(B) Minimum training curriculum require-
ments. 
(C) Minimum training hour requirements. 
(D) Minimum hands-on training require-
ments. 
(E) Minimum trainee competency and pro-
ficiency requirements. 
(F) Minimum requirements for training 
program quality control. 
(3) 
ACCREDITATION
AND
CERTIFICATION 
FEES.—The Administrator (or the State in the case 
of an authorized State program) shall impose a fee 
on— 
(A) persons operating training programs 
accredited under this title; and 
(B) lead-based pipe activities contractors 
certified in accordance accreditation with para-
graph (1). 
The fees shall be established at such level as is nec-
essary to cover the costs of administering and en-
forcing the standards and regulations under this sec-
tion which are applicable to such programs and con-
tractors. The fee shall not be imposed on any State, 
local government, or nonprofit training program. 
The Administrator (or the State in the case of an 
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authorized State program) may waive the fee for 
lead-based pipe activities contractors for the purpose 
of training their own employees. 
(b) LEAD-BASED PIPE ACTIVITIES.—For purposes of 
this title, the term ‘‘lead-based pipe activities’’ means— 
(1) in the case of housing, risk assessment, in-
spection, and abatement; and 
(2) in the case of any public building con-
structed before 1986, commercial building, or any 
other structure, evaluation and abatement of lead- 
based pipes and lead-based pipe hazards. 
(c) RENOVATION AND REMODELING.— 
(1) GUIDELINES.—In order to reduce the risk 
of exposure to lead in connection with renovation 
and remodeling of housing, public buildings, and 
commercial buildings, the Administrator shall, with-
in 18 months after the enactment of this section, 
promulgate guidelines for the conduct of such ren-
ovation and remodeling activities which may create 
a risk of exposure to dangerous levels of lead. The 
Administrator shall disseminate such guidelines to 
persons engaged in such renovation and remodeling 
through hardware stores, employee organizations, 
trade groups, State and local agencies, and through 
other appropriate means. 
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(2) STUDY OF CERTIFICATION.—The Adminis-
trator shall conduct a study of the extent to which 
persons engaged in various types of renovation and 
remodeling activities in housing, public buildings, 
and commercial buildings are exposed to lead in the 
conduct of such activities or disturb lead and create 
a lead-based pipe hazard on a regular or occasional 
basis. The Administrator shall complete such study 
and publish the results thereof within 30 months 
after the enactment of this section. 
(3) CERTIFICATION
DETERMINATION.—Within 
4 years after the enactment of this section, the Ad-
ministrator shall revise the regulations to apply the 
regulations to renovation or remodeling activities in 
housing and commercial buildings that create lead- 
based pipe hazards. In determining which contrac-
tors are engaged in such activities, the Adminis-
trator shall utilize the results of the study and con-
sult with the representatives of labor organizations, 
lead-based pipe activities contractors, persons en-
gaged in remodeling and renovation, experts in lead 
health effects, and others. If the Administrator de-
termines that a category of contractors engaged in 
renovation or remodeling does not require certifi-
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cation, the Administrator shall publish an expla-
nation of the basis for that determination. 
SEC. 202. IDENTIFICATION OF DANGEROUS LEVELS OF 
LEAD. 
Within 18 months after the enactment of this Act, 
the Administrator shall promulgate regulations which 
shall identify for purposes of this title lead-based pipe haz-
ards. 
SEC. 203. AUTHORIZED STATE PROGRAMS. 
(a) APPROVAL.—Any State which seeks to administer 
and enforce the standards, regulations, or other require-
ments established may, after notice and opportunity for 
public hearing, develop and submit to the Administrator 
an application, in such form as the Administrator shall 
require, for authorization of such a State program. Any 
such State may also certify to the Administrator at the 
time of submitting such program that the State program 
meets the requirements of paragraphs (1) and (2) of sub-
section (b). Upon submission of such certification, the 
State program shall be deemed to be authorized under this 
section, and shall apply in such State in lieu of the cor-
responding Federal program as the case may be, until 
such time as the Administrator disapproves the program 
or withdraws the authorization. 
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(b) APPROVAL OR DISAPPROVAL.—Within 180 days 
following submission of an application, the Administrator 
shall approve or disapprove the application. The Adminis-
trator may approve the application only if after notice and 
after opportunity for public hearing, the Administrator 
finds that— 
(1) the State program is at least as protective 
of human health and the environment as the Federal 
program as the case may be; and 
(2) such State program provides adequate en-
forcement. 
