164 
(I) 
COMMERCE.—The 
terms 
‘‘commerce’’ and ‘‘industry or activity 
affecting commerce’’ mean any activ-
ity, business, or industry in commerce 
or in which a labor dispute would 
hinder or obstruct commerce or the 
free flow of commerce, and include 
‘‘commerce’’ and any ‘‘industry affect-
ing commerce’’, as defined in para-
graphs (1) and (3) of section 501 of 
the Labor Management Relations Act, 
1947 (29 U.S.C. 142 (1) and (3)). 
(II) EMPLOYEE.—The term ‘‘em-
ployee’’ has the same meaning given 
such term in section 3(e) of the Fair 
Labor Standards Act of 1938 (29 
U.S.C. 203(e)). 
(III) PERSON.—The term ‘‘per-
son’’ has the same meaning given 
such term in section 3(a) of the Fair 
Labor Standards Act of 1938 (29 
U.S.C. 203(a)). 
(C) PREDECESSORS.—Any reference in 
this paragraph to an employer shall include a 
reference to any predecessor of such employer. 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00164
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
165 
(5) EMPLOYMENT BENEFITS.—The term ‘‘em-
ployment benefits’’ means all benefits provided or 
made available to employees by an employer, includ-
ing group life insurance, health insurance, disability 
insurance, sick leave, annual leave, educational bene-
fits, and pensions, regardless of whether such bene-
fits are provided by a practice or written policy of 
an employer or through an ‘‘employee benefit plan’’, 
as defined in section 3(3) of the Employee Retire-
ment Income Security Act of 1974 (29 U.S.C. 
1002(3)). 
(6) HEALTH
CARE
PROVIDER.—The term 
‘‘health care provider’’ means a provider who— 
(A)(i) is a doctor of medicine or osteopathy 
who is authorized to practice medicine or sur-
gery (as appropriate) by the State in which the 
doctor practices; or 
(ii) is any other person determined by the 
Secretary to be capable of providing health care 
services; and 
(B) is not employed by an employer for 
whom the provider issues certification under 
this subtitle. 
(7) PAID
SICK
TIME.—The term ‘‘paid sick 
time’’ means an increment of compensated leave that 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00165
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
166 
can be earned by an employee for use during an ab-
sence from employment for any of the reasons de-
scribed in paragraphs (1) through (4) of section 
245(b). 
(8) PARENT.—The term ‘‘parent’’ means a bio-
logical, foster, or adoptive parent of an employee, a 
stepparent of an employee, or a legal guardian or 
other person who stood in loco parentis to an em-
ployee when the employee was a child. 
(9) SECRETARY.—The term ‘‘Secretary’’ means 
the Secretary of Labor. 
(10) SEXUAL ASSAULT.—The term ‘‘sexual as-
sault’’ has the meaning given the term in section 
40002(a) of the Violence Against Women Act of 
1994 (42 U.S.C. 13925(a)). 
(11) SPOUSE.—The term ‘‘spouse’’, with re-
spect to an employee, has the meaning given such 
term by the marriage laws of the State in which the 
employee resides. 
(12) STALKING.—The term ‘‘stalking’’ has the 
meaning given the term in section 40002(a) of the 
Violence Against Women Act of 1994 (42 U.S.C. 
13925(a)). 
(13) VICTIM
SERVICES
ORGANIZATION.—The 
term ‘‘victim services organization’’ means a non-
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00166
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
167 
profit, nongovernmental organization that provides 
assistance to victims of domestic violence, sexual as-
sault, or stalking or advocates for such victims, in-
cluding a rape crisis center, an organization carrying 
out a domestic violence, sexual assault, or stalking 
prevention or treatment program, an organization 
operating a shelter or providing counseling services, 
or a legal services organization or other organization 
providing assistance through the legal process. 
SEC. 245. PROVISION OF PAID SICK TIME. 
(a) ACCRUAL OF PAID SICK TIME.— 
(1) IN
GENERAL.—An employer shall permit 
each employee employed by the employer to earn not 
less than 1 hour of paid sick time for every 30 hours 
worked, to be used as described in subsection (b). 
An employer shall not be required to permit an em-
ployee to earn, under this section, more than 56 
hours of paid sick time in a calendar year, unless 
the employer chooses to set a higher limit. 
(2) EXEMPT EMPLOYEES.— 
(A) IN GENERAL.—Except as provided in 
paragraph (3), for purposes of this section, an 
employee who is exempt from overtime require-
ments under section 13(a)(1) of the Fair Labor 
Standards Act of 1938 (29 U.S.C. 213(a)(1)) 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00167
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
168 
shall be assumed to work 40 hours in each 
workweek. 
(B) SHORTER
NORMAL
WORKWEEK.—If 
the normal workweek of such an employee is 
less than 40 hours, the employee shall earn 
paid sick time based upon that normal work-
week. 
(3) DATES OF ACCRUAL AND USE.—Employees 
shall begin to earn paid sick time under this section 
at the commencement of their employment. An em-
ployee shall be entitled to use the earned paid sick 
time beginning on the 60th calendar day following 
commencement of the employee’s employment. After 
that 60th calendar day, the employee may use the 
paid sick time as the time is earned. An employer 
may, at the discretion of the employer, loan paid 
sick time to an employee in advance of the earning 
of such time under this section by such employee. 
(4) CARRYOVER.— 
(A) IN GENERAL.—Except as provided in 
subparagraph (B), paid sick time earned under 
this section shall carry over from 1 calendar 
year to the next. 
(B) CONSTRUCTION.—This subtitle shall 
not be construed to require an employer to per-
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00168
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
169 
mit an employee to accrue more than 56 hours 
of earned paid sick time at a given time. 
(5) EMPLOYERS
WITH
EXISTING
POLICIES.— 
Any employer with a paid leave policy who makes 
available an amount of paid leave that is sufficient 
to meet the requirements of this section and that 
may be used for the same purposes and under the 
same conditions as the purposes and conditions out-
lined in subsection (b) shall not be required to per-
mit an employee to earn additional paid sick time 
under this section. 
(6) CONSTRUCTION.—Nothing in this section 
shall be construed as requiring financial or other re-
imbursement to an employee from an employer upon 
the employee’s termination, resignation, retirement, 
or other separation from employment for earned 
paid sick time that has not been used. 
(7) REINSTATEMENT.—If an employee is sepa-
rated from employment with an employer and is re-
hired, within 12 months after that separation, by the 
same employer, the employer shall reinstate the em-
ployee’s previously earned paid sick time. The em-
ployee shall be entitled to use the earned paid sick 
time and earn additional paid sick time at the re-
commencement of employment with the employer. 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00169
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
170 
(8) PROHIBITION.—An employer may not re-
quire, as a condition of providing paid sick time 
under this subtitle, that the employee involved 
search for or find a replacement worker to cover the 
hours during which the employee is using paid sick 
time. 
(b) USES.—Paid sick time earned under this section 
may be used by an employee for any of the following: 
(1) An absence resulting from a physical or 
mental illness, injury, or medical condition of the 
employee. 
(2) An absence resulting from obtaining profes-
sional medical diagnosis or care, or preventive med-
ical care, for the employee. 
(3) An absence for the purpose of caring for a 
child, a parent, a spouse, or any other individual re-
lated by blood or affinity whose close association 
with the employee is the equivalent of a family rela-
tionship, who— 
(A) has any of the conditions or needs for 
diagnosis or care described in paragraph (1) or 
(2); and 
(B) in the case of someone who is not a 
child, is otherwise in need of care. 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00170
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
171 
(4) An absence resulting from domestic vio-
lence, sexual assault, or stalking, if the time is to— 
(A) seek medical attention for the em-
ployee or the employee’s child, parent, or 
spouse, or an individual related to the employee 
as described in paragraph (3), to recover from 
physical or psychological injury or disability 
caused by domestic violence, sexual assault, or 
stalking; 
(B) obtain or assist a related person de-
scribed in paragraph (3) in obtaining services 
from a victim services organization; 
(C) obtain or assist a related person de-
scribed in paragraph (3) in obtaining psycho-
logical or other counseling; 
(D) seek relocation; or 
(E) take legal action, including preparing 
for or participating in any civil or criminal legal 
proceeding related to or resulting from domestic 
violence, sexual assault, or stalking. 
(c) SCHEDULING.—An employee shall make a reason-
able effort to schedule a period of paid sick time under 
this subtitle in a manner that does not unduly disrupt the 
operations of the employer. 
(d) PROCEDURES.— 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00171
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
172 
(1) IN GENERAL.—Paid sick time shall be pro-
vided upon the oral or written request of an em-
ployee. Such request shall— 
(A) include the expected duration of the 
period of such time; 
(B) in a case in which the need for such 
period of time is foreseeable at least 7 days in 
advance of such period, be provided at least 7 
days in advance of such period; and 
(C) otherwise, be provided as soon as prac-
ticable after the employee is aware of the need 
for such period. 
(2) CERTIFICATION IN GENERAL.— 
(A) PROVISION.— 
(i) IN GENERAL.—Subject to subpara-
graph (C), an employer may require that a 
request for paid sick time under this sec-
tion for a purpose described in paragraph 
(1), (2), or (3) of subsection (b) be sup-
ported by a certification issued by the 
health care provider of the eligible em-
ployee or of an individual described in sub-
section (b)(3), as appropriate, if the period 
of such time covers more than 3 consecu-
tive workdays. 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00172
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
173 
(ii) TIMELINESS.—The employee shall 
provide a copy of such certification to the 
employer in a timely manner, not later 
than 30 days after the first day of the pe-
riod of time. The employer shall not delay 
the commencement of the period of time on 
the basis that the employer has not yet re-
ceived the certification. 
(B) SUFFICIENT CERTIFICATION.— 
(i) IN GENERAL.—A certification pro-
vided under subparagraph (A) shall be suf-
ficient if it states— 
(I) the date on which the period 
of time will be needed; 
(II) the probable duration of the 
period of time; 
(III) the appropriate medical 
facts within the knowledge of the 
health care provider regarding the 
condition involved, subject to clause 
(ii); and 
(IV)(aa) for purposes of paid sick 
time under subsection (b)(1), a state-
ment that absence from work is medi-
cally necessary; 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00173
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
174 
(bb) for purposes of such time 
under subsection (b)(2), the dates on 
which testing for a medical diagnosis 
or care is expected to be given and the 
duration of such testing or care; and 
(cc) for purposes of such time 
under subsection (b)(3), in the case of 
time to care for someone who is not a 
child, a statement that care is needed 
for an individual described in such 
subsection, and an estimate of the 
amount of time that such care is 
needed for such individual. 
(ii) LIMITATION.—In issuing a certifi-
cation under subparagraph (A), a health 
care provider shall make reasonable efforts 
to limit the medical facts described in 
clause (i)(III) that are disclosed in the cer-
tification to the minimum necessary to es-
tablish a need for the employee to utilize 
paid sick time. 
(C) 
REGULATIONS.—Regulations 
pre-
scribed under section 253 shall specify the man-
ner in which an employee who does not have 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00174
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
175 
health insurance shall provide a certification for 
purposes of this paragraph. 
(D) CONFIDENTIALITY
AND
NONDISCLO-
SURE.— 
(i) PROTECTED
HEALTH
INFORMA-
TION.—Nothing in this subtitle shall be 
construed to require a health care provider 
to disclose information in violation of sec-
tion 1177 of the Social Security Act (42 
U.S.C. 1320d–6) or the regulations pro-
mulgated pursuant to section 264(c) of the 
Health Insurance Portability and Account-
ability Act of 1996 (42 U.S.C. 1320d–2 
note). 
(ii) 
HEALTH
INFORMATION 
RECORDS.—If 
an 
employer 
possesses 
health information about an employee or 
an employee’s child, parent, spouse or 
other individual described in subsection 
(b)(3), such information shall— 
(I) be maintained on a separate 
form and in a separate file from other 
personnel information; 
(II) be treated as a confidential 
medical record; and 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00175
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
176 
(III) not be disclosed except to 
the affected employee or with the per-
mission of the affected employee. 
(3) CERTIFICATION IN THE CASE OF DOMESTIC 
VIOLENCE, SEXUAL ASSAULT, OR STALKING.— 
(A) IN GENERAL.—An employer may re-
quire that a request for paid sick time under 
this section for a purpose described in sub-
section (b)(4) be supported by 1 of the fol-
lowing forms of documentation: 
(i) A police report indicating that the 
employee, or a member of the employee’s 
family described in subsection (b)(4), was 
a victim of domestic violence, sexual as-
sault, or stalking. 
(ii) A court order protecting or sepa-
rating the employee or a member of the 
employee’s family described in subsection 
(b)(4) from the perpetrator of an act of 
domestic violence, sexual assault, or stalk-
ing, or other evidence from the court or 
prosecuting attorney that the employee or 
a member of the employee’s family de-
scribed in subsection (b)(4) has appeared 
in court or is scheduled to appear in court 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00176
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
177 
in a proceeding related to domestic vio-
lence, sexual assault, or stalking. 
(iii) Other documentation signed by 
an employee or volunteer working for a vic-
tim services organization, an attorney, a 
police officer, a medical professional, a so-
cial worker, an antiviolence counselor, or a 
member of the clergy, affirming that the 
employee or a member of the employee’s 
family described in subsection (b)(4) is a 
victim of domestic violence, sexual assault, 
or stalking. 
(B) REQUIREMENTS.—The requirements 
of paragraph (2) shall apply to certifications 
under this paragraph, except that— 
(i) subclauses (III) and (IV) of sub-
paragraph (B)(i) and subparagraph (B)(ii) 
of such paragraph shall not apply; 
(ii) the certification shall state the 
reason that the leave is required with the 
facts to be disclosed limited to the min-
imum necessary to establish a need for the 
employee to be absent from work, and the 
employee shall not be required to explain 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00177
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
178 
the details of the domestic violence, sexual 
assault, or stalking involved; and 
(iii) with respect to confidentiality 
under subparagraph (D) of such para-
graph, any information provided to the em-
ployer under this paragraph shall be con-
fidential, except to the extent that any dis-
closure of such information is— 
(I) requested or consented to in 
writing by the employee; or 
(II) otherwise required by appli-
cable Federal or State law. 
SEC. 246. POSTING REQUIREMENT. 
(a) IN GENERAL.—Each employer shall post and 
keep posted a notice, to be prepared or approved in ac-
cordance with procedures specified in regulations pre-
scribed under section 253, setting forth excerpts from, or 
summaries of, the pertinent provisions of this subtitle in-
cluding— 
(1) information describing paid sick time avail-
able to employees under this subtitle; 
(2) information pertaining to the filing of an 
action under this subtitle; 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00178
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
179 
(3) the details of the notice requirement for a 
foreseeable 
period 
of 
time 
under 
section 
245(d)(1)(B); and 
(4) information that describes— 
(A) the protections that an employee has 
in exercising rights under this subtitle; and 
(B) how the employee can contact the Sec-
retary (or other appropriate authority as de-
scribed in section 248) if any of the rights are 
violated. 
(b) LOCATION.—The notice described under sub-
section (a) shall be posted— 
(1) in conspicuous places on the premises of the 
employer, where notices to employees (including ap-
plicants) are customarily posted; or 
(2) in employee handbooks. 
(c) VIOLATION; PENALTY.—Any employer who will-
fully violates the posting requirements of this section shall 
be subject to a civil fine in an amount not to exceed $100 
for each separate offense. 
SEC. 247. PROHIBITED ACTS. 
(a) INTERFERENCE WITH RIGHTS.— 
(1) EXERCISE OF RIGHTS.—It shall be unlawful 
for any employer to interfere with, restrain, or deny 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00179
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
180 
the exercise of, or the attempt to exercise, any right 
provided under this subtitle, including— 
(A) discharging or discriminating against 
(including retaliating against) any individual, 
including a job applicant, for exercising, or at-
tempting to exercise, any right provided under 
this subtitle; 
(B) using the taking of paid sick time 
under this subtitle as a negative factor in an 
employment action, such as hiring, promotion, 
or a disciplinary action; or 
(C) counting the paid sick time under a 
no-fault attendance policy or any other absence 
control policy. 
