Us Congress 2025-2026 Regular Session

Us Congress Senate Bill SB445 Compare Versions

Only one version of the bill is available at this time.

Old	New	Differences
1	1	II
2	2	119THCONGRESS
3	3	1
4	4	STSESSION S. 445
5	5	To amend the Internal Revenue Code of 1986 to provide for the proper
6	6	tax treatment of personal service income earned in pass-thru entities.
7	7	IN THE SENATE OF THE UNITED STATES
8	8	FEBRUARY6 (legislative day, FEBRUARY5), 2025
9	9	Ms. B
10	10	ALDWIN(for herself, Mr. VANHOLLEN, Mrs. MURRAY, Mr. SCHATZ,
11	11	Mr. M
12	12	ARKEY, Ms. KLOBUCHAR, Mr. KAINE, Mr. MERKLEY, Mr. REED,
13	13	Ms. H
14	14	IRONO, Ms. WARREN, Mr. SANDERS, Mr. BOOKER, and Mr.
15	15	W
16	16	ELCH) introduced the following bill; which was read twice and referred
17	17	to the Committee on Finance
18	18	A BILL
19	19	To amend the Internal Revenue Code of 1986 to provide
20	20	for the proper tax treatment of personal service income
21	21	earned in pass-thru entities.
22	22	Be it enacted by the Senate and House of Representa-1
23	23	tives of the United States of America in Congress assembled, 2
24	24	SECTION 1. SHORT TITLE; ETC. 3
25	25	(a) S
26	26	HORTTITLE.—This Act may be cited as the 4
27	27	‘‘Carried Interest Fairness Act of 2025’’. 5
28	28	(b) A
29	29	MENDMENT OF 1986 CODE.—Except as other-6
30	30	wise expressly provided, whenever in this Act an amend-7
31	31	ment or repeal is expressed in terms of an amendment 8
32	32	VerDate Sep 11 2014 00:13 Mar 06, 2025 Jkt 059200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S445.IS S445
33	33	kjohnson on DSK7ZCZBW3PROD with $$_JOB 2
34	34	•S 445 IS
35	35	to, or repeal of, a section or other provision, the reference 1
36	36	shall be considered to be made to a section or other provi-2
37	37	sion of the Internal Revenue Code of 1986. 3
38	38	(c) T
39	39	ABLE OFCONTENTS.—The table of contents for 4
40	40	this Act is as follows: 5
41	41	Sec. 1. Short title; etc.
42	42	Sec. 2. Partnership interests transferred in connection with performance of
43	43	services.
44	44	Sec. 3. Special rules for partners providing investment management services to
45	45	partnerships.
46	46	SEC. 2. PARTNERSHIP INTERESTS TRANSFERRED IN CON-
47	47	6
48	48	NECTION WITH PERFORMANCE OF SERVICES. 7
49	49	(a) M
50	50	ODIFICATION TOELECTIONTOINCLUDEPART-8
51	51	NERSHIPINTEREST IN GROSSINCOME IN YEAR OF 9
52	52	T
53	53	RANSFER.—Subsection (c) of section 83 is amended by 10
54	54	redesignating paragraph (4) as paragraph (5) and by in-11
55	55	serting after paragraph (3) the following new paragraph: 12
56	56	‘‘(4) P
57	57	ARTNERSHIP INTERESTS .—Except as 13
58	58	provided by the Secretary— 14
59	59	‘‘(A) I
60	60	N GENERAL.—In the case of any 15
61	61	transfer of an interest in a partnership in con-16
62	62	nection with the provision of services to (or for 17
63	63	the benefit of) such partnership— 18
64	64	‘‘(i) the fair market value of such in-19
65	65	terest shall be treated for purposes of this 20
66	66	section as being equal to the amount of the 21
67	67	distribution which the partner would re-22
68	68	ceive if the partnership sold (at the time of 23
69	69	VerDate Sep 11 2014 00:13 Mar 06, 2025 Jkt 059200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S445.IS S445
70	70	kjohnson on DSK7ZCZBW3PROD with $$_JOB 3
71	71	•S 445 IS
72	72	the transfer) all of its assets at fair market 1
73	73	value and distributed the proceeds of such 2
74	74	sale (reduced by the liabilities of the part-3
75	75	nership) to its partners in liquidation of 4
76	76	the partnership, and 5
77	77	‘‘(ii) the person receiving such interest 6
78	78	shall be treated as having made the elec-7
79	79	tion under subsection (b)(1) unless such 8