Upon authorization of a date program under this section, 
it shall be unlawful for any person to violate or fail or 
refuse to comply with any requirement of such program. 
(c) WITHDRAWAL OF AUTHORIZATION.—If a State is 
not administering and enforcing a program authorized 
under this section in compliance with standards, regula-
tions, and other requirements of this title, the Adminis-
trator shall so notify the State and, if corrective action 
is not completed within a reasonable time, not to exceed 
180 days, the Administrator shall withdraw authorization 
of such program and establish a Federal program pursu-
ant to this title. 
(d) MODEL STATE PROGRAM.—Within 18 months 
after the enactment of this title, the Administrator shall 
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promulgate a model State program which may be adopted 
by any State which seeks to administer and enforce a 
State program under this title. Such model program shall, 
to the extent practicable, encourage States to utilize exist-
ing State and local certification and accreditation pro-
grams and procedures. Such program shall encourage reci-
procity among the States with respect to the certification. 
(e) OTHER STATE REQUIREMENTS.—Nothing in this 
title shall be construed to prohibit any State or political 
subdivision thereof from imposing any requirements which 
are more stringent than those imposed by this title. 
(f) STATE AND LOCAL CERTIFICATION.—The regula-
tions under this title shall, to the extent appropriate, en-
courage States to seek program authorization and to use 
existing State and local certification and accreditation pro-
cedures, except that a State or local government shall not 
require more than 1 certification under this section for 
any lead-based pipe activities contractor to carry out lead- 
based pipe activities in the State or political subdivision 
thereof. 
(g) GRANTS TO STATES.—The Administrator is au-
thorized to make grants to States to develop and carry 
out authorized State programs under this section. The 
grants shall be subject to such terms and conditions as 
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the Administrator may establish to further the purposes 
of this title. 
(h) ENFORCEMENT BY ADMINISTRATOR.—If a State 
does not have a State program authorized under this sec-
tion and in effect by the date which is 2 years after pro-
mulgation of the regulations the Administrator shall, by 
such date, establish a Federal program for such State. 
SEC. 204. LEAD ABATEMENT AND MEASUREMENT. 
(a) PROGRAM
TO
PROMOTE
LEAD
EXPOSURE 
ABATEMENT.—The Administrator, in cooperation with 
other appropriate Federal departments and agencies, shall 
conduct a comprehensive program to promote safe, effec-
tive, and affordable monitoring, detection, and abatement 
of lead-based pipe and other lead exposure hazards. 
(b) STANDARDS
FOR ENVIRONMENTAL SAMPLING 
LABORATORIES.— 
(1) MINIMUM
PERFORMANCE
STANDARDS.— 
The Administrator shall establish protocols, criteria, 
and minimum performance standards for laboratory 
analysis of lead in paint pipes, taps, and water. 
Within 2 years after the enactment of this Act, the 
Administrator, in consultation with the Secretary of 
Health and Human Services, shall establish a pro-
gram to certify laboratories as qualified to test sub-
stances for lead content unless the Administrator de-
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termines, by the date specified in this paragraph, 
that effective voluntary accreditation programs are 
in place and operating on a nationwide basis at the 
time of such determination. To be certified under 
such program, a laboratory shall, at a minimum, 
demonstrate an ability to test substances accurately 
for lead content. 
(2) PUBLIC INFORMATION.—Not later than 24 
months after the date of the enactment of this sec-
tion, and annually thereafter, the Administrator 
shall publish and make available to the public a list 
of certified or accredited environmental sampling 
laboratories. 
(3) CERTIFICATION PROGRAM.—If the Adminis-
trator determines that effective voluntary accredita-
tion programs are in place for environmental sam-
pling laboratories, the Administrator shall review the 
performance and effectiveness of such programs 
within 3 years after such determination. If, upon 
such review, the Administrator determines that the 
voluntary accreditation programs are not effective in 
assuring the quality and consistency of laboratory 
analyses, the Administrator shall, not more than 12 
months thereafter, establish a certification program 
that meets the requirements of paragraph (1). 
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(c) EXPOSURE STUDIES.— 
(1) CHILDREN.—The Secretary of Health and 
Human Services (in this subsection referred to as 
the ‘‘Secretary’’), acting through the Director of the 
Centers for Disease Control (CDC), and the Direc-
tor of the National Institute of Environmental 
Health Sciences, shall jointly conduct a study of the 
sources of lead exposure in children who have ele-
vated blood lead levels (or other indicators of ele-
vated lead body burden), as defined by the Director 
of the Centers for Disease Control. 
