II 

110TH CONGRESS 

1ST SESSION S. 1624 

To amend the Internal Revenue Code of 1986 to provide that the exception 

from the treatment of publicly traded partnerships as corporations for 

partnerships with passive-type income shall not apply to partnerships 

directly or indirectly deriving income from providing investment adviser 

and related asset management services. 

IN THE SENATE OF THE UNITED STATES 

JUNE 14, 2007 

Mr. BAUCUS (for himself and Mr. GRASSLEY) introduced the following bill; 

which was read twice and referred to the Committee on Finance 

A BILL 

To amend the Internal Revenue Code of 1986 to provide 

that the exception from the treatment of publicly traded 

partnerships as corporations for partnerships with passive-type income shall not apply to partnerships directly 

or indirectly deriving income from providing investment 

adviser and related asset management services. 

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

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•S 1624 IS

1 SECTION 1. EXCEPTION FROM TREATMENT OF PUBLICLY 

2 TRADED PARTNERSHIPS AS CORPORATIONS 

3 NOT TO APPLY TO PARTNERSHIPS DIRECTLY 

4 OR INDIRECTLY DERIVING INCOME FROM 

5 PROVIDING INVESTMENT ADVISER AND RE6 LATED ASSET MANAGEMENT SERVICES. 

7 (a) IN GENERAL.—Section 7704(c) of the Internal 

8 Revenue Code of 1986 (relating to exception for partner9 ships with passive-type income) is amended by adding at 

10 the end the following new paragraph: 

11 ‘‘(4) EXCEPTION NOT TO APPLY TO PARTNER12 SHIPS PROVIDING CERTAIN INVESTMENT ADVISER

13 AND RELATED ASSET MANAGEMENT SERVICES.— 

14 This subsection shall not apply to any partnership 

15 which directly or indirectly has any item of income 

16 or gain (including capital gains or dividends), the 

17 rights to which are derived from— 

18 ‘‘(A) services provided by any person as an 

19 investment adviser (as defined in section 

20 202(a)(11) of the Investment Advisers Act of 

21 1940, 15 U.S.C. 80b–2(a)(11)) or as a person 

22 associated with an investment adviser (as de23 fined in section 202(a)(17) of the Investment 

24 Advisers Act of 1940, 15 U.S.C. 80b–2(a)(17)), 

25 or 

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•S 1624 IS

1 ‘‘(B) asset management services provided 

2 by any person described in subparagraph (A) 

3 (or any related person) in connection with the 

4 management of assets with respect to which 

5 services described in subparagraph (A) were 

6 provided. 

7 For purposes of subparagraph (A), the determina8 tion as to whether services provided by any person 

9 were provided as an investment adviser shall be 

10 made without regard to whether the person is re11 quired to register as an investment adviser under 

12 the Investment Advisers Act of 1940.’’. 

13 (b) EFFECTIVE DATE.— 

14 (1) IN GENERAL.—Except as provided in para15 graph (2), the amendment made by this section shall 

16 apply to taxable years of a partnership beginning on 

17 or after June 14, 2007. 

18 (2) TRANSITION RULE FOR CERTAIN PARTNER19 SHIPS.—In the case of a partnership— 

20 (A) the interests in which on June 14, 

21 2007, were— 

22 (i) traded on an established securities 

23 market, or 

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•S 1624 IS

1 (ii) readily tradeable on a secondary 

2 market (or the substantial equivalent 

3 thereof), or 

4 (B) which, on or before June 14, 2007, 

5 filed a registration statement with the Securi6 ties and Exchange Commission under section 6 

7 of the Securities Act of 1933 (15 U.S.C. 77f) 

8 which was required solely by reason of an initial 

9 public offering of interests in the partnership, 

10 the amendment made by this section shall apply to 

11 taxable years of the partnership beginning on or 

12 after June 14, 2012. Subparagraph (B) shall not 

13 apply to a registration statement which is filed with 

14 respect to securities which are to be issued on a de15 layed or continuous basis (as determined under the 

16 rules of the Securities and Exchange Commission 

17 promulgated under such Act). 

Æ 

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