(2) DISCRIMINATION.—It shall be unlawful for 
any employer to discharge or in any other manner 
discriminate against (including retaliating against) 
any individual, including a job applicant, for oppos-
ing any practice made unlawful by this subtitle. 
(b) INTERFERENCE WITH PROCEEDINGS OR INQUIR-
IES.—It shall be unlawful for any person to discharge or 
in any other manner discriminate against (including retali-
ating against) any individual, including a job applicant, 
because such individual— 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00180
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
181 
(1) has filed an action, or has instituted or 
caused to be instituted any proceeding, under or re-
lated to this subtitle; 
(2) has given, or is about to give, any informa-
tion in connection with any inquiry or proceeding re-
lating to any right provided under this subtitle; or 
(3) has testified, or is about to testify, in any 
inquiry or proceeding relating to any right provided 
under this subtitle. 
(c) CONSTRUCTION.—Nothing in this section shall be 
construed to state or imply that the scope of the activities 
prohibited by section 105 of the Family and Medical Leave 
Act of 1993 (29 U.S.C. 2615) is less than the scope of 
the activities prohibited by this section. 
SEC. 248. ENFORCEMENT AUTHORITY. 
(a) IN GENERAL.— 
(1) DEFINITION.—In this subsection: 
(A) the term ‘‘employee’’ means an em-
ployee described in subparagraph (A) or (B) of 
section 244(3); and 
(B) the term ‘‘employer’’ means an em-
ployer described in subclause (I) or (II) of sec-
tion 244(4)(A)(i). 
(2) INVESTIGATIVE AUTHORITY.— 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00181
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
182 
(A) IN GENERAL.—To ensure compliance 
with the provisions of this subtitle, or any regu-
lation or order issued under this subtitle, the 
Secretary shall have, subject to subparagraph 
(C), the investigative authority provided under 
section 11(a) of the Fair Labor Standards Act 
of 1938 (29 U.S.C. 211(a)), with respect to em-
ployers, employees, and other individuals af-
fected. 
(B) OBLIGATION TO KEEP AND PRESERVE 
RECORDS.—An employer shall make, keep, and 
preserve records pertaining to compliance with 
this subtitle in accordance with section 11(c) of 
the Fair Labor Standards Act of 1938 (29 
U.S.C. 211(c)) and in accordance with regula-
tions prescribed by the Secretary. 
(C) REQUIRED
SUBMISSIONS
GENERALLY 
LIMITED TO AN ANNUAL BASIS.—The Secretary 
shall not require, under the authority of this 
paragraph, an employer to submit to the Sec-
retary any books or records more than once 
during any 12-month period, unless the Sec-
retary has reasonable cause to believe there 
may exist a violation of this subtitle or any reg-
ulation or order issued pursuant to this subtitle, 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00182
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
183 
or is investigating a charge pursuant to para-
graph (4). 
(D) SUBPOENA AUTHORITY.—For the pur-
poses of any investigation provided for in this 
paragraph, the Secretary shall have the sub-
poena authority provided for under section 9 of 
the Fair Labor Standards Act of 1938 (29 
U.S.C. 209). 
(3) CIVIL ACTION BY EMPLOYEES OR INDIVID-
UALS.— 
(A) RIGHT OF ACTION.—An action to re-
cover the damages or equitable relief prescribed 
in subparagraph (B) may be maintained 
against any employer in any Federal or State 
court of competent jurisdiction by one or more 
employees or individuals or their representative 
for and on behalf of— 
(i) the employees or individuals; or 
(ii) the employees or individuals and 
others similarly situated. 
(B) LIABILITY.—Any employer who vio-
lates section 247 (including a violation relating 
to rights provided under section 245) shall be 
liable to any employee or individual affected— 
(i) for damages equal to— 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00183
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
184 
(I) the amount of— 
(aa) any wages, salary, em-
ployment benefits, or other com-
pensation denied or lost by rea-
son of the violation; or 
(bb) in a case in which 
wages, salary, employment bene-
fits, or other compensation have 
not been denied or lost, any ac-
tual monetary losses sustained as 
a direct result of the violation up 
to a sum equal to 56 hours of 
wages or salary for the employee 
or individual; 
(II) the interest on the amount 
described in subclause (I) calculated 
at the prevailing rate; and 
(III) an additional amount as liq-
uidated damages; and 
(ii) for such equitable relief as may be 
appropriate, including employment, rein-
statement, and promotion. 
(C) FEES AND COSTS.—The court in an 
action under this paragraph shall, in addition to 
any judgment awarded to the plaintiff, allow a 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00184
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
185 
reasonable attorney’s fee, reasonable expert wit-
ness fees, and other costs of the action to be 
paid by the defendant. 
(4) ACTION BY THE SECRETARY.— 
(A) ADMINISTRATIVE
ACTION.—The Sec-
retary shall receive, investigate, and attempt to 
resolve complaints of violations of section 247 
(including a violation relating to rights provided 
under section 245) in the same manner that the 
Secretary receives, investigates, and attempts to 
resolve complaints of violations of sections 6 
and 7 of the Fair Labor Standards Act of 1938 
(29 U.S.C. 206 and 207). 
(B) CIVIL
ACTION.—The Secretary may 
bring an action in any court of competent juris-
diction to recover the damages described in 
paragraph (3)(B)(i). 
(C) SUMS RECOVERED.—Any sums recov-
ered by the Secretary pursuant to subparagraph 
(B) shall be held in a special deposit account 
and shall be paid, on order of the Secretary, di-
rectly to each employee or individual affected. 
Any such sums not paid to an employee or indi-
vidual affected because of inability to do so 
within a period of 3 years shall be deposited 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00185
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
186 
into the Treasury of the United States as mis-
cellaneous receipts. 
(5) LIMITATION.— 
(A) IN GENERAL.—Except as provided in 
subparagraph (B), an action may be brought 
under paragraph (3), (4), or (6) not later than 
2 years after the date of the last event consti-
tuting the alleged violation for which the action 
is brought. 
(B) WILLFUL VIOLATION.—In the case of 
an action brought for a willful violation of sec-
tion 247 (including a willful violation relating to 
rights provided under section 245), such action 
may be brought within 3 years of the date of 
the last event constituting the alleged violation 
for which such action is brought. 
(C) 
COMMENCEMENT.—In 
determining 
when an action is commenced under paragraph 
(3), (4), or (6) for the purposes of this para-
graph, it shall be considered to be commenced 
on the date when the complaint is filed. 
(6) ACTION FOR INJUNCTION BY SECRETARY.— 
The district courts of the United States shall have 
jurisdiction, for cause shown, in an action brought 
by the Secretary— 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00186
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
187 
(A) to restrain violations of section 247 
(including a violation relating to rights provided 
under section 245), including the restraint of 
any withholding of payment of wages, salary, 
employment benefits, or other compensation, 
plus interest, found by the court to be due to 
employees or individuals eligible under this sub-
title; or 
(B) to award such other equitable relief as 
may be appropriate, including employment, re-
instatement, and promotion. 
(7) SOLICITOR
OF
LABOR.—The Solicitor of 
Labor may appear for and represent the Secretary 
on any litigation brought under paragraph (4) or 
(6). 
(8) GOVERNMENT
ACCOUNTABILITY
OFFICE 
AND LIBRARY OF CONGRESS.—Notwithstanding any 
other provision of this subsection, in the case of the 
Government Accountability Office and the Library of 
Congress, the authority of the Secretary of Labor 
under this subsection shall be exercised respectively 
by the Comptroller General of the United States and 
the Librarian of Congress. 
(b) EMPLOYEES COVERED BY CONGRESSIONAL AC-
COUNTABILITY ACT OF 1995.—The powers, remedies, and 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00187
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
188 
procedures provided in the Congressional Accountability 
Act of 1995 (2 U.S.C. 1301 et seq.) to the Board (as de-
fined in section 101 of that Act (2 U.S.C. 1301)), or any 
person, alleging a violation of section 202(a)(1) of that 
Act (2 U.S.C. 1312(a)(1)) shall be the powers, remedies, 
and procedures this subtitle provides to that Board, or any 
person, alleging an unlawful employment practice in viola-
tion of this subtitle against an employee described in sec-
tion 244(3)(C). 
(c) EMPLOYEES COVERED BY CHAPTER 5 OF TITLE 
3, UNITED STATES CODE.—The powers, remedies, and 
procedures provided in chapter 5 of title 3, United States 
Code, to the President, the Merit Systems Protection 
Board, or any person, alleging a violation of section 
412(a)(1) of that title, shall be the powers, remedies, and 
procedures this subtitle provides to the President, that 
Board, or any person, respectively, alleging an unlawful 
employment practice in violation of this subtitle against 
an employee described in section 244(3)(D). 
(d) EMPLOYEES COVERED BY CHAPTER 63 OF TITLE 
5, UNITED STATES CODE.—The powers, remedies, and 
procedures provided in title 5, United States Code, to an 
employing agency, provided in chapter 12 of that title to 
the Merit Systems Protection Board, or provided in that 
title to any person, alleging a violation of chapter 63 of 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00188
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
189 
that title, shall be the powers, remedies, and procedures 
this subtitle provides to that agency, that Board, or any 
person, respectively, alleging an unlawful employment 
practice in violation of this subtitle against an employee 
described in section 244(3)(E). 
(e) REMEDIES FOR STATE EMPLOYEES.— 
(1) WAIVER
OF
SOVEREIGN
IMMUNITY.—A 
State’s receipt or use of Federal financial assistance 
for any program or activity of a State shall con-
stitute a waiver of sovereign immunity, under the 
11th Amendment to the Constitution or otherwise, 
to a suit brought by an employee of that program 
or activity under this subtitle for equitable, legal, or 
other relief authorized under this subtitle. 
(2) OFFICIAL CAPACITY.—An official of a State 
may be sued in the official capacity of the official by 
any employee who has complied with the procedures 
under subsection (a)(3), for injunctive relief that is 
authorized under this subtitle. In such a suit the 
court may award to the prevailing party those costs 
authorized by section 722 of the Revised Statutes 
(42 U.S.C. 1988). 
(3) APPLICABILITY.—With respect to a par-
ticular program or activity, paragraph (1) applies to 
conduct occurring on or after the day, after the date 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00189
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
190 
of enactment of this Act, on which a State first re-
ceives or uses Federal financial assistance for that 
program or activity. 
(4) DEFINITION OF PROGRAM OR ACTIVITY.—In 
this subsection, the term ‘‘program or activity’’ has 
the meaning given the term in section 606 of the 
Civil Rights Act of 1964 (42 U.S.C. 2000d–4a). 
SEC. 249. COLLECTION OF DATA ON PAID SICK TIME AND 
FURTHER STUDY. 
(a) COMPILATION OF INFORMATION.—Effective 90 
days after the date of enactment of this Act, the Commis-
sioner of Labor Statistics shall annually compile informa-
tion on the following: 
(1) The number of employees who used paid 
sick time. 
(2) The number of hours of paid sick time 
used. 
(3) The number of employees who used paid 
sick time for absences necessary due to domestic vio-
lence, sexual assault, or stalking. 
(4) The demographic characteristics of employ-
ees who were eligible for and who used paid sick 
time. 
(b) GAO STUDY.— 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00190
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
191 
(1) IN GENERAL.—The Comptroller General of 
the United States shall annually conduct a study to 
determine the following: 
(A)(i) The number of days employees used 
paid sick time and the reasons for the use. 
(ii) The number of employees who used the 
paid sick time for periods of time covering more 
than 3 consecutive workdays. 
(B) The cost and benefits to employers of 
implementing the paid sick time policies. 
(C) The cost to employees of providing cer-
tification to obtain the paid sick time. 
(D) The benefits of the paid sick time to 
employees and their family members, including 
effects on employees’ ability to care for their 
family members or to provide for their own 
health needs. 
(E) Whether the paid sick time affected 
employees’ ability to sustain an adequate in-
come while meeting needs of the employees and 
their family members. 
(F) Whether employers who administered 
paid sick time policies prior to the date of en-
actment of this Act were affected by the provi-
sions of this subtitle. 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00191
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
192 
(G) Whether other types of leave were af-
fected by this subtitle. 
(H) Whether paid sick time affected reten-
tion and turnover and costs of presenteeism. 
(I) Whether the paid sick time increased 
the use of less costly preventive medical care 
and lowered the use of emergency room care. 
(J) Whether the paid sick time reduced the 
number of children sent to school when the chil-
dren were sick. 
(2) AGGREGATING
DATA.—The data collected 
under subparagraphs (A) and (D) of paragraph (1) 
shall be aggregated by gender, race, disability, earn-
ings level, age, marital status, family type, including 
parental status, and industry. 
(3) REPORTS.— 
(A) IN
GENERAL.—Not later than 18 
months after the date of enactment of this Act, 
the Comptroller General of the United States 
shall prepare and submit a report to the appro-
priate committees of Congress concerning the 
results of the study conducted pursuant to 
paragraph (1) and the data aggregated under 
paragraph (2). 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00192
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
193 
(B) FOLLOWUP REPORT.—Not later than 
5 years after the date of enactment of this Act, 
the Comptroller General of the United States 
shall prepare and submit a followup report to 
the appropriate committees of Congress con-
cerning the results of the study conducted pur-
suant to paragraph (1) and the data aggregated 
under paragraph (2). 
SEC. 250. EFFECT ON OTHER LAWS. 
(a) FEDERAL
AND
STATE
ANTIDISCRIMINATION 
LAWS.—Nothing in this subtitle shall be construed to 
modify or affect any Federal or State law prohibiting dis-
crimination on the basis of race, religion, color, national 
origin, sex, age, or disability. 
(b) STATE AND LOCAL LAWS.—Nothing in this sub-
title shall be construed to supersede (including pre-
empting) any provision of any State or local law that pro-
vides greater paid sick time or leave rights (including 
greater paid sick time or leave, or greater coverage of 
those eligible for paid sick time or leave) than the rights 
established under this subtitle. 
SEC. 251. EFFECT ON EXISTING EMPLOYMENT BENEFITS. 
(a) MORE PROTECTIVE.—Nothing in this subtitle 
shall be construed to diminish the obligation of an em-
ployer to comply with any contract, collective bargaining 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00193
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
194 
agreement, or any employment benefit program or plan 
that provides greater paid sick leave or other leave rights 
to employees or individuals than the rights established 
under this subtitle. 
(b) LESS PROTECTIVE.—The rights established for 
employees under this subtitle shall not be diminished by 
any contract, collective bargaining agreement, or any em-
ployment benefit program or plan. 
SEC. 252. ENCOURAGEMENT OF MORE GENEROUS LEAVE 
POLICIES. 
Nothing in this subtitle shall be construed to discour-
age employers from adopting or retaining leave policies 
more generous than policies that comply with the require-
ments of this subtitle. 
SEC. 253. REGULATIONS. 
(a) IN GENERAL.— 
(1) AUTHORITY.—Except as provided in para-
graph (2), not later than 180 days after the date of 
enactment of this Act, the Secretary shall prescribe 
such regulations as are necessary to carry out this 
subtitle with respect to employees described in sub-
paragraph (A) or (B) of section 244(3) and other in-
dividuals affected by employers described in sub-
clause (I) or (II) of section 244(4)(A)(i). 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00194
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
195 
(2) GOVERNMENT ACCOUNTABILITY OFFICE; LI-
BRARY OF CONGRESS.—The Comptroller General of 
the United States and the Librarian of Congress 
shall prescribe the regulations with respect to em-
ployees of the Government Accountability Office and 
the Library of Congress, respectively, and other indi-
viduals affected by the Comptroller General of the 
United States and the Librarian of Congress, re-
spectively. 
(b) EMPLOYEES COVERED BY CONGRESSIONAL AC-
COUNTABILITY ACT OF 1995.— 
(1) AUTHORITY.—Not later than 120 days 
after the date of enactment of this Act, the Board 
of Directors of the Office of Compliance shall pre-
scribe (in accordance with section 304 of the Con-
gressional Accountability Act of 1995 (2 U.S.C. 
1384)) such regulations as are necessary to carry 
out this subtitle with respect to employees described 
in section 244(3)(C) and other individuals affected 
by employers described in section 244(4)(A)(i)(III). 
