‘‘(B) in the case of a transfer or obligation 
under an incentive program, the transfer or ob-
ligation is part of a workforce incentive pro-
gram generally applicable to the nonmanage-
ment workforce of the debtor; and 
‘‘(C) the cost of the transfer or obliga-
tion— 
‘‘(i) is reasonable; 
‘‘(ii) is not excessive in the context of 
the financial circumstances of the debtor; 
and 
‘‘(iii) is not disproportionate in light 
of any economic loss incurred by the non-
management workforce of the debtor dur-
ing the case.’’. 
SEC. 305. PROHIBITION AGAINST SPECIAL COMPENSATION 
PAYMENTS. 
Section 363 of title 11, United States Code, is 
amended— 
(1) in subsection (b), by adding at the end the 
following: 
‘‘(3) No plan, program, or other transfer or obliga-
tion to or for the benefit of an insider of the debtor, a 
senior executive officer of the debtor, or any of the 20 
next most highly compensated employees of the debtor, de-
VerDate Sep 11 2014 
22:09 Oct 22, 2021
Jkt 029200
PO 00000
Frm 00043
Fmt 6652
Sfmt 6201
E:\BILLS\H5648.IH
H5648
pamtmann on DSKBC07HB2PROD with BILLS
partment or division managers of the debtor, or consult-
ants providing services to the debtor (regardless of wheth-
er the executive officer, employee, manager, or consultant 
is an insider) shall be approved if the debtor has, on or 
after the date that is 1 year before the date of the filing 
of the petition— 
‘‘(A) discontinued any plan, program, policy or 
practice of paying severance pay to the nonmanage-
ment workforce of the debtor; or 
‘‘(B) modified any plan, program, policy, or 
practice described in subparagraph (A) in order to 
reduce benefits under the plan, program, policy or 
practice.’’; and 
(2) in subsection (c)(1), by inserting before the 
period at the end the following: ‘‘, except that, for 
any transaction that constitutes a transfer or obliga-
tion subject to section 503(c), the trustee shall be 
required to obtain the prior approval of the court 
after notice and an opportunity for a hearing’’. 
SEC. 306. EXECUTIVE COMPENSATION UPON EXIT FROM 
BANKRUPTCY. 
Section 1129(a) of title 11, United States Code, is 
amended— 
(1) in paragraph (4), by adding at the end the 
following: ‘‘Except for compensation subject to re-
VerDate Sep 11 2014 
22:09 Oct 22, 2021
Jkt 029200
PO 00000
Frm 00044
Fmt 6652
Sfmt 6201
E:\BILLS\H5648.IH
H5648
pamtmann on DSKBC07HB2PROD with BILLS
view under paragraph (5), any payment or other dis-
tribution under the plan to or for the benefit of an 
insider of the debtor, a senior executive officer of the 
debtor, or any of the 20 next most highly com-
pensated employees of the debtor, department or di-
vision managers of the debtor, or consultants pro-
viding services to the debtor (regardless of whether 
the executive officer, employee, manager, or consult-
ant is an insider), shall not be approved by the court 
except as part of a program of payments or distribu-
tions generally applicable to employees of the debtor, 
and only to the extent that the court determines 
that the payment or other distribution is not exces-
sive or disproportionate in comparison to payments 
or other distributions to the nonmanagement work-
force of the debtor.’’; and 
(2) in paragraph (5)— 
(A) in subparagraph (A)(ii), by striking 
‘‘and’’ at the end; 
(B) in subparagraph (B), by striking the 
period at the end and inserting ‘‘; and’’; and 
(C) by adding at the end the following: 
‘‘(C) the compensation disclosed pursuant to 
subparagraph (B) has been approved by, or is sub-
ject to the approval of, the court as— 
VerDate Sep 11 2014 
22:09 Oct 22, 2021
Jkt 029200
PO 00000
Frm 00045
Fmt 6652
Sfmt 6201
E:\BILLS\H5648.IH
H5648
pamtmann on DSKBC07HB2PROD with BILLS
‘‘(i) reasonable in comparison to compensa-
tion paid to individuals holding comparable po-
sitions at comparable companies in the same in-
dustry; and 
‘‘(ii) not disproportionate in light of any 
economic concession made by the nonmanage-
ment workforce of the debtor during the case.’’. 
SEC. 307. COLLATERAL SURCHARGE FOR EMPLOYEE OBLI-
GATIONS. 
Section 506(c) of title 11, United States Code, is 
amended— 
(1) by inserting ‘‘(1)’’ before ‘‘The trustee’’; 
and 
(2) by adding at the end the following: 
‘‘(2) If one or more employees of the debtor have not 
received wages, accrued vacation, severance, or any other 
compensation owed under a plan, program, policy, or prac-
tice of the debtor, or pursuant to the terms of a collective 
bargaining agreement, for services rendered on or after 
the date of the commencement of the case, or the debtor 
has not made a contribution due under an employee wel-
fare benefit plan, as defined in section 3 of the Stop Wall 
Street Looting Act, on or after the date of the commence-
ment of the case, such unpaid obligations shall be— 
‘‘(A) deemed— 
VerDate Sep 11 2014 
22:09 Oct 22, 2021
Jkt 029200
PO 00000
Frm 00046
Fmt 6652
Sfmt 6201
E:\BILLS\H5648.IH
H5648
pamtmann on DSKBC07HB2PROD with BILLS
‘‘(i) reasonable, necessary costs and ex-
penses of preserving, or disposing of, property 
securing an allowed secured claim; and 
‘‘(ii) benefiting the holder of the allowed 
secured claim; and 
‘‘(B) recovered by the trustee for payment to 
the employees or the employee welfare benefit plan, 
as defined in section 3 of the Stop Wall Street 
Looting Act, as applicable, even if the trustee, or a 
predecessor or successor in interest, has otherwise 
waived the provisions of this subsection under an 
agreement with the holder of the allowed secured 
claim or a successor or predecessor in interest of the 
holder of the allowed secured claim.’’. 
