Title: Stop Wall Street Looting Act
Policy area: Finance and Financial Sector

Summary:
Stop Wall Street Looting Act
This bill generally revises provisions related to the regulation of private equity funds. Among other things, the bill
The bill modifies the tax treatment of carried interest—compensation that is typically received by a partner of a private equity fund and is based on a share of the fund's profits. (Under current law, carried interest is taxed as investment income rather than at ordinary income tax rates.) Among other things, the bill treats as ordinary income the net capital gain with respect to a private equity fund.

[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[S. 2155 Introduced in Senate (IS)]

<DOC>






116th CONGRESS
  1st Session
                                S. 2155

   To require the Securities and Exchange Commission to issue rules 
 requiring private funds to publicly disclose certain information, and 
                          for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             July 17, 2019

 Ms. Warren (for herself, Ms. Baldwin, Mrs. Gillibrand, Mr. Brown, and 
 Mr. Sanders) introduced the following bill; which was read twice and 
                  referred to the Committee on Finance

_______________________________________________________________________

                                 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 Representatives 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:

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 controlling 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 
                            controlled 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

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 equity 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 individuals who work for 
        companies owned by those funds. For millions of additional 
        individuals, a private investment fund acts as a landlord, a 
        lender, or an owner of a local grocery store, newspaper, or 
        hospital. Many pension funds are also investors in private 
        investment funds.
            (3) Private investment funds have taken controlling stakes 
        in companies in a wide variety of industries, 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 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 populations, including 
        affordable housing developments, for-profit colleges, payday 
        lenders, medical providers, and nursing homes.
            (5) While private investment funds often purport 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 necessary investments for 
        future growth. If an investment 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 relying 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 financial engineering. Private funds 
        should have a stake in the outcome of their investments, 
        enjoying returns if those investments are successful but 
        absorbing losses if those investments fail.
            (7) When a case is commenced under title 11, United States 
        Code, with respect to a portfolio company, 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 
        investment options. Funds also increasingly require investors 
        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 regulators and lawmakers about systemic 
        risk. The institutions that make and securitize risky loans 
        collect large fees and then pass on risk to unwitting 
        investors. 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, consumers, and 
                investors in the United States; and
                    (B) put an end to the practice of looting of 
                economically viable companies for the enrichment 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 securities 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 
                        entity has not in fact exercised such power to 
                        vote;
                    (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, controls, 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 
                        entity has not in fact exercised such power to 
                        vote;
                    (C) a person whose business is operated under a 
                lease or operating agreement by another entity, or 
                person substantially all of whose property is operated 
                under an operating agreement with that other entity; or
                    (D) an entity that operates the business or 
                substantially all of the property of another entity 
                under a lease or operating agreement.
            (2) Capital distribution.--The term ``capital 
        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 commerce; 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.
            (4) Change in control transaction.--The term ``change in 
        control transaction'' means a transaction that effects a change 
        in control.
            (5) Commission.--The term ``Commission'' means the 
        Securities and Exchange Commission.
            (6) Control person.--The term ``control person''--
                    (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 interests 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 
                        indirectly owned, controlled, or held with 
                        power to vote by a person 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 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 
                        corporation solely--
                                    (I) in a fiduciary or agency 
                                capacity without sole discretionary 
                                power to vote the securities; or
                                    (II) to secure a debt, if the 
                                person 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 direction 
                        of the management or policy of a corporation.
            (7) Corporation.--The term ``corporation'' means--
                    (A) a joint-stock company;
                    (B) a company or partnership association organized 
                under a law that makes only the capital subscribed or 
                callable up to a specified amount responsible for the 
                debts of the association, including a limited 
                partnership and a limited liability company;
                    (C) a trust; and
                    (D) an association having a power or privilege that 
                a private corporation, but not an individual or a 
                partnership, possesses.
            (8) Holder of an economic interest.--The term ``holder of 
        an economic interest''--
                    (A) means a person that directly or indirectly 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 include--
                            (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 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 occurs; 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 
                                security, without instruction, on--
                                            (aa) other than contested 
                                        matters; or
                                            (bb) matters that may 
                                        substantially 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 person 
                        does not exercise any voting other governance 
                        rights with respect to the interest; or
                            (ii) a person that is not an insider with 
                        respect to a control person.
            (9) Insider.--The term ``insider'' means any--
                    (A) director of a corporation;
                    (B) officer of a corporation;
                    (C) managing agent of a corporation;
                    (D) control person with respect to a corporation;
                    (E) affiliate of a corporation;
                    (F) consultant or contractor retained by a 
                corporation;
                    (G) affiliate, relative, or agent of a person 
                described in any of subparagraphs (A) through (E); and
                    (H) affiliate, relative, or agent of a person 
                described in subparagraph (G).
            (10) Investment adviser.--The term ``investment adviser'' 
        has the meaning given the term in section 202(a) of the 
        Investment Advisers Act of 1940 (15 U.S.C. 80b-2(a)).
            (11) Issuer.--The term ``issuer'' has the meaning given the 
        term in section 3(a) of the Securities Exchange Act of 1934 (15 
        U.S.C. 78c(a)).
            (12) National securities exchange.--The term ``national 
        securities exchange'' means an exchange that is registered as a 
        national securities exchange under section 6 of the Securities 
        Exchange Act of 1934 (15 U.S.C. 78f).
            (13) Private fund.--Except as otherwise expressly 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 Development 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.
            (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 CONTROLLING PRIVATE FUNDS.