(2) WATER.—The Secretary, in consultation 
with the Director of the National Institute for Occu-
pational Safety and Health, shall conduct a com-
prehensive study of means to reduce hazardous occu-
pational lead abatement exposures in water. This 
study shall include, at a minimum, each of the fol-
lowing: 
(A) Surveillance and intention capability in 
the States to identify and prevent hazardous ex-
posures to lead abatement workers. 
(B) Demonstration of lead abatement con-
trol methods and devices and work practices to 
identify and prevent hazardous lead exposures 
in the workplace. 
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(C) Evaluation, in consultation with the 
National Institute of Environmental Health 
Sciences, of health effects of low and high levels 
of occupational lead exposures through fluids on 
reproductive, neurological, renal, and cardio-
vascular health. 
(D) Identification of high-risk occupational 
settings to which prevention activities and re-
sources should be targeted. 
(E) A study assessing the potential expo-
sures and risks from lead to janitorial and cus-
todial workers. 
(3) CONTRIBUTION TO ELEVATED LEAD BODY 
BURDEN.—The studies described in paragraphs (1) 
and (2) shall as appropriate, examine the relative 
contributions to elevated lead body burden from each 
of the following: 
(A) Drinking water. 
(B) Food. 
(C) Occupational exposures, and other ex-
posures that the Secretary determines to be ap-
propriate. 
(4) REPORT.—Not later than 30 months after 
the date of the enactment of this section, the Sec-
retary shall submit a report to the Congress con-
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cerning the studies described in paragraphs (1) and 
(2). 
(d) PUBLIC EDUCATION.— 
(1) IN GENERAL.—The Administrator, in con-
junction with the Secretary of Health and Human 
Services, acting through the Director of the Agency 
for Toxic Substances and Disease Registry, and in 
conjunction with the Secretary of Housing and 
Urban Development, shall sponsor public education 
and outreach activities to increase public awareness 
of— 
(A) the scope and severity of lead poi-
soning from household sources, particularly 
lead-based pipes; 
(B) potential exposure to sources of lead in 
schools and childhood day care centers, particu-
larly lead-based pipes; 
(C) the implications of exposures for men 
and women, particularly those of childbearing 
age; 
(D) the need for careful, quality, abate-
ment and management actions; 
(E) the need for universal screening of 
children; 
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(F) other components of a lead poisoning 
prevention program; 
(G) the health consequences of lead expo-
sure resulting from lead-based pipe hazards; 
(H) risk assessment and inspection meth-
ods for lead-based pipe hazards; and 
(I) measures to reduce the risk of lead ex-
posure from lead-based pipes. 
(2) TARGETED AUDIENCES.—The activities de-
scribed in paragraph (1) shall be designed to provide 
educational services and information to— 
(A) health professionals; 
(B) the general public, with emphasis on 
parents of young children; 
(C) homeowners, landlords, and tenants; 
(D) consumers of home improvement prod-
ucts; 
(E) the residential real estate industry; 
and 
(F) the home renovation industry. 
(e) TECHNICAL ASSISTANCE.— 
(1) 
CLEARINGHOUSE.—Not 
later 
than 
months after the enactment of this Act, the Admin-
istrator shall establish, in consultation with the Sec-
retary of Housing and Urban Development and the 
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Director of the Centers for Disease Control, a Na-
tional Clearinghouse on Childhood Lead Poisoning 
(in this section referred to as the ‘‘Clearinghouse’’). 
The Clearinghouse shall— 
(A) collect, evaluate, and disseminate cur-
rent information on the assessment and reduc-
tion of lead-based pipe hazards, adverse health 
effects, sources of exposure, detection and risk 
assessment methods, environmental hazards 
abatement, and clean-up standards; 
(B) maintain a rapid-alert system to in-
form certified lead-based pipe activities contrac-
tors of significant developments in research re-
lated to lead-based paint hazards; and 
(C) perform any other duty that the Ad-
ministration determines necessary to achieve 
the purposes of this Act. 
(2) HOTLINE.—Not later than 6 months after 
the enactment of this subsection, the Administrator, 
in cooperation with other Federal agencies and with 
State and local governments, shall establish a single 
lead-based pipe hazard hotline to provide the public 
with answers to questions about lead poison in pre-
vention and referrals to the Clearinghouse for tech-
nical information. 
