Title: Creating Tech Startup Jobs Act
Policy area: Taxation

Summary:
Creating Tech Startup Jobs Act
This bill allows several tax credits for a qualified research intensive small business concern, which is a small business that is not over 10 years old, has fewer than 100 employees, and spends at least 30% of its gross expenditures on research or experimental expenditures.
For a qualified research intensive small business concern, the bill allows
The bill also (1) sets forth a special rule for the inclusion in gross income of partnership interests transferred in connection with the performance of services, and (2) modifies the tax treatment of partners who provide investment management services to partnerships.

[Congressional Bills 115th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5463 Introduced in House (IH)]

<DOC>






115th CONGRESS
  2d Session
                                H. R. 5463

 To amend the Internal Revenue Code of 1986 to allow a credit against 
income tax for equity investments in research intensive small business 
 concerns, to provide for the proper tax treatment of personal service 
      income earned in pass-thru entities, and for other purposes.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                             April 10, 2018

  Ms. Rosen introduced the following bill; which was referred to the 
                      Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
 To amend the Internal Revenue Code of 1986 to allow a credit against 
income tax for equity investments in research intensive small business 
 concerns, to provide for the proper tax treatment of personal service 
      income earned in pass-thru entities, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE; ETC.

    (a) Short Title.--This Act may be cited as the ``Creating Tech 
Startup Jobs Act''.
    (b) Amendment of 1986 Code.--Except as otherwise expressly 
provided, whenever in this Act an amendment or repeal is expressed in 
terms of an amendment to, or repeal of, a section or other provision, 
the reference shall be considered to be made to a section or other 
provision of the Internal Revenue Code of 1986.
    (c) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; etc.
Sec. 2. Credit for investments in small technology innovation 
                            companies.
Sec. 3. Research employment tax credit.
Sec. 4. Research expenditure tax credit.
Sec. 5. Partnership interests transferred in connection with 
                            performance of services.
Sec. 6. Special rules for partners providing investment management 
                            services to partnerships.

SEC. 2. CREDIT FOR INVESTMENTS IN SMALL TECHNOLOGY INNOVATION 
              COMPANIES.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1 
is amended by adding at the end the following new section:

``SEC. 45T. RESEARCH INTENSIVE INVESTMENT TAX CREDIT.

    ``(a) Allowance of Credit.--For purposes of section 38, the 
research intensive investment tax credit determined under this section 
for the taxable year is an amount equal to 20 percent of the amount 
paid by the taxpayer during such year to acquire a qualified equity 
investment in a qualified research intensive small business concern.
    ``(b) Maximum Credit.--The credit determined under this section 
with respect to any taxpayer for any taxable year shall not exceed 
$100,000.
    ``(c) Definitions.--For purposes of this section--
            ``(1) Qualified equity investment.--
                    ``(A) In general.--The term `qualified equity 
                investment' means any equity investment in a qualified 
                research intensive small business concern if such 
                investment is acquired by the taxpayer at its original 
                issue (directly or through an underwriter) solely in 
                exchange for cash.
                    ``(B) Equity investment.--The term `equity 
                investment' means--
                            ``(i) any stock (other than nonqualified 
                        preferred stock as defined in section 
                        351(g)(2)) in an entity which is a corporation, 
                        and
                            ``(ii) any capital interest in an entity 
                        which is a partnership.
                    ``(C) Redemptions.--A rule similar to the rule of 
                section 1202(c)(3) shall apply for purposes of this 
                subsection.
            ``(2) Qualified research intensive small business 
        concern.--The term `qualified research intensive small business 
        concern' means, with respect to any taxable year, any small 
        business concern (as defined in section 3 of the Small Business 
        Act) if--
                    ``(A) such taxable year begins not later than 10 
                years after the date on which such entity is 
                established,
                    ``(B) such entity employs an average of fewer than 
                100 employees on business days during such year, and
                    ``(C) at least 30 percent of the gross expenditures 
                of such entity for such year are research or 
                experimental expenditures under section 174.
    ``(d) Certain Taxpayers Not Eligible.--No credit shall be 
determined under this section for any equity investment in any 
qualified research intensive small business concern made by any 
individual who, at the time of the investment, is--
            ``(1) an employee of such concern, or
            ``(2) a member of the family (within the meaning of section 
        267(c)(4)) of an employee of such concern.
    ``(e) Basis Reduction.--The basis of any qualified equity 
investment shall be reduced by the amount of any credit determined 
under this section with respect to such investment. This subsection 
shall not apply for purposes of sections 1202, 1400B, and 1400F.
    ``(f) Regulations.--The Secretary shall prescribe such regulations 
as may be appropriate to carry out this section, including 
regulations--
            ``(1) which prevent the abuse of the purposes of this 
        section,
            ``(2) which impose appropriate reporting requirements, and
            ``(3) which apply the provisions of this section to newly 
        formed entities.''.
    (b) Credit Made Part of General Business Credit.--Subsection (b) of 
section 38 (relating to current year business credit) is amended by 
striking ``plus'' at the end of paragraph (36), by striking the period 
at the end of paragraph (37) and inserting ``, plus'', and by adding at 
the end the following new paragraph:
            ``(38) the research intensive investment tax credit 
        determined under section 45T.''.
    (c) Clerical Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1 is amended by adding at the end 
the following new item:

``Sec. 45T. Research intensive investment tax credit.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to investments made after December 31, 2018, in taxable years 
ending after such date.

SEC. 3. RESEARCH EMPLOYMENT TAX CREDIT.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1, 
as amended by the preceding provisions of this Act, is amended by 
adding at the end the following new section:

``SEC. 45U. RESEARCH EMPLOYMENT TAX CREDIT.

    ``(a) Allowance of Credit.--For purposes of section 38, in the case 
of a qualified research intensive small business concern, the research 
employment tax credit determined under this section for the taxable 
year is an amount equal to 5 percent of the qualified first-year 
research wages paid or incurred by such concern to full-time research 
employees during such year.
    ``(b) Dollar Limitations.--
            ``(1) Per employee limitation.--The credit determined under 
        subsection (a) with respect to any employee for any taxable 
        year shall not exceed $2,500 (reduced by the amount of any 
        credit determined under subsection (a) with respect to such 
        employee for the previous taxable year).
            ``(2) Aggregate lifetime employer limitation.--The credit 
        determined under subsection (a) with respect to any taxpayer 
        for any taxable year shall not exceed--
                    ``(A) $25,000, reduced by
                    ``(B) the taxpayer's (and any predecessor's) 
                aggregate credits determined under this section for all 
                prior taxable years.
    ``(c) Definitions.--For purposes of this section--
            ``(1) Qualified research intensive small business 
        concern.--The term `qualified research intensive small business 
        concern' has the meaning given such term under section 45T.
            ``(2) Qualified first-year research wages.--The term 
        `qualified first-year research wages' means, with respect to 
        any full-time research employee, the wages paid or incurred by 
        the taxpayer to such employee during the 1-year period 
        beginning with the day such employee begins work for the 
        employer.
            ``(3) Full-time research employee.--The term `full-time 
        research employee' means any employee for any taxable year if--
                    ``(A) such employee is employed an average of 35 or 
                more hours per week during such taxable year (or the 
                portion of such taxable year for which such employee is 
                employed by the employer), and
                    ``(B) a significant portion of the wages paid or 
                incurred by the taxpayer with respect to such employee 
                during the taxable year are research and experimental 
                expenditures under section 174.
            ``(4) Wages.--The term `wages' has the meaning given such 
        term under section 3306(b) determined without regard to any 
        dollar limitation contained therein.
    ``(d) Certain Individuals Ineligible.--Rules similar to the rules 
of paragraphs (1) and (2) of section 51(i) shall apply for purposes of 
this section except that the rule of section 51(i)(2) shall not apply 
for purposes of this section with respect to any individual if the 
hiring date of such individual is 6 months or more after the last 
preceding date with respect to which such individual was employed by 
the taxpayer.''.
    (b) Credit Made Part of General Business Credit.--Subsection (b) of 
section 38, as amended by the preceding provisions of this Act, is 
amended by striking ``plus'' at the end of paragraph (37), by striking 
the period at the end of paragraph (38) and inserting ``, plus'', and 
by adding at the end the following new paragraph:
            ``(39) the research employment tax credit determined under 
        section 45U.''.
    (c) Clerical Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1, as amended by the preceding 
provisions of this Act, is amended by adding at the end the following 
new item:

``Sec. 45U. Research employment tax credit.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to individuals who begin work for the employer after December 31, 
2018, in taxable years ending after such date.