80	80	person makes an election under this para-9
81	81	graph to have such subsection not apply. 10
82	82	‘‘(B) E
83	83	LECTION.—The election under sub-11
84	84	paragraph (A)(ii) shall be made under rules 12
85	85	similar to the rules of subsection (b)(2).’’. 13
86	86	(b) E
87	87	FFECTIVEDATE.—The amendments made by 14
88	88	this section shall apply to interests in partnerships trans-15
89	89	ferred after the date of the enactment of this Act. 16
90	90	SEC. 3. SPECIAL RULES FOR PARTNERS PROVIDING IN-17
91	91	VESTMENT MANAGEMENT SERVICES TO 18
92	92	PARTNERSHIPS. 19
93	93	(a) I
94	94	NGENERAL.—Part I of subchapter K of chapter 20
95	95	1 is amended by adding at the end the following new sec-21
96	96	tion: 22
97	97	VerDate Sep 11 2014 00:13 Mar 06, 2025 Jkt 059200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S445.IS S445
98	98	kjohnson on DSK7ZCZBW3PROD with $$_JOB 4
99	99	•S 445 IS
100	100	‘‘SEC. 710. SPECIAL RULES FOR PARTNERS PROVIDING IN-1
101	101	VESTMENT MANAGEMENT SERVICES TO 2
102	102	PARTNERSHIPS. 3
103	103	‘‘(a) T
104	104	REATMENT OF DISTRIBUTIVESHARE OF 4
105	105	P
106	106	ARTNERSHIPITEMS.—For purposes of this title, in the 5
107	107	case of an investment services partnership interest— 6
108	108	‘‘(1) I
109	109	N GENERAL.—Notwithstanding section 7
110	110	702(b)— 8
111	111	‘‘(A) an amount equal to the net capital 9
112	112	gain with respect to such interest for any part-10
113	113	nership taxable year shall be treated as ordi-11
114	114	nary income, and 12
115	115	‘‘(B) subject to the limitation of paragraph 13
116	116	(2), an amount equal to the net capital loss 14
117	117	with respect to such interest for any partner-15
118	118	ship taxable year shall be treated as an ordi-16
119	119	nary loss. 17
120	120	‘‘(2) R
121	121	ECHARACTERIZATION OF LOSSES LIM -18
122	122	ITED TO RECHARACTERIZED GAINS .—The amount 19
123	123	treated as ordinary loss under paragraph (1)(B) for 20
124	124	any taxable year shall not exceed the excess (if any) 21
125	125	of— 22
126	126	‘‘(A) the aggregate amount treated as ordi-23
127	127	nary income under paragraph (1)(A) with re-24
128	128	spect to the investment services partnership in-25
129	129	VerDate Sep 11 2014 00:13 Mar 06, 2025 Jkt 059200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S445.IS S445
130	130	kjohnson on DSK7ZCZBW3PROD with $$_JOB 5
131	131	•S 445 IS
132	132	terest for all preceding partnership taxable 1
133	133	years to which this section applies, over 2
134	134	‘‘(B) the aggregate amount treated as or-3
135	135	dinary loss under paragraph (1)(B) with re-4
136	136	spect to such interest for all preceding partner-5
137	137	ship taxable years to which this section applies. 6
138	138	‘‘(3) A
139	139	LLOCATION TO ITEMS OF GAIN AND 7
140	140	LOSS.— 8
141	141	‘‘(A) N
142	142	ET CAPITAL GAIN.—The amount 9
143	143	treated as ordinary income under paragraph 10
144	144	(1)(A) shall be allocated ratably among the 11
145	145	items of long-term capital gain taken into ac-12
146	146	count in determining such net capital gain. 13
147	147	‘‘(B) N
148	148	ET CAPITAL LOSS.—The amount 14
149	149	treated as ordinary loss under paragraph (1)(B) 15
150	150	shall be allocated ratably among the items of 16
151	151	long-term capital loss and short-term capital 17
152	152	loss taken into account in determining such net 18
153	153	capital loss. 19
154	154	‘‘(4) T
155	155	ERMS RELATING TO CAPITAL GAINS AND 20
156	156	LOSSES.—For purposes of this section— 21
157	157	‘‘(A) I
158	158	N GENERAL.—Net capital gain, long- 22
159	159	term capital gain, and long-term capital loss, 23
160	160	with respect to any investment services partner-24
161	161	ship interest for any taxable year, shall be de-25