(2) AGENCY
REGULATIONS.—The regulations 
prescribed under paragraph (1) shall be the same as 
substantive regulations promulgated by the Sec-
retary to carry out this subtitle except insofar as the 
Board may determine, for good cause shown and 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00195
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
196 
stated together with the regulations prescribed 
under paragraph (1), that a modification of such 
regulations would be more effective for the imple-
mentation of the rights and protections involved 
under this section. 
(c) EMPLOYEES COVERED BY CHAPTER 5 OF TITLE 
3, UNITED STATES CODE.— 
(1) AUTHORITY.—Not later than 120 days 
after the date of enactment of this Act, the Presi-
dent (or the designee of the President) shall pre-
scribe such regulations as are necessary to carry out 
this subtitle with respect to employees described in 
section 244(3)(D) and other individuals affected by 
employers described in section 244(4)(A)(i)(IV). 
(2) AGENCY
REGULATIONS.—The regulations 
prescribed under paragraph (1) shall be the same as 
substantive regulations promulgated by the Sec-
retary to carry out this subtitle except insofar as the 
President (or designee) may determine, for good 
cause shown and stated together with the regula-
tions prescribed under paragraph (1), that a modi-
fication of such regulations would be more effective 
for the implementation of the rights and protections 
involved under this section. 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00196
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
197 
(d) EMPLOYEES COVERED BY CHAPTER 63 OF TITLE 
5, UNITED STATES CODE.— 
(1) AUTHORITY.—Not later than 120 days 
after the date of enactment of this Act, the Director 
of the Office of Personnel Management shall pre-
scribe such regulations as are necessary to carry out 
this subtitle with respect to employees described in 
section 244(3)(E) and other individuals affected by 
employers described in section 244(4)(A)(i)(V). 
(2) AGENCY
REGULATIONS.—The regulations 
prescribed under paragraph (1) shall be the same as 
substantive regulations promulgated by the Sec-
retary to carry out this subtitle except insofar as the 
Director may determine, for good cause shown and 
stated together with the regulations prescribed 
under paragraph (1), that a modification of such 
regulations would be more effective for the imple-
mentation of the rights and protections involved 
under this section. 
SEC. 254. EFFECTIVE DATES. 
(a) EFFECTIVE DATE.—This subtitle shall take effect 
6 months after the date of issuance of regulations under 
section 253(a)(1). 
(b) COLLECTIVE BARGAINING AGREEMENTS.—In the 
case of a collective bargaining agreement in effect on the 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00197
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
198 
effective date prescribed by subsection (a), this subtitle 
shall take effect on the earlier of— 
(1) the date of the termination of such agree-
ment; or 
(2) the date that occurs 18 months after the 
date of issuance of regulations under section 
253(a)(1). 
Subtitle E—Establishing a Fair 
Minimum Wage 
SEC. 261. MINIMUM WAGE INCREASES. 
(a) MINIMUM WAGE.— 
(1) IN GENERAL.—Section 6(a)(1) of the Fair 
Labor Standards Act of 1938 (29 U.S.C. 206(a)(1)) 
is amended to read as follows: 
‘‘(1) except as otherwise provided in this sec-
tion, not less than— 
‘‘(A) $8.10 an hour, beginning on the first 
day of the third month that begins after the 
date of enactment of the Rebuild America Act; 
‘‘(B) $8.95 an hour, beginning 1 year after 
that first day; 
‘‘(C) $9.80 an hour, beginning 2 years 
after that first day; and 
‘‘(D) beginning on the date that is 3 years 
after that first day, and annually thereafter, the 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00198
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
199 
amount determined by the Secretary pursuant 
to subsection (h);’’. 
(2) DETERMINATION BASED ON INCREASE IN 
THE
CONSUMER
PRICE
INDEX.—Section 6 of the 
Fair Labor Standards Act of 1938 (29 U.S.C. 206) 
is amended by adding at the end the following: 
‘‘(h)(1) Each year, by not later than the date that 
is 90 days before a new minimum wage determined under 
subsection (a)(1)(D) is to take effect, the Secretary shall 
determine the minimum wage to be in effect pursuant to 
this subsection for the subsequent 1-year period. The wage 
determined pursuant to this subsection for a year shall 
be— 
‘‘(A) not less than the amount in effect under 
subsection (a)(1) on the date of such determination; 
‘‘(B) increased from such amount by the annual 
percentage increase in the Consumer Price Index for 
Urban Wage Earners and Clerical Workers (United 
States city average, all items, not seasonally ad-
justed), or its successor publication, as determined 
by the Bureau of Labor Statistics; and 
‘‘(C) rounded to the nearest multiple of $0.05. 
‘‘(2) In calculating the annual percentage increase in 
the Consumer Price Index for purposes of paragraph 
(1)(B), the Secretary shall compare such Consumer Price 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00199
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
200 
Index for the most recent month, quarter, or year avail-
able (as selected by the Secretary prior to the first year 
for which a minimum wage is in effect pursuant to this 
subsection) with the Consumer Price Index for the same 
month in the preceding year, the same quarter in the pre-
ceding year, or the preceding year, respectively.’’. 
(b) BASE MINIMUM WAGE FOR TIPPED EMPLOY-
EES.—Section 3(m)(1) of the Fair Labor Standards Act 
of 1938 (29 U.S.C. 203(m)(1)) is amended to read as fol-
lows: 
‘‘(1) the cash wage paid such employee, which 
for purposes of such determination shall be not less 
than— 
‘‘(A) for the 1-year period beginning on 
the first day of the third month that begins 
after the date of enactment of the Rebuild 
America Act, $3.00 an hour; 
‘‘(B) for each succeeding 1-year period 
until the hourly wage under this paragraph 
equals 70 percent of the wage in effect under 
section 6(a)(1) for such period, an hourly wage 
equal to the amount determined under this 
paragraph for the preceding year, increased by 
the lesser of— 
‘‘(i) $0.85; or 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00200
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
201 
‘‘(ii) the amount necessary for the 
wage in effect under this paragraph to 
equal 70 percent of the wage in effect 
under section 6(a)(1) for such period, 
rounded to the nearest multiple of $0.05; 
and 
‘‘(C) for each succeeding 1-year period 
after the year in which the hourly wage under 
this paragraph first equals 70 percent of the 
wage in effect under section 6(a)(1) for the 
same period, the amount necessary to ensure 
that the wage in effect under this paragraph re-
mains equal to 70 percent of the wage in effect 
under section 6(a)(1), rounded to the nearest 
multiple of $0.05; and’’. 
(c) PUBLICATION OF NOTICE.—Section 6 of the Fair 
Labor Standards Act of 1938 (as amended by subsection 
(a)) (29 U.S.C. 206) is further amended by adding at the 
end the following: 
‘‘(i) Not later than 60 days prior to the effective date 
of any increase in the minimum wage determined under 
subsection (h) or required for tipped employees in accord-
ance with subparagraph (B) or (C) of section 3(m)(1), as 
amended by section 261 of the Rebuild America Act, the 
Secretary shall publish in the Federal Register and on the 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00201
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
202 
website of the Department of Labor a notice announcing 
the adjusted required wage.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
subsections (a) and (b) shall take effect on the first day 
of the third month that begins after the date of enactment 
of this Act. 
Subtitle F—Empowering 
Hardworking Americans 
SEC. 271. AMENDMENTS TO THE NATIONAL LABOR RELA-
TIONS ACT. 
(a) COVERAGE.— 
(1) SUPERVISORS.—Section 2(11) of the Na-
tional Labor Relations Act (29 U.S.C. 152(11)) is 
amended— 
(A) by inserting ‘‘and for a majority of the 
individual’s worktime’’ after ‘‘interest of the 
employer’’; 
(B) by striking ‘‘assign,’’; and 
(C) by striking ‘‘or responsibly to direct 
them’’. 
(2) INDEPENDENT
CONTRACTORS.—Section 2 
of the National Labor Relations Act (29 U.S.C. 
152) is amended by adding at the end the following: 
‘‘(15) The term ‘independent contractor’ means 
an individual who performs services for an employer 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00202
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
203 
for remuneration and for whom it is found, to the 
satisfaction of the Board, that— 
‘‘(A) the individual has been and will con-
tinue to be free from direction and control of 
the employer, both under the individual’s con-
tract of service and in fact; 
‘‘(B) the service is outside the usual course 
of business of the employer; and 
‘‘(C) the individual is customarily engaged 
in an independently established trade, occupa-
tion, profession, or business, both under the in-
dividual’s contract of service and in fact.’’. 
(b) REMEDIES.— 
(1) IN GENERAL.—Section 10(l) of the National 
Labor Relations Act (29 U.S.C. 160(l)) is amend-
ed— 
(A) in the first sentence— 
(i) by inserting after ‘‘charged that’’ 
the following: ‘‘any person that is an em-
ployer has engaged in an unfair labor prac-
tice within the meaning of section 8(a) 
which results in the discharge of an em-
ployee or other serious economic loss, or 
that’’; and 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00203
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
204 
(ii) by striking ‘‘case of like char-
acter’’ and inserting ‘‘other cases described 
in this sentence’’; and 
(B) in the third sentence, by striking ‘‘as 
it deems just and proper, notwithstanding any 
other provision of law:’’ and inserting the fol-
lowing: ‘‘to protect the rights guaranteed by 
this Act, notwithstanding any other provision of 
law. The district court shall grant the relief re-
quested if the court finds that there is reason-
able cause to believe that the alleged violation 
of the Act has occurred and, giving deference to 
the Board’s expertise in labor policy, there ex-
ists a reasonable probability that the purposes 
of the Act will be frustrated unless temporary 
relief is granted, or temporary relief is reason-
ably necessary to preserve the effectiveness of 
the remedy or forestall further violations:’’. 
(2) CIVIL PENALTIES.—Section 12 of the Na-
tional Labor Relations Act (29 U.S.C. 162) is 
amended— 
(A) by striking ‘‘SEC. 12. Any’’ and insert-
ing the following: 
‘‘SEC. 12. PENALTIES. 
‘‘(a) CRIMINAL PENALTIES.—Any’’; and 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00204
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
205 
(B) by adding at the end the following: 
‘‘(b) CIVIL PENALTIES.—Any employer who engages 
in a violation of section 8 that results in the discharge 
of an employee or other serious economic loss, shall, in 
addition to any remedy ordered, be subject to a civil pen-
alty not to exceed $20,000 for each violation. In deter-
mining the amount of any penalty under this subsection, 
the Board shall consider— 
‘‘(1) the gravity of the unfair labor practice; 
‘‘(2) the impact of the unfair labor practice on 
the charging party, on other persons seeking to exer-
cise rights guaranteed by this Act, and on the public 
interest; and 
‘‘(3) the size of the employer.’’. 
Subtitle G—Increasing Job Oppor-
tunities for Americans With Dis-
abilities 
SEC. 281. MODIFICATION OF WORK OPPORTUNITY CREDIT. 
(a) QUALIFIED DISABILITY INSURANCE RECIPIENTS 
TREATED AS MEMBERS OF TARGETED GROUPS.— 
(1) IN
GENERAL.—Paragraph (1) of section 
51(d) of the Internal Revenue Code of 1986 is 
amended by striking ‘‘or’’ at the end of subpara-
graph (H), by striking the period at the end of sub-
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00205
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
206 
paragraph (I) and inserting ‘‘, or’’, and by adding 
at the end the following new subparagraph: 
‘‘(J) a qualified disability insurance recipi-
ent.’’. 
(2) QUALIFIED DISABILITY INSURANCE RECIPI-
ENT DEFINED.—Subsection (d) of section 51 of such 
Code is amended by adding at the end the following 
new paragraph: 
‘‘(15) QUALIFIED DISABILITY INSURANCE RE-
CIPIENT.—The term ‘qualified disability insurance 
recipient’ means any individual who is certified by 
the local designated agency as receiving disability in-
surance benefits under title II of the Social Security 
Act for any month ending within the 60-day period 
ending on the hiring date.’’. 
(b) MODIFICATION
OF VOCATIONAL REHABILITA-
TION REFERRALS.—Section 51(d)(6) of the Internal Rev-
enue Code of 1986 is amended by striking subparagraphs 
(A) and (B) and inserting the following: 
‘‘(A) having a physical or mental disability 
which, for such individual, constitutes or results 
in a substantial impediment to employment, 
and 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00206
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
207 
‘‘(B)(i) having been referred to the em-
ployer upon completion of (or while receiving) 
rehabilitative services pursuant to— 
‘‘(I) an individualized plan for employ-
ment under title I of the Rehabilitation Act 
of 1973, or 
‘‘(II) a program of vocational rehabili-
tation carried out under chapter 31 of title 
38, United States Code, or 
‘‘(III) an individual work plan devel-
oped and implemented by an employment 
network pursuant to subsection (g) of sec-
tion 1148 of the Social Security Act with 
respect to which the requirements of such 
subsection are met, or 
‘‘(ii) eligible to receive rehabilitative serv-
ices pursuant to a plan described in clause 
(i)(I) or a program described in clause (i)(II) 
but not receiving such services.’’. 
(c) INCREASED CREDIT
FOR CERTAIN DISABLED 
WORKERS.—Section 51 of the Internal Revenue Code of 
1986 is amended by adding at the end the following new 
subsection: 
‘‘(l) INCREASED CREDIT FOR CERTAIN DISABLED 
WORKERS.— 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00207
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
208 
‘‘(1) IN GENERAL.—In the case of any qualified 
disabled worker, subsection (b) shall be applied by 
substituting— 
‘‘(A) ‘2-year period’ for ‘1-year period’ in 
paragraph (2), and 
‘‘(B) ‘$30,000’ for ‘$6,000’ in paragraph 
(3). 
‘‘(2) QUALIFIED DISABLED WORKER.—For pur-
poses of this subsection, the term ‘qualified disabled 
worker’ means any individual who is— 
‘‘(A) a qualified SSI recipient who is cer-
tified by the local designated agency as an indi-
vidual who is receiving benefits described in 
subsection (d)(9) as the result of being a blind 
or disabled individual (as defined in section 
1614 of the Social Security Act), 
‘‘(B) a qualified disability insurance recipi-
ent, or 
‘‘(C) a vocational rehabilitation referral.’’. 
(d) EXTENSION OF CREDIT.—Subparagraph (B) of 
section 51(c)(4) of the Internal Revenue Code of 1986 is 
amended to read as follows: 
‘‘(B) after December 31, 2015.’’. 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00208
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
209 
(e) REPORTING.—Section 51 of the Internal Revenue 
Code of 1986, as amended by subsection (c), is amended 
by adding at the end the following new subsection: 
‘‘(m) REPORTING.—The Secretary of the Treasury 
shall require each taxpayer which is allowed a credit under 
this section to report— 
‘‘(1) the number of employees hired by the tax-
payer who are members of a targeted group, 
‘‘(2) the number of employees hired by the tax-
payer who have a disability, 
‘‘(3) the length of retention of employees who 
are members of a targeted group, and 
‘‘(4) such other information as the Secretary 
may require.’’. 
(f) EFFECTIVE DATE.—The amendments made by 
this section shall apply to individuals who begin work for 
an employer after the date of the enactment of this Act. 
TITLE III—RESTORING BALANCE 
AND FAIRNESS TO THE TAX 
CODE 
SEC. 300. AMENDMENT OF 1986 CODE. 
Except as otherwise expressly provided, whenever in 
this title an amendment or repeal is expressed in terms 
of an amendment to, or repeal of, a section or other provi-
sion, the reference shall be considered to be made to a 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00209
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
210 
section or other provision of the Internal Revenue Code 
of 1986. 
Subtitle A—Instituting the ‘‘Buffett 
Rule’’ 
SEC. 301. FAIR SHARE TAX ON HIGH-INCOME TAXPAYERS. 
(a) IN GENERAL.—Subchapter A of chapter 1 of the 
Internal Revenue Code of 1986 is amended by adding at 
the end the following new part: 
‘‘PART VIII—FAIR SHARE TAX ON HIGH-INCOME 
TAXPAYERS 
‘‘Sec. 59B. Fair share tax. 
‘‘SEC. 59B. FAIR SHARE TAX. 
