERESTS IN CONTROLLING PRIVATE 

19 FUNDS. 

20 (a) IN GENERAL.—Notwithstanding any other provi21 sion of law, or the terms of any contract or agreement, 

22 a controlling private fund, and any holder of an active in23 terest with respect to a controlling private fund, shall be 

24 jointly and severally liable for all liabilities of each target 

25 firm for which the controlling private fund is a control 


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

2 target firm, including— 

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

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

5 acquisition of the target firm by the controlling pri6 vate fund; 

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

8 or obligation under a settlement or consent order 

9 with a Federal or State governmental agency or in10 strumentality, including a consumer restitution obli11 gation, for which the target firm, or an affiliate of 

12 the target firm, is liable; 

13 (3) any liability resulting from a violation of 

14 section 3 of the Worker Adjustment and Retraining 

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

16 or an affiliate of the target firm; 

17 (4) any withdrawal liability determined under 

18 part 1 of subtitle E of title IV of the Employee Re19 tirement Income Security Act of 1974 (29 U.S.C. 

20 1381 et seq.) that is incurred by the target firm or 

21 an affiliate of the target firm; and 

22 (5) any claim for unfunded benefit liabilities 

23 owed to the Pension Benefit Guaranty Corporation 

24 under subtitle D of title IV of the Employee Retire25 ment Income Security Act of 1974 (29 U.S.C. 1361 


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

2 plan sponsored by the target firm or an affiliate of 

3 the target firm. 

4 (b) RULE OF CONSTRUCTION.—Nothing in this sec5 tion may be construed to diminish existing, as of the date 

6 of enactment of this Act, controlled group liability under 

7 the Employee Retirement Income Security Act of 1974 

8 (29 U.S.C. 1001 et seq.). 

9 SEC. 102. INDEMNIFICATION VOID AS AGAINST PUBLIC 

10 POLICY. 

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

12 firm, or an affiliate of a target firm, to indemnify a con13 trolling private fund with respect to— 

14 (1) the target firm; 

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

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

17 interest in the controlling private fund with respect 

18 to the liabilities of that person under section 101. 

19 TITLE II—ANTI-LOOTING 

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

21 DISTRIBUTIONS, REDEMPTIONS, BUYBACKS, 

22 AND OUTSOURCING. 

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

24 indirectly, during the 2-year period beginning on the clos25 ing date of a change in control transaction that results 


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1 in a private fund becoming a controlling private fund with 

2 respect to the target firm— 

3 (1) make a capital distribution or similarly re4 duce the equity capital of the target firm; 

5 (2) incur an obligation that commits the target 

6 firm to making a capital distribution or a similar re7 duction of the equity capital of the target firm after 

8 the end of that 2-year period; or 

9 (3) order a plant closing or mass layoff (as de10 fined in section 2(a) of the Worker Adjustment and 

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

12 relocate the trade or business conducted by the em13 ployees in the United States to one or more facilities 

14 outside the United States, in accordance with regu15 lations issued by the Secretary of Labor. 

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

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

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

19 (c) JOINT AND SEVERAL LIABILITY FOR AIDERS AND

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

21 an active interest in a controlling private fund, or any af22 filiate of a target firm that aids, abets, facilitates, sup23 ports, or instructs a target firm’s violation of subsection 

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1 cluding for reasonable attorney’s fees and costs awarded 

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

3 (d) CAUSE OF ACTION.— 

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

5 representative of an employee or creditor, of a target 

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

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

8 a debtor, may bring an action in an appropriate dis9 trict court of the United States against the direct or 

10 indirect transferee or obligee or beneficiary of the 

11 transfer or obligation to void the transfer or obliga12 tion and recover any transferred property for the 

13 target firm. 

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

15 a transfer, the court shall also award the plaintiff 

16 reasonable attorney’s fees and costs. 

17 SEC. 202. PREVENTION OF FRAUDULENT TRANSFERS. 

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

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

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

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

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

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

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


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1 (b) PRESUMPTION OF INSOLVENCY IN TRANSFERS

2 UNDERTAKEN IN CONNECTION WITH CHANGE IN CON3 TROL TRANSACTIONS.—Section 548 of title 11, United 

4 States Code, is amended by adding at the end the fol5 lowing: 

6 ‘‘(f)(1) In this subsection— 

7 ‘‘(A) the terms ‘change in control trans8 action’, ‘control person’, and ‘target firm’ have 

9 the meanings given those terms in section 3 of 

10 the Stop Wall Street Looting Act; and 

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

12 shorter of— 

13 ‘‘(i) the 8-year period beginning on 

14 the date on which a change in control 

15 transaction closed; or 

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

17 on which a change in control transaction 

18 closed and ending on the earliest subse19 quent date on which a public offering of a 

20 controlling share of the common equity se21 curities of the target firm occurs. 

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

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

24 made a transfer or incurred an obligation described 


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

2 if— 

3 ‘‘(A) the transfer was made to or obliga4 tion was incurred by the debtor or an affiliate 

5 in connection with a change in control trans6 action; or 

7 ‘‘(B) during a protected period— 

8 ‘‘(i) the transfer was made by the 

9 debtor or an affiliate to a control person, 

10 an affiliate, or an insider; or 

11 ‘‘(ii) the obligation was incurred by 

12 the debtor or an affiliate from a control 

13 person, an affiliate, or an insider. 

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

15 shall, in analyzing related transactions, link together 

16 as a single transaction any interrelated yet formally 

17 distinct steps in an integrated transaction (com18 monly known as the ‘step transaction doctrine’).’’. 

19 (c) STATUTE OF LIMITATIONS.— 

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

21 States Code, is amended— 

22 (A) in subsection (a)(1), by striking para23 graph ‘‘that was made or incurred on or within 

24 2 years before the date of the filing of the peti25 tion’’ and inserting ‘‘that was made or incurred 


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1 during the period described in subsection (g)’’; 

2 and 

3 (B) adding at the end the following: 

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

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

6 obligation incurred by the debtor on or within— 

7 ‘‘(1) 8 years before the date of the filing of the 

8 petition if the transfer was made or obligation in9 curred in connection with a change in control trans10 action, as defined in section 3 of the Stop Wall 

11 Street Looting Act; or 

12 ‘‘(2) 2 years before the date of the filing of the 

13 petition for all other transfers and obligations.’’. 

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

15 United States Code, is amended— 

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

17 the end; 

18 (B) in paragraph (3), by striking the pe19 riod at the end and inserting ‘‘; or’’; and 

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

21 ‘‘(4) within 8 years after the transfer was made 

22 or the obligation was incurred, if the transfer was 

23 made or the obligation was incurred— 


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•S 3022 IS

1 ‘‘(A) in connection with a change in con2 trol transaction, as defined in section 3 of the 

3 Stop Wall Street Looting Act; or 

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

5 in section 548(f) of title 11.’’. 

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

7 1103(c) of title 11, United States Code, is amended— 

8 (1) by redesignating paragraphs (3) through 

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

10 (2) by inserting after paragraph (2) the fol11 lowing: 

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

13 a director, officer, general partner, or person in con14 trol of the debtor regarding potential conflicts of in15 terest;’’. 

16 (e) ELIMINATION OF SHAM INDEPENDENT DIREC17 TORS.—Section 1107 of title 11, United States Code, is 

18 amended— 

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

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

21 subject to’’; and 

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

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

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

25 of creditors appointed under section 1102 of this title shall 


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•S 3022 IS

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

2 under this chapter to bring or settle on behalf of the es3 tate— 

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

5 553 to avoid a transfer made or obligation incurred 

6 by the debtor in connection with a change of control 

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

8 Street Looting Act; or 

9 ‘‘(2) an action against an insider, a former in10 sider, or an agent or aider and abettor of an insider 

11 or former insider.’’. 

12 SEC. 203. SURTAX ON CERTAIN AMOUNTS RECEIVED BY IN13 VESTMENT FIRMS FROM CONTROLLED TAR14 GET FIRMS. 

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

16 1 of the Internal Revenue Code of 1986 is amended by 

17 adding at the end the following new part: 

18 ‘‘PART VIII—SURTAX ON CERTAIN AMOUNTS 

19 RECEIVED BY INVESTMENT FIRMS 

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

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

21 INVESTMENT FIRMS FROM CONTROLLED 

22 TARGET FIRMS. 

23 ‘‘(a) IMPOSITION OF TAX.— 


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

2 payments are included in the gross income of a tax3 payer for any taxable year, then there is hereby im4 posed on the taxpayer for the taxable year a tax 

5 equal to the applicable percentage of the aggregate 

6 amount of such payments. Such tax shall be in addi7 tion to any other tax imposed by this subtitle. 

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

9 of this subsection, the term ‘applicable percentage’ 

10 means 100 percent, minus the highest rate of tax 

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

12 the taxable year. 

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

14 section— 

15 ‘‘(1) IN GENERAL.—The term ‘applicable pay16 ment’ means any amount paid or incurred by an ap17 plicable entity (or any person related within the 

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

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

20 is paid or incurred, is an applicable controlling enti21 ty. An amount shall be treated as an applicable pay22 ment without regard to whether it is paid or in23 curred to the taxpayer including it in gross income 

24 and to which subsection (a) applies. 


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1 ‘‘(2) EXCEPTIONS.—Such term shall not in2 clude any of the following: 

3 ‘‘(A) INTEREST.—Any amount paid or in4 curred which is treated as interest for purposes 

5 of this chapter. 

6 ‘‘(B) DISTRIBUTIONS OF PROPERTY WITH

7 RESPECT TO STOCK.—Any distribution of prop8 erty (as defined in section 317(a)) to which sec9 tion 301(a) applies. 

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

11 purposes of this section— 

12 ‘‘(1) APPLICABLE ENTITY.—The term ‘applica13 ble entity’ means any person— 

14 ‘‘(A) which is engaged in the active con15 duct of a trade or business, and 

16 ‘‘(B) with respect to which any other per17 son conducts activities in connection with an 

18 applicable trade or business. 

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

20 term ‘applicable controlling entity’ means, with re21 spect to any applicable entity, any person— 

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

23 trade or business some or all of the activities of 

24 which are conducted in connection with the ap25 plicable entity, and 


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•S 3022 IS

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

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

3 person which controls) the applicable entity. 

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

5 term ‘applicable trade or business’ means any activ6 ity conducted on a regular, continuous, and substan7 tial basis which, regardless of whether the activity is 

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

9 or in part, of— 

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

11 ‘‘(B) either— 

12 ‘‘(i) investing in or disposing of speci13 fied assets (or identifying specified assets 

14 for such investing or disposition), or 

15 ‘‘(ii) developing specified assets. 

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

17 asset’ means— 

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

19 475(c)(2) but without regard to the phrase 

20 ‘widely held or publicly traded’ in subparagraph 

21 (B) thereof and without regard to the last sen22 tence thereof), and 

23 ‘‘(B) real estate held for rental or invest24 ment. 


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1 ‘‘(d) RULES AND DEFINITIONS RELATING TO OWN2 ERSHIP ATTRIBUTION AND CONTROL.—For purposes of 

3 this section— 

4 ‘‘(1) CONSTRUCTIVE OWNERSHIP RULES USED

5 IN DETERMINING RELATED PARTY.—In determining 

6 whether persons are related within the meaning of 

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

8 rules of section 318 shall apply in lieu of the con9 structive ownership rules which would otherwise 

10 apply, except that in applying such rules the term 

11 ‘stock’ shall include capital, profits, or other bene12 ficial interests in persons other than corporations. 

13 ‘‘(2) CONTROL.— 

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

15 corporation, the term ‘control’ has the meaning 

16 given such term by section 304(c) (without re17 gard to paragraph (3)(B) thereof). 

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

19 person other than a corporation, such term 

20 means the ownership, directly or indirectly, of 

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

22 other beneficial interests in the person. 

