I 
116TH CONGRESS 
1ST SESSION H. R. 3848 
To require the Securities and Exchange Commission to issue rules requiring 
private funds to publicly disclose certain information, and for other purposes. 
IN THE HOUSE OF REPRESENTATIVES 
JULY 18, 2019 
Mr. POCAN (for himself, Ms. JAYAPAL, Mr. GARCI´A of Illinois, Mr. GRIJALVA, 
Mr. KHANNA, Ms. LEE of California, Ms. PRESSLEY, Ms. SCHAKOWSKY, 
and Ms. TLAIB) introduced the following bill; which was referred to the 
Committee on Ways and Means, and in addition to the Committees on 
Financial Services, the Judiciary, and Education and Labor, for a period 
to be subsequently determined by the Speaker, in each case for consider-
ation of such provisions as fall within the jurisdiction of the committee 
concerned 
A BILL 
To require the Securities and Exchange Commission to issue 
rules requiring private funds to publicly disclose certain 
information, and for other purposes. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 
(a) SHORT TITLE.—This Act may be cited as the 
‘‘Stop Wall Street Looting Act’’. 
(b) TABLE OF CONTENTS.—The table of contents for 
this Act is as follows: 
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Sec. 1. Short title; table of contents. 
Sec. 2. Findings. 
Sec. 3. Definitions. 
TITLE I—CORPORATE RESPONSIBILITY 
Sec. 101. Joint and several liability for controlling private funds. 
Sec. 102. Joint and several liability for holders of economic interests in control-
ling private funds. 
Sec. 103. Indemnification void as against public policy. 
TITLE II—ANTI-LOOTING 
Sec. 201. Limitations on post-acquisition dividends, distributions, redemptions, 
and buybacks. 
Sec. 202. Prevention of fraudulent transfers. 
Sec. 203. Surtax on certain amounts received by investment firms from con-
trolled target firms. 
Sec. 204. Limitation on deduction for business interest of certain businesses 
owned by private funds. 
TITLE III—PROTECTING WORKERS WHEN COMPANIES GO 
BANKRUPT 
Sec. 301. Increased priority for wages. 
Sec. 302. Priority for severance pay and contributions to employee benefit 
plans. 
Sec. 303. Priority for violations of Federal and State laws. 
Sec. 304. Limitation on executive compensation enhancements. 
Sec. 305. Prohibition against special compensation payments. 
Sec. 306. Executive compensation upon exit from bankruptcy. 
Sec. 307. Collateral surcharge for employee obligations. 
Sec. 308. Voidability of preferential compensation transfers. 
Sec. 309. Protection for employees in a sale of assets. 
Sec. 310. Protection of gift card purchasers. 
Sec. 311. Commercial real estate. 
TITLE IV—CLOSING THE CARRIED INTEREST LOOPHOLE 
Sec. 401. Amendment of 1986 Code. 
Sec. 402. Partnership interests transferred in connection with performance of 
services. 
Sec. 403. Special rules for partners providing investment management services 
to partnerships. 
TITLE V—INVESTOR PROTECTION AND MARKET TRANSPARENCY 
Sec. 501. Disclosure of fees and returns. 
Sec. 502. Fiduciary obligations. 
Sec. 503. Disclosures relating to the marketing of private equity funds. 
TITLE VI—RESTRICTIONS ON SECURITIZING RISKY CORPORATE 
DEBT 
Sec. 601. Risk retention requirements for securitization of corporate debt. 
TITLE VII—MISCELLANEOUS 
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Sec. 701. Anti-evasion. 
Sec. 702. Severability. 
SEC. 2. FINDINGS. 
Congress finds the following: 
(1) During the 20-year period preceding the 
date of enactment of this Act, activity by private eq-
uity funds has exploded. 
(2) Millions of people in communities across the 
United States rely on companies that are owned by 
private equity funds, including almost 5,800,000 in-
dividuals who work for companies owned by those 
funds. For millions of additional individuals, a pri-
vate investment fund acts as a landlord, a lender, or 
an owner of a local grocery store, newspaper, or hos-
pital. Many pension funds are also investors in pri-
vate investment funds. 
(3) Private investment funds have taken con-
trolling stakes in companies in a wide variety of in-
dustries, including the financial services, real estate, 
media, and healthcare industries, but some of the 
largest impacts from private investment funds have 
been in the retail sector. In the 2 years preceding 
the date of enactment of this Act, cases have been 
commenced under title 11, United States Code, with 
respect to dozens of retailers in the United States, 
including Sears, Toys ‘‘R’’ Us, Shopko, Payless 
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ShoeSource, Charlotte Russe, Bon-Ton, Nine West, 
David’s Bridal, Claire’s, and Southeastern Grocers, 
which was the parent company for BI–LO and 
Winn-Dixie. 
(4) Private investment funds have also targeted 
entities that serve low-income or vulnerable popu-
lations, including affordable housing developments, 
for-profit colleges, payday lenders, medical providers, 
and nursing homes. 
(5) While private investment funds often pur-
port to take over struggling companies and make 
those companies viable, the opposite is often true. 