SEC. 308. VOIDABILITY OF PREFERENTIAL COMPENSATION 
TRANSFERS. 
Section 547 of title 11, United States Code, is 
amended by adding at the end the following: 
‘‘(j)(1) The trustee may avoid a transfer to or for 
the benefit of an insider of the debtor, a senior executive 
officer of the debtor, or any of the 20 next most highly 
compensated employees of the debtor, department or divi-
sion managers of the debtor, or consultants providing serv-
ices to the debtor (regardless of whether the executive offi-
VerDate Sep 11 2014 
22:09 Oct 22, 2021
Jkt 029200
PO 00000
Frm 00047
Fmt 6652
Sfmt 6201
E:\BILLS\H5648.IH
H5648
pamtmann on DSKBC07HB2PROD with BILLS
cer, employee, manager, or consultant is an insider), 
that— 
‘‘(A) is made or incurred under a retention, 
bonus, or incentive plan devised before the date of 
the filing of the petition; and 
‘‘(B) does not meet the requirements under sec-
tion 363(b)(3) or 503(c). 
‘‘(2) Subsection (c) shall not constitute a defense 
against the recovery of a transfer under paragraph (1) of 
this subsection. 
‘‘(3)(A) The trustee, or a committee appointed under 
section 1102, may commence an action to recover a trans-
fer under paragraph (1) of this subsection. 
‘‘(B) If neither the trustee nor a committee com-
mences an action to recover a transfer under subpara-
graph (A) before the date of the commencement of a hear-
ing on the confirmation of a plan, any party in interest 
may apply to the court for authority to recover the trans-
fer for the benefit of the estate, in which case the costs 
of recovery shall be borne by the estate.’’. 
SEC. 309. PROTECTION FOR EMPLOYEES IN A SALE OF AS-
SETS. 
(a) REQUIREMENT RELATING TO PRESERVING JOBS 
AND MAINTAINING TERMS AND CONDITIONS RELATING 
VerDate Sep 11 2014 
22:09 Oct 22, 2021
Jkt 029200
PO 00000
Frm 00048
Fmt 6652
Sfmt 6201
E:\BILLS\H5648.IH
H5648
pamtmann on DSKBC07HB2PROD with BILLS
TO EMPLOYMENT.—Section 363 of title 11, United States 
Code, is amended by adding at the end the following: 
‘‘(q)(1) In approving a sale or lease of property of 
the estate under this section, or under a plan under chap-
ter 11, the court shall give substantial weight to the extent 
to which a prospective purchaser or lessee, respectively, 
of the property will— 
‘‘(A) preserve the jobs of the workforce of the 
debtor; and 
‘‘(B) maintain the terms and conditions of em-
ployment of the workforce of the debtor. 
‘‘(2) If there are two or more offers to purchase or 
lease property of the estate under this section, or under 
a plan under chapter 11, that qualify under the procedures 
for the sale or lease, respectively, approved by the court, 
the court shall approve the offer that best— 
‘‘(A) preserves the jobs of the workforce of the 
debtor; and 
‘‘(B) maintains the terms and conditions of em-
ployment of the workforce of the debtor. 
‘‘(r)(1) Any party seeking to purchase or lease prop-
erty of the estate under this section, or under a plan under 
chapter 11, shall represent to the court the effect of such 
a transaction with respect to— 
VerDate Sep 11 2014 
22:09 Oct 22, 2021
Jkt 029200
PO 00000
Frm 00049
Fmt 6652
Sfmt 6201
E:\BILLS\H5648.IH
H5648
pamtmann on DSKBC07HB2PROD with BILLS
‘‘(A) the preservation of the jobs of the work-
force of the debtor; and 
‘‘(B) the maintenance of the terms and condi-
tions of employment of the workforce of the debtor. 
‘‘(2) The court shall expressly include in an order ap-
proving a purchase or lease of property of the estate under 
this section, or under a plan under chapter 11, any rep-
resentation made by a purchaser or lessee of the property 
under paragraph (1). 
‘‘(3) With respect to a purchase or lease of property 
of the estate under this section, or under a plan under 
chapter 11— 
‘‘(A) the court shall have jurisdiction over the 
purchaser or lessee of the property in order to en-
force the terms of the order approving the purchase 
or lease; 
‘‘(B) the purchaser or lessee shall promptly dis-
close to the court any material noncompliance with 
the terms of the order described in subparagraph 
(A) and explain the basis for such noncompliance; 
and 
‘‘(C) with respect to material noncompliance de-
scribed in subparagraph (B), the court may impose 
any appropriate remedy, including injunctive relief, 
to address the noncompliance.’’. 
VerDate Sep 11 2014 
22:09 Oct 22, 2021
Jkt 029200
PO 00000
Frm 00050
Fmt 6652
Sfmt 6201
E:\BILLS\H5648.IH
H5648
pamtmann on DSKBC07HB2PROD with BILLS
(b) PLANS UNDER CHAPTER 11.— 
(1) CONTENTS OF PLAN.—Section 1123(b)(4) 
of title 11, United States Code, is amended by in-
serting ‘‘, which sale shall be subject to the require-
ments under subsections (q) and (r) of section 363 
of this title,’’ after ‘‘property of the estate’’. 