SEC. 4. RESEARCH EXPENDITURE TAX CREDIT.

    (a) In General.--Subpart D of part IV of subchapter A of chapter 1, 
as amended by the preceding provisions of this Act, is amended by 
adding at the end the following new section:

``SEC. 45V. RESEARCH EXPENDITURE CREDIT.

    ``(a) Allowance of Credit.--For purposes of section 38, in the case 
of a qualified research intensive small business concern, the research 
expenditure tax credit determined under this section for the taxable 
year is an amount equal to 20 percent of so much of the qualified 
research expenditures of such concern for such taxable year as--
            ``(1) exceeds 30 percent of the gross expenditures paid or 
        incurred by such concern during such taxable year, and
            ``(2) does not exceed 40 percent of such gross 
        expenditures.
    ``(b) Definitions.--For purposes of this section--
            ``(1) Qualified research intensive small business 
        concern.--The term `qualified research intensive small business 
        concern' has the meaning given such term under section 45T.
            ``(2) Qualified research expenditures.--The term `qualified 
        research expenditures' means research or experimental 
        expenditures with the meaning of section 174.''.
    (b) Credit Made Part of General Business Credit.--Subsection (b) of 
section 38, as amended by the preceding provisions of this Act, is 
amended by striking ``plus'' at the end of paragraph (38), by striking 
the period at the end of paragraph (39) and inserting ``, plus'', and 
by adding at the end the following new paragraph:
            ``(40) the research expenditure tax credit determined under 
        section 45V.''.
    (c) Clerical Amendment.--The table of sections for subpart D of 
part IV of subchapter A of chapter 1, as amended by the preceding 
provisions of this Act, is amended by adding at the end the following 
new item:

``Sec. 45V. Research expenditure tax credit.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2018.

SEC. 5. PARTNERSHIP INTERESTS TRANSFERRED IN CONNECTION WITH 
              PERFORMANCE OF SERVICES.

    (a) Modification to Election To Include Partnership Interest in 
Gross Income in Year of Transfer.--Subsection (c) of section 83 is 
amended by redesignating paragraph (4) as paragraph (5) and by 
inserting 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 connection with the 
                provision of services to (or for the benefit of) such 
                partnership--
                            ``(i) the fair market value of such 
                        interest shall be treated for purposes of this 
                        section as being equal to the amount of the 
                        distribution which the partner would receive 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 partnership) 
                        to its partners in liquidation of the 
                        partnership, and
                            ``(ii) the person receiving such interest 
                        shall be treated as having made the election 
                        under subsection (b)(1) unless such person 
                        makes an election under this paragraph to have 
                        such subsection not apply.
                    ``(B) Election.--The election under subparagraph 
                (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 transferred after the date of the 
enactment of this Act.

SEC. 6. SPECIAL RULES FOR PARTNERS PROVIDING INVESTMENT 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 section:

``SEC. 710. SPECIAL RULES FOR PARTNERS PROVIDING INVESTMENT MANAGEMENT 
              SERVICES TO PARTNERSHIPS.