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SEC. 205. LEAD HAZARD INFORMATION PAMPHLET. 
(a) IN GENERAL.—Not later than 2 years after the 
enactment of this Act, after notice and opportunity for 
comment, the Administrator of the Environmental Protec-
tion Agency, in consultation with the Secretary of Housing 
and Urban Development and with the Secretary of Health 
and Human Services, shall publish, and from time to time 
revise, a lead hazard information pamphlet. The pamphlet 
shall— 
(1) contain information regarding the health 
risks associated with exposure to lead; 
(2) provide information on the presence of lead- 
based pipe hazards in federally assisted, federally 
owned, and other housing; 
(3) describe the risks of lead exposure for chil-
dren under 6 years of age, pregnant women, women 
of childbearing age, persons involved in home ren-
ovation, and others residing in a dwelling with lead- 
based pipe hazards; 
(4) describe the risks of renovation in a dwell-
ing with lead-based pipe hazards; 
(5) provide information on approved methods 
for evaluating and reducing lead-based pipe hazards 
and their effectiveness in identifying, reducing, 
eliminating, or preventing exposure to lead-based 
pipe hazards; 
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(6) advise persons how to obtain a list of con-
tractors certified pursuant to this title in lead-based 
pipe hazard evaluation and reduction in the area in 
which the pamphlet is to be used; 
(7) state that a risk assessment or inspection 
for lead-based pipe is recommended prior to the pur-
chase, lease, or renovation of housing; 
(8) state that certain State and local laws im-
pose additional requirements related to lead-based 
pipe in housing and provide a listing of Federal, 
State, and local agencies in each State, including ad-
dress and telephone number, that can provide infor-
mation about applicable laws and available govern- 
mental and private assistance and financing; and 
(9) provide such other information about envi-
ronmental hazards associated with residential real 
property as the Administrator deems appropriate. 
(b) RENOVATION OF HOUSING.—Within 2 years after 
the enactment of this section, the Administrator shall pro-
mulgate regulations under this subsection to require each 
person who performs for compensation a renovation of 
housing to provide a lead hazard information pamphlet to 
the owner and occupant of such housing prior to com-
mencing the renovation. 
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SEC. 206. REGULATIONS. 
The regulations of the Administrator under this title 
shall include such recordkeeping and reporting require-
ments as may be necessary to insure the effective imple-
mentation of this title. The regulations may be amended 
from time to time as necessary. 
SEC. 207. CONTROL OF LEAD-BASED PIPE HAZARDS AT 
FEDERAL FACILITIES. 
Each department, agency, and instrumentality of ex-
ecutive, legislative, and judicial branches of the Federal 
Government (1) having jurisdiction over any property or 
facility, or (2) engaged in any activity resulting, or which 
may result, in a lead-based pipe hazard, and each officer, 
agent, or employee thereof, shall be subject to, and comply 
with, all Federal, State, interstate, and local requirements, 
both substantive and procedural (including any require-
ment for certification, licensing, recordkeeping, or report-
ing or any provisions for injunctive relief and such sanc-
tions as may be imposed by a court to enforce such relief 
respecting lead-based pipe, lead-based pipe activities, and 
lead-based pipe hazards in the same manner, and to the 
same extent as any nongovernmental entity is subject to 
such requirements, including the payment of reasonable 
service charges). The Federal, State, interstate, and local 
substantive and procedural requirements referred to in 
this subsection include, but are not limited to, all adminis-
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trative orders and all civil and administrative penalties 
and fines regardless of whether such penalties or fines are 
punitive or coercive in nature, or whether imposed for iso-
lated, intermittent or continuing violations. The United 
States hereby expressly waives any immunity otherwise 
applicable to the United States with respect to any such 
substantive or procedural requirement (including, but not 
limited to, any injunctive relief, administrative order, or 
civil or administrative penalty referred to in the preceding 
sentence, or reasonable service charge). The reasonable 
service charges referred to in this section include, but are 
not limited to, fees or charges assessed for certification 
and licensing, as well as any other nondiscriminatory 
charges that are assessed in connection with a Federal, 
State, interstate, or local lead-based pipe, lead-based pipe 
activities, or lead-based pipe hazard activities program. No 
agent, employee, or officer of the United States shall be 
personally liable for any civil penalty under any Federal, 
State, interstate, or local law relating to lead-based pipe, 
lead-based pipe activities, or lead-based pipe hazards with 
respect to any act or omission within the scope of his offi-
cial duties. 