162	162	VerDate Sep 11 2014 00:13 Mar 06, 2025 Jkt 059200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S445.IS S445
163	163	kjohnson on DSK7ZCZBW3PROD with $$_JOB 6
164	164	•S 445 IS
165	165	termined under section 1222, except that such 1
166	166	section shall be applied— 2
167	167	‘‘(i) without regard to the recharacter-3
168	168	ization of any item as ordinary income or 4
169	169	ordinary loss under this section, 5
170	170	‘‘(ii) by only taking into account items 6
171	171	of gain and loss taken into account by the 7
172	172	holder of such interest under section 702 8
173	173	(other than subsection (a)(9) thereof) with 9
174	174	respect to such interest for such taxable 10
175	175	year, and 11
176	176	‘‘(iii) by treating property which is 12
177	177	taken into account in determining gains 13
178	178	and losses to which section 1231 applies as 14
179	179	capital assets held for more than 1 year. 15
180	180	‘‘(B) N
181	181	ET CAPITAL LOSS.—The term ‘net 16
182	182	capital loss’ means the excess of the losses from 17
183	183	sales or exchanges of capital assets over the 18
184	184	gains from such sales or exchanges. Rules simi-19
185	185	lar to the rules of clauses (i) through (iii) of 20
186	186	subparagraph (A) shall apply for purposes of 21
187	187	the preceding sentence. 22
188	188	‘‘(5) S
189	189	PECIAL RULE FOR DIVIDENDS .—Any div-23
190	190	idend allocated with respect to any investment serv-24
191	191	ices partnership interest shall not be treated as 25
192	192	VerDate Sep 11 2014 00:13 Mar 06, 2025 Jkt 059200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S445.IS S445
193	193	kjohnson on DSK7ZCZBW3PROD with $$_JOB 7
194	194	•S 445 IS
195	195	qualified dividend income for purposes of section 1
196	196	1(h). 2
197	197	‘‘(6) S
198	198	PECIAL RULE FOR QUALIFIED SMALL 3
199	199	BUSINESS STOCK.—Section 1202 shall not apply to 4
200	200	any gain from the sale or exchange of qualified small 5
201	201	business stock (as defined in section 1202(c)) allo-6
202	202	cated with respect to any investment services part-7
203	203	nership interest. 8
204	204	‘‘(b) D
205	205	ISPOSITIONS OFPARTNERSHIPINTERESTS.— 9
206	206	‘‘(1) G
207	207	AIN.— 10
208	208	‘‘(A) I
209	209	N GENERAL.—Any gain on the dis-11
210	210	position of an investment services partnership 12
211	211	interest shall be— 13
212	212	‘‘(i) treated as ordinary income, and 14
213	213	‘‘(ii) recognized notwithstanding any 15
214	214	other provision of this subtitle. 16
215	215	‘‘(B) G
216	216	IFT AND TRANSFERS AT DEATH .— 17
217	217	In the case of a disposition of an investment 18
218	218	services partnership interest by gift or by rea-19
219	219	son of death of the taxpayer— 20
220	220	‘‘(i) subparagraph (A) shall not apply, 21
221	221	‘‘(ii) such interest shall be treated as 22
222	222	an investment services partnership interest 23
223	223	in the hands of the person acquiring such 24
224	224	interest, and 25
225	225	VerDate Sep 11 2014 00:13 Mar 06, 2025 Jkt 059200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S445.IS S445
226	226	kjohnson on DSK7ZCZBW3PROD with $$_JOB 8
227	227	•S 445 IS
228	228	‘‘(iii) any amount that would have 1
229	229	been treated as ordinary income under this 2
230	230	subsection had the decedent sold such in-3
231	231	terest immediately before death shall be 4
232	232	treated as an item of income in respect of 5
233	233	a decedent under section 691. 6
234	234	‘‘(2) L
235	235	OSS.—Any loss on the disposition of an 7
236	236	investment services partnership interest shall be 8
237	237	treated as an ordinary loss to the extent of the ex-9
238	238	cess (if any) of— 10
239	239	‘‘(A) the aggregate amount treated as ordi-11