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

24 such regulations or other guidance as may be necessary 


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

2 including regulations— 

3 ‘‘(1) providing for such adjustments to the ap4 plication of this section as are necessary to prevent 

5 the avoidance of the purposes of this section, includ6 ing through the use of unrelated persons, or conduit 

7 transactions, and 

8 ‘‘(2) modifying the constructive ownership rules 

9 under section 318 to the extent necessary to apply 

10 such rules to capital, profits, or other beneficial in11 terests as well as stock.’’. 

12 (b) DISALLOWANCE OF CREDITS AGAINST TAX.— 

13 Subparagraph (B) of section 26(b)(2) of the Internal Rev14 enue Code of 1986 is amended by inserting ‘‘or section 

15 59B (relating to surtax on certain amounts received by 

16 investment firms from controlled target firms)’’ after 

17 ‘‘anti-abuse tax)’’. 

18 (c) CONFORMING AMENDMENTS.— 

19 (1) The table of parts for subchapter A of chap20 ter 1 of the Internal Revenue Code of 1986 is 

21 amended by adding after the item relating to part 

22 VII the following new item: 

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

FIRMS’’. 

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

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


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•S 3022 IS

1 applicable payments included in gross income which 

2 are effectively connected with the conduct of a trade 

3 or business within the United States’’ before the pe4 riod. 

5 (3) Section 882(a)(1) of such Code is amend6 ed— 

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

8 ‘‘59A’’; and 

9 (B) by inserting ‘‘, and as provided in sec10 tion 59B on applicable payments included in 

11 gross income which are effectively connected 

12 with the conduct of a trade or business within 

13 the United States’’ before the period. 

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

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

16 of clause (i), by striking ‘‘over’’ at the end of clause 

17 (ii) and inserting ‘‘and’’, and by adding at the end 

18 the following new clause: 

19 ‘‘(iii) the tax imposed by section 59B, 

20 over’’. 

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

22 Code is amended by striking ‘‘tax’’ each place it ap23 pears and inserting ‘‘taxes’’. 

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

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


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•S 3022 IS

1 of clause (ii), by redesignating clause (iii) as clause 

2 (iv), and by inserting after clause (ii) the following 

3 new clause: 

4 ‘‘(iii) the tax imposed by section 59B, 

5 and’’. 

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

7 this section shall apply to applicable payments (as defined 

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

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

10 date of the enactment of this Act. 

11 SEC. 204. LIMITATION ON DEDUCTION FOR BUSINESS IN12 TEREST OF CERTAIN BUSINESSES OWNED BY 

13 PRIVATE FUNDS. 

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

15 Revenue Code of 1986 is amended by redesignating para16 graph (11) as paragraph (12) and by inserting after para17 graph (10) the following new paragraph: 

18 ‘‘(11) MODIFICATION OF LIMITATION FOR CER19 TAIN BUSINESSES OWNED BY PRIVATE FIRMS.— 

20 ‘‘(A) IN GENERAL.—In the case of a tax21 payer which is an applicable entity controlled by 

22 an applicable controlling entity (or any person 

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

24 707(b) to such entity) at any time during the 

25 taxable year— 


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

2 the taxpayer as of the close of the taxable 

3 year (or on any other day during the tax4 able year as the Secretary may prescribe in 

5 regulations) exceeds 1, then paragraph (1) 

6 shall be applied by substituting a percent7 age that the Secretary determines appro8 priate (and which shall be not less than 30 

9 percent) for ‘30 percent’, and 

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

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

12 business of the taxpayer as an electing real 

13 property trade or business— 

14 ‘‘(I) the taxpayer may not make 

15 any such election during such taxable 

16 year, and 

17 ‘‘(II) any such election of the 

18 taxpayer in effect as of the close of 

19 the taxable year preceding such tax20 able year with respect to a trade or 

21 business shall be revoked, effective for 

22 such taxable year and all succeeding 

23 taxable years. 

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

25 purposes of this paragraph, the term ‘ratio of 


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1 debt to equity’ means, with respect to any tax2 payer, the ratio which the total indebtedness of 

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

4 money and all other assets reduced (but not 

5 below zero) by such total indebtedness. For 

6 purposes of the preceding sentence— 

7 ‘‘(i) the amount taken into account 

8 with respect to any asset shall be the ad9 justed basis thereof for purposes of deter10 mining gain, 

11 ‘‘(ii) the amount taken into account 

12 with respect to any indebtedness with 

13 original issue discount shall be its issue 

14 price plus the portion of the original issue 

15 discount previously accrued as determined 

16 under the rules of section 1272 (deter17 mined without regard to subsection (a)(7) 

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

19 ‘‘(iii) there shall be such other adjust20 ments as the Secretary may by regulations 

21 prescribe. 

22 ‘‘(C) COORDINATION WITH DEPRECIATION

23 RULES.—If the alternative depreciation system 

24 under section 168(g) applies to property by rea25 son of an election under paragraph (7)(B) 


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•S 3022 IS

1 which is revoked under subparagraph 

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

3 under section 167(a) with respect to such prop4 erty for the taxable year of revocation and all 

5 succeeding taxable years shall be determined 

6 under section 168 in the same manner as if 

7 such revocation were a change in use of the 

8 property under section 168(i)(5) and the regu9 lations thereunder. 

10 ‘‘(D) DEFINITIONS AND RULES.—For pur11 poses of this paragraph— 

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

13 which is also used in section 59B shall 

14 have the same meaning as when used in 

15 such section, and 

16 ‘‘(ii) the constructive ownership rules 

17 of section 318 shall apply in the same 

18 manner as such rules apply for purposes of 

19 section 59B.’’. 

20 (b) EFFECTIVE DATES.— 

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

22 this section shall apply to taxable years beginning on 

23 or after the date of enactment of this Act. 

24 (2) REVOCATION OF ELECTIONS.—Subpara25 graphs (A)(ii)(II) and (C) of section 163(j)(11) of 


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•S 3022 IS

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

2 section, shall apply to taxable years beginning on or 

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

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

5 made before, on, or after such date. 

6 TITLE III—PROTECTING WORK7 ERS WHEN COMPANIES GO 

8 BANKRUPT 

9 SEC. 301. INCREASED PRIORITY FOR WAGES. 

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

11 amended— 

12 (1) in paragraph (4)— 

13 (A) by redesignating subparagraphs (A) 

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

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

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

17 ‘‘Fourth’’; 

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

19 in the matter preceding clause (i), as so redes20 ignated— 

21 (i) by striking ‘‘$10,000’’ and insert22 ing ‘‘$20,000’’; 

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

24 and 


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•S 3022 IS

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

2 cessation of the debtor’s business, which3 ever occurs first’’; and 

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

5 ‘‘(B) Severance pay described in subparagraph 

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

7 or termination of employment of the individual to 

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

9 (2) in paragraph (5)— 

10 (A) in subparagraph (A)— 

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

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

13 cessation of the debtor’s business, which14 ever occurs first’’; and 

15 (B) by striking subparagraph (B) and in16 serting the following: 

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

18 the number of employees covered by each such 

19 plan multiplied by $20,000.’’. 

20 SEC. 302. PRIORITY FOR SEVERANCE PAY AND CONTRIBU21 TIONS TO EMPLOYEE WELFARE BENEFIT 

22 PLANS. 

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

24 amended— 


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•S 3022 IS

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

2 the end; 

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

4 inserting a semicolon; and 

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

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

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

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

9 program, or policy generally applicable to employees 

10 of the debtor (but not under an individual contract 

11 of employment), or owed pursuant to a collective 

12 bargaining agreement, for layoff or termination on 

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

14 pay shall be deemed earned in full upon such layoff 

15 or termination of employment; and 

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

17 of the filing of the petition under an employee wel18 fare benefit plan, as defined in section 3 of the Stop 

19 Wall Street Looting Act.’’. 

20 SEC. 303. PRIORITY FOR VIOLATIONS OF FEDERAL AND 

21 STATE LAWS. 

22 (a) ALLOWANCE OF ADMINISTRATIVE EXPENSES IN

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

24 11, United States Code, is amended by inserting after 

25 ‘‘(ii)’’ the following: ‘‘any back pay, civil penalty, or damVerDate Sep 11 2014 22:09 Oct 22, 2021 Jkt 029200 PO 00000 Frm 00039 Fmt 6652 Sfmt 6201 E:\BILLS\S3022.IS S3022

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•S 3022 IS

1 ages for a violation of any Federal or State labor and em2 ployment law, including the Worker Adjustment and Re3 training Notification Act (29 U.S.C. 2101 et seq.) and any 

4 comparable State law, and’’. 

5 (b) ADMINISTRATION AND ENFORCEMENT OF WORK6 ER ADJUSTMENT AND RETRAINING NOTIFICATION RE7 QUIREMENTS.—Section 5(a)(1) of the Worker Adjustment 

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

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

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

11 sentence shall consist of the days, in the notification 

12 period, that are or that follow the date of the pro13 hibited closing or layoff under this Act,’’ after ‘‘pe14 riod of the violation,’’; and 

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

16 SEC. 304. LIMITATION ON EXECUTIVE COMPENSATION EN17 HANCEMENTS. 

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

19 amended— 

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

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

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

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

24 subparagraph (A)— 


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1 (A) by inserting ‘‘, a senior executive offi2 cer of the debtor, or any of the 20 next most 

3 highly compensated employees of the debtor, de4 partment or division managers of the debtor, or 

5 consultants providing services to the debtor (re6 gardless of whether the executive officer, em7 ployee, manager, or consultant is an insider)’’ 

8 after ‘‘insider of the debtor’’; 

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

10 performance or incentive compensation, a bonus 

11 of any kind, or any other financial return de12 signed to replace or enhance incentive, stock, or 

13 other compensation in effect before the date of 

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

15 with the debtor’s business,’’; and 

16 (C) by inserting ‘‘clear and convincing’’ be17 fore ‘‘evidence in the record’’; 

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

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

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

21 highly compensated employees of the debtor, depart22 ment or division managers of the debtor, or consult23 ants providing services to the debtor (regardless of 

24 whether the executive officer, employee, manager, or 


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•S 3022 IS

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

2 debtor’’; and 

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

4 following: 

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

6 the benefit of an insider of the debtor, a senior exec7 utive officer of the debtor, or any of the 20 next 

8 most highly compensated employees of the debtor, 

9 department or division managers of the debtor, or 

10 consultants providing services to the debtor (regard11 less of whether the executive officer, employee, man12 ager, or consultant is an insider), absent a finding 

13 by the court, based upon clear and convincing evi14 dence in the record, and without deference to a re15 quest by the debtor for such payment, that— 

16 ‘‘(A) because of the essential and particu17 larized nature of the services provided by the 

18 insider, executive officer, employee, manager, or 

19 consultant, the transfer or obligation is essen20 tial to— 

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

22 debtor; or 

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

24 the assets of the debtor are liquidated, the 

25 orderly liquidation of the assets; 


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•S 3022 IS

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

2 under an incentive program, the transfer or ob3 ligation is part of a workforce incentive pro4 gram generally applicable to the nonmanage5 ment workforce of the debtor; and 

6 ‘‘(C) the cost of the transfer or obliga7 tion— 

8 ‘‘(i) is reasonable; 

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

10 the financial circumstances of the debtor; 

11 and 

12 ‘‘(iii) is not disproportionate in light 

13 of any economic loss incurred by the non14 management workforce of the debtor dur15 ing the case.’’. 