(2) CONFIRMATION OF PLAN.—Section 1129(a) 
of title 11, United States Code, is amended by add-
ing at the end the following: 
‘‘(17) If the plan provides for the sale of all or 
substantially all of the property of the estate, the 
sale meets the requirements under subsections (q) 
and (r) of section 363 of this title.’’. 
SEC. 310. PROTECTION OF GIFT CARD PURCHASERS. 
(a) DEFINITION OF GIFT CARD.—Section 101(a) of 
title 11, United States Code, is amended by inserting after 
paragraph (26) the following: 
‘‘(26A) The term ‘gift card’ means a paper or 
electronic promise, plastic card, or other payment 
code or device that is— 
‘‘(A) redeemable at— 
‘‘(i) a single merchant; or 
‘‘(ii) an affiliated group of merchants 
that share the same name, mark, or logo; 
VerDate Sep 11 2014 
22:09 Oct 22, 2021
Jkt 029200
PO 00000
Frm 00051
Fmt 6652
Sfmt 6201
E:\BILLS\H5648.IH
H5648
pamtmann on DSKBC07HB2PROD with BILLS
‘‘(B) issued in a specified amount, regard-
less of whether that amount may be increased 
in value or reloaded at the request of the hold-
er; 
‘‘(C) purchased on a prepaid basis in ex-
change for payment; and 
‘‘(D) honored by the single merchant or af-
filiated group of merchants described in sub-
paragraph (A) upon presentation for goods or 
services.’’. 
(b) CONSUMER DEPOSIT.—Section 507(a) of title 11, 
United States Code, is amended by striking paragraph (7) 
and inserting the following: 
‘‘(7) Seventh, allowed unsecured claims of indi-
viduals, to the extent of $1,800 for each such indi-
vidual, arising from the deposit, before the com-
mencement of the case, of money in connection 
with— 
‘‘(A) the purchase, lease, or rental of prop-
erty; 
‘‘(B) the purchase of services, for the per-
sonal, family, or household use of such individ-
uals, that were not delivered or provided; or 
VerDate Sep 11 2014 
22:09 Oct 22, 2021
Jkt 029200
PO 00000
Frm 00052
Fmt 6652
Sfmt 6201
E:\BILLS\H5648.IH
H5648
pamtmann on DSKBC07HB2PROD with BILLS
‘‘(C) the purchase of a gift card with re-
spect to which funds exist that have not been 
redeemed.’’. 
SEC. 311. COMMERCIAL REAL ESTATE. 
Section 365(d) of title 11, United States Code, is 
amended— 
(1) by striking paragraph (4); and 
(2) by redesignating paragraph (5) as para-
graph (4). 
TITLE IV—CLOSING THE 
CARRIED INTEREST LOOPHOLE 
SEC. 401. 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 
section or other provision of the Internal Revenue Code 
of 1986. 
SEC. 402. 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 
TRANSFER.—Subsection (c) of section 83 is amended by 
VerDate Sep 11 2014 
22:09 Oct 22, 2021
Jkt 029200
PO 00000
Frm 00053
Fmt 6652
Sfmt 6201
E:\BILLS\H5648.IH
H5648
pamtmann on DSKBC07HB2PROD with BILLS
redesignating paragraph (4) as paragraph (5) and by in-
serting after paragraph (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 Sep 11 2014 
22:09 Oct 22, 2021
Jkt 029200
PO 00000
Frm 00054
Fmt 6652
Sfmt 6201
E:\BILLS\H5648.IH
H5648
pamtmann on DSKBC07HB2PROD with BILLS
‘‘(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 enactment of this Act. 
SEC. 403. SPECIAL RULES FOR PARTNERS PROVIDING IN-
VESTMENT 
MANAGEMENT 
SERVICES 
TO 
PARTNERSHIPS. 
(a) IN GENERAL.—Part I of subchapter K of chapter 
1 is amended by adding at the end the following new sec-
tion: 
‘‘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 Sep 11 2014 
22:09 Oct 22, 2021
Jkt 029200
PO 00000
Frm 00055
Fmt 6652
Sfmt 6201
E:\BILLS\H5648.IH
H5648
pamtmann on DSKBC07HB2PROD with BILLS
‘‘(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 Sep 11 2014 
22:09 Oct 22, 2021
Jkt 029200
PO 00000
Frm 00056
Fmt 6652
Sfmt 6201
E:\BILLS\H5648.IH
H5648
pamtmann on DSKBC07HB2PROD with BILLS
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 
(other than subsection (a)(9) thereof) with 
respect to such interest for such taxable 
year, and 
VerDate Sep 11 2014 
22:09 Oct 22, 2021
Jkt 029200
PO 00000
Frm 00057
Fmt 6652
Sfmt 6201
E:\BILLS\H5648.IH
H5648
pamtmann on DSKBC07HB2PROD with BILLS
‘‘(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 RULE FOR DIVIDENDS.—Any div-
idend allocated with respect to any investment serv-
ices partnership interest shall not be treated as 
qualified dividend income for purposes of section 
1(h). 
‘‘(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-
cated with respect to any investment services part-
nership interest. 
‘‘(b) DISPOSITIONS OF PARTNERSHIP INTERESTS.— 
‘‘(1) GAIN.— 
VerDate Sep 11 2014 
22:09 Oct 22, 2021
Jkt 029200
PO 00000
Frm 00058
Fmt 6652
Sfmt 6201
E:\BILLS\H5648.IH
H5648
pamtmann on DSKBC07HB2PROD with BILLS
‘‘(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. 
‘‘(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— 
VerDate Sep 11 2014 
22:09 Oct 22, 2021
Jkt 029200
PO 00000
Frm 00059
Fmt 6652
Sfmt 6201
E:\BILLS\H5648.IH
H5648
pamtmann on DSKBC07HB2PROD with BILLS
‘‘(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. 