240	240	nary income under subsection (a) with respect 12
241	241	to such interest for all partnership taxable 13
242	242	years to which this section applies, over 14
243	243	‘‘(B) the aggregate amount treated as or-15
244	244	dinary loss under subsection (a) with respect to 16
245	245	such interest for all partnership taxable years 17
246	246	to which this section applies. 18
247	247	‘‘(3) E
248	248	LECTION WITH RESPECT TO CERTAIN EX -19
249	249	CHANGES.—Paragraph (1)(A)(ii) shall not apply to 20
250	250	the contribution of an investment services partner-21
251	251	ship interest to a partnership in exchange for an in-22
252	252	terest in such partnership if— 23
253	253	‘‘(A) the taxpayer makes an irrevocable 24
254	254	election to treat the partnership interest re-25
255	255	VerDate Sep 11 2014 00:13 Mar 06, 2025 Jkt 059200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S445.IS S445
256	256	kjohnson on DSK7ZCZBW3PROD with $$_JOB 9
257	257	•S 445 IS
258	258	ceived in the exchange as an investment serv-1
259	259	ices partnership interest, and 2
260	260	‘‘(B) the taxpayer agrees to comply with 3
261	261	such reporting and recordkeeping requirements 4
262	262	as the Secretary may prescribe. 5
263	263	‘‘(4) D
264	264	ISTRIBUTIONS OF PARTNERSHIP PROP -6
265	265	ERTY.— 7
266	266	‘‘(A) I
267	267	N GENERAL.—In the case of any dis-8
268	268	tribution of property by a partnership with re-9
269	269	spect to any investment services partnership in-10
270	270	terest held by a partner, the partner receiving 11
271	271	such property shall recognize gain equal to the 12
272	272	excess (if any) of— 13
273	273	‘‘(i) the fair market value of such 14
274	274	property at the time of such distribution, 15
275	275	over 16
276	276	‘‘(ii) the adjusted basis of such prop-17
277	277	erty in the hands of such partner (deter-18
278	278	mined without regard to subparagraph 19
279	279	(C)). 20
280	280	‘‘(B) T
281	281	REATMENT OF GAIN AS ORDINARY 21
282	282	INCOME.—Any gain recognized by such partner 22
283	283	under subparagraph (A) shall be treated as or-23
284	284	dinary income to the same extent and in the 24
285	285	same manner as the increase in such partner’s 25
286	286	VerDate Sep 11 2014 00:13 Mar 06, 2025 Jkt 059200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S445.IS S445
287	287	kjohnson on DSK7ZCZBW3PROD with $$_JOB 10
288	288	•S 445 IS
289	289	distributive share of the taxable income of the 1
290	290	partnership would be treated under subsection 2
291	291	(a) if, immediately prior to the distribution, the 3
292	292	partnership had sold the distributed property at 4
293	293	fair market value and all of the gain from such 5
294	294	disposition were allocated to such partner. For 6
295	295	purposes of applying subsection (a)(2), any gain 7
296	296	treated as ordinary income under this subpara-8
297	297	graph shall be treated as an amount treated as 9
298	298	ordinary income under subsection (a)(1)(A). 10
299	299	‘‘(C) A
300	300	DJUSTMENT OF BASIS.—In the case 11
301	301	a distribution to which subparagraph (A) ap-12
302	302	plies, the basis of the distributed property in 13
303	303	the hands of the distributee partner shall be the 14
304	304	fair market value of such property. 15
305	305	‘‘(D) S
306	306	PECIAL RULES WITH RESPECT TO 16
307	307	MERGERS AND DIVISIONS .—In the case of a 17
308	308	taxpayer which satisfies requirements similar to 18
309	309	the requirements of subparagraphs (A) and (B) 19
310	310	of paragraph (3), this paragraph and paragraph 20
311	311	(1)(A)(ii) shall not apply to the distribution of 21
312	312	a partnership interest if such distribution is in 22
313	313	connection with a contribution (or deemed con-23