16 SEC. 305. PROHIBITION AGAINST SPECIAL COMPENSATION 

17 PAYMENTS. 

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

19 amended— 

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

21 following: 

22 ‘‘(3) No plan, program, or other transfer or obliga23 tion to or for the benefit of an insider of the debtor, a 

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

25 next most highly compensated employees of the debtor, deVerDate Sep 11 2014 22:09 Oct 22, 2021 Jkt 029200 PO 00000 Frm 00043 Fmt 6652 Sfmt 6201 E:\BILLS\S3022.IS S3022

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1 partment or division managers of the debtor, or consult2 ants providing services to the debtor (regardless of wheth3 er the executive officer, employee, manager, or consultant 

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

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

6 of the petition— 

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

8 practice of paying severance pay to the nonmanage9 ment workforce of the debtor; or 

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

11 practice described in subparagraph (A) in order to 

12 reduce benefits under the plan, program, policy or 

13 practice.’’; and 

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

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

16 any transaction that constitutes a transfer or obliga17 tion subject to section 503(c), the trustee shall be 

18 required to obtain the prior approval of the court 

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

20 SEC. 306. EXECUTIVE COMPENSATION UPON EXIT FROM 

21 BANKRUPTCY. 

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

23 amended— 

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

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•S 3022 IS

1 view under paragraph (5), any payment or other dis2 tribution under the plan to or for the benefit of an 

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

4 debtor, or any of the 20 next most highly com5 pensated employees of the debtor, department or di6 vision managers of the debtor, or consultants pro7 viding services to the debtor (regardless of whether 

8 the executive officer, employee, manager, or consult9 ant is an insider), shall not be approved by the court 

10 except as part of a program of payments or distribu11 tions generally applicable to employees of the debtor, 

12 and only to the extent that the court determines 

13 that the payment or other distribution is not exces14 sive or disproportionate in comparison to payments 

15 or other distributions to the nonmanagement work16 force of the debtor.’’; and 

17 (2) in paragraph (5)— 

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

19 ‘‘and’’ at the end; 

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

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

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

23 ‘‘(C) the compensation disclosed pursuant to 

24 subparagraph (B) has been approved by, or is sub25 ject to the approval of, the court as— 


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•S 3022 IS

1 ‘‘(i) reasonable in comparison to compensa2 tion paid to individuals holding comparable po3 sitions at comparable companies in the same in4 dustry; and 

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

6 economic concession made by the nonmanage7 ment workforce of the debtor during the case.’’. 

8 SEC. 307. COLLATERAL SURCHARGE FOR EMPLOYEE OBLI9 GATIONS. 

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

11 amended— 

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

13 and 

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

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

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

17 compensation owed under a plan, program, policy, or prac18 tice of the debtor, or pursuant to the terms of a collective 

19 bargaining agreement, for services rendered on or after 

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

21 has not made a contribution due under an employee wel22 fare benefit plan, as defined in section 3 of the Stop Wall 

23 Street Looting Act, on or after the date of the commence24 ment of the case, such unpaid obligations shall be— 

25 ‘‘(A) deemed— 


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•S 3022 IS

1 ‘‘(i) reasonable, necessary costs and ex2 penses of preserving, or disposing of, property 

3 securing an allowed secured claim; and 

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

5 secured claim; and 

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

7 the employees or the employee welfare benefit plan, 

8 as defined in section 3 of the Stop Wall Street 

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

10 predecessor or successor in interest, has otherwise 

11 waived the provisions of this subsection under an 

12 agreement with the holder of the allowed secured 

13 claim or a successor or predecessor in interest of the 

14 holder of the allowed secured claim.’’. 

15 SEC. 308. VOIDABILITY OF PREFERENTIAL COMPENSATION 

16 TRANSFERS. 

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

18 amended by adding at the end the following: 

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

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

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

22 compensated employees of the debtor, department or divi23 sion managers of the debtor, or consultants providing serv24 ices to the debtor (regardless of whether the executive offiVerDate Sep 11 2014 22:09 Oct 22, 2021 Jkt 029200 PO 00000 Frm 00047 Fmt 6652 Sfmt 6201 E:\BILLS\S3022.IS S3022

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1 cer, employee, manager, or consultant is an insider), 

2 that— 

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

4 bonus, or incentive plan devised before the date of 

5 the filing of the petition; and 

6 ‘‘(B) does not meet the requirements under sec7 tion 363(b)(3) or 503(c). 

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

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

10 this subsection. 

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

12 section 1102, may commence an action to recover a trans13 fer under paragraph (1) of this subsection. 

14 ‘‘(B) If neither the trustee nor a committee com15 mences an action to recover a transfer under subpara16 graph (A) before the date of the commencement of a hear17 ing on the confirmation of a plan, any party in interest 

18 may apply to the court for authority to recover the trans19 fer for the benefit of the estate, in which case the costs 

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

21 SEC. 309. PROTECTION FOR EMPLOYEES IN A SALE OF AS22 SETS. 

23 (a) REQUIREMENT RELATING TO PRESERVING JOBS

24 AND MAINTAINING TERMS AND CONDITIONS RELATING


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

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

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

4 the estate under this section, or under a plan under chap5 ter 11, the court shall give substantial weight to the extent 

6 to which a prospective purchaser or lessee, respectively, 

7 of the property will— 

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

9 debtor; and 

10 ‘‘(B) maintain the terms and conditions of em11 ployment of the workforce of the debtor. 

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

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

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

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

16 the court shall approve the offer that best— 

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

18 debtor; and 

19 ‘‘(B) maintains the terms and conditions of em20 ployment of the workforce of the debtor. 

21 ‘‘(r)(1) Any party seeking to purchase or lease prop22 erty of the estate under this section, or under a plan under 

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

24 a transaction with respect to— 


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1 ‘‘(A) the preservation of the jobs of the work2 force of the debtor; and 

3 ‘‘(B) the maintenance of the terms and condi4 tions of employment of the workforce of the debtor. 

5 ‘‘(2) The court shall expressly include in an order ap6 proving a purchase or lease of property of the estate under 

7 this section, or under a plan under chapter 11, any rep8 resentation made by a purchaser or lessee of the property 

9 under paragraph (1). 

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

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

12 chapter 11— 

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

14 purchaser or lessee of the property in order to en15 force the terms of the order approving the purchase 

16 or lease; 

17 ‘‘(B) the purchaser or lessee shall promptly dis18 close to the court any material noncompliance with 

19 the terms of the order described in subparagraph 

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

21 and 

22 ‘‘(C) with respect to material noncompliance de23 scribed in subparagraph (B), the court may impose 

24 any appropriate remedy, including injunctive relief, 

25 to address the noncompliance.’’. 


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1 (b) PLANS UNDER CHAPTER 11.— 

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

3 of title 11, United States Code, is amended by in4 serting ‘‘, which sale shall be subject to the require5 ments under subsections (q) and (r) of section 363 

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

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

8 of title 11, United States Code, is amended by add9 ing at the end the following: 

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

11 substantially all of the property of the estate, the 

12 sale meets the requirements under subsections (q) 

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

14 SEC. 310. PROTECTION OF GIFT CARD PURCHASERS. 

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

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

17 paragraph (26) the following: 

18 ‘‘(26A) The term ‘gift card’ means a paper or 

19 electronic promise, plastic card, or other payment 

20 code or device that is— 

21 ‘‘(A) redeemable at— 

22 ‘‘(i) a single merchant; or 

23 ‘‘(ii) an affiliated group of merchants 

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


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•S 3022 IS

1 ‘‘(B) issued in a specified amount, regard2 less of whether that amount may be increased 

3 in value or reloaded at the request of the hold4 er; 

5 ‘‘(C) purchased on a prepaid basis in ex6 change for payment; and 

7 ‘‘(D) honored by the single merchant or af8 filiated group of merchants described in sub9 paragraph (A) upon presentation for goods or 

10 services.’’. 

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

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

13 and inserting the following: 

14 ‘‘(7) Seventh, allowed unsecured claims of indi15 viduals, to the extent of $1,800 for each such indi16 vidual, arising from the deposit, before the com17 mencement of the case, of money in connection 

18 with— 

19 ‘‘(A) the purchase, lease, or rental of prop20 erty; 

21 ‘‘(B) the purchase of services, for the per22 sonal, family, or household use of such individ23 uals, that were not delivered or provided; or 


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•S 3022 IS

1 ‘‘(C) the purchase of a gift card with re2 spect to which funds exist that have not been 

3 redeemed.’’. 

4 SEC. 311. COMMERCIAL REAL ESTATE. 

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

6 amended— 

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

8 (2) by redesignating paragraph (5) as para9 graph (4). 

10 TITLE IV—CLOSING THE 

11 CARRIED INTEREST LOOPHOLE 

12 SEC. 401. AMENDMENT OF 1986 CODE. 

13 Except as otherwise expressly provided, whenever in 

14 this title an amendment or repeal is expressed in terms 

15 of an amendment to, or repeal of, a section or other provi16 sion, the reference shall be considered to be made to a 

17 section or other provision of the Internal Revenue Code 

18 of 1986. 

19 SEC. 402. PARTNERSHIP INTERESTS TRANSFERRED IN 

20 CONNECTION WITH PERFORMANCE OF SERV21 ICES. 

22 (a) MODIFICATION TO ELECTION TO INCLUDE PART23 NERSHIP INTEREST IN GROSS INCOME IN YEAR OF

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


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•S 3022 IS

1 redesignating paragraph (4) as paragraph (5) and by in2 serting after paragraph (3) the following new paragraph: 

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

4 provided by the Secretary— 

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

6 transfer of an interest in a partnership in con7 nection with the provision of services to (or for 

8 the benefit of) such partnership— 

9 ‘‘(i) the fair market value of such in10 terest shall be treated for purposes of this 

11 section as being equal to the amount of the 

12 distribution which the partner would re13 ceive if the partnership sold (at the time of 

14 the transfer) all of its assets at fair market 

15 value and distributed the proceeds of such 

16 sale (reduced by the liabilities of the part17 nership) to its partners in liquidation of 

18 the partnership, and 

19 ‘‘(ii) the person receiving such interest 

20 shall be treated as having made the elec21 tion under subsection (b)(1) unless such 

22 person makes an election under this para23 graph to have such subsection not apply. 


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1 ‘‘(B) ELECTION.—The election under sub2 paragraph (A)(ii) shall be made under rules 

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

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

5 this section shall apply to interests in partnerships trans6 ferred after the date of enactment of this Act. 

7 SEC. 403. SPECIAL RULES FOR PARTNERS PROVIDING IN8 VESTMENT MANAGEMENT SERVICES TO 

9 PARTNERSHIPS. 

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

11 1 is amended by adding at the end the following new sec12 tion: 

13 ‘‘SEC. 710. SPECIAL RULES FOR PARTNERS PROVIDING IN14 VESTMENT MANAGEMENT SERVICES TO 

15 PARTNERSHIPS. 

16 ‘‘(a) TREATMENT OF DISTRIBUTIVE SHARE OF

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

18 case of an investment services partnership interest— 

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

20 702(b)— 

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

22 gain with respect to such interest for any part23 nership taxable year shall be treated as ordi24 nary income, and 


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

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

3 with respect to such interest for any partner4 ship taxable year shall be treated as an ordi5 nary loss. 

6 ‘‘(2) RECHARACTERIZATION OF LOSSES LIM7 ITED TO RECHARACTERIZED GAINS.—The amount 

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

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

10 of— 

11 ‘‘(A) the aggregate amount treated as ordi12 nary income under paragraph (1)(A) with re13 spect to the investment services partnership in14 terest for all preceding partnership taxable 

15 years to which this section applies, over 

16 ‘‘(B) the aggregate amount treated as or17 dinary loss under paragraph (1)(B) with re18 spect to such interest for all preceding partner19 ship taxable years to which this section applies. 

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

21 LOSS.— 

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

23 treated as ordinary income under paragraph 

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


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•S 3022 IS

1 items of long-term capital gain taken into ac2 count in determining such net capital gain. 

3 ‘‘(B) NET CAPITAL LOSS.—The amount 

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

5 shall be allocated ratably among the items of 

6 long-term capital loss and short-term capital 

7 loss taken into account in determining such net 

8 capital loss. 