‘‘(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-
VerDate Sep 11 2014 
22:09 Oct 22, 2021
Jkt 029200
PO 00000
Frm 00060
Fmt 6652
Sfmt 6201
E:\BILLS\H5648.IH
H5648
pamtmann on DSKBC07HB2PROD with BILLS
‘‘(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
AND
DIVISIONS.—In the case of a 
taxpayer which satisfies 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 con-
tribution) of any property of the partnership to 
which section 721 applies pursuant to a trans-
action described in section 708(b)(2). 
‘‘(c) INVESTMENT SERVICES PARTNERSHIP INTER-
EST.—For purposes of this section— 
‘‘(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— 
VerDate Sep 11 2014 
22:09 Oct 22, 2021
Jkt 029200
PO 00000
Frm 00062
Fmt 6652
Sfmt 6201
E:\BILLS\H5648.IH
H5648
pamtmann on DSKBC07HB2PROD with BILLS
‘‘(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-
rectly) by one or more investment partnerships re-
ferred 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. 
VerDate Sep 11 2014 
22:09 Oct 22, 2021
Jkt 029200
PO 00000
Frm 00063
Fmt 6652
Sfmt 6201
E:\BILLS\H5648.IH
H5648
pamtmann on DSKBC07HB2PROD with BILLS
‘‘(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 two consecutive calendar quarters 
ending after the date of enactment of this sec-
tion— 
‘‘(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) less than 75 percent of the cap-
ital of the partnership is attributable to 
qualified capital interests which constitute 
property held in connection with a trade or 
business of the owner of such interest. 
‘‘(B) LOOK-THROUGH OF CERTAIN WHOL-
LY OWNED ENTITIES FOR PURPOSES OF DETER-
MINING ASSETS OF THE PARTNERSHIP.— 
VerDate Sep 11 2014 
22:09 Oct 22, 2021
Jkt 029200
PO 00000
Frm 00064
Fmt 6652
Sfmt 6201
E:\BILLS\H5648.IH
H5648
pamtmann on DSKBC07HB2PROD with BILLS
‘‘(i) IN
GENERAL.—For purposes of 
determining the assets of a partnership 
under subparagraph (A)(i)— 
‘‘(I) any interest in a specified 
entity shall not be treated as an asset 
of such partnership, and 
‘‘(II) such partnership shall be 
treated as holding its proportionate 
share of each of the assets of such 
specified entity. 
‘‘(ii) SPECIFIED
ENTITY.—For pur-
poses of clause (i), the term ‘specified enti-
ty’ means, with respect to any partnership 
(hereafter referred to as the upper-tier 
partnership), any person which engages in 
the same trade or business as the upper- 
tier partnership and is— 
‘‘(I) a partnership all of the cap-
ital and profits interests of which are 
held directly or indirectly by the 
upper-tier partnership, or 
‘‘(II) a foreign corporation which 
does not engage in a trade or business 
in the United States and all of the 
VerDate Sep 11 2014 
22:09 Oct 22, 2021
Jkt 029200
PO 00000
Frm 00065
Fmt 6652
Sfmt 6201
E:\BILLS\H5648.IH
H5648
pamtmann on DSKBC07HB2PROD with BILLS
stock of which is held directly or indi-
rectly by the upper-tier partnership. 
‘‘(C) SPECIAL RULES FOR DETERMINING 
IF
PROPERTY
HELD
IN
CONNECTION
WITH 
TRADE OR BUSINESS.— 
‘‘(i) IN GENERAL.—Except as other-
wise provided by the Secretary, solely for 
purposes of determining whether any inter-
est in a partnership constitutes property 
held in connection with a trade or business 
under subparagraph (A)(ii)— 
‘‘(I) a trade or business of any 
person closely related to the owner of 
such interest shall be treated as a 
trade or business of such owner, 
‘‘(II) such interest shall be treat-
ed as held by a person in connection 
with a trade or business during any 
taxable year if such interest was so 
held by such person during any 3 tax-
able years preceding such taxable 
year, and 
‘‘(III) paragraph (5)(B) shall not 
apply. 
VerDate Sep 11 2014 
22:09 Oct 22, 2021
Jkt 029200
PO 00000
Frm 00066
Fmt 6652
Sfmt 6201
E:\BILLS\H5648.IH
H5648
pamtmann on DSKBC07HB2PROD with BILLS
‘‘(ii) CLOSELY RELATED PERSONS.— 
For purposes of clause (i)(I), a person 
shall be treated as closely related to an-
other person if, taking into account the 
rules of section 267(c), the relationship be-
tween such persons is described in— 
‘‘(I) paragraph (1) or (9) of sec-
tion 267(b), or 
‘‘(II) section 267(b)(4), but solely 
in the case of a trust with respect to 
which each current beneficiary is the 
grantor or a person whose relationship 
to the grantor is described in para-
graph (1) or (9) of section 267(b). 
‘‘(D) ANTI-ABUSE 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. 