    (a) In General.--Notwithstanding any other provision 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 instrumentality, including a 
        consumer restitution obligation, 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 Retirement 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 Retirement 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 section 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 PRIVATE FUNDS.

    (a) In General.--Notwithstanding any other provision 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 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 instrumentality, including a 
        consumer restitution obligation, 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 Retirement 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 Retirement 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 section 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 reduce the 
        equity capital of the target firm; or
            (2) incur an obligation that commits the target firm to 
        making a capital distribution or a similar reduction 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 incurred, 
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 district 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 obligation 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 Control Transactions.--Section 548 of title 11, United 
States Code, is amended by adding at the end the following:
    ``(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--
                    ``(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 presumed 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 incurred 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 affiliate, 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').''.
    (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 control 
                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 INVESTMENT FIRMS FROM 
              CONTROLLED TARGET 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 
                            controlled target firms.

``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 taxpayer for any taxable 
        year, then there is hereby imposed 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 
        addition 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 payment' means any 
        amount paid or incurred by an applicable 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 entity. An 
        amount shall be treated as an applicable payment without regard 
        to whether it is paid or incurred to the taxpayer including it 
        in gross income and to which subsection (a) applies.
            ``(2) Exceptions.--Such term shall not include any of the 
        following:
                    ``(A) Interest.--Any amount paid or incurred which 
                is treated as interest for purposes of this chapter.
                    ``(B) Distributions of property with respect to 
                stock.--Any distribution of property (as defined in 
                section 317(a)) to which section 301(a) applies.
    ``(c) Definitions Relating to Entities.--For purposes of this 
section--
            ``(1) Applicable entity.--The term `applicable entity' 
        means any person--
                    ``(A) which is engaged in the active conduct of a 
                trade or business, and
                    ``(B) with respect to which any other person 
                conducts activities in connection with an applicable 
                trade or business.
            ``(2) Applicable controlling entity.--The term `applicable 
        controlling entity' means, with respect to any applicable 
        entity, any person--
                    ``(A) which is engaged in an applicable trade or 
                business some or all of the activities of which are 
                conducted in connection with the applicable 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 activity conducted on a regular, 
        continuous, and substantial 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 
                        specified 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 sentence thereof), and
                    ``(B) real estate held for rental or investment.
    ``(d) Rules and Definitions Relating to Ownership 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 constructive ownership rules which would otherwise 
        apply, except that in applying such rules the term `stock' 
        shall include capital, profits, or other beneficial 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 regard 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.
    ``(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 application of 
        this section as are necessary to prevent the avoidance of the 
        purposes of this section, including 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 interests as well as 
        stock.''.
    (b) Disallowance of Credits Against Tax.--Subparagraph (B) of 
section 26(b)(2) of the Internal Revenue 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 chapter 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''.