    ``(a) Treatment of Distributive Share of Partnership Items.--For 
purposes of this title, in the case of an investment services 
partnership interest--
            ``(1) In general.--Notwithstanding section 702(b)--
                    ``(A) an amount equal to the net capital gain with 
                respect to such interest for any partnership taxable 
                year shall be treated as ordinary income, and
                    ``(B) subject to the limitation of paragraph (2), 
                an amount equal to the net capital loss with respect to 
                such interest for any partnership taxable year shall be 
                treated as an ordinary loss.
            ``(2) Recharacterization of losses limited to 
        recharacterized gains.--The amount treated as ordinary loss 
        under paragraph (1)(B) for any taxable year shall not exceed 
        the excess (if any) of--
                    ``(A) the aggregate amount treated as ordinary 
                income under paragraph (1)(A) with respect to the 
                investment services partnership interest for all 
                preceding partnership taxable years to which this 
                section applies, over
                    ``(B) the aggregate amount treated as ordinary loss 
                under paragraph (1)(B) with respect to such interest 
                for all preceding partnership taxable years to which 
                this section applies.
            ``(3) Allocation to items of gain and loss.--
                    ``(A) Net capital gain.--The amount treated as 
                ordinary income under paragraph (1)(A) shall be 
                allocated ratably among the items of long-term capital 
                gain taken into account in determining such net capital 
                gain.
                    ``(B) Net capital loss.--The amount treated as 
                ordinary loss under paragraph (1)(B) shall be allocated 
                ratably among the items of long-term capital loss and 
                short-term capital loss taken into account in 
                determining such net capital loss.
            ``(4) Terms relating to capital gains and losses.--For 
        purposes of this section--
                    ``(A) In general.--Net capital gain, long-term 
                capital gain, and long-term capital loss, with respect 
                to any investment services partnership interest for any 
                taxable year, shall be determined under section 1222, 
                except that such section shall be applied--
                            ``(i) without regard to the 
                        recharacterization 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 similar 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 dividend allocated 
        with respect to any investment services partnership interest 
        shall not be treated as 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)) allocated with respect to any investment 
        services partnership interest.
    ``(b) Dispositions of Partnership Interests.--
            ``(1) Gain.--
                    ``(A) In general.--Any gain on the disposition 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 reason 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
                            ``(iii) any amount that would have been 
                        treated as ordinary income under this 
                        subsection had the decedent sold such interest 
                        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 excess (if any) of--
                    ``(A) the aggregate amount treated as ordinary 
                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 ordinary 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 exchanges.--
        Paragraph (1)(A)(ii) shall not apply to the contribution of an 
        investment services partnership interest to a partnership in 
        exchange for an interest in such partnership if--
                    ``(A) the taxpayer makes an irrevocable election to 
                treat the partnership interest received in the exchange 
                as an investment services partnership interest, and
                    ``(B) the taxpayer agrees to comply with such 
                reporting and recordkeeping requirements as the 
                Secretary may prescribe.
            ``(4) Distributions of partnership property.--
                    ``(A) In general.--In the case of any distribution 
                of property by a partnership with respect to any 
                investment services partnership interest 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 property 
                        in the hands of such partner (determined 
                        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 ordinary 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 subparagraph 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) applies, 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 terminations.--In the case of 
                a taxpayer which satisfies 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 section 721 applies pursuant to a 
                transaction described in paragraph (1)(B) or (2) of 
                section 708(b).
    ``(c) Investment Services Partnership Interest.--For purposes of 
this section--
            ``(1) In general.--The term `investment services 
        partnership interest' means any interest in an investment 
        partnership acquired or held by any person 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 before the 
                first date on which it is so held in connection 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.
            ``(2) Businesses to which this section applies.--A trade or 
        business is described in this paragraph if such trade or 
        business primarily involves the performance of any of the 
        following services with respect to assets held (directly or 
        indirectly) by one or more investment partnerships referred to 
        in paragraph (1):
                    ``(A) Advising as to the advisability of investing 
                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 section--
                            ``(i) substantially all of the assets of 
                        the partnership are specified assets 
                        (determined without regard to any section 197 
                        intangible within the meaning of section 
                        197(d)), and
                            ``(ii) less than 75 percent of the capital 
                        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 wholly-owned entities 
                for purposes of determining 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 purposes of 
                        clause (i), the term `specified entity' means, 
                        with respect to any partnership (hereafter 
                        referred to as the upper-tier partnership), any 
                        person which engages in the same trade or 
                        business as the upper-tier partnership and is--
                                    ``(I) a partnership all of the 
                                capital 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 