‘‘(E) CONTROLLED
GROUPS
OF
ENTI-
TIES.— 
‘‘(i) IN GENERAL.—In the case of a 
controlled group of entities, if an interest 
VerDate Sep 11 2014 
22:09 Oct 22, 2021
Jkt 029200
PO 00000
Frm 00067
Fmt 6652
Sfmt 6201
E:\BILLS\H5648.IH
H5648
pamtmann on DSKBC07HB2PROD with BILLS
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 Sep 11 2014 
22:09 Oct 22, 2021
Jkt 029200
PO 00000
Frm 00068
Fmt 6652
Sfmt 6201
E:\BILLS\H5648.IH
H5648
pamtmann on DSKBC07HB2PROD with BILLS
‘‘(F) 
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 Sep 11 2014 
22:09 Oct 22, 2021
Jkt 029200
PO 00000
Frm 00069
Fmt 6652
Sfmt 6201
E:\BILLS\H5648.IH
H5648
pamtmann on DSKBC07HB2PROD with BILLS
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 Sep 11 2014 
22:09 Oct 22, 2021
Jkt 029200
PO 00000
Frm 00071
Fmt 6652
Sfmt 6201
E:\BILLS\H5648.IH
H5648
pamtmann on DSKBC07HB2PROD with BILLS
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 Sep 11 2014 
22:09 Oct 22, 2021
Jkt 029200
PO 00000
Frm 00072
Fmt 6652
Sfmt 6201
E:\BILLS\H5648.IH
H5648
pamtmann on DSKBC07HB2PROD with BILLS
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 Sep 11 2014 
22:09 Oct 22, 2021
Jkt 029200
PO 00000
Frm 00073
Fmt 6652
Sfmt 6201
E:\BILLS\H5648.IH
H5648
pamtmann on DSKBC07HB2PROD with BILLS
‘‘(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 Sep 11 2014 
22:09 Oct 22, 2021
Jkt 029200
PO 00000
Frm 00074
Fmt 6652
Sfmt 6201
E:\BILLS\H5648.IH
H5648
pamtmann on DSKBC07HB2PROD with BILLS
‘‘(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 Sep 11 2014 
22:09 Oct 22, 2021
Jkt 029200
PO 00000
Frm 00075
Fmt 6652
Sfmt 6201
E:\BILLS\H5648.IH
H5648
pamtmann on DSKBC07HB2PROD with BILLS
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 enactment of this section un-
less such repayment is made with the proceeds 
of a loan or other advance described in the pre-
ceding 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. 
‘‘(9) SPECIAL
RULE
FOR
QUALIFIED
FAMILY 
PARTNERSHIPS.— 
VerDate Sep 11 2014 
22:09 Oct 22, 2021
Jkt 029200
PO 00000
Frm 00076
Fmt 6652
Sfmt 6201
E:\BILLS\H5648.IH
H5648
pamtmann on DSKBC07HB2PROD with BILLS
‘‘(I) are related to the natural 
person or trust referred to in clause 
(ii), or 
‘‘(II) provide services described 
in subsection (c)(2). 
‘‘(C) QUALIFIED FAMILY PARTNERSHIP.— 
For purposes of this paragraph, the term 
‘qualified family partnership’ means any part-
nership if— 
‘‘(i) all of the capital and profits in-
terests of such partnership are held by— 
‘‘(I) specified family members, 
‘‘(II) any person closely related 
(within the meaning of subsection 
(c)(3)(C)(ii)) to a specified family 
member, or 
‘‘(III) any other person (not de-
scribed in subclause (I) or (II)) if 
such interest is an investment services 
partnership interest with respect to 
such person, and 
‘‘(ii) such partnership does not hold 
itself out to the public as an investment 
advisor. 
VerDate Sep 11 2014 
22:09 Oct 22, 2021
Jkt 029200
PO 00000
Frm 00078
Fmt 6652
Sfmt 6201
E:\BILLS\H5648.IH
H5648
pamtmann on DSKBC07HB2PROD with BILLS
‘‘(D) SPECIFIED FAMILY MEMBERS.—For 
purposes of subparagraph (C), individuals shall 
be treated as specified family members if such 
individuals would be treated as one person 
under the rules of section 1361(c)(1) if the ap-
plicable date (within the meaning of subpara-
graph (B)(iii) thereof) were the latest of— 
‘‘(i) the date of the establishment of 
the partnership, 
‘‘(ii) the earliest date that the com-
mon ancestor holds a capital or profits in-
terest in the partnership, or 
‘‘(iii) the date of enactment of this 
section. 
‘‘(e) OTHER INCOME
AND GAIN
IN CONNECTION 
WITH INVESTMENT MANAGEMENT SERVICES.— 
‘‘(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 
VerDate Sep 11 2014 
22:09 Oct 22, 2021
Jkt 029200
PO 00000
Frm 00079
Fmt 6652
Sfmt 6201
E:\BILLS\H5648.IH
H5648
pamtmann on DSKBC07HB2PROD with BILLS
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, 
‘‘(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. 
VerDate Sep 11 2014 
22:09 Oct 22, 2021
Jkt 029200
PO 00000
Frm 00080
Fmt 6652
Sfmt 6201
E:\BILLS\H5648.IH
H5648
pamtmann on DSKBC07HB2PROD with BILLS
‘‘(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 
‘‘(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 
VerDate Sep 11 2014 
22:09 Oct 22, 2021
Jkt 029200
PO 00000
Frm 00081
Fmt 6652
Sfmt 6201
E:\BILLS\H5648.IH
H5648
pamtmann on DSKBC07HB2PROD with BILLS
were a partnership, would be an investment 
partnership. 
‘‘(f) EXCEPTION FOR DOMESTIC C CORPORATIONS.— 
Except as otherwise provided by the Secretary, in the case 
of a domestic C corporation— 
‘‘(1) subsections (a) and (b) shall not apply to 
any item allocated to such corporation with respect 
to any investment services partnership interest (or 
to any gain or loss with respect to the disposition of 
such an interest), and 
‘‘(2) subsection (e) shall not apply. 