‘‘(a) GENERAL RULE.— 
‘‘(1) PHASE-IN OF TAX.—In the case of any 
high-income taxpayer, there is hereby imposed for a 
taxable year (in addition to any other tax imposed 
by this subtitle) a tax equal to the product of— 
‘‘(A) the amount determined under para-
graph (2), and 
‘‘(B) a fraction (not to exceed 1)— 
‘‘(i) the numerator of which is the ex-
cess of— 
‘‘(I) 
the 
taxpayer’s 
adjusted 
gross income, over 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00210
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
211 
‘‘(II) the dollar amount in effect 
under subsection (c)(1), and 
‘‘(ii) the denominator of which is the 
dollar amount in effect under subsection 
(c)(1). 
‘‘(2) AMOUNT OF TAX.—The amount of tax de-
termined under this paragraph is an amount equal 
to the excess (if any) of— 
‘‘(A) the tentative fair share tax for the 
taxable year, over 
‘‘(B) the excess of— 
‘‘(i) the sum of— 
‘‘(I) the regular tax liability (as 
defined in section 26(b)) for the tax-
able year, 
‘‘(II) the tax imposed by section 
55 for the taxable year, plus 
‘‘(III) the payroll tax for the tax-
able year, over 
‘‘(ii) the credits allowable under part 
IV of subchapter A (other than sections 
27(a), 31, and 34). 
‘‘(b) TENTATIVE FAIR SHARE TAX.—For purposes 
of this section— 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00211
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
212 
‘‘(1) IN GENERAL.—The tentative fair share tax 
for the taxable year is 30 percent of the excess of— 
‘‘(A) the adjusted gross income of the tax-
payer, over 
‘‘(B) the modified charitable contribution 
deduction for the taxable year. 
‘‘(2) MODIFIED
CHARITABLE
CONTRIBUTION 
DEDUCTION.—For purposes of paragraph (1)— 
‘‘(A) IN
GENERAL.—The modified chari-
table contribution deduction for any taxable 
year is an amount equal to the amount which 
bears the same ratio to the deduction allowable 
under section 170 (section 642(c) in the case of 
a trust or estate) for such taxable year as— 
‘‘(i) the amount of itemized deduc-
tions allowable under the regular tax (as 
defined in section 55) for such taxable 
year, determined after the application of 
section 68, bears to 
‘‘(ii) such amount, determined before 
the application of section 68. 
‘‘(B) TAXPAYER
MUST
ITEMIZE.—In the 
case of any individual who does not elect to 
itemize deductions for the taxable year, the 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00212
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
213 
modified charitable contribution deduction shall 
be zero. 
‘‘(c) HIGH-INCOME TAXPAYER.—For purposes of this 
section— 
‘‘(1) IN GENERAL.—The term ‘high-income tax-
payer’ means, with respect to any taxable year, any 
taxpayer (other than a corporation) with an adjusted 
gross income for such taxable year in excess of 
$1,000,000 (50 percent of such amount in the case 
of a married individual who files a separate return). 
‘‘(2) INFLATION ADJUSTMENT.— 
‘‘(A) IN GENERAL.—In the case of a tax-
able year beginning after 2013, the $1,000,000 
amount under paragraph (1) shall be increased 
by an amount equal to— 
‘‘(i) such dollar amount, multiplied by 
‘‘(ii) the cost-of-living adjustment de-
termined under section 1(f)(3) for the cal-
endar year in which the taxable year be-
gins, determined by substituting ‘calendar 
year 2012’ for ‘calendar year 1992’ in sub-
paragraph (B) thereof. 
‘‘(B) ROUNDING.—If any amount as ad-
justed under subparagraph (A) is not a multiple 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00213
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
214 
of $10,000, such amount shall be rounded to 
the next lowest multiple of $10,000. 
‘‘(d) PAYROLL TAX.—For purposes of this section, 
the payroll tax for any taxable year is an amount equal 
to the excess of— 
‘‘(1) the taxes imposed on the taxpayer under 
sections 1401, 1411, 3101, 3201, and 3211(a) (to 
the extent such taxes are attributable to the rate of 
tax in effect under section 3101) with respect to 
such taxable year or wages or compensation received 
during the taxable year, over 
‘‘(2) the deduction allowable under section 
164(f) for such taxable year. 
‘‘(e) SPECIAL RULE FOR ESTATES AND TRUSTS.— 
For purposes of this section, in the case of an estate or 
trust, adjusted gross income shall be computed in the 
manner described in section 67(e). 
‘‘(f) NOT TREATED AS TAX IMPOSED BY THIS CHAP-
TER FOR CERTAIN PURPOSES.—The tax imposed under 
this section shall not be treated as tax imposed by this 
chapter for purposes of determining the amount of any 
credit under this chapter (other than the credit allowed 
under section 27(a)) or for purposes of section 55.’’. 
(b) CONFORMING AMENDMENT.—Section 26(b)(2) of 
such Code is amended by redesignating subparagraphs (C) 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00214
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
215 
through (X) as subparagraphs (D) through (Y), respec-
tively, and by inserting after subparagraph (B) the fol-
lowing new subparagraph: 
‘‘(C) section 59B (relating to fair share 
tax),’’. 
(c) CLERICAL AMENDMENT.—The table of parts for 
subchapter A of chapter 1 of such Code is amended by 
adding at the end the following new item: 
‘‘PART VIII. FAIR SHARE TAX ON HIGH-INCOME TAXPAYERS.’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2012. 
Subtitle B—Adopting a Wall Street 
Trading and Speculators Tax 
SEC. 311. TRANSACTION TAX. 
(a) IN GENERAL.—Chapter 36 of the Internal Rev-
enue Code of 1986 is amended by inserting after sub-
chapter B the following new subchapter: 
‘‘Subchapter C—Tax on Trading Transactions 
‘‘Sec. 4475. Tax on trading transactions. 
‘‘SEC. 4475. TAX ON TRADING TRANSACTIONS. 
‘‘(a) IMPOSITION OF TAX.—There is hereby imposed 
a tax on each covered transaction with respect to any secu-
rity. 
‘‘(b) RATE OF TAX.—The tax imposed under sub-
section (a) with respect to any covered transaction shall 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00215
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
216 
be 0.03 percent of the specified base amount with respect 
to such covered transaction. 
‘‘(c) SPECIFIED BASE AMOUNT.—For purposes of 
this section, the term ‘specified base amount’ means— 
‘‘(1) except as provided in paragraph (2), the 
fair market value of the security (determined as of 
the time of the covered transaction), and 
‘‘(2) in the case of any payment described in 
subsection (h), the amount of such payment. 
‘‘(d) COVERED TRANSACTION.—For purposes of this 
section, the term ‘covered transaction’ means— 
‘‘(1) except as provided in paragraph (2), any 
purchase if— 
‘‘(A) such purchase occurs or is cleared on 
a facility located in the United States, or 
‘‘(B) the purchaser or seller is a United 
States person, and 
‘‘(2) any transaction with respect to a security 
described in subparagraph (D), (E), or (F) of sub-
section (e)(1), if— 
‘‘(A) such security is traded or cleared on 
a facility located in the United States, or 
‘‘(B) any party with rights under such se-
curity is a United States person. 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00216
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
217 
‘‘(e) SECURITY AND OTHER DEFINITIONS.—For pur-
poses of this section— 
‘‘(1) 
IN
GENERAL.—The 
term 
‘security’ 
means— 
‘‘(A) any share of stock in a corporation, 
‘‘(B) any partnership or beneficial owner-
ship interest in a partnership or trust, 
‘‘(C) any note, bond, debenture, or other 
evidence of indebtedness, 
‘‘(D) any evidence of an interest in, or a 
derivative financial instrument with respect to, 
any security or securities described in subpara-
graph (A), (B), or (C), 
‘‘(E) any derivative financial instrument 
with respect to any currency or commodity, and 
‘‘(F) any other derivative financial instru-
ment any payment with respect to which is cal-
culated by reference to any specified index. 
‘‘(2) DERIVATIVE
FINANCIAL
INSTRUMENT.— 
The term ‘derivative financial instrument’ includes 
any option, forward contract, futures contract, no-
tional principal contract, or any similar financial in-
strument. 
‘‘(3) SPECIFIED
INDEX.—The term ‘specified 
index’ means any 1 or more of any combination of— 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00217
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
218 
‘‘(A) a fixed rate, price, or amount, or 
‘‘(B) a variable rate, price, or amount,
which is based on any current objectively deter-
minable information which is not within the control 
of any of the parties to the contract or instrument 
and is not unique to any of the parties’ cir-
cumstances. 
‘‘(4) TREATMENT OF EXCHANGES.— 
‘‘(A) IN GENERAL.—An exchange shall be 
treated as the sale of the property transferred 
and a purchase of the property received by each 
party to the exchange. 
‘‘(B) CERTAIN DEEMED EXCHANGES.—In 
the case of a distribution treated as an ex-
change for stock under section 302 or 331, the 
corporation making such distribution shall be 
treated as having purchased such stock for pur-
poses of this section. 
‘‘(f) EXCEPTIONS.— 
‘‘(1) EXCEPTION FOR INITIAL ISSUES.—No tax 
shall be imposed under subsection (a) on any cov-
ered transaction with respect to the initial issuance 
of any security described in subparagraph (A), (B), 
or (C) of subsection (e)(1). 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00218
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
219 
‘‘(2) EXCEPTION FOR CERTAIN TRADED SHORT- 
TERM INDEBTEDNESS.—A note, bond, debenture, or 
other evidence of indebtedness which— 
‘‘(A) is traded on a trading facility located 
in the United States, and 
‘‘(B) has a fixed maturity of not more 
than 100 days, 
shall not be treated as described in subsection 
(e)(1)(C). 
‘‘(3) EXCEPTION FOR SECURITIES LENDING AR-
RANGEMENTS.—No tax shall be imposed under sub-
section (a) on any covered transaction with respect 
to which gain or loss is not recognized by reason of 
section 1058. 
‘‘(g) BY WHOM PAID.— 
‘‘(1) IN GENERAL.—The tax imposed by this 
section shall be paid by— 
‘‘(A) in the case of a transaction which oc-
curs or is cleared on a facility located in the 
United States, such facility, and 
‘‘(B) in the case of a purchase not de-
scribed in subparagraph (A) which is executed 
by a broker (as defined in section 6045(c)(1)) 
which is a United States person, such broker. 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00219
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
220 
‘‘(2) SPECIAL
RULES
FOR
DIRECT, 
ETC., 
TRANSACTIONS.—In the case of any transaction to 
which paragraph (1) does not apply, the tax imposed 
by this section shall be paid by— 
‘‘(A) in the case of a transaction described 
in subsection (d)(1)— 
‘‘(i) the purchaser if the purchaser is 
a United States person, and 
‘‘(ii) the seller if the purchaser is not 
a United States person, and 
‘‘(B) in the case of a transaction described 
in subsection (d)(2)— 
‘‘(i) the payor if the payor is a United 
States person, and 
‘‘(ii) the payee if the payor is not a 
United States person. 
‘‘(h) CERTAIN PAYMENTS TREATED AS SEPARATE 
TRANSACTIONS.—Except as otherwise provided by the 
Secretary, any payment with respect to a security de-
scribed in subparagraph (D), (E), or (F) of subsection 
(e)(1) shall be treated as a separate transaction for pur-
poses of this section, including— 
‘‘(1) any net initial payment, net final or termi-
nating payment, or net periodical payment with re-
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00220
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
221 
spect to a notional principal contract (or similar fi-
nancial instrument), 
‘‘(2) any payment with respect to any forward 
contract (or similar financial instrument), and 
‘‘(3) any premium paid with respect to any op-
tion (or similar financial instrument). 
‘‘(i) ADMINISTRATION.—The Secretary shall carry 
out this section in consultation with the Securities and Ex-
change Commission and the Commodity Futures Trading 
Commission. 
‘‘(j) GUIDANCE; REGULATIONS.—The Secretary 
shall— 
‘‘(1) provide guidance regarding such informa-
tion reporting concerning covered transactions as the 
Secretary deems appropriate, and 
‘‘(2) prescribe such regulations as are necessary 
or appropriate to prevent avoidance of the purposes 
of this section, including the use of non-United 
States persons in such transactions.’’. 
(b) CLERICAL AMENDMENT.—The table of sub-
chapters for chapter 36 of such Code is amended by in-
serting after the item relating to subchapter B the fol-
lowing new item: 
‘‘Subchapter C. Tax on trading transactions.’’. 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00221
Fmt 6652
Sfmt 6211
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
222 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to transactions after December 31, 
2012. 
Subtitle C—Ending Tax Breaks for 
Companies 
That 
Ship 
Jobs 
Overseas 
SEC. 321. ALLOCATION OF EXPENSES AND TAXES ON BASIS 
OF REPATRIATION OF FOREIGN INCOME. 
(a) IN GENERAL.—Part III of subchapter N of chap-
ter 1 of the Internal Revenue Code of 1986 is amended 
by inserting after subpart G the following new subpart: 
‘‘Subpart H—Special Rules for Allocation of Foreign- 
Related Deductions and Foreign Tax Credits 
‘‘Sec. 975. Deductions allocated to deferred foreign income may not offset 
United States source income. 
‘‘Sec. 976. Amount of foreign taxes computed on overall basis. 
‘‘Sec. 977. Application of subpart. 
‘‘SEC. 975. DEDUCTIONS ALLOCATED TO DEFERRED FOR-
EIGN INCOME MAY NOT OFFSET UNITED 
STATES SOURCE INCOME. 
‘‘(a) CURRENT YEAR DEDUCTIONS.—For purposes 
of this chapter, foreign-related deductions for any taxable 
year— 
‘‘(1) shall be taken into account for such tax-
able year only to the extent that such deductions are 
allocable to currently-taxed foreign income, and 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00222
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
223 
‘‘(2) to the extent not so allowed, shall be taken 
into account in subsequent taxable years as provided 
in subsection (b). 
Foreign-related deductions shall be allocated to currently- 
taxed foreign income in the same proportion which cur-
rently-taxed foreign income bears to the sum of currently- 
taxed foreign income and deferred foreign income. 
‘‘(b) DEDUCTIONS RELATED TO REPATRIATED DE-
FERRED FOREIGN INCOME.— 
‘‘(1) IN GENERAL.—If there is repatriated for-
eign income for a taxable year, the portion of the 
previously deferred deductions allocated to the repa-
triated foreign income shall be taken into account 
for the taxable year as a deduction allocated to in-
come from sources outside the United States. Any 
such amount shall not be included in foreign-related 
deductions for purposes of applying subsection (a) to 
such taxable year. 
‘‘(2) PORTION OF PREVIOUSLY DEFERRED DE-
DUCTIONS.—For purposes of paragraph (1), the por-
tion of the previously deferred deductions allocated 
to repatriated foreign income is— 
‘‘(A) the amount which bears the same 
proportion to such deductions, as 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00223
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
224 
‘‘(B) the repatriated income bears to the 
previously deferred foreign income. 
‘‘(c) DEFINITIONS AND SPECIAL RULE.—For pur-
poses of this section— 
‘‘(1) FOREIGN-RELATED
DEDUCTIONS.—The 
term ‘foreign-related deductions’ means the total 
amount of deductions and expenses which would be 
allocated or apportioned to gross income from 
sources without the United States for the taxable 
year if both the currently-taxed foreign income and 
deferred foreign income were taken into account. 
‘‘(2) CURRENTLY-TAXED
FOREIGN
INCOME.— 
The term ‘currently-taxed foreign income’ means the 
amount of gross income from sources without the 
United States for the taxable year (determined with-
out regard to repatriated foreign income for such 
year). 
‘‘(3) DEFERRED FOREIGN INCOME.—The term 
‘deferred foreign income’ means the excess of— 
‘‘(A) the amount that would be includible 
in gross income under subpart F of this part 
for the taxable year if— 
‘‘(i) all controlled foreign corporations 
were treated as one controlled foreign cor-
poration, and 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00224
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
225 
‘‘(ii) all earnings and profits of all 
controlled foreign corporations were sub-
part F income (as defined in section 952), 
over 
‘‘(B) the sum of— 
‘‘(i) all dividends received during the 
taxable year from controlled foreign cor-
porations, plus 
‘‘(ii) amounts includible in gross in-
come under section 951(a). 