Leveraged buyouts impose enormous debt loads on 
otherwise viable companies and then strip those 
companies of assets, hobbling the operations of those 
companies and preventing them from making nec-
essary investments for future growth. If an invest-
ment goes well, the fund reaps most of the rewards, 
but if the investment does not go well, workers and 
customers of the company, and the community rely-
ing on the company, suffer. 
(6) Regardless of the performance of a private 
investment fund, the managers of the fund often 
make profits through fees, dividends, and other fi-
nancial engineering. Private funds should have a 
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stake in the outcome of their investments, enjoying 
returns if those investments are successful but ab-
sorbing losses if those investments fail. 
(7) When a case is commenced under title 11, 
United States Code, with respect to a portfolio com-
pany, workers not only lose jobs, but also lose wages 
and benefits that are owed, severance pay that has 
been promised, and pensions that have been earned. 
Workers should not be sent to the back of the line 
behind other creditors if, through no fault of those 
workers, an investment fails. 
(8) The performance of private investment 
funds is cloaked in secrecy. Those funds have full 
control over the information that the funds disclose 
to investors, which allows the funds to manufacture 
their own performance metrics and makes it difficult 
for an investor to compare the returns to other in-
vestment options. Funds also increasingly require in-
vestors to waive the fiduciary obligations applicable 
to the funds. Investors should have the information 
and bargaining power to take control over their own 
investments. 
(9) An increasing amount of risky debt is being 
introduced into the market and the quality of that 
debt is deteriorating, raising concerns with regu-
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lators and lawmakers about systemic risk. The insti-
tutions that make and securitize risky loans collect 
large fees and then pass on risk to unwitting inves-
tors. The financial system should not bear all of the 
risk while lenders and securitizers reap the rewards. 
(10) The Federal Government should— 
(A) protect workers, companies, con-
sumers, and investors in the United States; and 
(B) put an end to the practice of looting 
of economically viable companies for the enrich-
ment of private investment fund managers. 
SEC. 3. DEFINITIONS. 
In this Act: 
(1) AFFILIATE.—The term ‘‘affiliate’’ means— 
(A) a person that directly or indirectly 
owns, controls, or holds with power to vote, 20 
percent or more of the outstanding voting secu-
rities of another entity, other than a person 
that holds such securities— 
(i) in a fiduciary or agency capacity 
without sole discretionary power to vote 
such securities; or 
(ii) solely to secure a debt, if such en-
tity has not in fact exercised such power to 
vote; 
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(B) a corporation 20 percent or more of 
whose outstanding voting securities are directly 
or indirectly owned, controlled, or held with 
power to vote, by another entity (referred to in 
this subparagraph as a ‘‘covered entity’’), or by 
an entity that directly or indirectly owns, con-
trols, or holds with power to vote, 20 percent or 
more of the outstanding voting securities of the 
covered entity, other than an entity that holds 
such securities— 
(i) in a fiduciary or agency capacity 
without sole discretionary power to vote 
such securities; or 
(ii) solely to secure a debt, if such en-
tity has not in fact exercised such power to 
vote; 
(C) a person whose business is operated 
under a lease or operating agreement by an-
other entity, or person substantially all of whose 
property is operated under an operating agree-
ment with that other entity; or 
(D) an entity that operates the business or 
substantially all of the property of another enti-
ty under a lease or operating agreement. 
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(2) CAPITAL DISTRIBUTION.—The term ‘‘cap-
ital distribution’’ means— 
(A) a cash or share dividend; 
(B) a share repurchase; 
(C) a share redemption; 
(D) a share buyback; 
(E) a payment of interest or fee on a share 
of stock; and 
(F) any other transaction similar to a 
transaction described in subparagraphs (A) 
through (E). 
(3) CHANGE IN CONTROL.—The term ‘‘change 
in control’’ means a change of economic interest 
with respect to— 
(A) the power to vote more than 50 per 
centum of any class of voting securities of a 
corporation that engages in interstate com-
merce; or 
(B) any lesser per centum of any class of 
voting securities of a corporation that engages 
in interstate commerce that is sufficient to 
make the acquirer of such an interest a person 
that has the ability to direct the actions of that 
corporation. 
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(4) CHANGE IN CONTROL TRANSACTION.—The 
term ‘‘change in control transaction’’ means a trans-
action that effects a change in control. 
(5) COMMISSION.—The term ‘‘Commission’’ 
means the Securities and Exchange Commission. 
(6) CONTROL PERSON.—The term ‘‘control per-
son’’— 
(A) means— 
(i) a person— 
(I) that directly or indirectly 
owns, controls, or holds with power to 
vote, including through coordination 
with other persons, 20 percent or 
more of the outstanding voting inter-
ests of a target firm; or 
(II) that operates the business or 
substantially all of the property of a 
target firm under a lease or operating 
agreement; 
(ii) a corporation, other than a target 
firm, that has 20 percent or more of its 
outstanding voting interests directly or in-
directly owned, controlled, or held with 
power to vote by a person that directly or 
indirectly owns, controls, or holds with 
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power to vote, including through coordina-
tion with other persons, 20 percent or 
more of the outstanding voting interests of 
a target firm; and 
(iii) a person that otherwise has the 
ability to direct the actions of a target 
firm; and 
(B) does not include a person that— 
(i) holds the voting interests of a cor-
poration solely— 
(I) in a fiduciary or agency ca-
pacity 
without 
sole 
discretionary 
power to vote the securities; or 
(II) to secure a debt, if the per-
son has not exercised the power to 
vote; or 
(ii)(I) is a limited partner with respect 
to a person described in subparagraph (A) 
that is a partnership; and 
(II) does not participate in the direc-
tion of the management or policy of a cor-
poration. 