                                indirectly by the upper-tier 
                                partnership.
                    ``(C) Special rules for determining if property 
                held in connection with trade or business.--
                            ``(i) In general.--Except as otherwise 
                        provided by the Secretary, solely for purposes 
                        of determining whether any interest 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,
                                    ``(II) such interest shall be 
                                treated 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 taxable 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 another person 
                        if, taking into account the rules of section 
                        267(c), the relationship between such persons 
                        is described in--
                                    ``(I) paragraph (1) or (9) of 
                                section 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 paragraph (1) or (9) of 
                                section 267(b).
                    ``(D) Antiabuse rules.--The Secretary may issue 
                regulations or other guidance which prevent the 
                avoidance of the purposes of subparagraph (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 entities.--
                            ``(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 partnership 
                        by any member of such controlled group would 
                        (in the hands of such member) 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 entities.--For 
                        purposes of clause (i), the term `controlled 
                        group of entities' means a controlled group of 
                        corporations as defined in section 1563(a)(1), 
                        applied without regard 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 entities 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 corporations.--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 thereof), real estate held for rental or 
        investment, interests in partnerships, commodities (as defined 
        in section 475(e)(2)), cash or cash equivalents, or options or 
        derivative contracts with respect to any of the foregoing.
            ``(5) Related persons.--
                    ``(A) In general.--A person shall be treated as 
                related to another person if the relationship between 
                such persons is described in section 267(b) or 707(b).
                    ``(B) Attribution of partner services.--Any service 
                described in paragraph (2) which is provided by a 
                partner of a partnership shall be treated as also 
                provided by such partnership.
    ``(d) Exception for Certain Capital Interests.--
            ``(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 account 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 partners who do not 
                provide any services described in subsection (c)(2) and 
                who are not related to the partner holding the 
                qualified capital interest, and
                    ``(B) the allocations made to such other interests 
                are significant compared to the allocations made to 
                such qualified capital interest.
            ``(2) Authority to provide exceptions to allocation 
        requirements.--To the extent provided by the Secretary in 
        regulations or other guidance--
                    ``(A) Allocations to portion of qualified 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 providers' qualified 
                capital interests which are less than other 
                allocations.--Allocations shall not be treated as 
                failing to meet the requirement of paragraph (1)(A) 
                merely because the allocations to the qualified capital 
                interest represent a lower return than the allocations 
                made to the other qualified capital interests 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 investment services partnership interest and 
        which, by reason of a change in the services with respect to 
        assets 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 subsection, be less than the fair market 
        value of such interest (determined immediately before such 
        change).
            ``(4) Special rule for tiered partnerships.--Except as 
        otherwise provided by the Secretary, in the case of tiered 
        partnerships, all items which are allocated in a manner which 
        meets the requirements of paragraph (1) to qualified capital 
        interests in a lower-tier partnership shall retain such 
        character to the extent allocated on the basis of qualified 
        capital interests in any upper-tier partnership.
            ``(5) Exception for no-self-charged carry and management 
        fee provisions.--Except as otherwise provided by the Secretary, 
        an interest 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 subsection (c)(2) which are 
        provided (directly or indirectly) to the partnership by the 
        holder of such interest (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 entire 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 requirements of paragraph 
                (1)) if the partnership had sold all of its assets at 
                fair market value immediately before the disposition, 
                bears to
                    ``(B) the distributive share of gain or loss that 
                would have been so allocated to the investment services 
                partnership interest of which such qualified capital 
                interest is a part.
            ``(7) Qualified capital interest.--For purposes 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 included 
                        in gross income under section 83 with respect 
                        to the transfer of such interest, 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.
                    ``(B) Adjustment to qualified capital interest.--
                            ``(i) Distributions and losses.--The 
                        qualified capital interest shall be reduced by 
                        distributions from the partnership 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 contributions of 
                        property.--In the case of any contribution of 
                        property described in subparagraph (A)(i) with 
                        respect to which the fair market value of such 
                        property is not equal to the adjusted basis of 
                        such property immediately before such 
                        contribution, proper adjustments shall be made 
                        to the qualified capital interest to take into 
                        account such difference consistent with such 
                        regulations or other guidance as the Secretary 
                        may provide.
                    ``(C) Technical terminations, etc., disregarded.--
                No increase or decrease in the qualified capital 
