I 
110TH CONGRESS 
1ST SESSION H. R. 2785 
To amend the Internal Revenue Code of 1986 to provide that the exception 
from the treatment of publicly traded partnerships as corporations for 
partnerships with passive-type income shall not apply to partnerships 
directly or indirectly deriving income from providing investment adviser 
and related asset management services. 
IN THE HOUSE OF REPRESENTATIVES 
JUNE 20, 2007 
Mr. WELCH of Vermont introduced the following bill; which was referred to 
the Committee on Ways and Means 
A BILL 
To amend the Internal Revenue Code of 1986 to provide 
that the exception from the treatment of publicly traded 
partnerships as corporations for partnerships with pas-
sive-type income shall not apply to partnerships directly 
or indirectly deriving income from providing investment 
adviser and related asset management services. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
VerDate Aug 31 2005 
05:04 Jun 22, 2007
Jkt 059200
PO 00000
Frm 00001
Fmt 6652
Sfmt 6201
E:\BILLS\H2785.IH
H2785
bajohnson on PROD1PC77 with BILLS
SECTION 1. EXCEPTION FROM TREATMENT OF PUBLICLY 
TRADED PARTNERSHIPS AS CORPORATIONS 
NOT TO APPLY TO PARTNERSHIPS DIRECTLY 
OR INDIRECTLY DERIVING INCOME FROM 
PROVIDING INVESTMENT ADVISER AND RE-
LATED ASSET MANAGEMENT SERVICES. 
(a) IN GENERAL.—Section 7704(c) of the Internal 
Revenue Code of 1986 (relating to exception for partner-
ships with passive-type income) is amended by adding at 
the end the following new paragraph: 
‘‘(4) EXCEPTION NOT TO APPLY TO PARTNER-
SHIPS
PROVIDING
CERTAIN
INVESTMENT
ADVISER 
AND
RELATED
ASSET
MANAGEMENT
SERVICES.— 
This subsection shall not apply to any partnership 
which directly or indirectly has any item of income 
or gain (including capital gains or dividends), the 
rights to which are derived from— 
‘‘(A) services provided by any person as an 
investment adviser (as defined in section 
202(a)(11) of the Investment Advisers Act of 
1940, 15 U.S.C. 80b–2(a)(11)) or as a person 
associated with an investment adviser (as de-
fined in section 202(a)(17) of the Investment 
Advisers Act of 1940, 15 U.S.C. 80b–2(a)(17)), 
or 
VerDate Aug 31 2005 
05:04 Jun 22, 2007
Jkt 059200
PO 00000
Frm 00002
Fmt 6652
Sfmt 6201
E:\BILLS\H2785.IH
H2785
bajohnson on PROD1PC77 with BILLS
‘‘(B) asset management services provided 
by any person described in subparagraph (A) 
(or any related person) in connection with the 
management of assets with respect to which 
services described in subparagraph (A) were 
provided. 
For purposes of subparagraph (A), the determina-
tion as to whether services provided by any person 
were provided as an investment adviser shall be 
made without regard to whether the person is re-
quired to register as an investment adviser under 
the Investment Advisers Act of 1940.’’. 
(b) EFFECTIVE DATE.— 
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendment made by this section shall 
apply to taxable years of a partnership beginning on 
or after June 20, 2007. 
(2) TRANSITION RULE FOR CERTAIN PARTNER-
SHIPS.—In the case of a partnership the interests in 
which on June 20, 2007, were— 
(A) traded on an established securities 
market, or 
(B) readily tradeable on a secondary mar-
ket (or the substantial equivalent thereof), 
VerDate Aug 31 2005 
05:04 Jun 22, 2007
Jkt 059200
PO 00000
Frm 00003
Fmt 6652
Sfmt 6201
E:\BILLS\H2785.IH
H2785
bajohnson on PROD1PC77 with BILLS
the amendment made by this section shall apply to 
taxable years of the partnership beginning on or 
after June 20, 2007. 
Æ 
VerDate Aug 31 2005 
05:04 Jun 22, 2007
Jkt 059200
PO 00000
Frm 00004
Fmt 6652
Sfmt 6301
E:\BILLS\H2785.IH
H2785
bajohnson on PROD1PC77 with BILLS