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

10 LOSSES.—For purposes of this section— 

11 ‘‘(A) IN GENERAL.—Net capital gain, long12 term capital gain, and long-term capital loss, 

13 with respect to any investment services partner14 ship interest for any taxable year, shall be de15 termined under section 1222, except that such 

16 section shall be applied— 

17 ‘‘(i) without regard to the recharacter18 ization of any item as ordinary income or 

19 ordinary loss under this section, 

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

21 of gain and loss taken into account by the 

22 holder of such interest under section 702 

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

24 respect to such interest for such taxable 

25 year, and 


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1 ‘‘(iii) by treating property which is 

2 taken into account in determining gains 

3 and losses to which section 1231 applies as 

4 capital assets held for more than 1 year. 

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

6 capital loss’ means the excess of the losses from 

7 sales or exchanges of capital assets over the 

8 gains from such sales or exchanges. Rules simi9 lar to the rules of clauses (i) through (iii) of 

10 subparagraph (A) shall apply for purposes of 

11 the preceding sentence. 

12 ‘‘(5) SPECIAL RULE FOR DIVIDENDS.—Any div13 idend allocated with respect to any investment serv14 ices partnership interest shall not be treated as 

15 qualified dividend income for purposes of section 

16 1(h). 

17 ‘‘(6) SPECIAL RULE FOR QUALIFIED SMALL

18 BUSINESS STOCK.—Section 1202 shall not apply to 

19 any gain from the sale or exchange of qualified small 

20 business stock (as defined in section 1202(c)) allo21 cated with respect to any investment services part22 nership interest. 

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

24 ‘‘(1) GAIN.— 


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1 ‘‘(A) IN GENERAL.—Any gain on the dis2 position of an investment services partnership 

3 interest shall be— 

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

5 ‘‘(ii) recognized notwithstanding any 

6 other provision of this subtitle. 

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

8 In the case of a disposition of an investment 

9 services partnership interest by gift or by rea10 son of death of the taxpayer— 

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

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

13 an investment services partnership interest 

14 in the hands of the person acquiring such 

15 interest, and 

16 ‘‘(iii) any amount that would have 

17 been treated as ordinary income under this 

18 subsection had the decedent sold such in19 terest immediately before death shall be 

20 treated as an item of income in respect of 

21 a decedent under section 691. 

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

23 investment services partnership interest shall be 

24 treated as an ordinary loss to the extent of the ex25 cess (if any) of— 


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1 ‘‘(A) the aggregate amount treated as ordi2 nary income under subsection (a) with respect 

3 to such interest for all partnership taxable 

4 years to which this section applies, over 

5 ‘‘(B) the aggregate amount treated as or6 dinary loss under subsection (a) with respect to 

7 such interest for all partnership taxable years 

8 to which this section applies. 

9 ‘‘(3) ELECTION WITH RESPECT TO CERTAIN EX10 CHANGES.—Paragraph (1)(A)(ii) shall not apply to 

11 the contribution of an investment services partner12 ship interest to a partnership in exchange for an in13 terest in such partnership if— 

14 ‘‘(A) the taxpayer makes an irrevocable 

15 election to treat the partnership interest re16 ceived in the exchange as an investment serv17 ices partnership interest, and 

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

19 such reporting and recordkeeping requirements 

20 as the Secretary may prescribe. 

21 ‘‘(4) DISTRIBUTIONS OF PARTNERSHIP PROP22 ERTY.— 

23 ‘‘(A) IN GENERAL.—In the case of any dis24 tribution of property by a partnership with re25 spect to any investment services partnership inVerDate Sep 11 2014 22:09 Oct 22, 2021 Jkt 029200 PO 00000 Frm 00060 Fmt 6652 Sfmt 6201 E:\BILLS\S3022.IS S3022

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1 terest held by a partner, the partner receiving 

2 such property shall recognize gain equal to the 

3 excess (if any) of— 

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

5 property at the time of such distribution, 

6 over 

7 ‘‘(ii) the adjusted basis of such prop8 erty in the hands of such partner (deter9 mined without regard to subparagraph 

10 (C)). 

11 ‘‘(B) TREATMENT OF GAIN AS ORDINARY

12 INCOME.—Any gain recognized by such partner 

13 under subparagraph (A) shall be treated as or14 dinary income to the same extent and in the 

15 same manner as the increase in such partner’s 

16 distributive share of the taxable income of the 

17 partnership would be treated under subsection 

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

19 partnership had sold the distributed property at 

20 fair market value and all of the gain from such 

21 disposition were allocated to such partner. For 

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

23 treated as ordinary income under this subpara24 graph shall be treated as an amount treated as 

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


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

2 a distribution to which subparagraph (A) ap3 plies, the basis of the distributed property in 

4 the hands of the distributee partner shall be the 

5 fair market value of such property. 

6 ‘‘(D) SPECIAL RULES WITH RESPECT TO

7 MERGERS AND DIVISIONS.—In the case of a 

8 taxpayer which satisfies requirements similar to 

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

10 of paragraph (3), this paragraph and paragraph 

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

12 a partnership interest if such distribution is in 

13 connection with a contribution (or deemed con14 tribution) of any property of the partnership to 

15 which section 721 applies pursuant to a trans16 action described in section 708(b)(2). 

17 ‘‘(c) INVESTMENT SERVICES PARTNERSHIP INTER18 EST.—For purposes of this section— 

19 ‘‘(1) IN GENERAL.—The term ‘investment serv20 ices partnership interest’ means any interest in an 

21 investment partnership acquired or held by any per22 son in connection with the conduct of a trade or 

23 business described in paragraph (2) by such person 

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

25 in an investment partnership held by any person— 


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

2 services partnership interest for any period be3 fore the first date on which it is so held in con4 nection with such a trade or business, 

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

6 services partnership interest merely because 

7 such person holds such interest other than in 

8 connection with such a trade or business, and 

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

10 services partnership interest if acquired from a 

11 related person in whose hands such interest was 

12 an investment services partnership interest. 

13 ‘‘(2) BUSINESSES TO WHICH THIS SECTION AP14 PLIES.—A trade or business is described in this 

15 paragraph if such trade or business primarily in16 volves the performance of any of the following serv17 ices with respect to assets held (directly or indi18 rectly) by one or more investment partnerships re19 ferred to in paragraph (1): 

20 ‘‘(A) Advising as to the advisability of in21 vesting in, purchasing, or selling any specified 

22 asset. 

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

24 any specified asset. 


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1 ‘‘(C) Arranging financing with respect to 

2 acquiring specified assets. 

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

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

5 ‘‘(3) INVESTMENT PARTNERSHIP.— 

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

7 partnership’ means any partnership if, at the 

8 end of any two consecutive calendar quarters 

9 ending after the date of enactment of this sec10 tion— 

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

12 the partnership are specified assets (deter13 mined without regard to any section 197 

14 intangible within the meaning of section 

15 197(d)), and 

16 ‘‘(ii) less than 75 percent of the cap17 ital of the partnership is attributable to 

18 qualified capital interests which constitute 

19 property held in connection with a trade or 

20 business of the owner of such interest. 

21 ‘‘(B) LOOK-THROUGH OF CERTAIN WHOL22 LY OWNED ENTITIES FOR PURPOSES OF DETER23 MINING ASSETS OF THE PARTNERSHIP.— 


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1 ‘‘(i) IN GENERAL.—For purposes of 

2 determining the assets of a partnership 

3 under subparagraph (A)(i)— 

4 ‘‘(I) any interest in a specified 

5 entity shall not be treated as an asset 

6 of such partnership, and 

7 ‘‘(II) such partnership shall be 

8 treated as holding its proportionate 

9 share of each of the assets of such 

10 specified entity. 

11 ‘‘(ii) SPECIFIED ENTITY.—For pur12 poses of clause (i), the term ‘specified enti13 ty’ means, with respect to any partnership 

14 (hereafter referred to as the upper-tier 

15 partnership), any person which engages in 

16 the same trade or business as the upper17 tier partnership and is— 

18 ‘‘(I) a partnership all of the cap19 ital and profits interests of which are 

20 held directly or indirectly by the 

21 upper-tier partnership, or 

22 ‘‘(II) a foreign corporation which 

23 does not engage in a trade or business 

24 in the United States and all of the 


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•S 3022 IS

1 stock of which is held directly or indi2 rectly by the upper-tier partnership. 

3 ‘‘(C) SPECIAL RULES FOR DETERMINING

4 IF PROPERTY HELD IN CONNECTION WITH

5 TRADE OR BUSINESS.— 

6 ‘‘(i) IN GENERAL.—Except as other7 wise provided by the Secretary, solely for 

8 purposes of determining whether any inter9 est in a partnership constitutes property 

10 held in connection with a trade or business 

11 under subparagraph (A)(ii)— 

12 ‘‘(I) a trade or business of any 

13 person closely related to the owner of 

14 such interest shall be treated as a 

15 trade or business of such owner, 

16 ‘‘(II) such interest shall be treat17 ed as held by a person in connection 

18 with a trade or business during any 

19 taxable year if such interest was so 

20 held by such person during any 3 tax21 able years preceding such taxable 

22 year, and 

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

24 apply. 


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1 ‘‘(ii) CLOSELY RELATED PERSONS.— 

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

3 shall be treated as closely related to an4 other person if, taking into account the 

5 rules of section 267(c), the relationship be6 tween such persons is described in— 

7 ‘‘(I) paragraph (1) or (9) of sec8 tion 267(b), or 

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

10 in the case of a trust with respect to 

11 which each current beneficiary is the 

12 grantor or a person whose relationship 

13 to the grantor is described in para14 graph (1) or (9) of section 267(b). 

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

16 may issue regulations or other guidance which 

17 prevent the avoidance of the purposes of sub18 paragraph (A), including regulations or other 

19 guidance which treat convertible and contingent 

20 debt (and other debt having the attributes of 

21 equity) as a capital interest in the partnership. 

22 ‘‘(E) CONTROLLED GROUPS OF ENTI23 TIES.— 

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

25 controlled group of entities, if an interest 


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•S 3022 IS

1 in the partnership received in exchange for 

2 a contribution to the capital of the part3 nership by any member of such controlled 

4 group would (in the hands of such mem5 ber) constitute property held in connection 

6 with a trade or business, then any interest 

7 in such partnership held by any member of 

8 such group shall be treated for purposes of 

9 subparagraph (A) as constituting (in the 

10 hands of such member) property held in 

11 connection with a trade or business. 

12 ‘‘(ii) CONTROLLED GROUP OF ENTI13 TIES.—For purposes of clause (i), the term 

14 ‘controlled group of entities’ means a con15 trolled group of corporations as defined in 

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

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

18 1563. A partnership or any other entity 

19 (other than a corporation) shall be treated 

20 as a member of a controlled group of enti21 ties if such entity is controlled (within the 

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

23 of such group (including any entity treated 

24 as a member of such group by reason of 

25 this sentence). 


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1 ‘‘(F) SPECIAL RULE FOR CORPORA2 TIONS.—For purposes of this paragraph, in the 

3 case of a corporation, the determination of 

4 whether property is held in connection with a 

5 trade or business shall be determined as if the 

6 taxpayer were an individual. 

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

8 asset’ means securities (as defined in section 

9 475(c)(2) without regard to the last sentence there10 of), real estate held for rental or investment, inter11 ests in partnerships, commodities (as defined in sec12 tion 475(e)(2)), cash or cash equivalents, or options 

13 or derivative contracts with respect to any of the 

14 foregoing. 

15 ‘‘(5) RELATED PERSONS.— 

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

17 treated as related to another person if the rela18 tionship between such persons is described in 

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

20 ‘‘(B) ATTRIBUTION OF PARTNER SERV21 ICES.—Any service described in paragraph (2) 

22 which is provided by a partner of a partnership 

23 shall be treated as also provided by such part24 nership. 