(7) CORPORATION.—The term ‘‘corporation’’ 
means— 
(A) a joint-stock company; 
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(B) a company or partnership association 
organized under a law that makes only the cap-
ital subscribed or callable up to a specified 
amount responsible for the debts of the associa-
tion, including a limited partnership and a lim-
ited liability company; 
(C) a trust; and 
(D) an association having a power or privi-
lege that a private corporation, but not an indi-
vidual or a partnership, possesses. 
(8) HOLDER OF AN ECONOMIC INTEREST.—The 
term ‘‘holder of an economic interest’’— 
(A) means a person that directly or indi-
rectly has an economic interest in a corporation 
or a right to participate in the governance of a 
corporation, without regard to the form or 
source of that interest or right; 
(B) if the economic interest described in 
subparagraph (A) is a security, does not in-
clude— 
(i) an individual who is engaged in 
business as an underwriter of securities 
and who acquires that security through the 
good faith participation of the individual in 
a firm commitment underwriting registered 
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under the Securities Act of 1933 (15 
U.S.C. 77b) until the date that is 40 days 
after the date on which that acquisition oc-
curs; or 
(ii) a member of a national securities 
exchange solely because that member is the 
record holder of that security and, under 
the rules of that exchange— 
(I) may direct the vote of that se-
curity, without instruction, on— 
(aa) other than contested 
matters; or 
(bb) matters that may sub-
stantially affect the rights or 
privileges of the holders of the 
security to be voted; and 
(II) is otherwise precluded from 
voting without instruction; and 
(C) does not include— 
(i) a person that holds an economic 
interest solely to secure a debt if that per-
son does not exercise any voting other gov-
ernance rights with respect to the interest; 
or 
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change that is registered as a national securities ex-
change under section 6 of the Securities Exchange 
Act of 1934 (15 U.S.C. 78f). 
(13) PRIVATE FUND.—Except as otherwise ex-
pressly provided, the term ‘‘private fund’’— 
(A) means a company or partnership 
that— 
(i) would be considered an investment 
company under section 3 of the Investment 
Company Act of 1940 (15 U.S.C. 80a–3) 
but for the application of paragraph (1) or 
(7) of subsection (c) of such section 3; 
(ii) directly or through an affiliate, 
acts as a control person; and 
(iii) is not a venture capital fund, as 
defined in section 275.203(l)–1 of title 17, 
Code of Federal Regulations, as in effect 
on the date of enactment of this Act; and 
(B) does not include an institution selected 
under section 107 of the Community Develop-
ment Banking and Financial Institutions Act of 
1994 (12 U.S.C. 4706). 
(14) RELATIVE.—The term ‘‘relative’’ has the 
meaning given the term in section 101 of title 11, 
United States Code. 
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(15) TARGET FIRM.—The term ‘‘target firm’’ 
means a corporation that is acquired in a change in 
control transaction. 
TITLE I—CORPORATE 
RESPONSIBILITY 
SEC. 101. JOINT AND SEVERAL LIABILITY FOR CONTROL-
LING PRIVATE FUNDS. 
(a) IN GENERAL.—Notwithstanding any other provi-
sion of law, or the terms of any contract or agreement, 
a private fund shall be jointly and severally liable for all 
liabilities of each target firm with respect to the private 
fund, and any affiliate of such a target firm, including— 
(1) any debt incurred by the target firm or an 
affiliate of the target firm, including as part of the 
acquisition of the target firm by the private fund; 
(2) any Federal or State civil monetary penalty, 
or obligation under a settlement or consent order 
with a Federal or State governmental agency or in-
strumentality, including a consumer restitution obli-
gation, for which the target firm, or an affiliate of 
the target firm, is liable; 
(3) any liability resulting from a violation of 
section 3 of the Worker Adjustment and Retraining 
Notification Act (29 U.S.C. 2102) by the target firm 
or an affiliate of the target firm; 
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(4) any withdrawal liability determined under 
part 1 of subtitle E of title IV of the Employee Re-
tirement Income Security Act of 1974 (29 U.S.C. 
1381 et seq.) that is incurred by the target firm or 
an affiliate of the target firm; and 
(5) any claim for unfunded benefit liabilities 
owed to the Pension Benefit Guaranty Corporation 
under subtitle D of title IV of the Employee Retire-
ment Income Security Act of 1974 (29 U.S.C. 1361 
et seq.) with respect to the termination of a pension 
plan sponsored by the target firm or an affiliate of 
the target firm. 