‘‘(g) 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) require such reporting and recordkeeping 
by any person in such manner and at such time as 
the Secretary may prescribe for purposes of enabling 
the partnership to meet the requirements of section 
6031 with respect to any item described in section 
702(a)(9), 
‘‘(2) provide modifications to the application of 
this section (including treating related persons as 
not related to one another) to the extent such modi-
VerDate Sep 11 2014 
22:09 Oct 22, 2021
Jkt 029200
PO 00000
Frm 00082
Fmt 6652
Sfmt 6201
E:\BILLS\H5648.IH
H5648
pamtmann on DSKBC07HB2PROD with BILLS
fication is consistent with the purposes of this sec-
tion, 
‘‘(3) prevent the avoidance of the purposes of 
this section (including through the use of qualified 
family partnerships), and 
‘‘(4) coordinate this section with the other pro-
visions of this title. 
‘‘(h) 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 is amended by striking ‘‘or’’ at the end of para-
graph (1), by inserting ‘‘or’’ at the end of paragraph 
(2), and by inserting after paragraph (2) the fol-
lowing 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) is amended by striking ‘‘or’’ at the 
end of clause (i), by inserting ‘‘or’’ at the end of 
VerDate Sep 11 2014 
22:09 Oct 22, 2021
Jkt 029200
PO 00000
Frm 00083
Fmt 6652
Sfmt 6201
E:\BILLS\H5648.IH
H5648
pamtmann on DSKBC07HB2PROD with BILLS
‘‘(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-
mined under rules similar to the rules of section 
710(d)). 
‘‘(3) EXCEPTION FOR PUBLICLY TRADED PART-
NERSHIPS.—Except as otherwise provided by the 
Secretary, in the case of an exchange of an interest 
in a publicly traded partnership (as defined in sec-
tion 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 
VerDate Sep 11 2014 
22:09 Oct 22, 2021
Jkt 029200
PO 00000
Frm 00085
Fmt 6652
Sfmt 6201
E:\BILLS\H5648.IH
H5648
pamtmann on DSKBC07HB2PROD with BILLS
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. 
‘‘(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 is amended by add-
ing at the end the following new paragraph: 
‘‘(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— 
VerDate Sep 11 2014 
22:09 Oct 22, 2021
Jkt 029200
PO 00000
Frm 00086
Fmt 6652
Sfmt 6201
E:\BILLS\H5648.IH
H5648
pamtmann on DSKBC07HB2PROD with BILLS
‘‘(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 
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 
VerDate Sep 11 2014 
22:09 Oct 22, 2021
Jkt 029200
PO 00000
Frm 00087
Fmt 6652
Sfmt 6201
E:\BILLS\H5648.IH
H5648
pamtmann on DSKBC07HB2PROD with BILLS
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: 
‘‘(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). 
VerDate Sep 11 2014 
22:09 Oct 22, 2021
Jkt 029200
PO 00000
Frm 00088
Fmt 6652
Sfmt 6201
E:\BILLS\H5648.IH
H5648
pamtmann on DSKBC07HB2PROD with BILLS
‘‘(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 
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 enactment 
of this paragraph.’’. 
(d) IMPOSITION
OF
PENALTY
ON
UNDERPAY-
MENTS.— 
(1) IN
GENERAL.—Subsection (b) of section 
6662 is amended by inserting after paragraph (9) 
the following new paragraph: 
VerDate Sep 11 2014 
22:09 Oct 22, 2021
Jkt 029200
PO 00000
Frm 00089
Fmt 6652
Sfmt 6201
E:\BILLS\H5648.IH
H5648
pamtmann on DSKBC07HB2PROD with BILLS
‘‘(10) The application of section 710(e) or the 
regulations or other guidance prescribed under sec-
tion 710(g) to prevent the avoidance of the purposes 
of section 710.’’. 
(2) AMOUNT OF PENALTY.— 
(A) IN GENERAL.—Section 6662 is amend-
ed by adding at the end the following new sub-
section: 
‘‘(m) 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)(10), 
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) is amended 
by striking ‘‘or (i)’’ and inserting ‘‘, (i), or 
(m)’’. 
(3) SPECIAL RULES FOR APPLICATION OF REA-
SONABLE CAUSE EXCEPTION.—Subsection (c) of sec-
tion 6664 is amended— 
(A) by redesignating paragraphs (3) and 
(4) as paragraphs (4) and (5), respectively; 
VerDate Sep 11 2014 
22:09 Oct 22, 2021
Jkt 029200
PO 00000
Frm 00090
Fmt 6652
Sfmt 6201
E:\BILLS\H5648.IH
H5648
pamtmann on DSKBC07HB2PROD with BILLS
(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 
which section 6662 applies by reason of sub-
section (b)(10) 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)(4) shall apply for purposes of sub-
paragraph (A)(iii).’’. 
VerDate Sep 11 2014 
22:09 Oct 22, 2021
Jkt 029200
PO 00000
Frm 00091
Fmt 6652
Sfmt 6201
E:\BILLS\H5648.IH
H5648
pamtmann on DSKBC07HB2PROD with BILLS
(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) is 
amended by striking ‘‘and’’ at the end of para-
graph (16), by striking the period at the end of 
paragraph (17) and inserting ‘‘; and’’, and by 
inserting after paragraph (17) the following 
new paragraph: 
‘‘(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 is amended by 
adding at the end the following new subsection: 
‘‘(m) INVESTMENT SERVICES PARTNERSHIP INCOME 
OR LOSS.—For purposes of subsection (a)— 
VerDate Sep 11 2014 
22:09 Oct 22, 2021
Jkt 029200
PO 00000
Frm 00092
Fmt 6652
Sfmt 6201
E:\BILLS\H5648.IH
H5648
pamtmann on DSKBC07HB2PROD with BILLS
‘‘(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 
‘‘(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: 
VerDate Sep 11 2014 
22:09 Oct 22, 2021
Jkt 029200
PO 00000
Frm 00093
Fmt 6652
Sfmt 6201
E:\BILLS\H5648.IH
H5648
pamtmann on DSKBC07HB2PROD with BILLS
‘‘(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) SEPARATE ACCOUNTING BY PARTNER.—Section 
702(a) is amended by striking ‘‘and’’ at the end of para-
graph (7), by striking the period at the end of paragraph 
(8) and inserting ‘‘, and’’, and by inserting after para-
graph (8) the following: 
‘‘(9) any amount treated as ordinary income or 
loss under subsection (a), (b), or (e) of section 
710.’’. 