314	314	tribution) of any property of the partnership to 24
315	315	VerDate Sep 11 2014 00:13 Mar 06, 2025 Jkt 059200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S445.IS S445
316	316	kjohnson on DSK7ZCZBW3PROD with $$_JOB 11
317	317	•S 445 IS
318	318	which section 721 applies pursuant to a trans-1
319	319	action described in section 708(b)(2). 2
320	320	‘‘(c) I
321	321	NVESTMENTSERVICESPARTNERSHIPINTER-3
322	322	EST.—For purposes of this section— 4
323	323	‘‘(1) I
324	324	N GENERAL.—The term ‘investment serv-5
325	325	ices partnership interest’ means any interest in an 6
326	326	investment partnership acquired or held by any per-7
327	327	son in connection with the conduct of a trade or 8
328	328	business described in paragraph (2) by such person 9
329	329	(or any person related to such person). An interest 10
330	330	in an investment partnership held by any person— 11
331	331	‘‘(A) shall not be treated as an investment 12
332	332	services partnership interest for any period be-13
333	333	fore the first date on which it is so held in con-14
334	334	nection with such a trade or business, 15
335	335	‘‘(B) shall not cease to be an investment 16
336	336	services partnership interest merely because 17
337	337	such person holds such interest other than in 18
338	338	connection with such a trade or business, and 19
339	339	‘‘(C) shall be treated as an investment 20
340	340	services partnership interest if acquired from a 21
341	341	related person in whose hands such interest was 22
342	342	an investment services partnership interest. 23
343	343	‘‘(2) B
344	344	USINESSES TO WHICH THIS SECTION AP -24
345	345	PLIES.—A trade or business is described in this 25
346	346	VerDate Sep 11 2014 00:13 Mar 06, 2025 Jkt 059200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S445.IS S445
347	347	kjohnson on DSK7ZCZBW3PROD with $$_JOB 12
348	348	•S 445 IS
349	349	paragraph if such trade or business primarily in-1
350	350	volves the performance of any of the following serv-2
351	351	ices with respect to assets held (directly or indi-3
352	352	rectly) by one or more investment partnerships re-4
353	353	ferred to in paragraph (1): 5
354	354	‘‘(A) Advising as to the advisability of in-6
355	355	vesting in, purchasing, or selling any specified 7
356	356	asset. 8
357	357	‘‘(B) Managing, acquiring, or disposing of 9
358	358	any specified asset. 10
359	359	‘‘(C) Arranging financing with respect to 11
360	360	acquiring specified assets. 12
361	361	‘‘(D) Any activity in support of any service 13
362	362	described in subparagraphs (A) through (C). 14
363	363	‘‘(3) I
364	364	NVESTMENT PARTNERSHIP .— 15
365	365	‘‘(A) I
366	366	N GENERAL.—The term ‘investment 16
367	367	partnership’ means any partnership if, at the 17
368	368	end of any two consecutive calendar quarters 18
369	369	ending after the date of enactment of this sec-19
370	370	tion— 20
371	371	‘‘(i) substantially all of the assets of 21
372	372	the partnership are specified assets (deter-22
373	373	mined without regard to any section 197 23
374	374	intangible within the meaning of section 24
375	375	197(d)), and 25
376	376	VerDate Sep 11 2014 00:13 Mar 06, 2025 Jkt 059200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\S445.IS S445
377	377	kjohnson on DSK7ZCZBW3PROD with $$_JOB 13
378	378	•S 445 IS
379	379	‘‘(ii) less than 75 percent of the cap-1
380	380	ital of the partnership is attributable to 2
381	381	qualified capital interests which constitute 3
382	382	property held in connection with a trade or 4
383	383	business of the owner of such interest. 5
384	384	‘‘(B) L
385	385	OOK-THROUGH OF CERTAIN WHOL -6
386	386	LY OWNED ENTITIES FOR PURPOSES OF DETER -7