(b) RULE OF CONSTRUCTION.—Nothing in this sec-
tion may be construed to diminish existing, as of the date 
of this Act, controlled group liability under the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1001 
et seq.). 
SEC. 102. JOINT AND SEVERAL LIABILITY FOR HOLDERS OF 
ECONOMIC INTERESTS IN CONTROLLING PRI-
VATE FUNDS. 
(a) IN GENERAL.—Notwithstanding any other provi-
sion of law, or the terms of any contract or agreement, 
a holder of an economic interest in a private fund shall 
be jointly and severally liable for all liabilities of each tar-
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get firm with respect to the private fund, and any affiliate 
of such a target firm, including— 
(1) any debt incurred by the target firm or an 
affiliate of the target firm, including as part of the 
acquisition of the target firm by the private fund; 
(2) any Federal or State civil monetary penalty, 
or obligation under a settlement or consent order 
with a Federal or State governmental agency or in-
strumentality, including a consumer restitution obli-
gation, for which the target firm, or an affiliate of 
the target firm, is liable; 
(3) any liability resulting from a violation of 
section 3 of the Worker Adjustment and Retraining 
Notification Act (29 U.S.C. 2102) by the target firm 
or an affiliate of the target firm; 
(4) any withdrawal liability determined under 
part 1 of subtitle E of title IV of the Employee Re-
tirement Income Security Act of 1974 (29 U.S.C. 
1381 et seq.) that is incurred by the target firm or 
an affiliate of the target firm; and 
(5) any claim for unfunded benefit liabilities 
owed to the Pension Benefit Guaranty Corporation 
under subtitle D of title IV of the Employee Retire-
ment Income Security Act of 1974 (29 U.S.C. 1361 
et seq.) with respect to the termination of a pension 
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plan sponsored by the target firm or an affiliate of 
the target firm. 
(b) RULE OF CONSTRUCTION.—Nothing in this sec-
tion may be construed to diminish existing, as of the date 
of this Act, controlled group liability under the Employee 
Retirement Income Security Act of 1974 (29 U.S.C. 1001 
et seq.). 
SEC. 103. INDEMNIFICATION VOID AS AGAINST PUBLIC 
POLICY. 
It shall be void as against public policy for a target 
firm, or an affiliate of a target firm, to indemnify a private 
fund that is a control person with respect to the target 
firm, or any affiliate of the target firm, with respect to 
the liabilities of the fund or the affiliate, as applicable, 
under sections 101 and 102. 
TITLE II—ANTI-LOOTING 
SEC. 201. LIMITATIONS ON POST-ACQUISITION DIVIDENDS, 
DISTRIBUTIONS, 
REDEMPTIONS, 
AND 
BUYBACKS. 
(a) IN GENERAL.—No target firm may, during the 
2-year period beginning on the closing date of a change 
in control transaction that results in control of the target 
firm by a private fund— 
(1) make a capital distribution or similarly re-
duce the equity capital of the target firm; or 
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(2) incur an obligation that commits the target 
firm to making a capital distribution or a similar re-
duction of the equity capital of the target firm after 
the end of that 2-year period. 
(b) VOID.—Any transfer made or obligation incurred 
by a target firm or an affiliate with respect to a target 
firm in violation of subsection (a) shall be void. 
(c) JOINT AND SEVERAL LIABILITY FOR AIDERS AND 
ABETTORS.—Any control person that is a private fund, 
any holder of an economic interest in a control person that 
is a private fund, or any affiliate of a target firm that 
aids, abets, facilitates, supports, or instructs any violation 
of subsection (a) shall be jointly and severally liable under 
this subsection for any transfer made or obligation in-
curred, including for reasonable attorney’s fees and costs 
awarded to a plaintiff under subsection (d)(2). 
(d) CAUSE OF ACTION.— 
(1) IN GENERAL.—Any employee or creditor, or 
representative of an employee or creditor, of a target 
firm that is a debtor under title 11, United States 
Code, or of an affiliate of a target firm that is such 
a debtor, may bring an action in an appropriate dis-
trict court of the United States against the direct or 
indirect transferee or obligee or beneficiary of the 
transfer or obligation to void the transfer or obliga-
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tion and recover any transferred property for the 
target firm. 
(2) AWARD.—In a successful action to recover 
a transfer, the court shall also award the plaintiff 
reasonable attorney’s fees and costs. 
SEC. 202. PREVENTION OF FRAUDULENT TRANSFERS. 
(a) LIMITATION ON SAFE HARBORS.—Section 546(e) 
of title 11, United States Code, is amended by inserting 
after ‘‘548(b) of this title,’’ the following: ‘‘and except in 
the case of a transfer made in connection with a change 
in control transaction, as defined in section 3 of the Stop 
Wall Street Looting Act, or during the protected period, 
as defined in section 548(f) of this title,’’. 