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1 ‘‘(d) EXCEPTION FOR CERTAIN CAPITAL INTER2 ESTS.— 

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

4 of an investment services partnership interest which 

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

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

7 qualified capital interest shall not be taken into ac8 count under subsection (a) if— 

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

10 partnership to such qualified capital interest in 

11 the same manner as such allocations are made 

12 to other qualified capital interests held by part13 ners who do not provide any services described 

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

15 the partner holding the qualified capital inter16 est, and 

17 ‘‘(B) the allocations made to such other in18 terests are significant compared to the alloca19 tions made to such qualified capital interest. 

20 ‘‘(2) AUTHORITY TO PROVIDE EXCEPTIONS TO

21 ALLOCATION REQUIREMENTS.—To the extent pro22 vided by the Secretary in regulations or other guid23 ance— 

24 ‘‘(A) ALLOCATIONS TO PORTION OF QUALI25 FIED CAPITAL INTEREST.—Paragraph (1) may 


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•S 3022 IS

1 be applied separately with respect to a portion 

2 of a qualified capital interest. 

3 ‘‘(B) NO OR INSIGNIFICANT ALLOCATIONS

4 TO NONSERVICE PROVIDERS.—In any case in 

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

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

7 dividends) shall not be taken into account under 

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

9 properly allocable under such regulations or 

10 other guidance to qualified capital interests. 

11 ‘‘(C) ALLOCATIONS TO SERVICE PRO12 VIDERS’ QUALIFIED CAPITAL INTERESTS WHICH

13 ARE LESS THAN OTHER ALLOCATIONS.—Alloca14 tions shall not be treated as failing to meet the 

15 requirement of paragraph (1)(A) merely be16 cause the allocations to the qualified capital in17 terest represent a lower return than the alloca18 tions made to the other qualified capital inter19 ests referred to in such paragraph. 

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

21 AND CAPITAL CONTRIBUTIONS.—In the case of an 

22 interest in a partnership which was not an invest23 ment services partnership interest and which, by 

24 reason of a change in the services with respect to as25 sets held (directly or indirectly) by the partnership 


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1 or by reason of a change in the capital contributions 

2 to such partnership, becomes an investment services 

3 partnership interest, the qualified capital interest of 

4 the holder of such partnership interest immediately 

5 after such change shall not, for purposes of this sub6 section, be less than the fair market value of such 

7 interest (determined immediately before such 

8 change). 

9 ‘‘(4) SPECIAL RULE FOR TIERED PARTNER10 SHIPS.—Except as otherwise provided by the Sec11 retary, in the case of tiered partnerships, all items 

12 which are allocated in a manner which meets the re13 quirements of paragraph (1) to qualified capital in14 terests in a lower-tier partnership shall retain such 

15 character to the extent allocated on the basis of 

16 qualified capital interests in any upper-tier partner17 ship. 

18 ‘‘(5) EXCEPTION FOR NO-SELF-CHARGED

19 CARRY AND MANAGEMENT FEE PROVISIONS.—Ex20 cept as otherwise provided by the Secretary, an in21 terest shall not fail to be treated as satisfying the 

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

23 allocations made by the partnership to such interest 

24 do not reflect the cost of services described in sub25 section (c)(2) which are provided (directly or indiVerDate Sep 11 2014 22:09 Oct 22, 2021 Jkt 029200 PO 00000 Frm 00072 Fmt 6652 Sfmt 6201 E:\BILLS\S3022.IS S3022

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•S 3022 IS

1 rectly) to the partnership by the holder of such in2 terest (or a related person). 

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

4 case of any investment services partnership interest 

5 any portion of which is a qualified capital interest, 

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

7 gain or loss as bears the same proportion to the en8 tire amount of such gain or loss as— 

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

10 that would have been allocated to the qualified 

11 capital interest (consistent with the require12 ments of paragraph (1)) if the partnership had 

13 sold all of its assets at fair market value imme14 diately before the disposition, bears to 

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

16 that would have been so allocated to the invest17 ment services partnership interest of which such 

18 qualified capital interest is a part. 

19 ‘‘(7) QUALIFIED CAPITAL INTEREST.—For pur20 poses of this section— 

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

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

23 interest in the capital of the partnership as is 

24 attributable to— 


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1 ‘‘(i) the fair market value of any 

2 money or other property contributed to the 

3 partnership in exchange for such interest 

4 (determined without regard to section 

5 752(a)), 

6 ‘‘(ii) any amounts which have been in7 cluded in gross income under section 83 

8 with respect to the transfer of such inter9 est, and 

10 ‘‘(iii) the excess (if any) of— 

11 ‘‘(I) any items of income and 

12 gain taken into account under section 

13 702 with respect to such interest, over 

14 ‘‘(II) any items of deduction and 

15 loss so taken into account. 

16 ‘‘(B) ADJUSTMENT TO QUALIFIED CAPITAL

17 INTEREST.— 

18 ‘‘(i) DISTRIBUTIONS AND LOSSES.— 

19 The qualified capital interest shall be re20 duced by distributions from the partner21 ship with respect to such interest and by 

22 the excess (if any) of the amount described 

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

24 amount described in subparagraph 

25 (A)(iii)(I). 


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1 ‘‘(ii) SPECIAL RULE FOR CONTRIBU2 TIONS OF PROPERTY.—In the case of any 

3 contribution of property described in sub4 paragraph (A)(i) with respect to which the 

5 fair market value of such property is not 

6 equal to the adjusted basis of such prop7 erty immediately before such contribution, 

8 proper adjustments shall be made to the 

9 qualified capital interest to take into ac10 count such difference consistent with such 

11 regulations or other guidance as the Sec12 retary may provide. 

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

14 DISREGARDED.—No increase or decrease in the 

15 qualified capital interest of any partner shall re16 sult from a termination, merger, consolidation, 

17 or division described in section 708, or any 

18 similar transaction. 

19 ‘‘(8) TREATMENT OF CERTAIN LOANS.— 

20 ‘‘(A) PROCEEDS OF PARTNERSHIP LOANS

21 NOT TREATED AS QUALIFIED CAPITAL INTER22 EST OF SERVICE PROVIDING PARTNERS.—For 

23 purposes of this subsection, an investment serv24 ices partnership interest shall not be treated as 

25 a qualified capital interest to the extent that 


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•S 3022 IS

1 such interest is acquired in connection with the 

2 proceeds of any loan or other advance made or 

3 guaranteed, directly or indirectly, by any other 

4 partner or the partnership (or any person re5 lated to any such other partner or the partner6 ship). The preceding sentence shall not apply to 

7 the extent the loan or other advance is repaid 

8 before the date of enactment of this section un9 less such repayment is made with the proceeds 

10 of a loan or other advance described in the pre11 ceding sentence. 

12 ‘‘(B) REDUCTION IN ALLOCATIONS TO

13 QUALIFIED CAPITAL INTERESTS FOR LOANS

14 FROM NONSERVICE-PROVIDING PARTNERS TO

15 THE PARTNERSHIP.—For purposes of this sub16 section, any loan or other advance to the part17 nership made or guaranteed, directly or indi18 rectly, by a partner not providing services de19 scribed in subsection (c)(2) to the partnership 

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

21 taken into account in determining the qualified 

22 capital interests of the partners in the partner23 ship. 

24 ‘‘(9) SPECIAL RULE FOR QUALIFIED FAMILY

25 PARTNERSHIPS.— 


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

2 specified family partnership interest, paragraph 

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

4 phrase ‘and who are not related to the partner 

5 holding the qualified capital interest’. 

6 ‘‘(B) SPECIFIED FAMILY PARTNERSHIP IN7 TEREST.—For purposes of this paragraph, the 

8 term ‘specified family partnership interest’ 

9 means any investment services partnership in10 terest if— 

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

12 qualified family partnership, 

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

14 person or by a trust with respect to which 

15 each beneficiary is a grantor or a person 

16 whose relationship to the grantor is de17 scribed in section 267(b)(1), and 

18 ‘‘(iii) all other interests in such quali19 fied family partnership with respect to 

20 which significant allocations are made 

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

22 and in comparison to the allocations made 

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

24 held by persons who— 


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1 ‘‘(I) are related to the natural 

2 person or trust referred to in clause 

3 (ii), or 

4 ‘‘(II) provide services described 

5 in subsection (c)(2). 

6 ‘‘(C) QUALIFIED FAMILY PARTNERSHIP.— 

7 For purposes of this paragraph, the term 

8 ‘qualified family partnership’ means any part9 nership if— 

10 ‘‘(i) all of the capital and profits in11 terests of such partnership are held by— 

12 ‘‘(I) specified family members, 

13 ‘‘(II) any person closely related 

14 (within the meaning of subsection 

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

16 member, or 

17 ‘‘(III) any other person (not de18 scribed in subclause (I) or (II)) if 

19 such interest is an investment services 

20 partnership interest with respect to 

21 such person, and 

22 ‘‘(ii) such partnership does not hold 

23 itself out to the public as an investment 

24 advisor. 


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

2 purposes of subparagraph (C), individuals shall 

3 be treated as specified family members if such 

4 individuals would be treated as one person 

5 under the rules of section 1361(c)(1) if the ap6 plicable date (within the meaning of subpara7 graph (B)(iii) thereof) were the latest of— 

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

9 the partnership, 

10 ‘‘(ii) the earliest date that the com11 mon ancestor holds a capital or profits in12 terest in the partnership, or 

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

14 section. 

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

16 WITH INVESTMENT MANAGEMENT SERVICES.— 

17 ‘‘(1) IN GENERAL.—If— 

18 ‘‘(A) a person performs (directly or indi19 rectly) investment management services for any 

20 investment entity, 

21 ‘‘(B) such person holds (directly or indi22 rectly) a disqualified interest with respect to 

23 such entity, and 

24 ‘‘(C) the value of such interest (or pay25 ments thereunder) is substantially related to 


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•S 3022 IS

1 the amount of income or gain (whether or not 

2 realized) from the assets with respect to which 

3 the investment management services are per4 formed, 

5 any income or gain with respect to such interest 

6 shall be treated as ordinary income. Rules similar to 

7 the rules of subsections (a)(5) and (d) shall apply 

8 for purposes of this subsection. 

9 ‘‘(2) DEFINITIONS.—For purposes of this sub10 section— 

11 ‘‘(A) DISQUALIFIED INTEREST.— 

12 ‘‘(i) IN GENERAL.—The term ‘dis13 qualified interest’ means, with respect to 

14 any investment entity— 

15 ‘‘(I) any interest in such entity 

16 other than indebtedness, 

17 ‘‘(II) convertible or contingent 

18 debt of such entity, 

19 ‘‘(III) any option or other right 

20 to acquire property described in sub21 clause (I) or (II), and 

22 ‘‘(IV) any derivative instrument 

23 entered into (directly or indirectly) 

24 with such entity or any investor in 

25 such entity. 


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1 ‘‘(ii) EXCEPTIONS.—Such term shall 

2 not include— 

3 ‘‘(I) a partnership interest, 

4 ‘‘(II) except as provided by the 

5 Secretary, any interest in a taxable 

6 corporation, and 

7 ‘‘(III) except as provided by the 

8 Secretary, stock in an S corporation. 

9 ‘‘(B) TAXABLE CORPORATION.—The term 

10 ‘taxable corporation’ means— 

11 ‘‘(i) a domestic C corporation, or 

12 ‘‘(ii) a foreign corporation substan13 tially all of the income of which is— 

14 ‘‘(I) effectively connected with 

15 the conduct of a trade or business in 

16 the United States, or 

17 ‘‘(II) subject to a comprehensive 

18 foreign income tax (as defined in sec19 tion 457A(d)(2)). 

20 ‘‘(C) INVESTMENT MANAGEMENT SERV21 ICES.—The term ‘investment management serv22 ices’ means a substantial quantity of any of the 

23 services described in subsection (c)(2). 

24 ‘‘(D) INVESTMENT ENTITY.—The term ‘in25 vestment entity’ means any entity which, if it 


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•S 3022 IS

1 were a partnership, would be an investment 

2 partnership. 