            (2) Section 871(b)(1) of such Code is amended by inserting 
        ``and shall be taxable as provided in section 59B on applicable 
        payments included in gross income which are effectively 
        connected with the conduct 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 section 59B on applicable 
        payments included in gross income which are effectively 
        connected with the conduct 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 appears 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 (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 INTEREST OF CERTAIN 
              BUSINESSES OWNED BY PRIVATE FUNDS.

    (a) In General.--Section 163(j) of the Internal Revenue Code of 
1986 is amended by redesignating paragraph (10) as paragraph (11) and 
by inserting after paragraph (9) the following new paragraph:
            ``(10) Modification of limitation for certain businesses 
        owned by private firms.--
                    ``(A) In general.--In the case of a taxpayer 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--
                            ``(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 taxable year as 
                        the Secretary may prescribe in regulations) 
                        exceeds 1, then paragraph (1) shall be applied 
                        by substituting `___ 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 taxable 
                                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 taxpayer, the ratio which 
                the total indebtedness of 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 adjusted 
                        basis thereof for purposes of determining 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 (determined without 
                        regard to subsection (a)(7) or (b)(4) thereof), 
                        and
                            ``(iii) there shall be such other 
                        adjustments 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 reason of an election under 
                paragraph (7)(B) which is revoked under subparagraph 
                (A)(ii)(II), then the depreciation deduction under 
                section 167(a) with respect to such property 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 
                regulations thereunder.
                    ``(D) Definitions and rules.--For purposes 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.--Subparagraphs (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 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 WORKERS 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 redesignated--
                            (i) by striking ``$10,000'' and inserting 
                        ``$20,000'';
                            (ii) by striking ``within 180 days''; and
                            (iii) by striking ``or the date of the 
                        cessation of the debtor's business, whichever 
                        occurs first''; and
                    (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, whichever 
                        occurs first''; and
                    (B) by striking subparagraph (B) and inserting 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 CONTRIBUTIONS 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:
            ``(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 benefit 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 damages for a violation of any Federal or State labor and employment 
law, including the Worker Adjustment and Retraining Notification Act 
(29 U.S.C. 2101 et seq.) and any comparable State law, and''.
    (b) Administration and Enforcement of Worker Adjustment and 
Retraining Notification Requirements.--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 prohibited closing or layoff 
        under this Act,'' after ``period of the violation,''; and
            (2) by inserting ``calendar'' after ``60''.

SEC. 304. LIMITATION ON EXECUTIVE COMPENSATION ENHANCEMENTS.