(b) PRESUMPTION OF INSOLVENCY IN TRANSFERS 
UNDERTAKEN IN CONNECTION WITH CHANGE IN CON-
TROL TRANSACTIONS.—Section 548 of title 11, United 
States Code, is amended by adding at the end the fol-
lowing: 
‘‘(f)(1) In this subsection— 
‘‘(A) the terms ‘change in control transaction’, 
‘control person’, and ‘target firm’ have the meanings 
given those terms in section 3 of the Stop Wall 
Street Looting Act; and 
‘‘(B) the term ‘protected period’ means the 
shorter of— 
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‘‘(i) the 8-year period beginning on the 
date on which a change in control transaction 
closed; or 
‘‘(ii) the period beginning on the date on 
which a change in control transaction closed 
and ending on the earliest subsequent date on 
which a public offering of a controlling share of 
the common equity securities of the target firm 
occurs. 
‘‘(2) For purposes of this section, the debtor is pre-
sumed to have made a transfer or incurred an obligation 
described in subparagraphs (A) and (B) of subsection 
(a)(1) if— 
‘‘(A) the transfer is made to or obligation is in-
curred by a target firm or an affiliate in connection 
with a change in control transaction; or 
‘‘(B) the transfer is made to a target firm or 
an affiliate by, or obligation is incurred by a target 
firm or an affiliate from, a control person, an affil-
iate, or an insider during a protected period. 
‘‘(3) For the purposes of this section, a court shall, 
in analyzing related transactions, link together as a single 
transaction any interrelated yet formally distinct steps in 
an integrated transaction (commonly known as the ‘step 
transaction doctrine’).’’. 
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(c) STATUTE OF LIMITATIONS.—Section 3306(b) of 
title 28, United States Code, is amended— 
(1) in paragraph (2), by striking ‘‘or’’ at the 
end; 
(2) in paragraph (3), by striking the period at 
the end and inserting ‘‘; or’’; and 
(3) by adding at the end the following: 
‘‘(4) within 8 years after the transfer was made 
or the obligation was incurred, if the transfer was 
made or the obligation was incurred— 
‘‘(A) in connection with a change in con-
trol transaction, as defined in section 3 of the 
Stop Wall Street Looting Act; or 
‘‘(B) during a protected period, as defined 
in section 548(f) of title 11.’’. 
SEC. 203. SURTAX ON CERTAIN AMOUNTS RECEIVED BY IN-
VESTMENT FIRMS FROM CONTROLLED TAR-
GET FIRMS. 
(a) IMPOSITION OF TAX.—Subchapter A of chapter 
1 of the Internal Revenue Code of 1986 is amended by 
adding at the end the following new part: 
‘‘PART VIII—SURTAX ON CERTAIN AMOUNTS 
RECEIVED BY INVESTMENT FIRMS 
‘‘Sec. 59B. Surtax on certain amounts received by investment firms from con-
trolled target firms. 
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‘‘SEC. 59B. SURTAX ON CERTAIN AMOUNTS RECEIVED BY 
INVESTMENT 
FIRMS 
FROM 
CONTROLLED 
TARGET FIRMS. 
‘‘(a) IMPOSITION OF TAX.— 
‘‘(1) IN GENERAL.—If one or more applicable 
payments are included in the gross income of a tax-
payer for any taxable year, then there is hereby im-
posed on the taxpayer for the taxable year a tax 
equal to the applicable percentage of the aggregate 
amount of such payments. Such tax shall be in addi-
tion to any other tax imposed by this subtitle. 
‘‘(2) APPLICABLE PERCENTAGE.—For purposes 
of this subsection, the term ‘applicable percentage’ 
means 100 percent, minus the highest rate of tax 
under section 1 or 11 (whichever is applicable) for 
the taxable year. 
‘‘(b) APPLICABLE PAYMENT.—For purposes of this 
section— 
‘‘(1) IN GENERAL.—The term ‘applicable pay-
ment’ means any amount paid or incurred by an ap-
plicable entity (or any person related within the 
meaning of section 267(b) or 707(b) to such entity) 
to any other person which, at the time such amount 
is paid or incurred, is an applicable controlling enti-
ty. An amount shall be treated as an applicable pay-
ment without regard to whether it is paid or in-
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curred to the taxpayer including it in gross income 
and to which subsection (a) applies. 
‘‘(2) EXCEPTIONS.—Such term shall not in-
clude any of the following: 
‘‘(A) INTEREST.—Any amount paid or in-
curred which is treated as interest for purposes 
of this chapter. 
‘‘(B) DISTRIBUTIONS OF PROPERTY WITH 
RESPECT TO STOCK.—Any distribution of prop-
erty (as defined in section 317(a)) to which sec-
tion 301(a) applies. 
‘‘(c) DEFINITIONS RELATING
TO ENTITIES.—For 
purposes of this section— 
‘‘(1) APPLICABLE ENTITY.—The term ‘applica-
ble entity’ means any person— 
‘‘(A) which is engaged in the active con-
duct of a trade or business, and 
‘‘(B) with respect to which any other per-
son conducts activities in connection with an 
applicable trade or business. 
‘‘(2) APPLICABLE CONTROLLING ENTITY.—The 
term ‘applicable controlling entity’ means, with re-
spect to any applicable entity, any person— 
‘‘(A) which is engaged in an applicable 
trade or business some or all of the activities of 
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which are conducted in connection with the ap-
plicable entity, and 
‘‘(B) which controls (or is related within 
the meaning of section 267(b) or 707(b) to a 
person which controls) the applicable entity. 