                interest of any partner shall result 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 interest of service providing 
                partners.--For purposes of this subsection, an 
                investment services 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 related to 
                any such other partner or the partnership). 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 proceeds 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 subsection, 
                any loan or other advance to the partnership made or 
                guaranteed, directly or indirectly, by a partner not 
                providing services described 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 
                partnership.
            ``(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 interest.--For 
                purposes of this paragraph, the term `specified family 
                partnership interest' means any investment services 
                partnership interest 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 whose 
                        relationship to the grantor is described in 
                        section 267(b)(1), and
                            ``(iii) all other interests in such 
                        qualified 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 partnership if--
                            ``(i) all of the capital and profits 
                        interests 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
                                    ``(III) any other person (not 
                                described 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 applicable date (within the meaning 
                of subparagraph (B)(iii) thereof) were the latest of--
                            ``(i) the date of the establishment of the 
                        partnership,
                            ``(ii) the earliest date that the common 
                        ancestor holds a capital or profits interest 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--
                    ``(A) a person performs (directly or indirectly) 
                investment management services for any investment 
                entity,
                    ``(B) such person holds (directly or indirectly) a 
                disqualified interest with respect to such entity, and
                    ``(C) the value of such interest (or payments 
                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 performed,
        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 subsection--
                    ``(A) Disqualified interest.--
                            ``(i) In general.--The term `disqualified 
                        interest' means, with respect to any investment 
                        entity--
                                    ``(I) any interest in such entity 
                                other than indebtedness,
                                    ``(II) convertible or contingent 
                                debt of such entity,
                                    ``(III) any option or other right 
                                to acquire property described in 
                                subclause (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 substantially 
                        all of the income of which is--
                                    ``(I) effectively connected with 
                                the conduct of a trade or business in 
                                the United States, or
                                    ``(II) subject to a comprehensive 
                                foreign income tax (as defined in 
                                section 457A(d)(2)).
                    ``(C) Investment management services.--The term 
                `investment management services' means a substantial 
                quantity of any of the services described in subsection 
                (c)(2).
                    ``(D) Investment entity.--The term `investment 
                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 appropriate to carry out the 
purposes of this section, including regulations or other guidance to--
            ``(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 modification is consistent with 
        the purposes of this section,
            ``(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 provisions of 
        this title.
    ``(h) Cross Reference.--For 40-percent penalty on certain 
underpayments due to the avoidance of this section, see section 
6662.''.
    (b) Application of Section 751 to Indirect Dispositions of 
Investment Services Partnership Interests.--
            (1) In general.--Subsection (a) of section 751 is amended 
        by striking ``or'' at the end of paragraph (1), by inserting 
        ``or'' at the end of paragraph (2), and by inserting after 
        paragraph (2) the following new paragraph:
            ``(3) investment services partnership interests held by the 
        partnership,''.
            (2) Certain distributions treated as sales or exchanges.--
        Subparagraph (A) of section 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 
        following 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 paragraph (1), 
                by inserting ``or'' at the end of paragraph (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 interest).''.
            (4) Investment services partnership interests; qualified 
        capital interests.--Section 751 is amended by adding at the end 
        the following new subsection:
    ``(g) Investment Services Partnership Interests.--For purposes of 
this section--
            ``(1) In general.--The term `investment services 
        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 
        (determined under rules similar to the rules of section 
        710(d)).
            ``(3) Exception for publicly traded partnerships.--Except 
        as otherwise provided by the Secretary, in the case of an 
        exchange of an interest in a publicly traded partnership (as 
        defined in section 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
                    ``(B) such partnership shall be treated as owning 
                its proportionate share of the property of any other 
                partnership in which it is a partner.
            ``(4) Recognition of gains.--Any gain with respect to which 
        subsection (a) applies by reason of paragraph (3) thereof shall 
        be recognized notwithstanding 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 investment services partnership interests 
        for purposes of this section.''.
    (c) Treatment for Purposes of Section 7704.--Subsection (d) of 
section 7704 is amended by adding at the end the following new 
paragraph:
            ``(6) Income from certain carried interests not 
        qualified.--
                    ``(A) In general.--Specified carried interest 
                income shall not be treated as qualifying income.
                    ``(B) Specified carried interest income.--For 
                purposes of this paragraph--
                            ``(i) In general.--The term `specified 
                        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 