387	387	MINING ASSETS OF THE PARTNERSHIP .— 8
388	388	‘‘(i) I
389	389	N GENERAL.—For purposes of 9
390	390	determining the assets of a partnership 10
391	391	under subparagraph (A)(i)— 11
392	392	‘‘(I) any interest in a specified 12
393	393	entity shall not be treated as an asset 13
394	394	of such partnership, and 14
395	395	‘‘(II) such partnership shall be 15
396	396	treated as holding its proportionate 16
397	397	share of each of the assets of such 17
398	398	specified entity. 18
399	399	‘‘(ii) S
400	400	PECIFIED ENTITY.—For pur-19
401	401	poses of clause (i), the term ‘specified enti-20
402	402	ty’ means, with respect to any partnership 21
403	403	(hereafter referred to as the upper-tier 22
404	404	partnership), any person which engages in 23
405	405	the same trade or business as the upper- 24
406	406	tier partnership and is— 25
407	407	VerDate Sep 11 2014 00:13 Mar 06, 2025 Jkt 059200 PO 00000 Frm 00013 Fmt 6652 Sfmt 6201 E:\BILLS\S445.IS S445
408	408	kjohnson on DSK7ZCZBW3PROD with $$_JOB 14
409	409	•S 445 IS
410	410	‘‘(I) a partnership all of the cap-1
411	411	ital and profits interests of which are 2
412	412	held directly or indirectly by the 3
413	413	upper-tier partnership, or 4
414	414	‘‘(II) a foreign corporation which 5
415	415	does not engage in a trade or business 6
416	416	in the United States and all of the 7
417	417	stock of which is held directly or indi-8
418	418	rectly by the upper-tier partnership. 9
419	419	‘‘(C) S
420	420	PECIAL RULES FOR DETERMINING 10
421	421	IF PROPERTY HELD IN CONNECTION WITH 11
422	422	TRADE OR BUSINESS.— 12
423	423	‘‘(i) I
424	424	N GENERAL.—Except as other-13
425	425	wise provided by the Secretary, solely for 14
426	426	purposes of determining whether any inter-15
427	427	est in a partnership constitutes property 16
428	428	held in connection with a trade or business 17
429	429	under subparagraph (A)(ii)— 18
430	430	‘‘(I) a trade or business of any 19
431	431	person closely related to the owner of 20
432	432	such interest shall be treated as a 21
433	433	trade or business of such owner, 22
434	434	‘‘(II) such interest shall be treat-23
435	435	ed as held by a person in connection 24
436	436	with a trade or business during any 25
437	437	VerDate Sep 11 2014 00:13 Mar 06, 2025 Jkt 059200 PO 00000 Frm 00014 Fmt 6652 Sfmt 6201 E:\BILLS\S445.IS S445
438	438	kjohnson on DSK7ZCZBW3PROD with $$_JOB 15
439	439	•S 445 IS
440	440	taxable year if such interest was so 1
441	441	held by such person during any 3 tax-2
442	442	able years preceding such taxable 3
443	443	year, and 4
444	444	‘‘(III) paragraph (5)(B) shall not 5
445	445	apply. 6
446	446	‘‘(ii) C
447	447	LOSELY RELATED PERSONS .— 7
448	448	For purposes of clause (i)(I), a person 8
449	449	shall be treated as closely related to an-9
450	450	other person if, taking into account the 10
451	451	rules of section 267(c), the relationship be-11
452	452	tween such persons is described in— 12
453	453	‘‘(I) paragraph (1) or (9) of sec-13
454	454	tion 267(b), or 14
455	455	‘‘(II) section 267(b)(4), but solely 15
456	456	in the case of a trust with respect to 16
457	457	which each current beneficiary is the 17
458	458	grantor or a person whose relationship 18
459	459	to the grantor is described in para-19
460	460	graph (1) or (9) of section 267(b). 20
461	461	‘‘(D) A
462	462	NTIABUSE RULES.—The Secretary 21
463	463	may issue regulations or other guidance which 22
464	464	prevent the avoidance of the purposes of sub-23
465	465	paragraph (A), including regulations or other 24
466	466	guidance which treat convertible and contingent 25
467	467	VerDate Sep 11 2014 00:13 Mar 06, 2025 Jkt 059200 PO 00000 Frm 00015 Fmt 6652 Sfmt 6201 E:\BILLS\S445.IS S445