    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 officer of 
                the debtor, or any of the 20 next most highly 
                compensated employees of the debtor, department or 
                division managers of the debtor, or consultants 
                providing services to the debtor (regardless of whether 
                the executive officer, employee, 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 designed 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'' before 
                ``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, department or division managers of the debtor, or 
        consultants 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 executive officer 
        of the debtor, or any of the 20 next most highly compensated 
        employees of the debtor, department or division managers of the 
        debtor, or consultants providing services to the debtor 
        (regardless of whether the executive officer, employee, 
        manager, or consultant is an insider), absent a finding by the 
        court, based upon clear and convincing evidence in the record, 
        and without deference to a request by the debtor for such 
        payment, that--
                    ``(A) because of the essential and particularized 
                nature of the services provided by the insider, 
                executive officer, employee, manager, or consultant, 
                the transfer or obligation is essential to--
                            ``(i) the survival of the business of the 
                        debtor; or
                            ``(ii) in a case in which some or all of 
                        the assets of the debtor are liquidated, the 
                        orderly liquidation of the assets;
                    ``(B) in the case of a transfer or obligation under 
                an incentive program, the transfer or obligation is 
                part of a workforce incentive program generally 
                applicable to the nonmanagement workforce of the 
                debtor; and
                    ``(C) the cost of the transfer or obligation--
                            ``(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 nonmanagement 
                        workforce of the debtor during 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 obligation 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 division managers of the debtor, or 
consultants providing services to the debtor (regardless of whether 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--
            ``(A) discontinued any plan, program, policy or practice of 
        paying severance pay to the nonmanagement 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 obligation 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 review under paragraph 
        (5), any payment or other distribution 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 
        compensated employees of the debtor, department or division 
        managers of the debtor, or consultants providing services to 
        the debtor (regardless of whether the executive officer, 
        employee, manager, or consultant is an insider), shall not be 
        approved by the court except as part of a program of payments 
        or distributions generally applicable to employees of the 
        debtor, and only to the extent that the court determines that 
        the payment or other distribution is not excessive or 
        disproportionate in comparison to payments or other 
        distributions to the nonmanagement workforce 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 subject to the approval of, the 
        court as--
                    ``(i) reasonable in comparison to compensation paid 
                to individuals holding comparable positions at 
                comparable companies in the same industry; and
                    ``(ii) not disproportionate in light of any 
                economic concession made by the nonmanagement workforce 
                of the debtor during the case.''.

SEC. 307. COLLATERAL SURCHARGE FOR EMPLOYEE OBLIGATIONS.

    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 practice 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 benefit plan 
on or after the date of the commencement of the case, such unpaid 
obligations shall be--
            ``(A) deemed--
                    ``(i) reasonable, necessary costs and expenses of 
                preserving, or disposing of, property securing an 
                allowed secured claim; and
                    ``(ii) benefiting the holder of the allowed secured 
                claim; and
            ``(B) recovered by the trustee for payment to the employees 
        or the employee benefit plan, as applicable, even if the 
        trustee, or a predecessor or successor in interest, has 
        otherwise waived the provisions 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 division managers of the debtor, or consultants providing 
services to the debtor (regardless of whether the executive officer, 
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 section 
        363(b)(3) or 503(c).
    ``(2) Subsection (c) shall not constitute a defense against the 
recovery of a transfer under paragraph (1) of this subsection.
    ``(3)(A) The trustee, or a committee appointed under section 1102, 
may commence an action to recover a transfer under paragraph (1) of 
this subsection.
    ``(B) If neither the trustee nor a committee commences an action to 
recover a transfer under subparagraph (A) before the date of the 
commencement of a hearing on the confirmation of a plan, any party in 
interest may apply to the court for authority to recover the transfer 
for the benefit of the estate, in which case the costs of recovery 
shall be borne by the estate.''.

SEC. 309. PROTECTION FOR EMPLOYEES IN A SALE OF ASSETS.

