tax’ means, with respect to any foreign corpora-
tion, the income tax of a foreign country if— 
‘‘(i) such corporation is eligible for the 
benefits of a comprehensive income tax trea-
ty between such foreign country and the 
United States, or 
‘‘(ii) such corporation demonstrates to 
the satisfaction of the Secretary that such 
foreign country has a comprehensive income 
tax. 
‘‘(e) REGULATIONS.—The Secretary shall prescribe 
such regulations as are necessary or appropriate to carry 
out the purposes of this section, including regulations to— 
‘‘(1) prevent the avoidance of the purposes of this 
section, and 
‘‘(2) coordinate this section with the other provi-
sions of this subchapter. 
‘‘(f) CROSS REFERENCE.—For 40 percent no fault 
penalty on certain underpayments due to the avoidance of 
this section, see section 6662.’’. 
(b) APPLICATION
TO
REAL
ESTATE
INVESTMENT 
TRUSTS.— 
(1) IN GENERAL.—Subsection (c) of section 856 
is amended by adding at the end the following new 
paragraph: 
VerDate Aug 31 2005 
23:07 Jun 20, 2008
Jkt 069200
PO 00000
Frm 00015
Fmt 6652
Sfmt 6203
E:\BILLS\H6275.RH
H6275
pwalker on PROD1PC71 with BILLS
‘‘(9) EXCEPTION FROM RECHARACTERIZATION OF 
INCOME FROM INVESTMENT SERVICES PARTNERSHIP 
INTERESTS.— 
‘‘(A) IN
GENERAL.—Paragraphs (2), (3), 
and (4) shall be applied without regard to sec-
tion 710 (relating to special rules for partners 
providing investment management services to 
partnership). 
‘‘(B) SPECIAL
RULE
FOR
PARTNERSHIPS 
OWNED BY REITS.—Section 7704 shall be applied 
without regard to section 710 in the case of a 
partnership which meets each of the following re-
quirements: 
‘‘(i) Such partnership is treated as 
publicly traded under section 7704 solely by 
reason of interests in such partnership 
being convertible into interests in a real es-
tate investment trust which is publicly trad-
ed. 
‘‘(ii) 50 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 
investment trust (determined with the ap-
plication of section 267(c)). 
VerDate Aug 31 2005 
23:07 Jun 20, 2008
Jkt 069200
PO 00000
Frm 00016
Fmt 6652
Sfmt 6203
E:\BILLS\H6275.RH
H6275
pwalker on PROD1PC71 with BILLS
‘‘(iii) Such partnership meets the re-
quirements of paragraphs (2), (3), and (4) 
(applied without regard to section 710).’’. 
(2) CONFORMING AMENDMENT.—Paragraph (4) 
of section 7704(d) is amended by inserting ‘‘(deter-
mined without regard to section 856(c)(8))’’ after 
‘‘856(c)(2)’’. 
(c) IMPOSITION OF PENALTY ON UNDERPAYMENTS.— 
(1) IN GENERAL.—Subsection (b) of section 6662 
is amended by inserting after paragraph (5) the fol-
lowing new paragraph: 
‘‘(6) The application of subsection (d) of section 
710 or the regulations prescribed under section 710(e) 
to prevent the avoidance of the purposes of section 
710.’’. 
(2) AMOUNT OF PENALTY.— 
(A) IN GENERAL.—Section 6662 is amended 
by adding at the end the following new sub-
section: 
‘‘(i) 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)(6), 
subsection (a) shall be applied with respect to such portion 
by substituting ‘40 percent’ for ‘20 percent’.’’. 
VerDate Aug 31 2005 
23:07 Jun 20, 2008
Jkt 069200
PO 00000
Frm 00017
Fmt 6652
Sfmt 6203
E:\BILLS\H6275.RH
H6275
pwalker on PROD1PC71 with BILLS
(B) CONFORMING AMENDMENTS.—Subpara-
graph (B) of section 6662A(e)(2) is amended— 
(i) by striking ‘‘section 6662(h)’’ and 
inserting ‘‘subsection (h) or (i) of section 
6662’’, and 
(ii) by striking ‘‘GROSS
VALUATION 
MISSTATEMENT
PENALTY’’ in the heading 
and inserting ‘‘CERTAIN INCREASED UNDER-
PAYMENT PENALTIES’’. 
(3) REASONABLE CAUSE EXCEPTION NOT APPLI-
CABLE.—Subsection (c) of section 6664 is amended— 
(A) by redesignating paragraphs (2) and 
(3) as paragraphs (3) and (4), respectively, 
(B) by striking ‘‘paragraph (2)’’ in para-
graph (4), as so redesignated, and inserting 
‘‘paragraph (3)’’, and 
(C) by inserting after paragraph (1) the fol-
lowing new paragraph: 
‘‘(2) EXCEPTION.—Paragraph (1) shall not 
apply to any portion of an underpayment to which 
this section applies by reason of subsection (b)(6).’’. 
(d) CONFORMING AMENDMENTS.— 
(1) Subsection (d) of section 731 is amended by 
inserting ‘‘section 710(b)(4) (relating to distributions 
of partnership property),’’ before ‘‘section 736’’. 
VerDate Aug 31 2005 
23:07 Jun 20, 2008
Jkt 069200
PO 00000
Frm 00018
Fmt 6652
Sfmt 6203
E:\BILLS\H6275.RH
H6275
pwalker on PROD1PC71 with BILLS
(2) Section 741 is amended by inserting ‘‘or sec-
tion 710 (relating to special rules for partners pro-
viding investment management services to partner-
ship)’’ before the period at the end. 
(3) Paragraph (13) of section 1402(a) is amend-
ed— 
(A) by striking ‘‘other than guaranteed’’ 
and inserting ‘‘other than— 
‘‘(A) guaranteed’’, 
(B) by striking the semicolon at the end and 
inserting ‘‘, and’’, and 
(C) by adding at the end the following new 
subparagraph: 
‘‘(B) any income treated as ordinary in-
come under section 710 received by an indi-
vidual who provides investment management 
services (as defined in section 710(d)(2));’’. 
(4) Paragraph (12) of section 211(a) of the So-
cial Security Act is amended— 
(A) by striking ‘‘other than guaranteed’’ 
and inserting ‘‘other than— 
‘‘(A) guaranteed’’, 
(B) by striking the semicolon at the end and 
inserting ‘‘, and’’, and 
VerDate Aug 31 2005 
23:07 Jun 20, 2008
Jkt 069200
PO 00000
Frm 00019
Fmt 6652
Sfmt 6203
E:\BILLS\H6275.RH
H6275
pwalker on PROD1PC71 with BILLS
(C) by adding at the end the following new 
subparagraph: 
‘‘(B) any income treated as ordinary in-
come under section 710 of the Internal Revenue 
Code of 1986 received by an individual who pro-
vides investment management services (as de-
fined in section 710(d)(2) of such Code);’’. 
(5) The table of sections for part I of subchapter 
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 partnership.’’. 
(e) EFFECTIVE DATE.— 
(1) IN GENERAL.—Except as otherwise provided 
in this subsection, the amendments made by this sec-
tion shall apply to taxable years ending after June 
18, 2008. 
(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 June 18, 2008, the amount of the 
net income referred to in such section shall be treated 
as being the lesser of the net income for the entire 
partnership taxable year or the net income deter-
mined by only taking into account items attributable 
VerDate Aug 31 2005 
23:07 Jun 20, 2008
Jkt 069200
PO 00000
Frm 00020
Fmt 6652
Sfmt 6203
E:\BILLS\H6275.RH
H6275
pwalker on PROD1PC71 with BILLS