‘‘(3) APPLICABLE TRADE OR BUSINESS.—The 
term ‘applicable trade or business’ means any activ-
ity conducted on a regular, continuous, and substan-
tial basis which, regardless of whether the activity is 
conducted in one or more entities, consists, in whole 
or in part, of— 
‘‘(A) raising or returning capital, and 
‘‘(B) either— 
‘‘(i) investing in or disposing of speci-
fied assets (or identifying specified assets 
for such investing or disposition), or 
‘‘(ii) developing specified assets. 
‘‘(4) SPECIFIED
ASSET.—The term ‘specified 
asset’ means— 
‘‘(A) securities (as defined in section 
475(c)(2) but without regard to the phrase 
‘widely held or publicly traded’ in subparagraph 
(B) thereof and without regard to the last sen-
tence thereof), and 
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‘‘(B) real estate held for rental or invest-
ment. 
‘‘(d) RULES AND DEFINITIONS RELATING TO OWN-
ERSHIP ATTRIBUTION AND CONTROL.—For purposes of 
this section— 
‘‘(1) CONSTRUCTIVE OWNERSHIP RULES USED 
IN DETERMINING RELATED PARTY.—In determining 
whether persons are related within the meaning of 
section 267(b) or 707(b), the constructive ownership 
rules of section 318 shall apply in lieu of the con-
structive ownership rules which would otherwise 
apply, except that in applying such rules the term 
‘stock’ shall include capital, profits, or other bene-
ficial interests in persons other than corporations. 
‘‘(2) CONTROL.— 
‘‘(A) CORPORATIONS.—In the case of a 
corporation, the term ‘control’ has the meaning 
given such term by section 304(c) (without re-
gard to paragraph (3)(B) thereof). 
‘‘(B) OTHER ENTITIES.—In the case of a 
person other than a corporation, such term 
means the ownership, directly or indirectly, of 
at least 50 percent of the capital, profits, or 
other beneficial interests in the person. 
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‘‘(e) REGULATIONS.—The Secretary shall prescribe 
such regulations or other guidance as may be necessary 
or appropriate to carry out the provisions of this section, 
including regulations— 
‘‘(1) providing for such adjustments to the ap-
plication of this section as are necessary to prevent 
the avoidance of the purposes of this section, includ-
ing through the use of unrelated persons, or conduit 
transactions, and 
‘‘(2) modifying the constructive ownership rules 
under section 318 to the extent necessary to apply 
such rules to capital, profits, or other beneficial in-
terests as well as stock.’’. 
(b) DISALLOWANCE OF CREDITS AGAINST TAX.— 
Subparagraph (B) of section 26(b)(2) of the Internal Rev-
enue Code of 1986 is amended by inserting ‘‘or section 
59B (relating to surtax on certain amounts received by 
investment firms from controlled target firms)’’ after 
‘‘anti-abuse tax)’’. 
(c) CONFORMING AMENDMENTS.— 
(1) The table of parts for subchapter A of chap-
ter 1 of the Internal Revenue Code of 1986 is 
amended by adding after the item relating to part 
VII the following new item: 
‘‘PART VIII. SURTAX ON CERTAIN AMOUNTS RECEIVED BY INVESTMENT 
FIRMS’’. 
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(2) Section 871(b)(1) of such Code is amended 
by inserting ‘‘and shall be taxable as provided in sec-
tion 59B on applicable payments included in gross 
income which are effectively connected with the con-
duct of a trade or business within the United 
States’’ after ‘‘United States’’. 
(3) Section 882(a)(1) of such Code is amended 
by inserting ‘‘and shall be taxable as provided in sec-
tion 59B on applicable payments included in gross 
income which are effectively connected with the con-
duct of a trade or business within the United 
States’’ after ‘‘United States’’. 
(4) Subparagraph (A) of section 6425(c)(1) of 
such Code is amended by striking ‘‘plus’’ at the end 
of clause (i), by striking ‘‘over’’ at the end of clause 
(ii) and inserting ‘‘plus’’ and by adding at the end 
the following new clause: 
‘‘(iii) the tax imposed by section 59B, 
over’’. 
(5) Paragraph (1) of section 6654(f) of such 
Code is amended by striking ‘‘tax’’ each place it ap-
pears and inserting ‘‘taxes’’. 
(6) Subparagraph (A) of section 6655(g)(1) of 
such Code is amended by striking ‘‘plus’’ at the end 
of clause (ii), by redesignating clause (iii) as clause 
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(iv), and by inserting after clause (ii) the following 
new clause: 
‘‘(iii) the tax imposed by section 59B, 
plus’’. 
(d) EFFECTIVE DATE.—The amendments made by 
this section shall apply to applicable payments (as defined 
in section 59B(b) of the Internal Revenue Code of 1986, 
as added by this section) paid or accrued on or after the 
date of enactment of this Act. 
SEC. 204. LIMITATION ON DEDUCTION FOR BUSINESS IN-
TEREST OF CERTAIN BUSINESSES OWNED BY 
PRIVATE FUNDS. 