468	468	kjohnson on DSK7ZCZBW3PROD with $$_JOB 16
469	469	•S 445 IS
470	470	debt (and other debt having the attributes of 1
471	471	equity) as a capital interest in the partnership. 2
472	472	‘‘(E) C
473	473	ONTROLLED GROUPS OF ENTI -3
474	474	TIES.— 4
475	475	‘‘(i) I
476	476	N GENERAL.—In the case of a 5
477	477	controlled group of entities, if an interest 6
478	478	in the partnership received in exchange for 7
479	479	a contribution to the capital of the part-8
480	480	nership by any member of such controlled 9
481	481	group would (in the hands of such mem-10
482	482	ber) constitute property held in connection 11
483	483	with a trade or business, then any interest 12
484	484	in such partnership held by any member of 13
485	485	such group shall be treated for purposes of 14
486	486	subparagraph (A) as constituting (in the 15
487	487	hands of such member) property held in 16
488	488	connection with a trade or business. 17
489	489	‘‘(ii) C
490	490	ONTROLLED GROUP OF ENTI -18
491	491	TIES.—For purposes of clause (i), the term 19
492	492	‘controlled group of entities’ means a con-20
493	493	trolled group of corporations as defined in 21
494	494	section 1563(a)(1), applied without regard 22
495	495	to subsections (a)(4) and (b)(2) of section 23
496	496	1563. A partnership or any other entity 24
497	497	(other than a corporation) shall be treated 25
498	498	VerDate Sep 11 2014 00:13 Mar 06, 2025 Jkt 059200 PO 00000 Frm 00016 Fmt 6652 Sfmt 6201 E:\BILLS\S445.IS S445
499	499	kjohnson on DSK7ZCZBW3PROD with $$_JOB 17
500	500	•S 445 IS
501	501	as a member of a controlled group of enti-1
502	502	ties if such entity is controlled (within the 2
503	503	meaning of section 954(d)(3)) by members 3
504	504	of such group (including any entity treated 4
505	505	as a member of such group by reason of 5
506	506	this sentence). 6
507	507	‘‘(F) S
508	508	PECIAL RULE FOR CORPORA -7
509	509	TIONS.—For purposes of this paragraph, in the 8
510	510	case of a corporation, the determination of 9
511	511	whether property is held in connection with a 10
512	512	trade or business shall be determined as if the 11
513	513	taxpayer were an individual. 12
514	514	‘‘(4) S
515	515	PECIFIED ASSET.—The term ‘specified 13
516	516	asset’ means securities (as defined in section 14
517	517	475(c)(2) without regard to the last sentence there-15
518	518	of), real estate held for rental or investment, inter-16
519	519	ests in partnerships, commodities (as defined in sec-17
520	520	tion 475(e)(2)), cash or cash equivalents, or options 18
521	521	or derivative contracts with respect to any of the 19
522	522	foregoing. 20
523	523	‘‘(5) R
524	524	ELATED PERSONS.— 21
525	525	‘‘(A) I
526	526	N GENERAL.—A person shall be 22
527	527	treated as related to another person if the rela-23
528	528	tionship between such persons is described in 24
529	529	section 267(b) or 707(b). 25
530	530	VerDate Sep 11 2014 00:13 Mar 06, 2025 Jkt 059200 PO 00000 Frm 00017 Fmt 6652 Sfmt 6201 E:\BILLS\S445.IS S445
531	531	kjohnson on DSK7ZCZBW3PROD with $$_JOB 18
532	532	•S 445 IS
533	533	‘‘(B) ATTRIBUTION OF PARTNER SERV -1
534	534	ICES.—Any service described in paragraph (2) 2
535	535	which is provided by a partner of a partnership 3
536	536	shall be treated as also provided by such part-4
537	537	nership. 5
538	538	‘‘(d) E
539	539	XCEPTION FOR CERTAINCAPITALINTER-6
540	540	ESTS.— 7
541	541	‘‘(1) I
542	542	N GENERAL.—In the case of any portion 8
543	543	of an investment services partnership interest which 9
544	544	is a qualified capital interest, all items of gain and 10
545	545	loss (and any dividends) which are allocated to such 11
546	546	qualified capital interest shall not be taken into ac-12