3 ‘‘(f) EXCEPTION FOR DOMESTIC C CORPORATIONS.— 

4 Except as otherwise provided by the Secretary, in the case 

5 of a domestic C corporation— 

6 ‘‘(1) subsections (a) and (b) shall not apply to 

7 any item allocated to such corporation with respect 

8 to any investment services partnership interest (or 

9 to any gain or loss with respect to the disposition of 

10 such an interest), and 

11 ‘‘(2) subsection (e) shall not apply. 

12 ‘‘(g) REGULATIONS.—The Secretary shall prescribe 

13 such regulations or other guidance as is necessary or ap14 propriate to carry out the purposes of this section, includ15 ing regulations or other guidance to— 

16 ‘‘(1) require such reporting and recordkeeping 

17 by any person in such manner and at such time as 

18 the Secretary may prescribe for purposes of enabling 

19 the partnership to meet the requirements of section 

20 6031 with respect to any item described in section 

21 702(a)(9), 

22 ‘‘(2) provide modifications to the application of 

23 this section (including treating related persons as 

24 not related to one another) to the extent such modiVerDate Sep 11 2014 22:09 Oct 22, 2021 Jkt 029200 PO 00000 Frm 00082 Fmt 6652 Sfmt 6201 E:\BILLS\S3022.IS S3022

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•S 3022 IS

1 fication is consistent with the purposes of this sec2 tion, 

3 ‘‘(3) prevent the avoidance of the purposes of 

4 this section (including through the use of qualified 

5 family partnerships), and 

6 ‘‘(4) coordinate this section with the other pro7 visions of this title. 

8 ‘‘(h) CROSS REFERENCE.—For 40-percent penalty 

9 on certain underpayments due to the avoidance of this sec10 tion, see section 6662.’’. 

11 (b) APPLICATION OF SECTION 751 TO INDIRECT DIS12 POSITIONS OF INVESTMENT SERVICES PARTNERSHIP IN13 TERESTS.— 

14 (1) IN GENERAL.—Subsection (a) of section 

15 751 is amended by striking ‘‘or’’ at the end of para16 graph (1), by inserting ‘‘or’’ at the end of paragraph 

17 (2), and by inserting after paragraph (2) the fol18 lowing new paragraph: 

19 ‘‘(3) investment services partnership interests 

20 held by the partnership,’’. 

21 (2) CERTAIN DISTRIBUTIONS TREATED AS

22 SALES OR EXCHANGES.—Subparagraph (A) of sec23 tion 751(b)(1) is amended by striking ‘‘or’’ at the 

24 end of clause (i), by inserting ‘‘or’’ at the end of 


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•S 3022 IS

1 clause (ii), and by inserting after clause (ii) the fol2 lowing new clause: 

3 ‘‘(iii) investment services partnership 

4 interests held by the partnership,’’. 

5 (3) APPLICATION OF SPECIAL RULES IN THE

6 CASE OF TIERED PARTNERSHIPS.—Subsection (f) of 

7 section 751 is amended— 

8 (A) by striking ‘‘or’’ at the end of para9 graph (1), by inserting ‘‘or’’ at the end of para10 graph (2), and by inserting after paragraph (2) 

11 the following new paragraph: 

12 ‘‘(3) an investment services partnership interest 

13 held by the partnership,’’; and 

14 (B) by striking ‘‘partner.’’ and inserting 

15 ‘‘partner (other than a partnership in which it 

16 holds an investment services partnership inter17 est).’’. 

18 (4) INVESTMENT SERVICES PARTNERSHIP IN19 TERESTS; QUALIFIED CAPITAL INTERESTS.—Section 

20 751 is amended by adding at the end the following 

21 new subsection: 

22 ‘‘(g) INVESTMENT SERVICES PARTNERSHIP INTER23 ESTS.—For purposes of this section— 


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•S 3022 IS

1 ‘‘(1) IN GENERAL.—The term ‘investment serv2 ices partnership interest’ has the meaning given 

3 such term by section 710(c). 

4 ‘‘(2) ADJUSTMENTS FOR QUALIFIED CAPITAL

5 INTERESTS.—The amount to which subsection (a) 

6 applies by reason of paragraph (3) thereof shall not 

7 include so much of such amount as is attributable 

8 to any portion of the investment services partnership 

9 interest which is a qualified capital interest (deter10 mined under rules similar to the rules of section 

11 710(d)). 

12 ‘‘(3) EXCEPTION FOR PUBLICLY TRADED PART13 NERSHIPS.—Except as otherwise provided by the 

14 Secretary, in the case of an exchange of an interest 

15 in a publicly traded partnership (as defined in sec16 tion 7704) to which subsection (a) applies— 

17 ‘‘(A) this section shall be applied without 

18 regard to subsections (a)(3), (b)(1)(A)(iii), and 

19 (f)(3), and 

20 ‘‘(B) such partnership shall be treated as 

21 owning its proportionate share of the property 

22 of any other partnership in which it is a part23 ner. 

24 ‘‘(4) RECOGNITION OF GAINS.—Any gain with 

25 respect to which subsection (a) applies by reason of 


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•S 3022 IS

1 paragraph (3) thereof shall be recognized notwith2 standing any other provision of this title. 

3 ‘‘(5) COORDINATION WITH INVENTORY

4 ITEMS.—An investment services partnership interest 

5 held by the partnership shall not be treated as an 

6 inventory item of the partnership. 

7 ‘‘(6) PREVENTION OF DOUBLE COUNTING.— 

8 Under regulations or other guidance prescribed by 

9 the Secretary, subsection (a)(3) shall not apply with 

10 respect to any amount to which section 710 applies. 

11 ‘‘(7) VALUATION METHODS.—The Secretary 

12 shall prescribe regulations or other guidance which 

13 provide the acceptable methods for valuing invest14 ment services partnership interests for purposes of 

15 this section.’’. 

16 (c) TREATMENT FOR PURPOSES OF SECTION

17 7704.—Subsection (d) of section 7704 is amended by add18 ing at the end the following new paragraph: 

19 ‘‘(6) INCOME FROM CERTAIN CARRIED INTER20 ESTS NOT QUALIFIED.— 

21 ‘‘(A) IN GENERAL.—Specified carried in22 terest income shall not be treated as qualifying 

23 income. 

24 ‘‘(B) SPECIFIED CARRIED INTEREST IN25 COME.—For purposes of this paragraph— 


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•S 3022 IS

1 ‘‘(i) IN GENERAL.—The term ‘speci2 fied carried interest income’ means— 

3 ‘‘(I) any item of income or gain 

4 allocated to an investment services 

5 partnership interest (as defined in 

6 section 710(c)) held by the partner7 ship, 

8 ‘‘(II) any gain on the disposition 

9 of an investment services partnership 

10 interest (as so defined) or a partner11 ship interest to which (in the hands of 

12 the partnership) section 751 applies, 

13 and 

14 ‘‘(III) any income or gain taken 

15 into account by the partnership under 

16 subsection (b)(4) or (e) of section 

17 710. 

18 ‘‘(ii) EXCEPTION FOR QUALIFIED CAP19 ITAL INTERESTS.—A rule similar to the 

20 rule of section 710(d) shall apply for pur21 poses of clause (i). 

22 ‘‘(C) COORDINATION WITH OTHER PROVI23 SIONS.—Subparagraph (A) shall not apply to 

24 any item described in paragraph (1)(E) (or so 


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•S 3022 IS

1 much of paragraph (1)(F) as relates to para2 graph (1)(E)). 

3 ‘‘(D) SPECIAL RULES FOR CERTAIN PART4 NERSHIPS.— 

5 ‘‘(i) CERTAIN PARTNERSHIPS OWNED

6 BY REAL ESTATE INVESTMENT TRUSTS.— 

7 Subparagraph (A) shall not apply in the 

8 case of a partnership which meets each of 

9 the following requirements: 

10 ‘‘(I) Such partnership is treated 

11 as publicly traded under this section 

12 solely by reason of interests in such 

13 partnership being convertible into in14 terests in a real estate investment 

15 trust which is publicly traded. 

16 ‘‘(II) Fifty percent or more of 

17 the capital and profits interests of 

18 such partnership are owned, directly 

19 or indirectly, at all times during the 

20 taxable year by such real estate in21 vestment trust (determined with the 

22 application of section 267(c)). 

23 ‘‘(III) Such partnership meets 

24 the requirements of paragraphs (2), 

25 (3), and (4) of section 856(c). 


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•S 3022 IS

1 ‘‘(ii) CERTAIN PARTNERSHIPS OWN2 ING OTHER PUBLICLY TRADED PARTNER3 SHIPS.—Subparagraph (A) shall not apply 

4 in the case of a partnership which meets 

5 each of the following requirements: 

6 ‘‘(I) Substantially all of the as7 sets of such partnership consist of in8 terests in one or more publicly traded 

9 partnerships (determined without re10 gard to subsection (b)(2)). 

11 ‘‘(II) Substantially all of the in12 come of such partnership is ordinary 

13 income or section 1231 gain (as de14 fined in section 1231(a)(3)). 

15 ‘‘(E) TRANSITIONAL RULE.—Subpara16 graph (A) shall not apply to any taxable year 

17 of the partnership beginning before the date 

18 which is 10 years after the date of enactment 

19 of this paragraph.’’. 

20 (d) IMPOSITION OF PENALTY ON UNDERPAY21 MENTS.— 

22 (1) IN GENERAL.—Subsection (b) of section 

23 6662 is amended by inserting after paragraph (9) 

24 the following new paragraph: 


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1 ‘‘(10) The application of section 710(e) or the 

2 regulations or other guidance prescribed under sec3 tion 710(g) to prevent the avoidance of the purposes 

4 of section 710.’’. 

5 (2) AMOUNT OF PENALTY.— 

6 (A) IN GENERAL.—Section 6662 is amend7 ed by adding at the end the following new sub8 section: 

9 ‘‘(m) INCREASE IN PENALTY IN CASE OF PROPERTY

10 TRANSFERRED FOR INVESTMENT MANAGEMENT SERV11 ICES.—In the case of any portion of an underpayment to 

12 which this section applies by reason of subsection (b)(10), 

13 subsection (a) shall be applied with respect to such portion 

14 by substituting ‘40 percent’ for ‘20 percent’.’’. 

15 (B) CONFORMING AMENDMENT.—Subpara16 graph (B) of section 6662A(e)(2) is amended 

17 by striking ‘‘or (i)’’ and inserting ‘‘, (i), or 

18 (m)’’. 

19 (3) SPECIAL RULES FOR APPLICATION OF REA20 SONABLE CAUSE EXCEPTION.—Subsection (c) of sec21 tion 6664 is amended— 

22 (A) by redesignating paragraphs (3) and 

23 (4) as paragraphs (4) and (5), respectively; 


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•S 3022 IS

1 (B) by striking ‘‘paragraph (3)’’ in para2 graph (5)(A), as so redesignated, and inserting 

3 ‘‘paragraph (4)’’; and 

4 (C) by inserting after paragraph (2) the 

5 following new paragraph: 

6 ‘‘(3) SPECIAL RULE FOR UNDERPAYMENTS AT7 TRIBUTABLE TO INVESTMENT MANAGEMENT SERV8 ICES.— 

9 ‘‘(A) IN GENERAL.—Paragraph (1) shall 

10 not apply to any portion of an underpayment to 

11 which section 6662 applies by reason of sub12 section (b)(10) unless— 

13 ‘‘(i) the relevant facts affecting the 

14 tax treatment of the item are adequately 

15 disclosed, 

16 ‘‘(ii) there is or was substantial au17 thority for such treatment, and 

18 ‘‘(iii) the taxpayer reasonably believed 

19 that such treatment was more likely than 

20 not the proper treatment. 