(g) CONFORMING AMENDMENTS.— 
(1) Subsection (d) of section 731 is amended by 
inserting ‘‘section 710(b)(4) (relating to distribu-
tions of partnership property),’’ after ‘‘to the extent 
otherwise provided by’’. 
(2) Section 741 is amended by inserting ‘‘or 
section 710 (relating to special rules for partners 
VerDate Sep 11 2014 
22:09 Oct 22, 2021
Jkt 029200
PO 00000
Frm 00094
Fmt 6652
Sfmt 6201
E:\BILLS\H5648.IH
H5648
pamtmann on DSKBC07HB2PROD with BILLS
providing investment management services to part-
nerships)’’ before the period at the end. 
(3) The table of sections for part I of sub-
chapter K of chapter 1 is amended by adding at the 
end the following new item: 
‘‘Sec. 710. Special rules for partners providing investment management services 
to partnerships.’’. 
(4)(A) Part IV of subchapter O of chapter 1 is 
amended by striking section 1061. 
(B) The table of sections for part IV of sub-
chapter O of chapter 1 is amended by striking the 
item relating to section 1061. 
(h) 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 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 enactment 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 partnership tax-
able year or the net capital gain determined by only 
VerDate Sep 11 2014 
22:09 Oct 22, 2021
Jkt 029200
PO 00000
Frm 00095
Fmt 6652
Sfmt 6201
E:\BILLS\H5648.IH
H5648
pamtmann on DSKBC07HB2PROD with BILLS
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 
enactment of this Act. 
(B) INDIRECT DISPOSITIONS.—The amend-
ments made by subsection (b) shall apply to 
transactions after the date of 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 enactment of this 
Act. 
TITLE 
V—INVESTOR 
PROTEC-
TION AND MARKET TRANS-
PARENCY 
SEC. 501. DISCLOSURE OF FEES AND RETURNS. 
The Investment Company Act of 1940 (15 U.S.C. 
80a–1 et seq.) is amended by adding at the end the fol-
lowing: 
VerDate Sep 11 2014 
22:09 Oct 22, 2021
Jkt 029200
PO 00000
Frm 00096
Fmt 6652
Sfmt 6201
E:\BILLS\H5648.IH
H5648
pamtmann on DSKBC07HB2PROD with BILLS
‘‘SEC. 66. DISCLOSURE OF FEES AND RETURNS. 
‘‘(a) DEFINITIONS.—In this section— 
‘‘(1) the terms ‘controlling private fund’, ‘pri-
vate fund’, and ‘target firm’ have the meanings 
given the terms in section 3 of the Stop Wall Street 
Looting Act; and 
‘‘(2) the term ‘expenditure for political activi-
ties’— 
‘‘(A) means— 
‘‘(i) an independent expenditure, as 
that term is defined in section 301(17) of 
the Federal Election Campaign Act of 
1971 (52 U.S.C. 30101(17)); 
‘‘(ii) a disbursement for an election-
eering communication, as that term is de-
fined in section 304(f)(3) of the Federal 
Election Campaign Act of 1971 (52 U.S.C. 
30104(f)(3)) or any other public commu-
nication, as defined in section 301(22) of 
that Act (52 U.S.C. 30101(22)), that 
would be an electioneering communication 
if it were a broadcast, cable, or satellite 
communication; or 
‘‘(iii) dues or other payments to trade 
associations or organizations described in 
section 501(c) of the Internal Revenue 
VerDate Sep 11 2014 
22:09 Oct 22, 2021
Jkt 029200
PO 00000
Frm 00097
Fmt 6652
Sfmt 6201
E:\BILLS\H5648.IH
H5648
pamtmann on DSKBC07HB2PROD with BILLS
Code of 1986 and exempt from tax under 
section 501(a) of that Code that are, or 
could reasonably be anticipated to be, used 
or transferred to another association or or-
ganization for the purposes described in 
clause (i) or (ii); and 
‘‘(B) does not include an expenditure for— 
‘‘(i) direct lobbying efforts through 
registered lobbyists employed or hired by a 
controlling private fund; 
‘‘(ii) communications by a controlling 
private fund to— 
‘‘(I) a partner of the fund or ex-
ecutive or administrative personnel 
with respect to the fund; or 
‘‘(II) a family member of any in-
dividual described in subclause (I); or 
‘‘(iii) the establishment and adminis-
tration of contributions to a separate seg-
regated private fund to be utilized for po-
litical purposes by a controlling private 
fund. 
‘‘(b) RULES.—Not later than 1 year after the date 
of enactment of this section, the Commission shall issue 
final rules that require a controlling private fund to, using 
VerDate Sep 11 2014 
22:09 Oct 22, 2021
Jkt 029200
PO 00000
Frm 00098
Fmt 6652
Sfmt 6201
E:\BILLS\H5648.IH
H5648
pamtmann on DSKBC07HB2PROD with BILLS
generally accepted accounting principles, annually report 
the following information with respect to that controlling 
private fund: 
‘‘(1) The name, address, and vintage year of 
the fund. 
‘‘(2) The name of each general partner of the 
fund. 