    (a) Requirement Relating to Preserving Jobs and Maintaining Terms 
and Conditions Relating to Employment.--Section 363 of title 11, United 
States Code, is amended by adding at the end the following:
    ``(q)(1) In approving a sale or lease of property of the estate 
under this section, or under a plan under chapter 11, the court shall 
give substantial weight to the extent to which a prospective purchaser 
or lessee, respectively, of the property will--
            ``(A) preserve the jobs of the workforce of the debtor; and
            ``(B) maintain the terms and conditions of employment of 
        the workforce of the debtor.
    ``(2) If there are 2 or more offers to purchase or lease property 
of the estate under this section, or under a plan under chapter 11, 
that qualify under the procedures for the sale or lease, respectively, 
approved by the court, the court shall approve the offer that best--
            ``(A) preserves the jobs of the workforce of the debtor; 
        and
            ``(B) maintains the terms and conditions of employment of 
        the workforce of the debtor.
    ``(r)(1) Any party seeking to purchase or lease property of the 
estate under this section, or under a plan under chapter 11, shall 
represent to the court the effect of such a transaction with respect 
to--
            ``(A) the preservation of the jobs of the workforce of the 
        debtor; and
            ``(B) the maintenance of the terms and conditions of 
        employment of the workforce of the debtor.
    ``(2) The court shall expressly include in an order approving a 
purchase or lease of property of the estate under this section, or 
under a plan under chapter 11, any representation made by a purchaser 
or lessee of the property under paragraph (1).
    ``(3) With respect to a purchase or lease of property of the estate 
under this section, or under a plan under chapter 11--
            ``(A) the court shall have jurisdiction over the purchaser 
        or lessee of the property in order to enforce the terms of the 
        order approving the purchase or lease;
            ``(B) the purchaser or lessee shall promptly disclose to 
        the court any material noncompliance with the terms of the 
        order described in subparagraph (A) and explain the basis for 
        such noncompliance; and
            ``(C) with respect to material noncompliance described in 
        subparagraph (B), the court may impose any appropriate remedy, 
        including injunctive relief, to address the noncompliance.''.
    (b) Plans Under Chapter 11.--
            (1) Contents of plan.--Section 1123(b)(4) of title 11, 
        United States Code, is amended by inserting ``, which sale 
        shall be subject to the requirements under subsections (q) and 
        (r) of section 363 of this title,'' after ``property of the 
        estate''.
            (2) Confirmation of plan.--Section 1129(a) of title 11, 
        United States Code, is amended by adding at the end the 
        following:
            ``(17) If the plan provides for the sale of all or 
        substantially all of the property of the estate, the sale meets 
        the requirements under subsections (q) and (r) of section 363 
        of this title.''.

SEC. 310. PROTECTION OF GIFT CARD PURCHASERS.

    (a) Definition of Gift Card.--Section 101(a) of title 11, United 
States Code, is amended by inserting after paragraph (26) the 
following:
            ``(26A) The term `gift card' means a paper or electronic 
        promise, plastic card, or other payment code or device that 
        is--
                    ``(A) redeemable at--
                            ``(i) a single merchant; or
                            ``(ii) an affiliated group of merchants 
                        that share the same name, mark, or logo;
                    ``(B) issued in a specified amount, regardless of 
                whether that amount may be increased in value or 
                reloaded at the request of the holder;
                    ``(C) purchased on a prepaid basis in exchange for 
                payment; and
                    ``(D) honored by the single merchant or affiliated 
                group of merchants described in subparagraph (A) upon 
                presentation for goods or services.''.
    (b) Consumer Deposit.--Section 507(a) of title 11, United States 
Code, is amended by striking paragraph (7) and inserting the following:
            ``(7) Seventh, allowed unsecured claims of individuals, to 
        the extent of $1,800 for each such individual, arising from the 
        deposit, before the commencement of the case, of money in 
        connection with--
                    ``(A) the purchase, lease, or rental of property;
                    ``(B) the purchase of services, for the personal, 
                family, or household use of such individuals, that were 
                not delivered or provided; or
                    ``(C) the purchase of a gift card with respect to 
                which funds exist that have not been redeemed.''.

SEC. 311. COMMERCIAL REAL ESTATE.

    Section 365(d) of title 11, United States Code, is amended--
            (1) by striking paragraph (4); and
            (2) by redesignating paragraph (5) as paragraph (4).

            TITLE IV--CLOSING THE CARRIED INTEREST LOOPHOLE

SEC. 401. AMENDMENT OF 1986 CODE.

    Except as otherwise expressly provided, whenever in this title 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.

SEC. 402. 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 
enactment of this Act.

SEC. 403. 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 and 
                divisions.--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 section 708(b)(2).
    ``(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) Anti-abuse 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 
                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 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 enactment of this paragraph.''.
    (d) Imposition of Penalty on Underpayments.--
            (1) In general.--Subsection (b) of section 6662 is amended 
        by inserting after paragraph (8) the following new paragraph:
            ``(9) 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:
    ``(l) 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)(9), 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 (l)''.
            (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)(9) 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)(4) 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.''.
            (4)(A) Part IV of subchapter O of chapter 1 is amended by 
        striking section 1061.
            (B) The table of sections for part IV of subchapter O of 
        chapter 1 is amended by striking the item relating to section 
        1061.
    (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 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 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 enactment of this Act.
                    (B) Indirect dispositions.--The amendments made by 
                subsection (b) shall apply to transactions after the 
                date of 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 enactment of 
        this Act.