                                partnership,
                                    ``(II) any gain on the disposition 
                                of an investment services partnership 
                                interest (as so defined) or a 
                                partnership 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.
                            ``(ii) Exception for qualified capital 
                        interests.--A rule similar to the rule of 
                        section 710(d) shall apply for purposes of 
                        clause (i).
                    ``(C) Coordination with other provisions.--
                Subparagraph (A) shall not apply to any item described 
                in paragraph (1)(E) (or so much of paragraph (1)(F) as 
                relates to paragraph (1)(E)).
                    ``(D) Special rules for certain partnerships.--
                            ``(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 
                                interests 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 or 
                                indirectly, at all times during the 
                                taxable year by such real estate 
                                investment 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 owning other 
                        publicly traded partnerships.--Subparagraph (A) 
                        shall not apply in the case of a partnership 
                        which meets each of the following requirements:
                                    ``(I) Substantially all of the 
                                assets of such partnership consist of 
                                interests in one or more publicly 
                                traded partnerships (determined without 
                                regard to subsection (b)(2)).
                                    ``(II) Substantially all of the 
                                income of such partnership is ordinary 
                                income or section 1231 gain (as defined 
                                in section 1231(a)(3)).
                    ``(E) Transitional rule.--Subparagraph (A) shall 
                not apply to any taxable year of the partnership 
                beginning before the date which is 10 years after the 
                date of the enactment of this paragraph.''.
    (d) Imposition of Penalty on Underpayments.--
            (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 section 710(g) to prevent 
        the avoidance of the purposes of section 710.''.
            (2) Amount of penalty.--
                    (A) In general.--Section 6662 is amended by adding 
                at the end the following new subsection:
    ``(k) Increase in Penalty in Case of Property Transferred for 
Investment Management Services.--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.--Subparagraph (B) of 
                section 6662A(e)(2) is amended by striking ``or (i)'' 
                and inserting ``, (i), or (k)''.
            (3) Special rules for application of reasonable cause 
        exception.--Subsection (c) of section 6664 is amended--
                    (A) by redesignating paragraphs (3) and (4) as 
                paragraphs (4) and (5), respectively;
                    (B) by striking ``paragraph (3)'' in paragraph 
                (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 attributable to 
        investment management services.--
                    ``(A) In general.--Paragraph (1) shall not apply to 
                any portion of an underpayment to which section 6662 
                applies by reason of subsection (b)(8) unless--
                            ``(i) the relevant facts affecting the tax 
                        treatment of the item are adequately disclosed,
                            ``(ii) there is or was substantial 
                        authority for such treatment, and
                            ``(iii) the taxpayer reasonably believed 
                        that such treatment was more likely than not 
                        the proper treatment.
                    ``(B) Rules relating to reasonable belief.--Rules 
                similar to the rules of subsection (d)(3) shall apply 
                for purposes of subparagraph (A)(iii).''.
    (e) Income and Loss From Investment Services Partnership Interests 
Taken Into Account in Determining Net Earnings From Self-Employment.--
            (1) Internal revenue code.--
                    (A) In general.--Section 1402(a) is amended by 
                striking ``and'' at the end of paragraph (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 engaged 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 
        account in determining the net earnings from self-employment of 
        such individual.''.
                    (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 services 
        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 income 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 interests.--A rule 
        similar to the rule of section 710(d) shall apply for purposes 
        of applying paragraph (1)(B).''.
            (2) Social security act.--Section 211(a) of the Social 
        Security Act is amended by striking ``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 following new paragraph:
            ``(17) Notwithstanding the preceding provisions of this 
        subsection, in the case of any individual engaged in the trade 
        or business of providing services described in section 
        710(c)(2) of the Internal Revenue Code of 1986 with respect to 
        any entity, investment 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 paragraph (7), by striking the period at 
the end of paragraph (8) and inserting ``, and'', and by inserting 
after paragraph (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 distributions 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 partnerships)'' before the period at the 
        end.
            (3) The table of sections for part I of subchapter K of 
        chapter 1 is amended by adding at the end the following new 
        item:

``Sec. 710. Special rules for partners providing investment management 
                            services to partnerships.''.
    (h) Effective Date.--
            (1) In general.--Except as otherwise provided 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 include 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 
        enactment of this Act, the amount of the net capital gain 
        referred to in such section shall be treated as being the 
        lesser of the net capital gain for the entire partnership 
        taxable year or the net capital gain determined by only taking 
        into account items attributable to the portion of the 
        partnership taxable year which is after such date.
            (3) Dispositions of partnership interests.--
                    (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 amendments 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.--Section 710(e) of such Code (as added by 
        this section) shall take effect on the date of the enactment of 
        this Act.
                                 <all>