‘‘(4) PREVIOUSLY
DEFERRED
FOREIGN
IN-
COME.—The term ‘previously deferred foreign in-
come’ means the aggregate amount of deferred for-
eign income for all prior taxable years to which this 
part applies, determined as of the beginning of the 
taxable year, reduced by the repatriated foreign in-
come for all such prior taxable years. 
‘‘(5) REPATRIATED
FOREIGN
INCOME.—The 
term ‘repatriated foreign income’ means the amount 
included in gross income on account of distributions 
out of previously deferred foreign income. 
‘‘(6) PREVIOUSLY
DEFERRED
DEDUCTIONS.— 
The term ‘previously deferred deductions’ means the 
aggregate amount of foreign-related deductions not 
taken into account under subsection (a) for all prior 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00225
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
226 
taxable years (determined as of the beginning of the 
taxable year), reduced by any amounts taken into 
account under subsection (b) for such prior taxable 
years. 
‘‘(7) 
TREATMENT
OF
CERTAIN
FOREIGN 
TAXES.— 
‘‘(A) PAID BY CONTROLLED FOREIGN COR-
PORATION.—Section 78 shall not apply for pur-
poses of determining currently-taxed foreign in-
come and deferred foreign income. 
‘‘(B) PAID BY TAXPAYER.—For purposes 
of determining currently-taxed foreign income, 
gross income from sources without the United 
States shall be reduced by the aggregate 
amount of taxes described in the applicable 
paragraph of section 901(b) which are paid by 
the taxpayer (without regard to sections 902 
and 960) during the taxable year. 
‘‘(8) COORDINATION
WITH
SECTION
976.—In 
determining currently-taxed foreign income and de-
ferred foreign income, the amount of deemed foreign 
tax credits shall be determined with regard to sec-
tion 976. 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00226
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
227 
‘‘SEC. 976. AMOUNT OF FOREIGN TAXES COMPUTED ON 
OVERALL BASIS. 
‘‘(a) CURRENT YEAR ALLOWANCE.—For purposes of 
this chapter, the amount taken into account as foreign in-
come taxes for any taxable year shall be an amount which 
bears the same ratio to the total foreign income taxes for 
that taxable year as— 
‘‘(1) the currently-taxed foreign income for such 
taxable year, bears to 
‘‘(2) the sum of the currently-taxed foreign in-
come and deferred foreign income for such year. 
The portion of the total foreign income taxes for any tax-
able year not taken into account under the preceding sen-
tence for a taxable year shall only be taken into account 
as provided in subsection (b) (and shall not be taken into 
account for purposes of applying sections 902 and 960). 
‘‘(b) ALLOWANCE RELATED TO REPATRIATED DE-
FERRED FOREIGN INCOME.— 
‘‘(1) IN GENERAL.—If there is repatriated for-
eign income for any taxable year, the portion of the 
previously deferred foreign income taxes paid or ac-
crued during such taxable year shall be taken into 
account for the taxable year as foreign taxes paid or 
accrued. Any such taxes so taken into account shall 
not be included in foreign income taxes for purposes 
of applying subsection (a) to such taxable year. 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00227
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
229 
that would be paid or accrued during the taxable 
year under sections 902 and 960 if— 
‘‘(A) all controlled foreign corporations 
were treated as one controlled foreign corpora-
tion, and 
‘‘(B) all earnings and profits of all con-
trolled foreign corporations were subpart F in-
come (as defined in section 952). 
‘‘(3) FOREIGN INCOME TAXES.—The term ‘for-
eign income taxes’ means any income, war profits, or 
excess profits taxes paid by the taxpayer to any for-
eign country or possession of the United States. 
‘‘(4) CURRENTLY-TAXED FOREIGN INCOME AND 
DEFERRED
FOREIGN
INCOME.—The terms ‘cur-
rently-taxed foreign income’ and ‘deferred foreign in-
come’ have the meanings given such terms by sec-
tion 975(c)). 
‘‘SEC. 977. APPLICATION OF SUBPART. 
‘‘This subpart— 
‘‘(1) shall be applied before subpart A, and 
‘‘(2) shall be applied separately with respect to 
the categories of income specified in section 
904(d)(1).’’. 
(b) CLERICAL AMENDMENT.—The table of subparts 
for part III of subpart N of chapter 1 of such Code is 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00229
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
230 
amended by inserting after the item relating to subpart 
G the following new item: 
‘‘SUBPART H. SPECIAL RULES FOR ALLOCATION OF FOREIGN-RELATED 
DEDUCTIONS AND FOREIGN TAX CREDITS.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2012. 
SEC. 322. EXCESS INCOME FROM TRANSFERS OF INTANGI-
BLES TO LOW-TAXED AFFILIATES TREATED 
AS SUBPART F INCOME. 
(a) IN GENERAL.—Subsection (a) of section 954 of 
the Internal Revenue Code of 1986 is amended by insert-
ing after paragraph (3) the following new paragraph: 
‘‘(4) the foreign base company excess intangible 
income for the taxable year (determined under sub-
section (f) and reduced as provided in subsection 
(b)(5)), and’’. 
(b) FOREIGN BASE COMPANY EXCESS INTANGIBLE 
INCOME.—Section 954 of such Code is amended by insert-
ing after subsection (e) the following new subsection: 
‘‘(f) FOREIGN BASE COMPANY EXCESS INTANGIBLE 
INCOME.—For purposes of subsection (a)(4) and this sub-
section: 
‘‘(1) FOREIGN BASE COMPANY EXCESS INTAN-
GIBLE INCOME DEFINED.— 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00230
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
231 
‘‘(A) IN
GENERAL.—The term ‘foreign 
base company excess intangible income’ means, 
with respect to any covered intangible, the ex-
cess of— 
‘‘(i) the sum of— 
‘‘(I) gross income from the sale, 
lease, license, or other disposition of 
property in which such covered intan-
gible is used directly or indirectly, and 
‘‘(II) gross income from the pro-
vision of services related to such cov-
ered intangible or in connection with 
property in which such covered intan-
gible is used directly or indirectly, 
over 
‘‘(ii) 150 percent of the costs properly 
allocated and apportioned to the gross in-
come taken into account under clause (i) 
other than expenses for interest and taxes 
and any expenses which are not directly al-
locable to such gross income. 
‘‘(B) SAME COUNTRY INCOME NOT TAKEN 
INTO ACCOUNT.—If— 
‘‘(i) the sale, lease, license, or other 
disposition of the property referred to in 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00231
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
232 
subparagraph (A)(i)(I) is for use, con-
sumption, or disposition in the country 
under the laws of which the controlled for-
eign corporation is created or organized, or 
‘‘(ii) the services referred to in sub-
paragraph (A)(i)(II) are performed in such 
country, 
the gross income from such sale, lease, license, 
or other disposition, or provision of services, 
shall not be taken into account under subpara-
graph (A)(i). 
‘‘(C) SPECIAL RULE FOR RESEARCH AND 
DEVELOPMENT EXPENSES.—Research and de-
velopment costs for any taxable year shall be 
treated for purposes of subparagraph (A) as 
properly allocable to gross income derived from 
a covered intangible if such costs are properly 
allocable to the line of business in which such 
gross income is earned. 
‘‘(2) EXCEPTION BASED ON EFFECTIVE FOR-
EIGN INCOME TAX RATE.— 
‘‘(A) IN GENERAL.—Foreign base company 
excess intangible income shall not include the 
applicable percentage of any item of income re-
ceived by a controlled foreign corporation if the 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00232
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
233 
taxpayer establishes to the satisfaction of the 
Secretary that such income was subject to an 
effective rate of income tax imposed by a for-
eign country in excess of 10 percent. 
‘‘(B) 
APPLICABLE
PERCENTAGE.—For 
purposes of subparagraph (A), the term ‘appli-
cable percentage’ means the ratio (expressed as 
a percentage), not greater than 100 percent, 
of— 
‘‘(i) the number of percentage points 
by which the effective rate of income tax 
referred to in subparagraph (A) exceeds 10 
percentage points, over 
‘‘(ii) 5 percentage points. 
‘‘(C) TREATMENT OF LOSSES IN DETER-
MINING EFFECTIVE RATE OF FOREIGN INCOME 
TAX.—For purposes of determining the effective 
rate of income tax imposed by any foreign 
country— 
‘‘(i) such effective rate shall be deter-
mined without regard to any losses carried 
to the relevant taxable year, and 
‘‘(ii) to the extent the income with re-
spect to such intangible reduces losses in 
the relevant taxable year, such effective 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00233
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
234 
rate shall be treated as being the effective 
rate which would have been imposed on 
such income without regard to such losses. 
‘‘(3) COVERED
INTANGIBLE.—The term ‘cov-
ered intangible’ means, with respect to any con-
trolled foreign corporation, any intangible property 
(as defined in section 936(h)(3)(B))— 
‘‘(A) which is sold, leased, licensed, or oth-
erwise transferred (directly or indirectly) to 
such controlled foreign corporation from a 
United States related person, or 
‘‘(B) with respect to which such controlled 
foreign corporation and one or more related 
persons has (directly or indirectly) entered into 
any shared risk or development agreement (in-
cluding any cost sharing agreement). 
‘‘(4) RELATED
PERSON.—The term ‘related 
person’ has the meaning given such term in sub-
section (d)(3).’’. 
(c) CONFORMING AMENDMENTS.— 
(1) Paragraph (4) of section 954(b) of such 
Code is amended by inserting ‘‘foreign base company 
excess intangible income described in subsection 
(a)(4) or’’ before ‘‘foreign base company oil-related 
income’’ in the last sentence thereof. 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00234
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
235 
(2) Paragraph (5) of section 954(b) of such 
Code is amended by inserting ‘‘the foreign base com-
pany excess intangible income,’’ before ‘‘and the for-
eign base company oil related income’’. 
(3) Subsection (b) of section 954 of such Code 
is amended by adding at the end the following new 
paragraph: 
‘‘(7) FOREIGN BASE COMPANY EXCESS INTAN-
GIBLE INCOME NOT TREATED AS ANOTHER KIND OF 
BASE COMPANY INCOME.—Income of a corporation 
which is foreign base company excess intangible in-
come shall not be considered foreign base company 
income of such corporation under paragraph (2), 
(3), or (5) of subsection (a).’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to income from transactions con-
nected with or benefitting from covered intangibles in tax-
able years beginning on or after January 1, 2013. 
SEC. 323. MODIFICATIONS OF FOREIGN TAX CREDIT RULES 
APPLICABLE TO DUAL CAPACITY TAXPAYERS. 
(a) IN GENERAL.—Section 901 of the Internal Rev-
enue Code of 1986 is amended by redesignating subsection 
(n) as subsection (o) and by inserting after subsection (m) 
the following new subsection: 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00235
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
236 
‘‘(n) SPECIAL RULES RELATING TO DUAL CAPACITY 
TAXPAYERS.— 
‘‘(1) GENERAL
RULE.—Notwithstanding any 
other provision of this chapter, any amount paid or 
accrued by a dual capacity taxpayer or any member 
of the worldwide affiliated group of which such dual 
capacity taxpayer is also a member to any foreign 
country or to any possession of the United States 
for any period shall not be considered a tax to the 
extent such amount exceeds the amount (determined 
in accordance with regulations) which would have 
been required to be paid if the taxpayer were not a 
dual capacity taxpayer. 
‘‘(2) DUAL
CAPACITY
TAXPAYER.—For pur-
poses of this subsection, the term ‘dual capacity tax-
payer’ means, with respect to any foreign country or 
possession of the United States, a person who— 
‘‘(A) is subject to a levy of such country or 
possession, and 
‘‘(B) receives (or will receive) directly or 
indirectly a specific economic benefit (as deter-
mined in accordance with regulations) from 
such country or possession. 
‘‘(3) REGULATIONS.—The Secretary may issue 
such regulations or other guidance as is necessary or 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00236
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
237 
appropriate to carry out the purposes of this sub-
section.’’. 
(b) CONTRARY TREATY OBLIGATIONS UPHELD.— 
The amendments made by this section shall not apply to 
the extent contrary to any treaty obligation of the United 
States. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to amounts that, if such amounts 
were an amount of tax paid or accrued, would be consid-
ered paid or accrued in taxable years beginning after De-
cember 31, 2012. 
Subtitle D—Making Wall Street 
Take Responsibility 
SEC. 331. FINANCIAL CRISIS RESPONSIBILITY FEE. 
(a) AMOUNT TO BE COLLECTED.—In order to cover 
the costs to the Federal Government of assistance pro-
vided through the Emergency Economic Stabilization Act 
of 2008, including the Troubled Asset Relief Program, the 
Secretary of the Treasury, during the 10-year period be-
ginning on the first day of fiscal year 2013 and continuing 
through the end of fiscal year 2022, shall assess a Finan-
cial Crisis Responsibility Fee to collect a total of 
$65,000,000,000. 
(b) ASSESSMENT AND SCHEDULE.—To collect the 
Financial Crisis Responsibility Fee, the Secretary of the 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00237
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
238 
Treasury shall establish, by regulation, an assessment 
schedule by fiscal year, including assessment base and 
rates, that— 
(1) is designed, in the judgment of the Sec-
retary of the Treasury, to result in the collection of 
$65,000,000,000; and 
(2) shall apply to any financial institution with 
$50,000,000,000 or more in total consolidated assets 
that received taxpayer assistance under the Emer-
gency Economic Stabilization Act of 2008, including 
the Troubled Asset Relief Program. 
(c) CONSIDERATION OF ECONOMIC RECOVERY.—To 
minimize any adverse impact to, and to promote the full 
recovery of, the economy and financial sector, the Sec-
retary of the Treasury shall phase in the assessment rate 
required under this part over the 10-year period described 
in subsection (a), in a manner determined by the Sec-
retary of the Treasury. 
Subtitle E—Closing the Carried 
Interest Loophole 
SEC. 341. PARTNERSHIP INTERESTS TRANSFERRED IN 
CONNECTION WITH PERFORMANCE OF SERV-
ICES. 
(a) MODIFICATION TO ELECTION TO INCLUDE PART-
NERSHIP INTEREST
IN GROSS INCOME
IN YEAR
OF 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00238
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
239 
TRANSFER.—Subsection (c) of section 83 of the Internal 
Revenue Code of 1986 is amended by redesignating para-
graph (4) as paragraph (5) and by inserting after para-
graph (3) the following new paragraph: 
‘‘(4) PARTNERSHIP
INTERESTS.—Except as 
provided by the Secretary— 
‘‘(A) IN
GENERAL.—In the case of any 
transfer of an interest in a partnership in con-
nection with the provision of services to (or for 
the benefit of) such partnership— 
‘‘(i) the fair market value of such in-
terest shall be treated for purposes of this 
section as being equal to the amount of the 
distribution which the partner would re-
ceive if the partnership sold (at the time of 
the transfer) all of its assets at fair market 
value and distributed the proceeds of such 
sale (reduced by the liabilities of the part-
nership) to its partners in liquidation of 
the partnership, and 
‘‘(ii) the person receiving such interest 
shall be treated as having made the elec-
tion under subsection (b)(1) unless such 
person makes an election under this para-
graph to have such subsection not apply. 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00239
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
240 
‘‘(B) ELECTION.—The election under sub-
paragraph (A)(ii) shall be made under rules 
similar to the rules of subsection (b)(2).’’. 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to interests in partnerships trans-
ferred after the date of the enactment of this Act. 
SEC. 342. SPECIAL RULES FOR PARTNERS PROVIDING IN-
VESTMENT 
MANAGEMENT 
SERVICES 
TO 
PARTNERSHIPS. 
(a) IN GENERAL.—Part I of subchapter K of chapter 
1 of the Internal Revenue Code of 1986 is amended by 
adding at the end the following new section: 
‘‘SEC. 710. SPECIAL RULES FOR PARTNERS PROVIDING IN-
VESTMENT 
MANAGEMENT 
SERVICES 
TO 
PARTNERSHIPS. 