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SEC. 208. PROHIBITED ACTS. 
It shall be unlawful for any person to fail or refuse 
to comply with a provision of this title or with any rule 
or order issued under this title. 
SEC. 209. RELATIONSHIP TO OTHER FEDERAL LAW. 
Nothing in this title shall affect the authority of other 
appropriate Federal agencies to establish or enforce any 
requirements which are at least as stringent as those es-
tablished pursuant to this title. 
SEC. 210. GENERAL PROVISIONS RELATING TO ADMINIS-
TRATIVE PROCEEDINGS. 
(a) APPLICABILITY.—This section applies to the pro-
mulgation or revision of any regulation issued under this 
title. 
(b) RULEMAKING DOCKET.—Not later than the date 
of proposal of an action to which this section applies, the 
Administrator shall establish a rulemaking docket for such 
action (in this subsection referred to as a ‘‘rule’’). When-
ever a rule applies only within a particular State, a second 
(identical) docket shall be established in the appropriate 
regional office of the Environmental Protection Agency. 
(c) INSPECTION AND COPYING.— 
(1) PUBLIC
AVAILABILITY.—The rulemaking 
docket required under subsection (b) shall be open 
for inspection by the public at reasonable times spec-
ified in the notice of proposed rulemaking. Any per-
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son may copy documents contained in the docket. 
The Administrator shall provide copying facilities 
which may be used at the expense of the person 
seeking copies, but the Administrator may waive or 
reduce such expenses in such instances as the public 
interest requires. Any person may request copies by 
mail if the person pays the expenses, including per-
sonnel costs to do the copying. 
(2) DOCKET.— 
(A) 
COMMENTS
AND
INFORMATION.— 
Promptly upon receipt by the agency, all writ-
ten comments and documentary information on 
the proposed rule received from any person for 
inclusion in the docket during the comment pe-
riod shall be placed in the docket. The tran-
script of public hearing if any, on the proposed 
rule shall also be included in the docket 
promptly upon receipt from the person who 
transcribed such hearings. All documents which 
become available after the proposed rule has 
been published and which the Administrator de-
termines are of central relevance to the rule-
making shall be placed in the docket as soon as 
possible after their availability. 
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(B) DRAFTS
OF
RULES.—The drafts of 
proposed rules submitted by the Administrator 
to the Office of Management and Budget for 
any interagency review process prior to proposal 
of any such rule, all documents accompanying 
such drafts, and all written comments thereon 
by other agencies and all written responses to 
such written comments by the Administrator 
shall be placed in the docket no later than the 
date of proposal of the rule. The drafts of the 
final rule submitted for such review process 
prior to promulgation and all such written com-
ments thereto all documents accompanying such 
drafts, and written responses thereto shall be 
placed in the docket no later than the date of 
promulgation. 
(d) EXPLANATION.— 
(1) MAJOR CHANGES.—The promulgated rule 
shall be accompanied by an explanation of the rea-
sons for any major changes in the promulgated rule 
from the proposed rule. 
(2) RESPONSES.—The promulgated rule shall 
also be accompanied by a response to each of the 
significant comments, criticisms, and new data sub-
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mitted in written or oral presentations during the 
comment period. 
(3) LIMITATION.—The promulgated rule may 
not be based (in part or whole) on any information 
or data which has not been placed in the docket as 
of the date of such promulgation. 
(e) EFFECTIVE DATE.—The requirements of this sec-
tion shall take effect with respect to any rule the proposal 
of which occurs after 90 days after the date of the enact-
ment of this Act. 
TITLE III—AUTHORIZATION OF 
APPROPRIATIONS FOR LEAD 
HAZARD REDUCTION 
SEC. 301. HUD GRANTS FOR LEAD HAZARDS REDUCTION IN 
HOUSING. 
There is authorized to be appropriated for grants 
under section 101 of this Act and section 1011 of the Res-
idential Lead-Based Paint Hazard Reduction Act of 1992 
(42 U.S.C. 4852) $9,500,000,000 for each of fiscal years 
2020 through 2029. 
SEC. 302. EPA FUNDING FOR LEAD EXPOSURE REDUCTION. 
