‘‘(m) SPECIAL RULES FOR PROFESSIONAL SERVICE 
BUSINESSES.— 
‘‘(1) SHAREHOLDERS PROVIDING SERVICES TO 
DISQUALIFIED S CORPORATIONS.— 
‘‘(A) IN GENERAL.—In the case of any dis-
qualified S corporation, each shareholder of 
such disqualified S corporation who provides 
substantial services with respect to the profes-
sional service business referred to in subpara-
graph (C) shall take into account such share-
holder’s pro rata share of all items of income or 
loss described in section 1366 which are attrib-
utable to such business in determining the 
shareholder’s net earnings from self-employ-
ment. 
‘‘(B) TREATMENT OF FAMILY MEMBERS.— 
Except as otherwise provided by the Secretary, 
the shareholder’s pro rata share of items re-
ferred to in subparagraph (A) shall be increased 
by the pro rata share of such items of each 
member of such shareholder’s family (within 
the meaning of section 318(a)(1)) who does not 
provide substantial services with respect to such 
professional service business. 
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‘‘(C) DISQUALIFIED S CORPORATION.—For 
purposes of this subsection, the term ‘disquali-
fied S corporation’ means— 
‘‘(i) any S corporation which is a 
partner in a partnership which is engaged 
in a professional service business if sub-
stantially all of the activities of such S cor-
poration are performed in connection with 
such partnership, and 
‘‘(ii) any other S corporation which is 
engaged in a professional service business 
if the principal asset of such business is 
the reputation and skill of 3 or fewer em-
ployees. 
‘‘(2) PARTNERS.—In the case of any partner-
ship which is engaged in a professional service busi-
ness, subsection (a)(13) shall not apply to any part-
ner who provides substantial services with respect to 
such professional service business. 
‘‘(3) PROFESSIONAL SERVICE BUSINESS.—For 
purposes of this subsection, the term ‘professional 
service business’ means any trade or business if sub-
stantially all of the activities of such trade or busi-
ness involve providing services in the fields of health, 
law, lobbying, engineering, architecture, accounting, 
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actuarial science, performing arts, consulting, ath-
letics, investment advice or management, or broker-
age services. 
‘‘(4) REGULATIONS.—The Secretary shall pre-
scribe such regulations as may be necessary or ap-
propriate to carry out the purposes of this sub-
section, including regulations which prevent the 
avoidance of the purposes of this subsection through 
tiered entities or otherwise. 
‘‘(5) CROSS REFERENCE.—For employment tax 
treatment of wages paid to shareholders of S cor-
porations, see subtitle C.’’. 
(b) CONFORMING AMENDMENT.—Section 211 of the 
Social Security Act is amended by adding at the end the 
following new subsection: 
‘‘(l) SPECIAL RULES FOR PROFESSIONAL SERVICE 
BUSINESSES.— 
‘‘(1) SHAREHOLDERS PROVIDING SERVICES TO 
DISQUALIFIED S CORPORATIONS.— 
‘‘(A) IN GENERAL.—In the case of any dis-
qualified S corporation, each shareholder of 
such disqualified S corporation who provides 
substantial services with respect to the profes-
sional service business referred to in subpara-
graph (C) shall take into account such share-
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holder’s pro rata share of all items of income or 
loss described in section 1366 of the Internal 
Revenue Code of 1986 which are attributable to 
such business in determining the shareholder’s 
net earnings from self-employment. 
‘‘(B) TREATMENT OF FAMILY MEMBERS.— 
Except as otherwise provided by the Secretary 
of the Treasury, the shareholder’s pro rata 
share of items referred to in subparagraph (A) 
shall be increased by the pro rata share of such 
items of each member of such shareholder’s 
family (within the meaning of section 318(a)(1) 
of the Internal Revenue Code of 1986) who 
does not provide substantial services with re-
spect to such professional service business. 
‘‘(C) DISQUALIFIED S CORPORATION.—For 
purposes of this subsection, the term ‘disquali-
fied S corporation’ means— 
‘‘(i) any S corporation which is a 
partner in a partnership which is engaged 
in a professional service business if sub-
stantially all of the activities of such S cor-
poration are performed in connection with 
such partnership, and 
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‘‘(ii) any other S corporation which is 
engaged in a professional service business 
if the principal asset of such business is 
the reputation and skill of 3 or fewer em-
ployees. 
‘‘(2) PARTNERS.—In the case of any partner-
ship which is engaged in a professional service busi-
ness, subsection (a)(12) shall not apply to any part-
ner who provides substantial services with respect to 
such professional service business. 
‘‘(3) PROFESSIONAL SERVICE BUSINESS.—For 
purposes of this subsection, the term ‘professional 
service business’ means any trade or business if sub-
stantially all of the activities of such trade or busi-
ness involve providing services in the fields of health, 
law, lobbying, engineering, architecture, accounting, 
actuarial science, performing arts, consulting, ath-
letics, investment advice or management, or broker-
age services.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to taxable years beginning after 
December 31, 2011. 
Æ 
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