‘‘(a) TREATMENT
OF
DISTRIBUTIVE
SHARE
OF 
PARTNERSHIP ITEMS.—For purposes of this title, in the 
case of an investment services partnership interest— 
‘‘(1) IN
GENERAL.—Notwithstanding section 
702(b)— 
‘‘(A) an amount equal to the net capital 
gain with respect to such interest for any part-
nership taxable year shall be treated as ordi-
nary income, and 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00240
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
241 
‘‘(B) subject to the limitation of paragraph 
(2), an amount equal to the net capital loss 
with respect to such interest for any partner-
ship taxable year shall be treated as an ordi-
nary loss. 
‘‘(2) RECHARACTERIZATION
OF
LOSSES
LIM-
ITED
TO
RECHARACTERIZED
GAINS.—The amount 
treated as ordinary loss under paragraph (1)(B) for 
any taxable year shall not exceed the excess (if any) 
of— 
‘‘(A) the aggregate amount treated as ordi-
nary income under paragraph (1)(A) with re-
spect to the investment services partnership in-
terest for all preceding partnership taxable 
years to which this section applies, over 
‘‘(B) the aggregate amount treated as or-
dinary loss under paragraph (1)(B) with re-
spect to such interest for all preceding partner-
ship taxable years to which this section applies. 
‘‘(3) ALLOCATION
TO
ITEMS
OF
GAIN
AND 
LOSS.— 
‘‘(A) NET
CAPITAL
GAIN.—The amount 
treated as ordinary income under paragraph 
(1)(A) shall be allocated ratably among the 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00241
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
242 
items of long-term capital gain taken into ac-
count in determining such net capital gain. 
‘‘(B) NET
CAPITAL
LOSS.—The amount 
treated as ordinary loss under paragraph (1)(B) 
shall be allocated ratably among the items of 
long-term capital loss and short-term capital 
loss taken into account in determining such net 
capital loss. 
‘‘(4) TERMS RELATING TO CAPITAL GAINS AND 
LOSSES.—For purposes of this section— 
‘‘(A) IN GENERAL.—Net capital gain, long- 
term capital gain, and long-term capital loss, 
with respect to any investment services partner-
ship interest for any taxable year, shall be de-
termined under section 1222, except that such 
section shall be applied— 
‘‘(i) without regard to the recharacter-
ization of any item as ordinary income or 
ordinary loss under this section, 
‘‘(ii) by only taking into account items 
of gain and loss taken into account by the 
holder of such interest under section 702 
with respect to such interest for such tax-
able year, and 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00242
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
243 
‘‘(iii) by treating property which is 
taken into account in determining gains 
and losses to which section 1231 applies as 
capital assets held for more than 1 year. 
‘‘(B) NET CAPITAL LOSS.—The term ‘net 
capital loss’ means the excess of the losses from 
sales or exchanges of capital assets over the 
gains from such sales or exchanges. Rules simi-
lar to the rules of clauses (i) through (iii) of 
subparagraph (A) shall apply for purposes of 
the preceding sentence. 
‘‘(5) SPECIAL RULES FOR DIVIDENDS.— 
‘‘(A) INDIVIDUALS.—Any dividend allo-
cated to any investment services partnership in-
terest shall not be treated as qualified dividend 
income for purposes of section 1(h). 
‘‘(B) CORPORATIONS.—No deduction shall 
be allowed under section 243 or 245 with re-
spect to any dividend allocated to any invest-
ment services partnership interest. 
‘‘(6) SPECIAL
RULE
FOR
QUALIFIED
SMALL 
BUSINESS STOCK.—Section 1202 shall not apply to 
any gain from the sale or exchange of qualified small 
business stock (as defined in section 1202(c)) allo-
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00243
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
244 
cated with respect to any investment services part-
nership interest. 
‘‘(b) DISPOSITIONS OF PARTNERSHIP INTERESTS.— 
‘‘(1) GAIN.— 
‘‘(A) IN GENERAL.—Any gain on the dis-
position of an investment services partnership 
interest shall be— 
‘‘(i) treated as ordinary income, and 
‘‘(ii) recognized notwithstanding any 
other provision of this subtitle. 
‘‘(B) GIFT AND TRANSFERS AT DEATH.— 
In the case of a disposition of an investment 
services partnership interest by gift or by rea-
son of death of the taxpayer— 
‘‘(i) subparagraph (A) shall not apply, 
‘‘(ii) such interest shall be treated as 
an investment services partnership interest 
in the hands of the person acquiring such 
interest, and 
‘‘(iii) any amount that would have 
been treated as ordinary income under this 
subsection had the decedent sold such in-
terest immediately before death shall be 
treated as an item of income in respect of 
a decedent under section 691. 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00244
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
245 
‘‘(2) LOSS.—Any loss on the disposition of an 
investment services partnership interest shall be 
treated as an ordinary loss to the extent of the ex-
cess (if any) of— 
‘‘(A) the aggregate amount treated as ordi-
nary income under subsection (a) with respect 
to such interest for all partnership taxable 
years to which this section applies, over 
‘‘(B) the aggregate amount treated as or-
dinary loss under subsection (a) with respect to 
such interest for all partnership taxable years 
to which this section applies. 
‘‘(3) ELECTION WITH RESPECT TO CERTAIN EX-
CHANGES.—Paragraph (1)(A)(ii) shall not apply to 
the contribution of an investment services partner-
ship interest to a partnership in exchange for an in-
terest in such partnership if— 
‘‘(A) the taxpayer makes an irrevocable 
election to treat the partnership interest re-
ceived in the exchange as an investment serv-
ices partnership interest, and 
‘‘(B) the taxpayer agrees to comply with 
such reporting and recordkeeping requirements 
as the Secretary may prescribe. 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00245
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
246 
‘‘(4) DISTRIBUTIONS OF PARTNERSHIP PROP-
ERTY.— 
‘‘(A) IN GENERAL.—In the case of any dis-
tribution of property by a partnership with re-
spect to any investment services partnership in-
terest held by a partner, the partner receiving 
such property shall recognize gain equal to the 
excess (if any) of— 
‘‘(i) the fair market value of such 
property at the time of such distribution, 
over 
‘‘(ii) the adjusted basis of such prop-
erty in the hands of such partner (deter-
mined without regard to subparagraph 
(C)). 
‘‘(B) TREATMENT OF GAIN AS ORDINARY 
INCOME.—Any gain recognized by such partner 
under subparagraph (A) shall be treated as or-
dinary income to the same extent and in the 
same manner as the increase in such partner’s 
distributive share of the taxable income of the 
partnership would be treated under subsection 
(a) if, immediately prior to the distribution, the 
partnership had sold the distributed property at 
fair market value and all of the gain from such 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00246
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
247 
disposition were allocated to such partner. For 
purposes of applying subsection (a)(2), any gain 
treated as ordinary income under this subpara-
graph shall be treated as an amount treated as 
ordinary income under subsection (a)(1)(A). 
‘‘(C) ADJUSTMENT OF BASIS.—In the case 
a distribution to which subparagraph (A) ap-
plies, the basis of the distributed property in 
the hands of the distributee partner shall be the 
fair market value of such property. 
‘‘(D) SPECIAL RULES WITH RESPECT TO 
MERGERS, DIVISIONS, AND TECHNICAL TERMI-
NATIONS.—In the case of a taxpayer which sat-
isfies requirements similar to the requirements 
of subparagraphs (A) and (B) of paragraph (3), 
this paragraph and paragraph (1)(A)(ii) shall 
not apply to the distribution of a partnership 
interest if such distribution is in connection 
with a contribution (or deemed contribution) of 
any property of the partnership to which sec-
tion 721 applies pursuant to a transaction de-
scribed in paragraph (1)(B) or (2) of section 
708(b). 
‘‘(c) INVESTMENT SERVICES PARTNERSHIP INTER-
EST.—For purposes of this section— 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00247
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
248 
‘‘(1) IN GENERAL.—The term ‘investment serv-
ices partnership interest’ means any interest in an 
investment partnership acquired or held by any per-
son in connection with the conduct of a trade or 
business described in paragraph (2) by such person 
(or any person related to such person). An interest 
in an investment partnership held by any person— 
‘‘(A) shall not be treated as an investment 
services partnership interest for any period be-
fore the first date on which it is so held in con-
nection with such a trade or business, 
‘‘(B) shall not cease to be an investment 
services partnership interest merely because 
such person holds such interest other than in 
connection with such a trade or business, and 
‘‘(C) shall be treated as an investment 
services partnership interest if acquired from a 
related person in whose hands such interest was 
an investment services partnership interest. 
‘‘(2) BUSINESSES TO WHICH THIS SECTION AP-
PLIES.—A trade or business is described in this 
paragraph if such trade or business primarily in-
volves the performance of any of the following serv-
ices with respect to assets held (directly or indi-
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00248
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
249 
rectly) by the investment partnership referred to in 
paragraph (1): 
‘‘(A) Advising as to the advisability of in-
vesting in, purchasing, or selling any specified 
asset. 
‘‘(B) Managing, acquiring, or disposing of 
any specified asset. 
‘‘(C) Arranging financing with respect to 
acquiring specified assets. 
‘‘(D) Any activity in support of any service 
described in subparagraphs (A) through (C). 
‘‘(3) INVESTMENT PARTNERSHIP.— 
‘‘(A) IN GENERAL.—The term ‘investment 
partnership’ means any partnership if, at the 
end of any calendar quarter ending after the 
date of enactment of this section— 
‘‘(i) substantially all of the assets of 
the partnership are specified assets (deter-
mined without regard to any section 197 
intangible within the meaning of section 
197(d)), and 
‘‘(ii) more than half of the capital of 
the partnership is attributable to qualified 
capital interests which (in the hands of the 
owners of such interests) constitute prop-
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00249
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
250 
erty not held in connection with a trade or 
business. 
‘‘(B) SPECIAL RULES FOR DETERMINING 
IF PROPERTY NOT HELD IN CONNECTION WITH 
TRADE
OR
BUSINESS.—Except as otherwise 
provided by the Secretary, for purposes of de-
termining whether any interest in a partnership 
constitutes property not held in connection with 
a trade or business under subparagraph 
(A)(ii)— 
‘‘(i) any election under subsection (e) 
or (f) of section 475 shall be disregarded, 
and 
‘‘(ii) paragraph (5)(B) shall not apply. 
‘‘(C) ANTIABUSE
RULES.—The Secretary 
may issue regulations or other guidance which 
prevent the avoidance of the purposes of sub-
paragraph (A), including regulations or other 
guidance which treat convertible and contingent 
debt (and other debt having the attributes of 
equity) as a capital interest in the partnership. 
‘‘(D) CONTROLLED
GROUPS
OF
ENTI-
TIES.— 
‘‘(i) IN GENERAL.—In the case of a 
controlled group of entities, if an interest 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00250
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
251 
in the partnership received in exchange for 
a contribution to the capital of the part-
nership by any member of such controlled 
group would (in the hands of such mem-
ber) constitute property held in connection 
with a trade or business, then any interest 
in such partnership held by any member of 
such group shall be treated for purposes of 
subparagraph (A) as constituting (in the 
hands of such member) property held in 
connection with a trade or business. 
‘‘(ii) CONTROLLED GROUP OF ENTI-
TIES.—For purposes of clause (i), the term 
‘controlled group of entities’ means a con-
trolled group of corporations as defined in 
section 1563(a)(1), applied without regard 
to subsections (a)(4) and (b)(2) of section 
1563. A partnership or any other entity 
(other than a corporation) shall be treated 
as a member of a controlled group of enti-
ties if such entity is controlled (within the 
meaning of section 954(d)(3)) by members 
of such group (including any entity treated 
as a member of such group by reason of 
this sentence). 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00251
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
252 
‘‘(E) 
SPECIAL
RULE
FOR
CORPORA-
TIONS.—For purposes of this paragraph, in the 
case of a corporation, the determination of 
whether property is held in connection with a 
trade or business shall be determined as if the 
taxpayer were an individual. 
‘‘(4) SPECIFIED
ASSET.—The term ‘specified 
asset’ means securities (as defined in section 
475(c)(2) without regard to the last sentence there-
of), real estate held for rental or investment, inter-
ests in partnerships, commodities (as defined in sec-
tion 475(e)(2)), cash or cash equivalents, or options 
or derivative contracts with respect to any of the 
foregoing. 
‘‘(5) RELATED PERSONS.— 
‘‘(A) IN
GENERAL.—A person shall be 
treated as related to another person if the rela-
tionship between such persons is described in 
section 267(b) or 707(b). 
‘‘(B) ATTRIBUTION
OF
PARTNER
SERV-
ICES.—Any service described in paragraph (2) 
which is provided by a partner of a partnership 
shall be treated as also provided by such part-
nership. 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00252
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
253 
‘‘(d) EXCEPTION
FOR CERTAIN CAPITAL INTER-
ESTS.— 
‘‘(1) IN GENERAL.—In the case of any portion 
of an investment services partnership interest which 
is a qualified capital interest, all items of gain and 
loss (and any dividends) which are allocated to such 
qualified capital interest shall not be taken into ac-
count under subsection (a) if— 
‘‘(A) allocations of items are made by the 
partnership to such qualified capital interest in 
the same manner as such allocations are made 
to other qualified capital interests held by part-
ners who do not provide any services described 
in subsection (c)(2) and who are not related to 
the partner holding the qualified capital inter-
est, and 
‘‘(B) the allocations made to such other in-
terests are significant compared to the alloca-
tions made to such qualified capital interest. 
‘‘(2) AUTHORITY TO PROVIDE EXCEPTIONS TO 
ALLOCATION
REQUIREMENTS.—To the extent pro-
vided by the Secretary in regulations or other guid-
ance— 
‘‘(A) ALLOCATIONS TO PORTION OF QUALI-
FIED CAPITAL INTEREST.—Paragraph (1) may 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00253
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
254 
be applied separately with respect to a portion 
of a qualified capital interest. 
‘‘(B) NO OR INSIGNIFICANT ALLOCATIONS 
TO NONSERVICE PROVIDERS.—In any case in 
which the requirements of paragraph (1)(B) are 
not satisfied, items of gain and loss (and any 
dividends) shall not be taken into account under 
subsection (a) to the extent that such items are 
properly allocable under such regulations or 
other guidance to qualified capital interests. 
‘‘(C) ALLOCATIONS
TO
SERVICE
PRO-
VIDERS’ QUALIFIED CAPITAL INTERESTS WHICH 
ARE LESS THAN OTHER ALLOCATIONS.—Alloca-
tions shall not be treated as failing to meet the 
requirement of paragraph (1)(A) merely be-
cause the allocations to the qualified capital in-
terest represent a lower return than the alloca-
tions made to the other qualified capital inter-
ests referred to in such paragraph. 
‘‘(3) SPECIAL RULE FOR CHANGES IN SERVICES 
AND CAPITAL CONTRIBUTIONS.—In the case of an 
interest in a partnership which was not an invest-
ment services partnership interest and which, by 
reason of a change in the services with respect to as-
sets held (directly or indirectly) by the partnership 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00254
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
255 
or by reason of a change in the capital contributions 
to such partnership, becomes an investment services 
partnership interest, the qualified capital interest of 
the holder of such partnership interest immediately 
after such change shall not, for purposes of this sub-
section, be less than the fair market value of such 
interest 
(determined 
immediately 
before 
such 
change). 
‘‘(4) SPECIAL
RULE
FOR
TIERED
PARTNER-
SHIPS.—Except as otherwise provided by the Sec-
retary, in the case of tiered partnerships, all items 
which are allocated in a manner which meets the re-
quirements of paragraph (1) to qualified capital in-
terests in a lower-tier partnership shall retain such 
character to the extent allocated on the basis of 
qualified capital interests in any upper-tier partner-
ship. 
‘‘(5) 
EXCEPTION
FOR
NO-SELF-CHARGED 
CARRY
AND
MANAGEMENT
FEE
PROVISIONS.—Ex-
cept as otherwise provided by the Secretary, an in-
terest shall not fail to be treated as satisfying the 
requirement of paragraph (1)(A) merely because the 
allocations made by the partnership to such interest 
do not reflect the cost of services described in sub-
section (c)(2) which are provided (directly or indi-
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00255
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
256 
rectly) to the partnership by the holder of such in-
terest (or a related person). 