‘‘(3) The name of each limited partner of the 
fund. 
‘‘(4) A list of each entity with respect to which 
the fund owns an equity interest. 
‘‘(5) In dollars, the total amount of regulatory 
assets under management by the fund. 
‘‘(6) In dollars, the total amount of net assets 
under management by the fund. 
‘‘(7) The percentage of fund equity contributed 
by the general partners of the fund and the percent-
age of fund equity contributed by the limited part-
ners of the fund. 
‘‘(8) Information on the debt owed by the fund, 
including— 
‘‘(A) the dollar amount of total debt; 
‘‘(B) the percentage of debt for which the 
creditor is a financial institution in the United 
States; 
VerDate Sep 11 2014 
22:09 Oct 22, 2021
Jkt 029200
PO 00000
Frm 00099
Fmt 6652
Sfmt 6201
E:\BILLS\H5648.IH
H5648
pamtmann on DSKBC07HB2PROD with BILLS
100 
‘‘(C) the percentage of debt for which the 
creditor is a financial institution outside of the 
United States; 
‘‘(D) the percentage of debt for which the 
creditor is an entity that is located in the 
United States and is not a financial institution; 
and 
‘‘(E) the percentage of debt for which the 
creditor is an entity that is located outside of 
the United States and is not a financial institu-
tion. 
‘‘(9) The gross performance of the fund during 
the year covered by the report. 
‘‘(10) For the year covered by the report, the 
difference obtained by subtracting the financial 
gains of the fund by the fees that the general part-
ners of the fund charged to the limited partners of 
the fund (commonly referred to as the ‘performance 
net of fees’). 
‘‘(11) For the year covered by the report, an 
annual financial statement, which shall include in-
come statements, a balance sheet, and cash flow 
statements. 
VerDate Sep 11 2014 
22:09 Oct 22, 2021
Jkt 029200
PO 00000
Frm 00100
Fmt 6652
Sfmt 6201
E:\BILLS\H5648.IH
H5648
pamtmann on DSKBC07HB2PROD with BILLS
101 
‘‘(12) The average debt-to-equity ratio of each 
target firm with respect to the fund and the debt- 
to-equity ratio of each such target firm. 
‘‘(13) The total gross asset value of each target 
firm with respect to the fund and the gross asset 
value of each such target firm. 
‘‘(14) The total amount of debt held by each 
target firm with respect to the fund and the total 
amount of debt held by each such target firm. 
‘‘(15) The total amount of debt held by each 
target firm with respect to the fund that, as of the 
date on which the report is submitted, are cat-
egorized as liabilities, long-term liabilities, and pay-
ment in kind or zero coupon debt. 
‘‘(16) The total number of target firms with re-
spect to the fund that experienced default during the 
period covered by the report, including the name of 
any such target firm. 
‘‘(17) The total number of the target firms with 
respect to the fund with respect to which a case was 
commenced under title 11, United States Code, dur-
ing the period covered by the report, including the 
name of any such target firm. 
‘‘(18) The percentage of the equity of the fund 
that is owned by— 
VerDate Sep 11 2014 
22:09 Oct 22, 2021
Jkt 029200
PO 00000
Frm 00101
Fmt 6652
Sfmt 6201
E:\BILLS\H5648.IH
H5648
pamtmann on DSKBC07HB2PROD with BILLS
102 
‘‘(A) citizens of the United States; 
‘‘(B) individuals who are not citizens of the 
United States; 
‘‘(C) brokers or dealers; 
‘‘(D) insurance companies; 
‘‘(E) investment companies that are reg-
istered with the Commission under this Act; 
‘‘(F) private funds and other investment 
companies not required to be registered with 
the Commission; 
‘‘(G) nonprofit organizations; 
‘‘(H) pension plans maintained by State or 
local governments (or an agency or instrumen-
tality of either); 
‘‘(I) pension plans maintained by non-
governmental employers; 
‘‘(J) State or municipal government enti-
ties; 
‘‘(K) banking or thrift institutions; 
‘‘(L) sovereign wealth funds; and 
‘‘(M) other investors. 
‘‘(19) The total dollar amount of aggregate fees 
and expenses collected by the fund, the manager of 
the fund, or related parties from target firms for 
VerDate Sep 11 2014 
22:09 Oct 22, 2021
Jkt 029200
PO 00000
Frm 00102
Fmt 6652
Sfmt 6201
E:\BILLS\H5648.IH
H5648
pamtmann on DSKBC07HB2PROD with BILLS
103 
which the fund is a controlling private fund, which 
shall— 
‘‘(A) be categorized by the type of fee; and 
‘‘(B) include a description of the purpose 
of the fees. 
‘‘(20) The total dollar amount of aggregate fees 
and expenses collected by the fund, the manager of 
the fund, or related parties from the limited part-
ners of the fund, which shall— 
‘‘(A) be categorized by the type of fee; and 
‘‘(B) include a description of the purpose 
of the fees. 
‘‘(21) The total carried interest claimed by the 
fund, the manager of the fund, or related parties 
and the total dollar amount of carried interest dis-
tributed to the limited partners of the fund. 
‘‘(22) A description of, during the year covered 
by the report, any material changes in risk factors 
at the fund level, including— 
‘‘(A) concentration risk; 
‘‘(B) foreign exchange risk; and 
‘‘(C) extra-financial risk, including envi-
ronmental, social, and corporate governance 
risk. 
VerDate Sep 11 2014 
22:09 Oct 22, 2021
Jkt 029200
PO 00000
Frm 00103
Fmt 6652
Sfmt 6201
E:\BILLS\H5648.IH
H5648
pamtmann on DSKBC07HB2PROD with BILLS