There is authorized to be appropriated such sums as 
may be necessary for each of fiscal years 2020 through 
2029 to carry out— 
(1) title II of this Act; 
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(2) title IV of the Toxic Substances Control Act 
(15 U.S.C. 2681 et seq.) and 
(3) such other lead hazard reduction activities 
as the Administrator of the Environmental Protec-
tion Agency is authorized under law to undertake, 
including activities under the Safe Drinking Water 
Act (42 U.S.C. 300f et seq.). 
TITLE IV—REVENUE 
PROVISIONS 
SEC. 401. 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 
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 
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lotter on DSKBCFDHB2PROD with BILLS
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. 
‘‘(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. 402. 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: 
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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 
‘‘(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 
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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.— 
‘‘(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 
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‘‘(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— 
‘‘(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-
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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-
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 
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lotter on DSKBCFDHB2PROD with BILLS
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 
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-
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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— 
‘‘(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. 
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‘‘(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. 
‘‘(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 
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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.— 
‘‘(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 
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lotter on DSKBCFDHB2PROD with BILLS
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 
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, 
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‘‘(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. 
‘‘(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) ANTIABUSE RULES.—The Secretary 
may issue regulations or other guidance which 
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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 
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 
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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). 
‘‘(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.— 
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‘‘(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. 
‘‘(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 
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‘‘(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 
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-
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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 
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 
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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-
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 
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‘‘(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— 
‘‘(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. 
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‘‘(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). 
‘‘(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-
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lotter on DSKBCFDHB2PROD with BILLS
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 
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-
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lotter on DSKBCFDHB2PROD with BILLS
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.— 
‘‘(A) IN
GENERAL.—In the case of any 
specified family partnership interest, paragraph 
(1)(A) shall be applied without regard to the 
phrase ‘and who are not related to the partner 
holding the qualified capital interest’. 
‘‘(B) SPECIFIED FAMILY PARTNERSHIP IN-
TEREST.—For purposes of this paragraph, the 
term ‘specified family partnership interest’ 
means any investment services partnership in-
terest if— 
‘‘(i) such interest is an interest in a 
qualified family partnership, 
‘‘(ii) such interest is held by a natural 
person or by a trust with respect to which 
each beneficiary is a grantor or a person 
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lotter on DSKBCFDHB2PROD with BILLS
whose relationship to the grantor is de-
scribed in section 267(b)(1), and 
‘‘(iii) all other interests in such quali-
fied family partnership with respect to 
which significant allocations are made 
(within the meaning of paragraph (1)(B) 
and in comparison to the allocations made 
to the interest described in clause (ii)) are 
held by persons who— 
‘‘(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 
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‘‘(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. 
‘‘(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 the enactment of this 
section. 
‘‘(e) OTHER INCOME
AND GAIN
IN CONNECTION 
WITH INVESTMENT MANAGEMENT SERVICES.— 
‘‘(1) IN GENERAL.—If— 
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‘‘(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, 
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‘‘(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 
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‘‘(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) 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— 
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‘‘(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-
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 
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(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 
clause (ii), and by inserting after clause (ii) the fol-
lowing 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 is amended— 
(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).’’. 
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(4) INVESTMENT SERVICES PARTNERSHIP IN-
TERESTS; QUALIFIED CAPITAL INTERESTS.—Section 
751 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-
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 
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‘‘(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. 
‘‘(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: 
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‘‘(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 
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. 
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‘‘(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: 
‘‘(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 
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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 
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 
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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 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(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: 
‘‘(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) is amended 
by striking ‘‘or (i)’’ and inserting ‘‘, (i), or (k)’’. 
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(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; 
(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)(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. 
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‘‘(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) 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.’’. 
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(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)— 
‘‘(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 
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‘‘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) 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-
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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 
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) Part IV of subchapter O of chapter 1 is 
amended by striking section 1061, and the table of 
sections for such part 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 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 
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100 
referred to in such section shall be treated as being 
the lesser of the net capital gain for the entire part-
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. 
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101 
SEC. 403. RETURN TO PRE-2018 ESTATE AND GIFT TAX 
BASIC EXCLUSION AMOUNT. 
(a) IN GENERAL.—Section 2010(c)(3) of the Internal 
Revenue Code of 1986 is amended by striking subpara-
graph (C). 
(b) EFFECTIVE DATE.—The amendments made by 
this section shall apply to estates of decedents dying and 
gifts made after the date of the enactment of this Act. 
Æ 
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