21 ‘‘(B) RULES RELATING TO REASONABLE

22 BELIEF.—Rules similar to the rules of sub23 section (d)(4) shall apply for purposes of sub24 paragraph (A)(iii).’’. 


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1 (e) INCOME AND LOSS FROM INVESTMENT SERVICES

2 PARTNERSHIP INTERESTS TAKEN INTO ACCOUNT IN DE3 TERMINING NET EARNINGS FROM SELF-EMPLOYMENT.— 

4 (1) INTERNAL REVENUE CODE.— 

5 (A) IN GENERAL.—Section 1402(a) is 

6 amended by striking ‘‘and’’ at the end of para7 graph (16), by striking the period at the end of 

8 paragraph (17) and inserting ‘‘; and’’, and by 

9 inserting after paragraph (17) the following 

10 new paragraph: 

11 ‘‘(18) 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) with respect to any 

15 entity, investment services partnership income or 

16 loss (as defined in subsection (m)) of such individual 

17 with respect to such entity shall be taken into ac18 count in determining the net earnings from self-em19 ployment of such individual.’’. 

20 (B) INVESTMENT SERVICES PARTNERSHIP

21 INCOME OR LOSS.—Section 1402 is amended by 

22 adding at the end the following new subsection: 

23 ‘‘(m) INVESTMENT SERVICES PARTNERSHIP INCOME

24 OR LOSS.—For purposes of subsection (a)— 


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1 ‘‘(1) IN GENERAL.—The term ‘investment serv2 ices partnership income or loss’ means, with respect 

3 to any investment services partnership interest (as 

4 defined in section 710(c)) or disqualified interest (as 

5 defined in section 710(e)), the net of— 

6 ‘‘(A) the amounts treated as ordinary in7 come or ordinary loss under subsections (b) and 

8 (e) of section 710 with respect to such interest, 

9 ‘‘(B) all items of income, gain, loss, and 

10 deduction allocated to such interest, and 

11 ‘‘(C) the amounts treated as realized from 

12 the sale or exchange of property other than a 

13 capital asset under section 751 with respect to 

14 such interest. 

15 ‘‘(2) EXCEPTION FOR QUALIFIED CAPITAL IN16 TERESTS.—A rule similar to the rule of section 

17 710(d) shall apply for purposes of applying para18 graph (1)(B).’’. 

19 (2) SOCIAL SECURITY ACT.—Section 211(a) of 

20 the Social Security Act is amended by striking 

21 ‘‘and’’ at the end of paragraph (15), by striking the 

22 period at the end of paragraph (16) and inserting ‘‘; 

23 and’’, and by inserting after paragraph (16) the fol24 lowing new paragraph: 


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1 ‘‘(17) Notwithstanding the preceding provisions 

2 of this subsection, in the case of any individual en3 gaged in the trade or business of providing services 

4 described in section 710(c)(2) of the Internal Rev5 enue Code of 1986 with respect to any entity, invest6 ment services partnership income or loss (as defined 

7 in section 1402(m) of such Code) shall be taken into 

8 account in determining the net earnings from self9 employment of such individual.’’. 

10 (f) SEPARATE ACCOUNTING BY PARTNER.—Section 

11 702(a) is amended by striking ‘‘and’’ at the end of para12 graph (7), by striking the period at the end of paragraph 

13 (8) and inserting ‘‘, and’’, and by inserting after para14 graph (8) the following: 

15 ‘‘(9) any amount treated as ordinary income or 

16 loss under subsection (a), (b), or (e) of section 

17 710.’’. 

18 (g) CONFORMING AMENDMENTS.— 

19 (1) Subsection (d) of section 731 is amended by 

20 inserting ‘‘section 710(b)(4) (relating to distribu21 tions of partnership property),’’ after ‘‘to the extent 

22 otherwise provided by’’. 

23 (2) Section 741 is amended by inserting ‘‘or 

24 section 710 (relating to special rules for partners 


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•S 3022 IS

1 providing investment management services to part2 nerships)’’ before the period at the end. 

3 (3) The table of sections for part I of sub4 chapter K of chapter 1 is amended by adding at the 

5 end the following new item: 

‘‘Sec. 710. Special rules for partners providing investment management services 

to partnerships.’’. 

6 (4)(A) Part IV of subchapter O of chapter 1 is 

7 amended by striking section 1061. 

8 (B) The table of sections for part IV of sub9 chapter O of chapter 1 is amended by striking the 

10 item relating to section 1061. 

11 (h) EFFECTIVE DATE.— 

12 (1) IN GENERAL.—Except as otherwise pro13 vided in this subsection, the amendments made by 

14 this section shall apply to taxable years ending after 

15 the date of enactment of this Act. 

16 (2) PARTNERSHIP TAXABLE YEARS WHICH IN17 CLUDE EFFECTIVE DATE.—In applying section 

18 710(a) of the Internal Revenue Code of 1986 (as 

19 added by this section) in the case of any partnership 

20 taxable year which includes the date of enactment of 

21 this Act, the amount of the net capital gain referred 

22 to in such section shall be treated as being the lesser 

23 of the net capital gain for the entire partnership tax24 able year or the net capital gain determined by only 


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•S 3022 IS

1 taking into account items attributable to the portion 

2 of the partnership taxable year which is after such 

3 date. 

4 (3) DISPOSITIONS OF PARTNERSHIP INTER5 ESTS.— 

6 (A) IN GENERAL.—Section 710(b) of such 

7 Code (as added by this section) shall apply to 

8 dispositions and distributions after the date of 

9 enactment of this Act. 

10 (B) INDIRECT DISPOSITIONS.—The amend11 ments made by subsection (b) shall apply to 

12 transactions after the date of enactment of this 

13 Act. 

14 (4) OTHER INCOME AND GAIN IN CONNECTION

15 WITH INVESTMENT MANAGEMENT SERVICES.—Sec16 tion 710(e) of such Code (as added by this section) 

17 shall take effect on the date of enactment of this 

18 Act. 

19 TITLE V—INVESTOR PROTEC20 TION AND MARKET TRANS21 PARENCY 

22 SEC. 501. DISCLOSURE OF FEES AND RETURNS. 

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

24 80a–1 et seq.) is amended by adding at the end the fol25 lowing: 


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1 ‘‘SEC. 66. DISCLOSURE OF FEES AND RETURNS. 

2 ‘‘(a) DEFINITIONS.—In this section— 

3 ‘‘(1) the terms ‘controlling private fund’, ‘pri4 vate fund’, and ‘target firm’ have the meanings 

5 given the terms in section 3 of the Stop Wall Street 

6 Looting Act; and 

7 ‘‘(2) the term ‘expenditure for political activi8 ties’— 

9 ‘‘(A) means— 

10 ‘‘(i) an independent expenditure, as 

11 that term is defined in section 301(17) of 

12 the Federal Election Campaign Act of 

13 1971 (52 U.S.C. 30101(17)); 

14 ‘‘(ii) a disbursement for an election15 eering communication, as that term is de16 fined in section 304(f)(3) of the Federal 

17 Election Campaign Act of 1971 (52 U.S.C. 

18 30104(f)(3)) or any other public commu19 nication, as defined in section 301(22) of 

20 that Act (52 U.S.C. 30101(22)), that 

21 would be an electioneering communication 

22 if it were a broadcast, cable, or satellite 

23 communication; or 

24 ‘‘(iii) dues or other payments to trade 

25 associations or organizations described in 

26 section 501(c) of the Internal Revenue 


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1 Code of 1986 and exempt from tax under 

2 section 501(a) of that Code that are, or 

3 could reasonably be anticipated to be, used 

4 or transferred to another association or or5 ganization for the purposes described in 

6 clause (i) or (ii); and 

7 ‘‘(B) does not include an expenditure for— 

8 ‘‘(i) direct lobbying efforts through 

9 registered lobbyists employed or hired by a 

10 controlling private fund; 

11 ‘‘(ii) communications by a controlling 

12 private fund to— 

13 ‘‘(I) a partner of the fund or ex14 ecutive or administrative personnel 

15 with respect to the fund; or 

16 ‘‘(II) a family member of any in17 dividual described in subclause (I); or 

18 ‘‘(iii) the establishment and adminis19 tration of contributions to a separate seg20 regated private fund to be utilized for po21 litical purposes by a controlling private 

22 fund. 

23 ‘‘(b) RULES.—Not later than 1 year after the date 

24 of enactment of this section, the Commission shall issue 

25 final rules that require a controlling private fund to, using 


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1 generally accepted accounting principles, annually report 

2 the following information with respect to that controlling 

3 private fund: 

4 ‘‘(1) The name, address, and vintage year of 

5 the fund. 

6 ‘‘(2) The name of each general partner of the 

7 fund. 

8 ‘‘(3) The name of each limited partner of the 

9 fund. 

10 ‘‘(4) A list of each entity with respect to which 

11 the fund owns an equity interest. 

12 ‘‘(5) In dollars, the total amount of regulatory 

13 assets under management by the fund. 

14 ‘‘(6) In dollars, the total amount of net assets 

15 under management by the fund. 

16 ‘‘(7) The percentage of fund equity contributed 

17 by the general partners of the fund and the percent18 age of fund equity contributed by the limited part19 ners of the fund. 

20 ‘‘(8) Information on the debt owed by the fund, 

21 including— 

22 ‘‘(A) the dollar amount of total debt; 

23 ‘‘(B) the percentage of debt for which the 

24 creditor is a financial institution in the United 

25 States; 


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1 ‘‘(C) the percentage of debt for which the 

2 creditor is a financial institution outside of the 

3 United States; 

4 ‘‘(D) the percentage of debt for which the 

5 creditor is an entity that is located in the 

6 United States and is not a financial institution; 

7 and 

8 ‘‘(E) the percentage of debt for which the 

9 creditor is an entity that is located outside of 

10 the United States and is not a financial institu11 tion. 

12 ‘‘(9) The gross performance of the fund during 

13 the year covered by the report. 

14 ‘‘(10) For the year covered by the report, the 

15 difference obtained by subtracting the financial 

16 gains of the fund by the fees that the general part17 ners of the fund charged to the limited partners of 

18 the fund (commonly referred to as the ‘performance 

19 net of fees’). 

20 ‘‘(11) For the year covered by the report, an 

21 annual financial statement, which shall include in22 come statements, a balance sheet, and cash flow 

23 statements. 


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1 ‘‘(12) The average debt-to-equity ratio of each 

2 target firm with respect to the fund and the debt3 to-equity ratio of each such target firm. 

4 ‘‘(13) The total gross asset value of each target 

5 firm with respect to the fund and the gross asset 

6 value of each such target firm. 

7 ‘‘(14) The total amount of debt held by each 

8 target firm with respect to the fund and the total 

9 amount of debt held by each such target firm. 

10 ‘‘(15) The total amount of debt held by each 

11 target firm with respect to the fund that, as of the 

12 date on which the report is submitted, are cat13 egorized as liabilities, long-term liabilities, and pay14 ment in kind or zero coupon debt. 

15 ‘‘(16) The total number of target firms with re16 spect to the fund that experienced default during the 

17 period covered by the report, including the name of 

18 any such target firm. 

19 ‘‘(17) The total number of the target firms with 

20 respect to the fund with respect to which a case was 

21 commenced under title 11, United States Code, dur22 ing the period covered by the report, including the 

23 name of any such target firm. 

24 ‘‘(18) The percentage of the equity of the fund 

25 that is owned by— 


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1 ‘‘(A) citizens of the United States; 

2 ‘‘(B) individuals who are not citizens of the 

3 United States; 

4 ‘‘(C) brokers or dealers; 

5 ‘‘(D) insurance companies; 

6 ‘‘(E) investment companies that are reg7 istered with the Commission under this Act; 

8 ‘‘(F) private funds and other investment 

9 companies not required to be registered with 

10 the Commission; 

11 ‘‘(G) nonprofit organizations; 

12 ‘‘(H) pension plans maintained by State or 

13 local governments (or an agency or instrumen14 tality of either); 

15 ‘‘(I) pension plans maintained by non16 governmental employers; 

17 ‘‘(J) State or municipal government enti18 ties; 

19 ‘‘(K) banking or thrift institutions; 

20 ‘‘(L) sovereign wealth funds; and 

21 ‘‘(M) other investors. 