          TITLE V--INVESTOR PROTECTION AND MARKET TRANSPARENCY

SEC. 501. DISCLOSURE OF FEES AND RETURNS.

    The Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.) is 
amended by adding at the end the following:

``SEC. 66. DISCLOSURE OF FEES AND RETURNS.

    ``(a) Definitions.--In this section, the terms `private fund' and 
`target firm' have the meanings given the terms in section 3 of the 
Stop Wall Street Looting Act.
    ``(b) Rules.--Not later than 1 year after the date of enactment of 
this section, the Commission shall issue final rules that require a 
private fund to, using generally accepted accounting principles, 
annually report the following information with respect to that private 
fund:
            ``(1) The name, address, and vintage year of the fund.
            ``(2) The name of each general partner of the fund.
            ``(3) The name of each limited partner of the fund.
            ``(4) A list of each entity with respect to which the fund 
        owns a percentage.
            ``(5) In dollars, the total amount of regulatory assets 
        under management by the fund.
            ``(6) In dollars, the total amount of net assets under 
        management by the fund.
            ``(7) The percentage of fund equity contributed by the 
        general partners of the fund and the percentage of fund equity 
        contributed by the limited partners of the fund.
            ``(8) Information on the debt held by the fund, including--
                    ``(A) the dollar amount of total debt;
                    ``(B) the percentage of debt for which the creditor 
                is a financial institution in the United States;
                    ``(C) the percentage of debt for which the creditor 
                is a financial institution outside of the United 
                States;
                    ``(D) the percentage of debt for which the creditor 
                is an entity that is located in the United States and 
                is not a financial institution; and
                    ``(E) the percentage of debt for which the creditor 
                is an entity that is located outside of the United 
                States and is not a financial institution.
            ``(9) The gross performance of the fund during the year 
        covered by the report.
            ``(10) For the year covered by the report, the difference 
        obtained by subtracting the financial gains of the fund by the 
        fees that the general partners of the fund charged to the 
        limited partners of the fund (commonly referred to as the 
        `performance net of fees').
            ``(11) For the year covered by the report, an annual 
        financial statement, which shall include income statements, a 
        balance sheet, and cash flow statements.
            ``(12) The average debt-to-equity ratio of each target firm 
        with respect to the fund and the debt-to-equity ratio of each 
        such target firm.
            ``(13) The total gross asset value of each target firm with 
        respect to the fund and the gross asset value of each such 
        target firm.
            ``(14) The total amount of debt held by each target firm 
        with respect to the fund and the total amount of debt held by 
        each such target firm.
            ``(15) The total amount of debt held by each target firm 
        with respect to the fund that, as of the date on which the 
        report is submitted, are categorized as liabilities, long-term 
        liabilities, and payment in kind or zero coupon debt.
            ``(16) The total number of target firms with respect to the 
        fund that experienced default during the period covered by the 
        report, including the name of any such target firm.
            ``(17) The total number of the target firms with respect to 
        the fund with respect to which a case was commenced under title 
        11, United States Code, during the period covered by the 
        report, including the name of any such target firm.
            ``(18) The percentage of the equity of the fund that is 
        owned by--
                    ``(A) citizens of the United States;
                    ``(B) individuals who are not citizens of the 
                United States;
                    ``(C) brokers or dealers;
                    ``(D) insurance companies;
                    ``(E) investment companies that are registered with 
                the Commission under this Act;
                    ``(F) private funds and other investment companies 
                not required to be registered with the Commission;
                    ``(G) nonprofit organizations;
                    ``(H) pension plans maintained by State or local 
                governments (or an agency or instrumentality of 
                either);
                    ``(I) pension plans maintained by nongovernmental 
                employers;
                    ``(J) State or municipal government entities;
                    ``(K) banking or thrift institutions;
                    ``(L) sovereign wealth funds; and
                    ``(M) other investors.
            ``(19) The total dollar amount of aggregate fees and 
        expenses collected by the fund, the manager of the fund, or 
        related parties from target firms with respect to the fund, 
        which shall--
                    ``(A) be categorized by the type of fee; and
                    ``(B) include a description of the purpose of the 
                fees.
            ``(20) The total dollar amount of aggregate fees and 
        expenses collected by the fund, the manager of the fund, or 
        related parties from the limited partners of the fund, which 
        shall--
                    ``(A) be categorized by the type of fee; and
                    ``(B) include a description of the purpose of the 
                fees.
            ``(21) The total carried interest claimed by the fund, the 
        manager of the fund, or related parties and the total dollar 
        amount of carried interest distributed to the limited partners 
        of the fund.
            ``(22) A description of, during the year covered by the 
        report, any material changes in risk factors at the fund level, 
        including--
                    ``(A) concentration risk;
                    ``(B) foreign exchange risk; and
                    ``(C) extra-financial risk, including 
                environmental, social, and corporate governance risk.
            ``(23) Any other information that the Commission determines 
        is necessary and appropriate for the protection of investors.
    ``(c) Periodic Review.--The Commission shall, with respect to the 
rules issued under subsection (b)--
            ``(1) review the rules once every 5 years; and
            ``(2) revise the rules as necessary to ensure that the 
        disclosures required under the rules reflect contemporary (as 
        of the date on which the rules are revised) trends and 
        characteristics with respect to private investment markets.
    ``(d) Public Availability.--Notwithstanding any provision of 
section 204 of the Investment Advisers Act of 1940 (15 U.S.C. 80b-4), 
the information disclosed under the rules issued under subsection (b) 
shall be made available to the public.''.