(a) IN GENERAL.—Section 163(j) of the Internal 
Revenue Code of 1986 is amended by redesignating para-
graph (10) as paragraph (11) and by inserting after para-
graph (9) the following new paragraph: 
‘‘(10) MODIFICATION OF LIMITATION FOR CER-
TAIN BUSINESSES OWNED BY PRIVATE FIRMS.— 
‘‘(A) IN GENERAL.—In the case of a tax-
payer which is an applicable entity controlled by 
an applicable controlling entity (or any person 
related within the meaning of section 267(b) or 
707(b) to such entity) at any time during the 
taxable year— 
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‘‘(i) if the ratio of debt to equity of 
the taxpayer as of the close of the taxable 
year (or on any other day during the tax-
able year as the Secretary may prescribe in 
regulations) exceeds 1, then paragraph (1) 
shall be applied by substituting ‘lll 
percent’ for ‘30 percent’, and 
‘‘(ii) in the case of the election under 
paragraph (7)(B) to treat any trade or 
business of the taxpayer as an electing real 
property trade or business— 
‘‘(I) the taxpayer may not make 
any such election during such taxable 
year, and 
‘‘(II) any such election of the 
taxpayer in effect as of the close of 
the taxable year preceding such tax-
able year with respect to a trade or 
business shall be revoked, effective for 
such taxable year and all succeeding 
taxable years. 
‘‘(B) RATIO
OF
DEBT
TO
EQUITY.—For 
purposes of this paragraph, the term ‘ratio of 
debt to equity’ means, with respect to any tax-
payer, the ratio which the total indebtedness of 
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the taxpayer bears to the sum of the taxpayer’s 
money and all other assets reduced (but not 
below zero) by such total indebtedness. For 
purposes of the preceding sentence— 
‘‘(i) the amount taken into account 
with respect to any asset shall be the ad-
justed basis thereof for purposes of deter-
mining gain, 
‘‘(ii) the amount taken into account 
with respect to any indebtedness with 
original issue discount shall be its issue 
price plus the portion of the original issue 
discount previously accrued as determined 
under the rules of section 1272 (deter-
mined without regard to subsection (a)(7) 
or (b)(4) thereof), and 
‘‘(iii) there shall be such other adjust-
ments as the Secretary may by regulations 
prescribe. 
‘‘(C) COORDINATION WITH DEPRECIATION 
RULES.—If the alternative depreciation system 
under section 168(g) applies to property by rea-
son of an election under paragraph (7)(B) 
which 
is 
revoked 
under 
subparagraph 
(A)(ii)(II), then the depreciation deduction 
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under section 167(a) with respect to such prop-
erty for the taxable year of revocation and all 
succeeding taxable years shall be determined 
under section 168 in the same manner as if 
such revocation were a change in use of the 
property under section 168(i)(5) and the regu-
lations thereunder. 
‘‘(D) DEFINITIONS AND RULES.—For pur-
poses of this paragraph— 
‘‘(i) any term used in this paragraph 
which is also used in section 59B shall 
have the same meaning as when used in 
such section, and 
‘‘(ii) the constructive ownership rules 
of section 318 shall apply in the same 
manner as such rules apply for purposes of 
section 59B.’’. 
(b) EFFECTIVE DATES.— 
(1) IN GENERAL.—The amendments made by 
this section shall apply to taxable years beginning on 
or after the date of enactment of this Act. 
(2) REVOCATION
OF
ELECTIONS.—Subpara-
graphs (A)(ii)(II) and (C) of section 163(j)(10) of 
the Internal Revenue Code of 1986, as added by this 
section, shall apply to taxable years beginning on or 
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after the date of enactment of this Act, with respect 
to elections under section 163(j)(7)(B) of such Code 
made before, on, or after such date. 
TITLE III—PROTECTING WORK-
ERS WHEN COMPANIES GO 
BANKRUPT 
SEC. 301. INCREASED PRIORITY FOR WAGES. 
Section 507(a) of title 11, United States Code, is 
amended— 
(1) in paragraph (4)— 
(A) by redesignating subparagraphs (A) 
and (B) as clauses (i) and (ii), respectively; 
(B) in the matter preceding clause (i), as 
so redesignated, by inserting ‘‘(A)’’ before 
‘‘Fourth’’; 
(C) in subparagraph (A), as so designated, 
in the matter preceding clause (i), as so redes-
ignated— 
(i) by striking ‘‘$10,000’’ and insert-
ing ‘‘$20,000’’; 
(ii) by striking ‘‘within 180 days’’; 
and 
(iii) by striking ‘‘or the date of the 
cessation of the debtor’s business, which-
ever occurs first’’; and 
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(D) by adding at the end the following: 
‘‘(B) Severance pay described in subparagraph 
(A)(i) shall be deemed earned in full upon the layoff 
or termination of employment of the individual to 
whom the severance pay is owed.’’; and 
(2) in paragraph (5)— 
(A) in subparagraph (A)— 
(i) by striking ‘‘within 180 days’’; and 
(ii) by striking ‘‘or the date of the 
cessation of the debtor’s business, which-
ever occurs first’’; and 
(B) by striking subparagraph (B) and in-
serting the following: 
‘‘(B) for each such plan, to the extent of 
the number of employees covered by each such 
plan multiplied by $20,000.’’. 