‘‘(6) SPECIAL RULE FOR DISPOSITIONS.—In the 
case of any investment services partnership interest 
any portion of which is a qualified capital interest, 
subsection (b) shall not apply to so much of any 
gain or loss as bears the same proportion to the en-
tire amount of such gain or loss as— 
‘‘(A) the distributive share of gain or loss 
that would have been allocated to the qualified 
capital interest (consistent with the require-
ments of paragraph (1)) if the partnership had 
sold all of its assets at fair market value imme-
diately before the disposition, bears to 
‘‘(B) the distributive share of gain or loss 
that would have been so allocated to the invest-
ment services partnership interest of which such 
qualified capital interest is a part. 
‘‘(7) QUALIFIED CAPITAL INTEREST.—For pur-
poses of this section— 
‘‘(A) IN
GENERAL.—The term ‘qualified 
capital interest’ means so much of a partner’s 
interest in the capital of the partnership as is 
attributable to— 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00256
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
257 
‘‘(i) the fair market value of any 
money or other property contributed to the 
partnership in exchange for such interest 
(determined without regard to section 
752(a)), 
‘‘(ii) any amounts which have been in-
cluded in gross income under section 83 
with respect to the transfer of such inter-
est, and 
‘‘(iii) the excess (if any) of— 
‘‘(I) any items of income and 
gain taken into account under section 
702 with respect to such interest, over 
‘‘(II) any items of deduction and 
loss so taken into account. 
‘‘(B) ADJUSTMENT TO QUALIFIED CAPITAL 
INTEREST.— 
‘‘(i) DISTRIBUTIONS
AND
LOSSES.— 
The qualified capital interest shall be re-
duced by distributions from the partner-
ship with respect to such interest and by 
the excess (if any) of the amount described 
in subparagraph (A)(iii)(II) over the 
amount 
described 
in 
subparagraph 
(A)(iii)(I). 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00257
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
258 
‘‘(ii) SPECIAL RULE FOR CONTRIBU-
TIONS OF PROPERTY.—In the case of any 
contribution of property described in sub-
paragraph (A)(i) with respect to which the 
fair market value of such property is not 
equal to the adjusted basis of such prop-
erty immediately before such contribution, 
proper adjustments shall be made to the 
qualified capital interest to take into ac-
count such difference consistent with such 
regulations or other guidance as the Sec-
retary may provide. 
‘‘(C) TECHNICAL
TERMINATIONS, 
ETC., 
DISREGARDED.—No increase or decrease in the 
qualified capital interest of any partner shall re-
sult from a termination, merger, consolidation, 
or division described in section 708, or any 
similar transaction. 
‘‘(8) TREATMENT OF CERTAIN LOANS.— 
‘‘(A) PROCEEDS OF PARTNERSHIP LOANS 
NOT TREATED AS QUALIFIED CAPITAL INTER-
EST OF SERVICE PROVIDING PARTNERS.—For 
purposes of this subsection, an investment serv-
ices partnership interest shall not be treated as 
a qualified capital interest to the extent that 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00258
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
259 
such interest is acquired in connection with the 
proceeds of any loan or other advance made or 
guaranteed, directly or indirectly, by any other 
partner or the partnership (or any person re-
lated to any such other partner or the partner-
ship). The preceding sentence shall not apply to 
the extent the loan or other advance is repaid 
before the date of the enactment of this section 
unless such repayment is made with the pro-
ceeds of a loan or other advance described in 
the preceding sentence. 
‘‘(B) REDUCTION
IN
ALLOCATIONS
TO 
QUALIFIED
CAPITAL
INTERESTS
FOR
LOANS 
FROM
NONSERVICE-PROVIDING
PARTNERS
TO 
THE PARTNERSHIP.—For purposes of this sub-
section, any loan or other advance to the part-
nership made or guaranteed, directly or indi-
rectly, by a partner not providing services de-
scribed in subsection (c)(2) to the partnership 
(or any person related to such partner) shall be 
taken into account in determining the qualified 
capital interests of the partners in the partner-
ship. 
‘‘(e) OTHER INCOME
AND GAIN
IN CONNECTION 
WITH INVESTMENT MANAGEMENT SERVICES.— 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00259
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
260 
‘‘(1) IN GENERAL.—If— 
‘‘(A) a person performs (directly or indi-
rectly) investment management services for any 
investment entity, 
‘‘(B) such person holds (directly or indi-
rectly) a disqualified interest with respect to 
such entity, and 
‘‘(C) the value of such interest (or pay-
ments thereunder) is substantially related to 
the amount of income or gain (whether or not 
realized) from the assets with respect to which 
the investment management services are per-
formed, 
any income or gain with respect to such interest 
shall be treated as ordinary income. Rules similar to 
the rules of subsections (a)(5) and (d) shall apply 
for purposes of this subsection. 
‘‘(2) DEFINITIONS.—For purposes of this sub-
section— 
‘‘(A) DISQUALIFIED INTEREST.— 
‘‘(i) IN
GENERAL.—The term ‘dis-
qualified interest’ means, with respect to 
any investment entity— 
‘‘(I) any interest in such entity 
other than indebtedness, 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00260
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
261 
‘‘(II) convertible or contingent 
debt of such entity, 
‘‘(III) any option or other right 
to acquire property described in sub-
clause (I) or (II), and 
‘‘(IV) any derivative instrument 
entered into (directly or indirectly) 
with such entity or any investor in 
such entity. 
‘‘(ii) EXCEPTIONS.—Such term shall 
not include— 
‘‘(I) a partnership interest, 
‘‘(II) except as provided by the 
Secretary, any interest in a taxable 
corporation, and 
‘‘(III) except as provided by the 
Secretary, stock in an S corporation. 
‘‘(B) TAXABLE CORPORATION.—The term 
‘taxable corporation’ means— 
‘‘(i) a domestic C corporation, or 
‘‘(ii) a foreign corporation substan-
tially all of the income of which is— 
‘‘(I) effectively connected with 
the conduct of a trade or business in 
the United States, or 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00261
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
262 
‘‘(II) subject to a comprehensive 
foreign income tax (as defined in sec-
tion 457A(d)(2)). 
‘‘(C) INVESTMENT
MANAGEMENT
SERV-
ICES.—The term ‘investment management serv-
ices’ means a substantial quantity of any of the 
services described in subsection (c)(2). 
‘‘(D) INVESTMENT ENTITY.—The term ‘in-
vestment entity’ means any entity which, if it 
were a partnership, would be an investment 
partnership. 
‘‘(f) REGULATIONS.—The Secretary shall prescribe 
such regulations or other guidance as is necessary or ap-
propriate to carry out the purposes of this section, includ-
ing regulations or other guidance to— 
‘‘(1) provide modifications to the application of 
this section (including treating related persons as 
not related to one another) to the extent such modi-
fication is consistent with the purposes of this sec-
tion, 
‘‘(2) prevent the avoidance of the purposes of 
this section, and 
‘‘(3) coordinate this section with the other pro-
visions of this title. 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00262
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
263 
‘‘(g) CROSS REFERENCE.—For 40 percent penalty on 
certain underpayments due to the avoidance of this sec-
tion, see section 6662.’’. 
(b) APPLICATION OF SECTION 751 TO INDIRECT DIS-
POSITIONS OF INVESTMENT SERVICES PARTNERSHIP IN-
TERESTS.— 
(1) IN
GENERAL.—Subsection (a) of section 
751 of such Code is amended by striking ‘‘or’’ at the 
end of paragraph (1), by inserting ‘‘or’’ at the end 
of paragraph (2), and by inserting after paragraph 
(2) the following new paragraph: 
‘‘(3) investment services partnership interests 
held by the partnership,’’. 
(2) CERTAIN
DISTRIBUTIONS
TREATED
AS 
SALES OR EXCHANGES.—Subparagraph (A) of sec-
tion 751(b)(1) of such Code is amended by striking 
‘‘or’’ at the end of clause (i), by inserting ‘‘or’’ at 
the end of clause (ii), and by inserting after clause 
(ii) the following new clause: 
‘‘(iii) investment services partnership 
interests held by the partnership,’’. 
(3) APPLICATION OF SPECIAL RULES IN THE 
CASE OF TIERED PARTNERSHIPS.—Subsection (f) of 
section 751 of such Code is amended— 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00263
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
264 
(A) by striking ‘‘or’’ at the end of para-
graph (1), by inserting ‘‘or’’ at the end of para-
graph (2), and by inserting after paragraph (2) 
the following new paragraph: 
‘‘(3) an investment services partnership interest 
held by the partnership,’’, and 
(B) by striking ‘‘partner.’’ and inserting 
‘‘partner (other than a partnership in which it 
holds an investment services partnership inter-
est).’’. 
(4) INVESTMENT SERVICES PARTNERSHIP IN-
TERESTS; QUALIFIED CAPITAL INTERESTS.—Section 
751 of such Code is amended by adding at the end 
the following new subsection: 
‘‘(g) INVESTMENT SERVICES PARTNERSHIP INTER-
ESTS.—For purposes of this section— 
‘‘(1) IN GENERAL.—The term ‘investment serv-
ices partnership interest’ has the meaning given 
such term by section 710(c). 
‘‘(2) ADJUSTMENTS
FOR
QUALIFIED
CAPITAL 
INTERESTS.—The amount to which subsection (a) 
applies by reason of paragraph (3) thereof shall not 
include so much of such amount as is attributable 
to any portion of the investment services partnership 
interest which is a qualified capital interest (deter-
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00264
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
265 
mined under rules similar to the rules of section 
710(d)). 
‘‘(3) EXCEPTION FOR PUBLICLY TRADED PART-
NERSHIPS.—In the case of an exchange of an inter-
est in a publicly traded partnership (as defined in 
section 7704) to which subsection (a) applies— 
‘‘(A) this section shall be applied without 
regard to subsections (a)(3), (b)(1)(A)(iii), and 
(f)(3), and 
‘‘(B) such partnership shall be treated as 
owning its proportionate share of the property 
of any other partnership in which it is a part-
ner. 
‘‘(4) RECOGNITION OF GAINS.—Any gain with 
respect to which subsection (a) applies by reason of 
paragraph (3) thereof shall be recognized notwith-
standing any other provision of this title. 
‘‘(5) 
COORDINATION
WITH
INVENTORY 
ITEMS.—An investment services partnership interest 
held by the partnership shall not be treated as an 
inventory item of the partnership. 
‘‘(6) PREVENTION
OF
DOUBLE
COUNTING.— 
Under regulations or other guidance prescribed by 
the Secretary, subsection (a)(3) shall not apply with 
respect to any amount to which section 710 applies. 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00265
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
266 
‘‘(7) VALUATION
METHODS.—The Secretary 
shall prescribe regulations or other guidance which 
provide the acceptable methods for valuing invest-
ment services partnership interests for purposes of 
this section.’’. 
(c) TREATMENT
FOR
PURPOSES
OF
SECTION 
7704.—Subsection (d) of section 7704 of such Code is 
amended by adding at the end the following new para-
graph: 
‘‘(6) INCOME FROM CERTAIN CARRIED INTER-
ESTS NOT QUALIFIED.— 
‘‘(A) IN GENERAL.—Specified carried in-
terest income shall not be treated as qualifying 
income. 
‘‘(B) SPECIFIED
CARRIED
INTEREST
IN-
COME.—For purposes of this paragraph— 
‘‘(i) IN GENERAL.—The term ‘speci-
fied carried interest income’ means— 
‘‘(I) any item of income or gain 
allocated to an investment services 
partnership interest (as defined in 
section 710(c)) held by the partner-
ship, 
‘‘(II) any gain on the disposition 
of an investment services partnership 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00266
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
267 
interest (as so defined) or a partner-
ship interest to which (in the hands of 
the partnership) section 751 applies, 
and 
‘‘(III) any income or gain taken 
into account by the partnership under 
subsection (b)(4) or (e) of section 
710. 
‘‘(ii) EXCEPTION FOR QUALIFIED CAP-
ITAL
INTERESTS.—A rule similar to the 
rule of section 710(d) shall apply for pur-
poses of clause (i). 
‘‘(C) COORDINATION WITH OTHER PROVI-
SIONS.—Subparagraph (A) shall not apply to 
any item described in paragraph (1)(E) (or so 
much of paragraph (1)(F) as relates to para-
graph (1)(E)). 
‘‘(D) SPECIAL RULES FOR CERTAIN PART-
NERSHIPS.— 
‘‘(i) CERTAIN PARTNERSHIPS OWNED 
BY REAL ESTATE INVESTMENT TRUSTS.— 
Subparagraph (A) shall not apply in the 
case of a partnership which meets each of 
the following requirements: 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00267
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
268 
‘‘(I) Such partnership is treated 
as publicly traded under this section 
solely by reason of interests in such 
partnership being convertible into in-
terests in a real estate investment 
trust which is publicly traded. 
‘‘(II) Fifty percent or more of 
the capital and profits interests of 
such partnership are owned, directly 
or indirectly, at all times during the 
taxable year by such real estate in-
vestment trust (determined with the 
application of section 267(c)). 
‘‘(III) Such partnership meets 
the requirements of paragraphs (2), 
(3), and (4) of section 856(c). 
‘‘(ii) CERTAIN
PARTNERSHIPS
OWN-
ING OTHER PUBLICLY TRADED PARTNER-
SHIPS.—Subparagraph (A) shall not apply 
in the case of a partnership which meets 
each of the following requirements: 
‘‘(I) Substantially all of the as-
sets of such partnership consist of in-
terests in one or more publicly traded 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00268
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
269 
partnerships (determined without re-
gard to subsection (b)(2)). 
‘‘(II) Substantially all of the in-
come of such partnership is ordinary 
income or section 1231 gain (as de-
fined in section 1231(a)(3)). 
‘‘(E) 
TRANSITIONAL
RULE.—Subpara-
graph (A) shall not apply to any taxable year 
of the partnership beginning before the date 
which is 10 years after the date of the enact-
ment of this paragraph.’’. 
(d) IMPOSITION
OF
PENALTY
ON
UNDERPAY-
MENTS.— 
(1) IN
GENERAL.—Subsection (b) of section 
6662 of such Code is amended by inserting after 
paragraph (7) the following new paragraph: 
‘‘(8) The application of section 710(e) or the 
regulations or other guidance prescribed under sec-
tion 710(f) to prevent the avoidance of the purposes 
of section 710.’’. 
(2) AMOUNT OF PENALTY.— 
(A) IN GENERAL.—Section 6662 of such 
Code is amended by adding at the end the fol-
lowing new subsection: 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00269
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
270 
‘‘(k) INCREASE IN PENALTY IN CASE OF PROPERTY 
TRANSFERRED FOR INVESTMENT MANAGEMENT SERV-
ICES.—In the case of any portion of an underpayment to 
which this section applies by reason of subsection (b)(8), 
subsection (a) shall be applied with respect to such portion 
by substituting ‘40 percent’ for ‘20 percent’.’’. 
(B) CONFORMING AMENDMENT.—Subpara-
graph (B) of section 6662A(e)(2) of such Code 
is amended by striking ‘‘or (i)’’ and inserting ‘‘, 
(i), or (k)’’. 
(3) SPECIAL RULES FOR APPLICATION OF REA-
SONABLE CAUSE EXCEPTION.—Subsection (c) of sec-
tion 6664 of such Code is amended— 
(A) by redesignating paragraphs (3) and 
(4) as paragraphs (4) and (5), respectively; 
(B) by striking ‘‘paragraph (3)’’ in para-
graph (5)(A), as so redesignated, and inserting 
‘‘paragraph (4)’’; and 
(C) by inserting after paragraph (2) the 
following new paragraph: 
‘‘(3) SPECIAL RULE FOR UNDERPAYMENTS AT-
TRIBUTABLE TO INVESTMENT MANAGEMENT SERV-
ICES.— 
‘‘(A) IN
GENERAL.—Paragraph (1) shall 
not apply to any portion of an underpayment to 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00270
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
271 
which section 6662 applies by reason of sub-
section (b)(8) unless— 
‘‘(i) the relevant facts affecting the 
tax treatment of the item are adequately 
disclosed, 
‘‘(ii) there is or was substantial au-
thority for such treatment, and 
‘‘(iii) the taxpayer reasonably believed 
that such treatment was more likely than 
not the proper treatment. 