SEC. 502. FIDUCIARY OBLIGATIONS.

    (a) Fiduciary Duties Under ERISA.--Section 401(b)(1) of the 
Employee Retirement Income Security Act of 1974 (29 U.S.C. 1101(b)(1)) 
is amended--
            (1) by inserting ``or a private fund (as defined in section 
        3 of the Stop Wall Street Looting Act)'' before ``, the 
        assets''; and
            (2) by inserting ``or such private fund, as applicable'' 
        before the period at the end.
    (b) Prohibition Against Waiving Fiduciary Duties.--Section 211(h) 
of the Investment Advisers Act of 1940 (15 U.S.C. 80b-11(h)) is 
amended--
            (1) in paragraph (1), by striking ``and'' at the end;
            (2) in paragraph (2), by striking the period at the end and 
        inserting ``; and''; and
            (3) by adding at the end the following:
            ``(3) promulgate rules that prohibit an investment adviser 
        from requiring any person to which the investment adviser 
        provides investment advice, including a pension plan (as 
        defined in section 3 of the Employee Retirement Income Security 
        Act of 1974 (29 U.S.C. 1002)) that is subject to title I of the 
        Employee Retirement Income Security Act of 1974 (29 U.S.C. 1001 
        et seq.), to, as a condition of the investment adviser 
        providing that advice, sign a contract or other agreement in 
        which that person waives a fiduciary duty owed by that person 
        to another person.''.
    (c) Applicability of Benefits.--The general partner of a private 
fund may not provide any term or benefit to any limited partner of the 
fund unless the general partner provides that term or benefit to all 
limited partners of the fund.

SEC. 503. DISCLOSURES RELATING TO THE MARKETING OF PRIVATE EQUITY 
              FUNDS.