22 ‘‘(19) The total dollar amount of aggregate fees 

23 and expenses collected by the fund, the manager of 

24 the fund, or related parties from target firms for 


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1 which the fund is a controlling private fund, which 

2 shall— 

3 ‘‘(A) be categorized by the type of fee; and 

4 ‘‘(B) include a description of the purpose 

5 of the fees. 

6 ‘‘(20) The total dollar amount of aggregate fees 

7 and expenses collected by the fund, the manager of 

8 the fund, or related parties from the limited part9 ners of the fund, which shall— 

10 ‘‘(A) be categorized by the type of fee; and 

11 ‘‘(B) include a description of the purpose 

12 of the fees. 

13 ‘‘(21) The total carried interest claimed by the 

14 fund, the manager of the fund, or related parties 

15 and the total dollar amount of carried interest dis16 tributed to the limited partners of the fund. 

17 ‘‘(22) A description of, during the year covered 

18 by the report, any material changes in risk factors 

19 at the fund level, including— 

20 ‘‘(A) concentration risk; 

21 ‘‘(B) foreign exchange risk; and 

22 ‘‘(C) extra-financial risk, including envi23 ronmental, social, and corporate governance 

24 risk. 


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1 ‘‘(23) Disclosures that satisfy the Recommenda2 tions of the Task Force on Climate-related Financial 

3 Disclosures of the Financial Stability Board, as re4 ported in June 2017. 

5 ‘‘(24) A description of the human capital man6 agement practices of the fund, including— 

7 ‘‘(A) fund workforce demographic informa8 tion, including the number of full-time employ9 ees, the number of part-time employees, the 

10 number of contingent workers (including tem11 porary and contract workers), and any policies 

12 or practices of the firm relating to subcon13 tracting, outsourcing, and insourcing; 

14 ‘‘(B) fund workforce composition, including 

15 data on the diversity of that workforce, includ16 ing the racial and gender composition of that 

17 workforce, and any policies and audits relating 

18 to the diversity of that workforce; and 

19 ‘‘(C) any incident of alleged workplace har20 assment during the 5 years preceding the year 

21 in which the report is submitted. 

22 ‘‘(25) A description of any expenditure for po23 litical activities made during the year preceding the 

24 year in which the report is submitted, including— 


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1 ‘‘(A) the date on which each such expendi2 ture for political activities was made; 

3 ‘‘(B) the amount of each such expenditure 

4 for political activities; 

5 ‘‘(C) if such an expenditure for political ac6 tivities was made in support of, or in opposition 

7 to, a candidate, the name of the candidate, the 

8 office sought by the candidate, and the political 

9 party affiliation of the candidate; 

10 ‘‘(D) a summary of— 

11 ‘‘(i) each such expenditure for political 

12 activities that is in amount that is not less 

13 than $10,000; and 

14 ‘‘(ii) each expenditure for political ac15 tivities with respect to a particular election 

16 if the total amount of expenditures for po17 litical activities by the firm with respect to 

18 that election is in an amount that is not 

19 less than $10,000; 

20 ‘‘(E) a description of the specific nature of 

21 any expenditure for political activities that the 

22 firm intends to make for the year in which the 

23 report is submitted, to the extent that the spe24 cific nature is known to the firm; and 


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1 ‘‘(F) the total amount of expenditures for 

2 political activities that the fund intends to make 

3 for the year in which the report is submitted. 

4 ‘‘(26) For the year preceding the year in which 

5 the report is submitted, the total amount of Federal 

6 support, if any, received by— 

7 ‘‘(A) the fund; and 

8 ‘‘(B) any entity with respect to which the 

9 fund is a beneficial owner, as that term is de10 fined in section 5336(a)(3) of title 31, United 

11 States Code. 

12 ‘‘(27) Any other information that the Commis13 sion determines is necessary and appropriate for the 

14 protection of investors. 

15 ‘‘(c) PERIODIC REVIEW.—The Commission shall, 

16 with respect to the rules issued under subsection (b)— 

17 ‘‘(1) review the rules once every 5 years; and 

18 ‘‘(2) revise the rules as necessary to ensure that 

19 the disclosures required under the rules reflect con20 temporary (as of the date on which the rules are re21 vised) trends and characteristics with respect to pri22 vate investment markets. 

23 ‘‘(d) PUBLIC AVAILABILITY.—Notwithstanding any 

24 provision of section 204 of the Investment Advisers Act 

25 of 1940 (15 U.S.C. 80b–4), the information disclosed 


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1 under the rules issued under subsection (b) shall be made 

2 available to the public.’’. 

3 SEC. 502. FIDUCIARY OBLIGATIONS. 

4 (a) FIDUCIARY DUTIES UNDER ERISA.— 

5 (1) PLAN ASSETS.—Section 401(b)(1) of the 

6 Employee Retirement Income Security Act of 1974 

7 (29 U.S.C. 1101(b)(1)) is amended— 

8 (A) by inserting ‘‘or a private fund (as de9 fined in section 3 of the Stop Wall Street 

10 Looting Act)’’ before ‘‘, the assets’’; and 

11 (B) by inserting ‘‘or such private fund, as 

12 applicable’’ before the period at the end. 

13 (2) FIDUCIARY OBLIGATIONS OF FUND MAN14 AGERS.—Section 3(21)(A) of such Act (29 U.S.C. 

15 1002(21)) is amended by inserting ‘‘, and, in the 

16 case of a plan which invests in a security issued by 

17 a private fund (as such term is defined in section 3 

18 of the Stop Wall Street Looting Act), includes the 

19 manager of such private fund’’ before the period at 

20 the end. 

21 (b) PROHIBITION AGAINST WAIVING FIDUCIARY DU22 TIES.—Section 211(h) of the Investment Advisers Act of 

23 1940 (15 U.S.C. 80b–11(h)) is amended— 

24 (1) in paragraph (1), by striking ‘‘and’’ at the 

25 end; 


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1 (2) in paragraph (2), by striking the period at 

2 the end and inserting ‘‘; and’’; and 

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

4 ‘‘(3) promulgate rules that prohibit an invest5 ment adviser from requiring any person to which the 

6 investment adviser provides investment advice, in7 cluding a pension plan (as defined in section 3 of the 

8 Employee Retirement Income Security Act of 1974 

9 (29 U.S.C. 1002)) that is subject to title I of the 

10 Employee Retirement Income Security Act of 1974 

11 (29 U.S.C. 1001 et seq.), to, as a condition of the 

12 investment adviser providing that advice, sign a con13 tract or other agreement in which that person waives 

14 a fiduciary duty owed by that person to another per15 son.’’. 

16 (c) APPLICABILITY OF BENEFITS.—The general 

17 partner of a controlling private fund that is a partnership 

18 may not provide any term or benefit to any limited partner 

19 of the fund unless the general partner provides that term 

20 or benefit to all limited partners of the fund. 

21 SEC. 503. DISCLOSURES RELATING TO THE MARKETING OF 

22 PRIVATE EQUITY FUNDS. 

23 Any investment adviser to a private fund shall dis24 close to potential investors with respect to the other pri25 vate funds, as defined in section 202(a) of the Investment 


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1 Advisers Act of 1940 (15 U.S.C. 80b–2(a)), managed by 

2 that investment adviser (referred to in this section as 

3 ‘‘managed firms’’) the following information: 

4 (1) A list of all managed firms with respect to 

5 the investment adviser, including those managed 

6 firms that, as of the date on which the disclosure is 

7 made— 

8 (A) have active investments; and 

9 (B) have liquidated the assets of the firms. 

10 (2) For each managed firm listed under para11 graph (1), the following information: 

12 (A) As applicable, the total term of the 

13 listed firm beginning with the commencement of 

14 the commitment period with respect to the firm 

15 and ending on the date on which the firm is 

16 dissolved, including, with respect to a listed 

17 firm that, as of the date on which the disclosure 

18 is made, is actively investing— 

19 (i) the term specified by any limited 

20 partnership agreement; and 

21 (ii) the nature of any provisions that 

22 would allow for the extension of that term. 

23 (B) The performance of the listed firm’s 

24 net of fees, as measured by the public market 

25 equivalent or a similar measure. 


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1 (C) A list of target firms with respect to 

2 which the listed firm was a control person, the 

3 nature of the control person relationship, and 

4 the period of that control. 

5 (D) The number of employees at each tar6 get firm identified under subparagraph (C), as 

7 of the date on which the listed firm became a 

8 control person with respect to the target firm, 

9 and the date on which the listed firm ceased to 

10 be a control person with respect to the target 

11 firm. 

12 (E) A list of target firms with respect to 

13 the listed firm with respect to which a case has 

14 been commenced under title 11, United States 

15 Code. 

16 (F) For each target firm with respect to 

17 the listed firm, and with respect to which the 

18 listed firm is a control person— 

19 (i) a list of actions taken by any State 

20 or local regulatory agency; and 

21 (ii) any legal or regulatory penalties 

22 paid, or settlements entered into, by the 

23 general partners of the target firm or the 

24 target firm itself. 


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1 (3) The percentage breakdown of the means 

2 employed by the investment adviser to divest owner3 ship or control of target firms, including— 

4 (A) the sale of target firms to other pri5 vate funds; 

6 (B) the sale of target firms to private enti7 ties, other than private funds; 

8 (C) the sale of target firms to issuers, the 

9 securities of which are traded on a national se10 curities exchange; 

11 (D) the commencement of cases under title 

12 11, United States Code, with respect to target 

13 firms; and 

14 (E) initial public offerings with respect to 

15 target firms. 

16 TITLE VI—RESTRICTIONS ON 

17 SECURITIZING RISKY COR18 PORATE DEBT 

19 SEC. 601. RISK RETENTION REQUIREMENTS FOR SECURITI20 ZATION OF CORPORATE DEBT. 

21 Section 15G of the Securities Exchange Act of 1934 

22 (15 U.S.C. 78o–11) is amended— 

23 (1) in subsection (a)(3)— 

24 (A) in subparagraph (A), by striking ‘‘or’’ 

25 at the end; 


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1 (B) in subparagraph (B), by striking 

2 ‘‘and’’ at the end and inserting ‘‘or’’; and 

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

4 ‘‘(C) a manager of a collateralized debt ob5 ligation; and’’; 

6 (2) by redesignating subsection (i) as subsection 

7 (j); and 

8 (3) by inserting after subsection (h) the fol9 lowing: 

10 ‘‘(i) RULES OF CONSTRUCTION.—With respect to a 

11 securitizer described in subsection (a)(3)(C)— 

12 ‘‘(1) any provision of this section that requires 

13 that securitizer to retain a portion of the credit risk 

14 for an asset that such securitizer does not hold, or 

15 has never held, shall be construed as requiring that 

16 securitizer to— 

17 ‘‘(A) obtain that portion of the credit risk 

18 for that asset; and 

19 ‘‘(B) retain that portion of the credit risk, 

20 either directly by the securitizer or through a 

21 wholly-owned affiliate of the securitizer; and 

22 ‘‘(2) any reference in this section to an asset 

23 transferred by the securitizer shall be construed to 

24 include any transfer caused by the securitizer.’’. 


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1 TITLE VII—MISCELLANEOUS 

2 SEC. 701. ANTI-EVASION. 

3 It shall be unlawful to conduct any activity, including 

4 by entering into an agreement or contract, engaging in 

5 a transaction, or structuring an entity, to willfully evade 

6 or attempt to evade any provision of this Act. 

7 SEC. 702. SEVERABILITY. 

8 If any provision of this Act or the application of such 

9 a provision to any person or circumstance is held to be 

10 invalid or unconstitutional, the remainder of this Act and 

11 the application of the provisions of this Act to any person 

12 or circumstance shall remain and shall not be affected by 

13 that holding. 

Æ 


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