‘‘(B) RULES
RELATING
TO
REASONABLE 
BELIEF.—Rules similar to the rules of sub-
section (d)(3) shall apply for purposes of sub-
paragraph (A)(iii).’’. 
(e) INCOME AND LOSS FROM INVESTMENT SERVICES 
PARTNERSHIP INTERESTS TAKEN INTO ACCOUNT IN DE-
TERMINING NET EARNINGS FROM SELF-EMPLOYMENT.— 
(1) INTERNAL REVENUE CODE.— 
(A) IN
GENERAL.—Section 1402(a) of 
such Code is amended by striking ‘‘and’’ at the 
end of paragraph (16), by striking the period at 
the end of paragraph (17) and inserting ‘‘; 
and’’, and by inserting after paragraph (17) the 
following new paragraph: 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00271
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
272 
‘‘(18) notwithstanding the preceding provisions 
of this subsection, in the case of any individual en-
gaged in the trade or business of providing services 
described in section 710(c)(2) with respect to any 
entity, investment services partnership income or 
loss (as defined in subsection (m)) of such individual 
with respect to such entity shall be taken into ac-
count in determining the net earnings from self-em-
ployment of such individual.’’. 
(B) INVESTMENT SERVICES PARTNERSHIP 
INCOME OR LOSS.—Section 1402 of such Code 
is amended by adding at the end the following 
new subsection: 
‘‘(m) INVESTMENT SERVICES PARTNERSHIP INCOME 
OR LOSS.—For purposes of subsection (a)— 
‘‘(1) IN GENERAL.—The term ‘investment serv-
ices partnership income or loss’ means, with respect 
to any investment services partnership interest (as 
defined in section 710(c)) or disqualified interest (as 
defined in section 710(e)), the net of— 
‘‘(A) the amounts treated as ordinary in-
come or ordinary loss under subsections (b) and 
(e) of section 710 with respect to such interest, 
‘‘(B) all items of income, gain, loss, and 
deduction allocated to such interest, and 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00272
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
273 
‘‘(C) the amounts treated as realized from 
the sale or exchange of property other than a 
capital asset under section 751 with respect to 
such interest. 
‘‘(2) EXCEPTION FOR QUALIFIED CAPITAL IN-
TERESTS.—A rule similar to the rule of section 
710(d) shall apply for purposes of applying para-
graph (1)(B).’’. 
(2) SOCIAL SECURITY ACT.—Section 211(a) of 
the Social Security Act is amended by striking 
‘‘and’’ at the end of paragraph (15), by striking the 
period at the end of paragraph (16) and inserting ‘‘; 
and’’, and by inserting after paragraph (16) the fol-
lowing new paragraph: 
‘‘(17) Notwithstanding the preceding provisions 
of this subsection, in the case of any individual en-
gaged in the trade or business of providing services 
described in section 710(c)(2) of the Internal Rev-
enue Code of 1986 with respect to any entity, invest-
ment services partnership income or loss (as defined 
in section 1402(m) of such Code) shall be taken into 
account in determining the net earnings from self- 
employment of such individual.’’. 
(f) CONFORMING AMENDMENTS.— 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00273
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
274 
(1) Subsection (d) of section 731 of such Code 
is amended by inserting ‘‘section 710(b)(4) (relating 
to distributions of partnership property),’’ after ‘‘to 
the extent otherwise provided by’’. 
(2) Section 741 of such Code is amended by in-
serting ‘‘or section 710 (relating to special rules for 
partners providing investment management services 
to partnerships)’’ before the period at the end. 
(3) The table of sections for part I of sub-
chapter K of chapter 1 of such Code is amended by 
adding at the end the following new item: 
‘‘Sec. 710. Special rules for partners providing investment management services 
to partnerships.’’. 
(g) EFFECTIVE DATE.— 
(1) IN
GENERAL.—Except as otherwise pro-
vided in this subsection, the amendments made by 
this section shall apply to taxable years ending after 
the date of the enactment of this Act. 
(2) PARTNERSHIP TAXABLE YEARS WHICH IN-
CLUDE
EFFECTIVE
DATE.—In applying section 
710(a) of the Internal Revenue Code of 1986 (as 
added by this section) in the case of any partnership 
taxable year which includes the date of the enact-
ment of this Act, the amount of the net capital gain 
referred to in such section shall be treated as being 
the lesser of the net capital gain for the entire part-
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00274
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
275 
nership taxable year or the net capital gain deter-
mined by only taking into account items attributable 
to the portion of the partnership taxable year which 
is after such date. 
(3) DISPOSITIONS
OF
PARTNERSHIP
INTER-
ESTS.— 
(A) IN GENERAL.—Section 710(b) of such 
Code (as added by this section) shall apply to 
dispositions and distributions after the date of 
the enactment of this Act. 
(B) INDIRECT DISPOSITIONS.—The amend-
ments made by subsection (b) shall apply to 
transactions after the date of the enactment of 
this Act. 
(4) OTHER INCOME AND GAIN IN CONNECTION 
WITH INVESTMENT MANAGEMENT SERVICES.—Sec-
tion 710(e) of such Code (as added by this section) 
shall take effect on the date of the enactment of this 
Act. 
Subtitle F—Raising the Capital 
Gains Rate 
SEC. 351. INCREASED CAPITAL GAINS RATE FOR HIGH-IN-
COME INDIVIDUALS. 
(a) IN GENERAL.—Paragraph (1) of section 1(h) of 
the Internal Revenue Code of 1986 is amended— 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00275
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
276 
(1) in subparagraph (C), by striking ‘‘of the ad-
justed net capital gain’’ and all that follows and in-
serting ‘‘of the lesser of— 
‘‘(i) so much of the adjusted net cap-
ital gain (or, if less, taxable income) as ex-
ceeds the amount on which a tax is deter-
mined under subparagraph (B), or 
‘‘(ii) the excess (if any) of— 
‘‘(I) $50,000 ($100,000 in the 
case of a joint return), over 
‘‘(II) the sum of the amounts on 
which a tax is determined under sub-
paragraphs (A) and (B), and’’, and 
(2) by striking subparagraphs (D) and (E) and 
inserting the following: 
‘‘(D) the lesser of— 
‘‘(i) 28 percent, or 
‘‘(ii) the highest marginal tax rate de-
termined under this section (determined 
without regard to this subsection) which 
would be imposed on the taxable income of 
the taxpayer in excess of the sum of the 
amount on which tax is determined under 
the preceding subparagraphs of this para-
graph, 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00276
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
277 
multiplied by such amount of taxable income.’’. 
(b) MINIMUM TAX.—Paragraph (3) of section 55(b) 
of such Code is amended— 
(1) in subparagraph (C), by striking ‘‘of the ad-
justed net capital gain’’ and all that follows, and in-
serting ‘‘of the lesser of— 
‘‘(i) so much of the adjusted net cap-
ital gain (or, if less, taxable excess) as ex-
ceeds the amount on which tax is deter-
mined under subparagraph (B), or’’. 
‘‘(ii) the excess described in section 
1(h)(1)(C)(ii), plus’’, and 
(2) by striking subparagraphs (D) inserting the 
following: 
‘‘(D) the lesser of— 
‘‘(i) 28 percent, or 
‘‘(ii) the highest marginal tax rate de-
termined under section 1 (determined with-
out regard to subsection (h)) which would 
be imposed on the taxable excess of the 
taxpayer in excess of the sum of the 
amount on which tax is determined under 
the preceding subparagraphs of this para-
graph, 
multiplied by such amount of taxable excess.’’. 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00277
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
278 
(c) CONFORMING AMENDMENTS.— 
(1) The following provisions of such Code are 
amended by striking ‘‘15 percent’’ and inserting ‘‘28 
percent’’: 
(A) Section 1445(e)(1). 
(B) The second sentence of section 
7518(g)(6)(A). 
(C) Section 53511(f)(2) of title 46, United 
States Code. 
(2) Section 1445(e)(6) of such Code is amended 
by striking ‘‘15 percent (20 percent in the case of 
taxable years beginning after December 31, 2010)’’ 
and inserting ‘‘28 percent’’. 
(d) EFFECTIVE DATES.— 
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section 
shall apply to taxable years beginning after Decem-
ber 31, 2012. 
(2) WITHHOLDING.—The amendments made by 
paragraphs (1)(A) and (2) of subsection (c) shall 
apply to amounts paid on or after January 1, 2013. 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00278
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
279 
Subtitle G—Pension Guaranty 
Improvement 
SEC. 361. SHORT TITLE. 
This subtitle may be cited as the ‘‘Pension Guaranty 
Improvement Act of 2012’’. 
SEC. 362. FINDINGS. 
Congress makes the following findings: 
(1) The Pension Benefit Guaranty Corporation 
(referred to in this section as the ‘‘Corporation’’) 
plays a critical role in helping to protect the retire-
ment security of the 44,000,000 workers and retir-
ees with defined benefit pension plans. 
(2) The Corporation has struggled over the 
years to address deficiencies and implement long- 
term strategies for success. 
(3) The Corporation faces long-term fiscal chal-
lenges, which have been exacerbated by the recent fi-
nancial crisis. 
(4) It is necessary for Congress to take imme-
diate steps to improve the governance of the Cor-
poration and ensure appropriate oversight by, and 
accountability to, key stakeholders, including labor, 
plan sponsors, and retirees. 
(5) It is further necessary to takes steps to en-
sure that the guaranty provided by the Corporation 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00279
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
280 
is fair to participants and that the Corporation has 
sufficient resources to satisfy its obligations. 
SEC. 363. PENSION BENEFIT GUARANTY CORPORATION 
GOVERNANCE IMPROVEMENT. 
(a) BOARD OF DIRECTORS OF THE PENSION BEN-
EFIT GUARANTY CORPORATION.— 
(1) IN GENERAL.—Section 4002(d) of the Em-
ployee Retirement Income Security Act of 1974 (29 
U.S.C. 1302(d)) is amended to read as follows: 
‘‘(d)(1) The board of directors of the corporation con-
sists of— 
‘‘(A) the Secretary of the Treasury, the Sec-
retary of Labor, and the Secretary of Commerce; 
and 
‘‘(B) 4 other members. 
‘‘(2)(A) The members of the board of directors de-
scribed under paragraph (1)(B)— 
‘‘(i) shall be appointed by the President; and 
‘‘(ii) shall have expertise relevant to business of 
the corporation, which may include experience with 
insurance programs, defined benefit pension plans, 
or institutional asset management. 
‘‘(B) Except as provided in subparagraph (C)(ii), 
each member of the board of directors described under 
paragraph (1)(B) shall be appointed for a term of 4 years. 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00280
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
281 
‘‘(C)(i) The initial members of the board of directors 
described under paragraph (1)(B) shall be appointed as 
soon as practicable after the date of enactment of the Pen-
sion Guaranty Improvement Act of 2012. 
‘‘(ii) Of the initial members of the board of directors 
described under paragraph (1)(B) and appointed under 
clause (i)— 
‘‘(I) the term of one such member shall end on 
December 31, 2013; 
‘‘(II) the term of one such member shall end on 
December 31, 2014; 
‘‘(III) the term of one such member shall end 
on December 31, 2015; and 
‘‘(IV) the term of one such member shall end 
on December 31, 2016. 
‘‘(D)(i) Not more than 2 members of the board of 
directors described under paragraph (1)(B) may be mem-
bers of the same political party. 
‘‘(ii) At least 1 member of the board of directors shall 
be an enrolled actuary or other financial expert. 
‘‘(iii) At least 1 member of the board of directors 
shall have experience with the issues unique to retired plan 
participants. 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00281
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
282 
‘‘(E)(i) Any vacancy on the board of directors shall 
be filled in the manner in which the original appointment 
was made. 
‘‘(ii) In the event of vacancy in the office of the Sec-
retary of the Treasury, the Secretary of Labor, or the Sec-
retary of Commerce and pending the appointment of a 
successor, or during the absence or disability of such a 
Secretary, the applicable acting Secretary shall be a mem-
ber of the board of directors. 
‘‘(iii) A member of the board of directors appointed 
to fill a vacancy occurring before the expiration of the 
term for which the predecessor of such member was ap-
pointed shall be appointed for the remainder of such term. 
‘‘(iv) A member of the board of directors described 
under paragraph (1)(B) may continue to serve after the 
expiration of the term of office for which such member 
was appointed until a successor has been appointed. 
‘‘(F) A member of the board of directors described 
under paragraph (1)(B) may be removed for good cause 
by the President or by unanimous decision of the other 
members of the board of directors. 
‘‘(G) A majority of the members of the board of direc-
tors in office shall constitute a quorum for the transaction 
of business. The vote of the majority of the members 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00282
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
283 
present and voting at a meeting at which a quorum is 
present shall be the act of the board of directors. 
‘‘(3) Each member of the board of directors described 
under paragraph (1)(A) shall designate in writing an offi-
cial, not below the level of Assistant Secretary, to serve 
as the voting representative of such member on the board. 
Such designation shall be effective until revoked or until 
a date or event specified therein. Any such representative 
may refer for board action any matter under consideration 
by the designating board member. 
‘‘(4) The members of the board of directors described 
under— 
‘‘(A) subparagraph (A) of paragraph (1), shall 
serve without compensation, but shall be reimbursed 
for travel, subsistence, and other necessary expenses 
incurred in the performance of their duties as mem-
bers of the board; and 
‘‘(B) subparagraph (B) of paragraph (1) shall, 
for each day (including traveltime) during which 
they are attending meetings or conferences of the 
board or otherwise engaged in the business of the 
board, be compensated at a rate fixed by the cor-
poration which is not in excess of the daily equiva-
lent of the annual rate of basic pay for a position 
at level IV of the Executive Schedule under section 
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00283
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
284 
5315 of title 5, United States Code, and while away 
from their homes or regular places of business they 
may be allowed travel expenses, including per diem 
in lieu of subsistence, as authorized by section 5703 
of title 5, United States Code. 
‘‘(5)(A) The Secretary of Labor is the chairman of 
the board of directors. 
‘‘(B) The President shall designate 1 of the members 
appointed under paragraph (2) as the vice-chairman of the 
board of directors. 
‘‘(6) The Inspector General of the corporation shall 
report to the board of directors, and not less than twice 
a year, shall attend a meeting of the board of directors 
to provide a report on the activities and findings of the 
Inspector General, including with respect to monitoring 
and review of the operations of the corporation. 
‘‘(7) The General Counsel of the corporation shall— 
‘‘(A) serve as the secretary to the board of di-
rectors, and shall advise such board as needed; and 
‘‘(B) have overall responsibility for all legal 
matters affecting the corporation and provide the 
corporation with legal advice and opinions on all 
matters of law affecting the corporation, except that 
the authority of the General Counsel shall not ex-
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00284
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS
304 
percentage of such average, whichever 
is closest. The Secretary shall deter-
mine such average on an annual basis 
and may prescribe equivalent rates for 
years in any such 25-year period for 
which the rates described in any such 
clause are not available. 
‘‘(II) APPLICABLE MINIMUM PER-
CENTAGE; 
APPLICABLE
MAXIMUM 
PERCENTAGE.—For purposes of sub-
clause (I), the applicable minimum 
percentage and the applicable max-
imum percentage for a plan year be-
ginning in a calendar year shall be de-
termined in accordance with the fol-
lowing table: 
‘‘If the calendar year is: 
The 
applicable 
minimum 
percentage 
is: 
The 
applicable 
maximum 
percentage 
is: 
2012 ........................................................................
90% 
110%
2013 ........................................................................
85% 
115%
2014 ........................................................................
80% 
120%
2015 ........................................................................
75% 
125%
After 2015 ..............................................................
70% 
130%.’’. 
(2) CONFORMING AMENDMENTS.— 
(A) Paragraph (6) of section 404(o) of 
such Code is amended by inserting ‘‘(deter-
VerDate Mar 15 2010 
20:37 May 14, 2012
Jkt 019200
PO 00000
Frm 00304
Fmt 6652
Sfmt 6201
E:\BILLS\H5727.IH
H5727
ebenthall on DSK5SPTVN1PROD with BILLS