    Any investment adviser to a private fund shall disclose to 
potential investors with respect to the other private funds, as defined 
in section 202(a) of the Investment Advisers Act of 1940 (15 U.S.C. 
80b-2(a)), managed by that investment adviser (referred to in this 
section as ``managed firms'') the following information:
            (1) A list of all managed firms with respect to the 
        investment adviser, including those managed firms that, as of 
        the date on which the disclosure is made--
                    (A) have active investments; and
                    (B) have liquidated the assets of the firms.
            (2) For each managed firm listed under paragraph (1), the 
        following information:
                    (A) As applicable, the total term of the listed 
                firm beginning with the commencement of the commitment 
                period with respect to the firm and ending on the date 
                on which the firm is dissolved, including, with respect 
                to a listed firm that, as of the date on which the 
                disclosure is made, is actively investing--
                            (i) the term specified by any limited 
                        partnership agreement; and
                            (ii) the nature of any provisions that 
                        would allow for the extension of that term.
                    (B) The performance of the listed firm's net of 
                fees, as measured by the public market equivalent or a 
                similar measure.
                    (C) A list of target firms with respect to which 
                the listed firm was a control person and the period of 
                that control.
                    (D) The number of employees at each target firm 
                identified under subparagraph (C), as of the date on 
                which the listed firm became a control person with 
                respect to the target firm, and the date on which the 
                listed firm ceased to be a control person with respect 
                to the target firm.
                    (E) A list of target firms with respect to the 
                listed firm with respect to which a case has been 
                commenced under title 11, United States Code.
                    (F) For each target firm with respect to the listed 
                firm, and with respect to which the listed firm is a 
                control person--
                            (i) a list of actions taken by any State or 
                        local regulatory agency; and
                            (ii) any legal or regulatory penalties 
                        paid, or settlements entered into, by the 
                        general partners of the target firm or the 
                        target firm itself.
            (3) The percentage breakdown of the means employed by the 
        investment adviser to divest ownership or control of target 
        firms, including--
                    (A) the sale of target firms to other private 
                funds;
                    (B) the sale of target firms to private entities;
                    (C) the sale of target firms to issuers, the 
                securities of which are traded on a national securities 
                exchange;
                    (D) the commencement of cases under title 11, 
                United States Code, with respect to target firms; and
                    (E) initial public offerings with respect to target 
                firms.

      TITLE VI--RESTRICTIONS ON SECURITIZING RISKY CORPORATE DEBT

SEC. 601. RISK RETENTION REQUIREMENTS FOR SECURITIZATION OF CORPORATE 
              DEBT.

    Section 15G of the Securities Exchange Act of 1934 (15 U.S.C. 78o-
11) is amended--
            (1) in subsection (a)(3)--
                    (A) in subparagraph (A), by striking ``or'' at the 
                end;
                    (B) in subparagraph (B), by striking ``and'' at the 
                end and inserting ``or''; and
                    (C) by adding at the end the following:
                    ``(C) a manager of a collateralized debt 
                obligation; and'';
            (2) by redesignating subsection (i) as subsection (j); and
            (3) by inserting after subsection (h) the following:
    ``(i) Rules of Construction.--With respect to a securitizer 
described in subsection (a)(3)(C)--
            ``(1) any provision of this section that requires that 
        securitizer to retain a portion of the credit risk for an asset 
        that such securitizer does not hold, or has never held, shall 
        be construed as requiring that securitizer to obtain that 
        portion of the credit risk for that asset; and
            ``(2) any reference in this section to an asset transferred 
        by the securitizer shall be construed to include any transfer 
        caused by the securitizer.''.

                        TITLE VII--MISCELLANEOUS

SEC. 701. ANTI-EVASION.

    It shall be unlawful to conduct any activity, including by entering 
into an agreement or contract, engaging in a transaction, or 
structuring an entity, to willfully evade or attempt to evade any 
provision of this Act.

SEC. 702. SEVERABILITY.

    If any provision of this Act or the application of such a provision 
to any person or circumstance is held to be invalid or 
unconstitutional, the remainder of this Act and the application of the 
provisions of this Act to any person or circumstance shall remain and 
shall not be affected by that holding.
                                 <all>