SEC. 302. PRIORITY FOR SEVERANCE PAY AND CONTRIBU-
TIONS TO EMPLOYEE BENEFIT PLANS. 
Section 503(b) of title 11, United States Code, is 
amended— 
(1) in paragraph (8)(B), by striking ‘‘and’’ at 
the end; 
(2) in paragraph (9), by striking the period and 
inserting a semicolon; and 
(3) by adding at the end the following: 
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‘‘(10) severance pay owed to employees of the 
debtor (other than to an insider of the debtor or a 
senior executive officer of the debtor), under a plan, 
program, or policy generally applicable to employees 
of the debtor (but not under an individual contract 
of employment), or owed pursuant to a collective 
bargaining agreement, for layoff or termination on 
or after the date of the filing of the petition, which 
pay shall be deemed earned in full upon such layoff 
or termination of employment; and 
‘‘(11) any contribution due on or after the date 
of the filing of the petition under an employee ben-
efit plan.’’. 
SEC. 303. PRIORITY FOR VIOLATIONS OF FEDERAL AND 
STATE LAWS. 
(a) ALLOWANCE OF ADMINISTRATIVE EXPENSES IN 
BANKRUPTCY CASES.—Section 503(b)(1)(A)(ii) of title 
11, United States Code, is amended by inserting after 
‘‘(ii)’’ the following: ‘‘any back pay, civil penalty, or dam-
ages for a violation of any Federal or State labor and em-
ployment law, including the Worker Adjustment and Re-
training Notification Act (29 U.S.C. 2101 et seq.) and any 
comparable State law, and’’. 
(b) ADMINISTRATION AND ENFORCEMENT OF WORK-
ER ADJUSTMENT AND RETRAINING NOTIFICATION RE-
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QUIREMENTS.—Section 5(a)(1) of the Worker Adjustment 
and Retraining Notification Act (29 U.S.C. 2104(a)(1)) 
is amended, in the matter following subparagraph (B)— 
(1) by inserting ‘‘which for purposes of this 
sentence shall consist of the days, in the notification 
period, that are or that follow the date of the pro-
hibited closing or layoff under this Act,’’ after ‘‘pe-
riod of the violation,’’; and 
(2) by inserting ‘‘calendar’’ after ‘‘60’’. 
SEC. 304. LIMITATION ON EXECUTIVE COMPENSATION EN-
HANCEMENTS. 
Section 503(c) of title 11, United States Code, is 
amended— 
(1) in the matter preceding paragraph (1), by 
inserting ‘‘and subject to section 363(b)(3),’’ after 
‘‘Notwithstanding subsection (b),’’; 
(2) in paragraph (1), in the matter preceding 
subparagraph (A)— 
(A) by inserting ‘‘, a senior executive offi-
cer of the debtor, or any of the 20 next most 
highly compensated employees of the debtor, de-
partment or division managers of the debtor, or 
consultants providing services to the debtor (re-
gardless of whether the executive officer, em-
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ployee, manager, or consultant is an insider)’’ 
after ‘‘insider of the debtor’’; 
(B) by inserting ‘‘or for the payment of 
performance or incentive compensation, a bonus 
of any kind, or any other financial return de-
signed to replace or enhance incentive, stock, or 
other compensation in effect before the date of 
the commencement of the case,’’ after ‘‘remain 
with the debtor’s business,’’; and 
(C) by inserting ‘‘clear and convincing’’ be-
fore ‘‘evidence in the record’’; 
(3) in paragraph (2), in the matter preceding 
subparagraph (A), by inserting ‘‘, a senior executive 
officer of the debtor, or any of the 20 next most 
highly compensated employees of the debtor, depart-
ment or division managers of the debtor, or consult-
ants providing services to the debtor (regardless of 
whether the executive officer, employee, manager, or 
consultant is an insider)’’ after ‘‘an insider of the 
debtor’’; and 
(4) by striking paragraph (3) and inserting the 
following: 
‘‘(3) any other transfer or obligation to or for 
the benefit of an insider of the debtor, a senior exec-
utive officer of the debtor, or any of the 20 next 
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‘‘(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-
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— 
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‘‘(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-
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-
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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— 
‘‘(i) reasonable in comparison to compensa-
tion paid to individuals holding comparable po-
sitions at comparable companies in the same in-
dustry; and 
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‘‘(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 ben-
efit plan on or after the date of the commencement of the 
case, such unpaid obligations shall be— 
‘‘(A) deemed— 
‘‘(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 
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‘‘(B) recovered by the trustee for payment to 
the employees or the employee benefit plan, as appli-
cable, even if the trustee, or a predecessor or suc-
cessor in interest, has otherwise waived the provi-
sions 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-
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). 
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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 
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
AND
DIVISIONS.—In the case of a 
taxpayer which satisfies requirements similar to 
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