547	547	count under subsection (a) if— 13
548	548	‘‘(A) allocations of items are made by the 14
549	549	partnership to such qualified capital interest in 15
550	550	the same manner as such allocations are made 16
551	551	to other qualified capital interests held by part-17
552	552	ners who do not provide any services described 18
553	553	in subsection (c)(2) and who are not related to 19
554	554	the partner holding the qualified capital inter-20
555	555	est, and 21
556	556	‘‘(B) the allocations made to such other in-22
557	557	terests are significant compared to the alloca-23
558	558	tions made to such qualified capital interest. 24
559	559	VerDate Sep 11 2014 00:13 Mar 06, 2025 Jkt 059200 PO 00000 Frm 00018 Fmt 6652 Sfmt 6201 E:\BILLS\S445.IS S445
560	560	kjohnson on DSK7ZCZBW3PROD with $$_JOB 19
561	561	•S 445 IS
562	562	‘‘(2) AUTHORITY TO PROVIDE EXCEPTIONS TO 1
563	563	ALLOCATION REQUIREMENTS .—To the extent pro-2
564	564	vided by the Secretary in regulations or other guid-3
565	565	ance— 4
566	566	‘‘(A) A
567	567	LLOCATIONS TO PORTION OF QUALI -5
568	568	FIED CAPITAL INTEREST .—Paragraph (1) may 6
569	569	be applied separately with respect to a portion 7
570	570	of a qualified capital interest. 8
571	571	‘‘(B) N
572	572	O OR INSIGNIFICANT ALLOCATIONS 9
573	573	TO NONSERVICE PROVIDERS .—In any case in 10
574	574	which the requirements of paragraph (1)(B) are 11
575	575	not satisfied, items of gain and loss (and any 12
576	576	dividends) shall not be taken into account under 13
577	577	subsection (a) to the extent that such items are 14
578	578	properly allocable under such regulations or 15
579	579	other guidance to qualified capital interests. 16
580	580	‘‘(C) A
581	581	LLOCATIONS TO SERVICE PRO -17
582	582	VIDERS’ QUALIFIED CAPITAL INTERESTS WHICH 18
583	583	ARE LESS THAN OTHER ALLOCATIONS .—Alloca-19
584	584	tions shall not be treated as failing to meet the 20
585	585	requirement of paragraph (1)(A) merely be-21
586	586	cause the allocations to the qualified capital in-22
587	587	terest represent a lower return than the alloca-23
588	588	tions made to the other qualified capital inter-24
589	589	ests referred to in such paragraph. 25
590	590	VerDate Sep 11 2014 00:13 Mar 06, 2025 Jkt 059200 PO 00000 Frm 00019 Fmt 6652 Sfmt 6201 E:\BILLS\S445.IS S445
591	591	kjohnson on DSK7ZCZBW3PROD with $$_JOB 20
592	592	•S 445 IS
593	593	‘‘(3) SPECIAL RULE FOR CHANGES IN SERVICES 1
594	594	AND CAPITAL CONTRIBUTIONS .—In the case of an 2
595	595	interest in a partnership which was not an invest-3
596	596	ment services partnership interest and which, by 4
597	597	reason of a change in the services with respect to as-5
598	598	sets held (directly or indirectly) by the partnership 6
599	599	or by reason of a change in the capital contributions 7
600	600	to such partnership, becomes an investment services 8
601	601	partnership interest, the qualified capital interest of 9
602	602	the holder of such partnership interest immediately 10
603	603	after such change shall not, for purposes of this sub-11
604	604	section, be less than the fair market value of such 12
605	605	interest (determined immediately before such 13
606	606	change). 14
607	607	‘‘(4) S
608	608	PECIAL RULE FOR TIERED PARTNER -15
609	609	SHIPS.—Except as otherwise provided by the Sec-16
610	610	retary, in the case of tiered partnerships, all items 17
611	611	which are allocated in a manner which meets the re-18
612	612	quirements of paragraph (1) to qualified capital in-19
613	613	terests in a lower-tier partnership shall retain such 20
614	614	character to the extent allocated on the basis of 21
615	615	qualified capital interests in any upper-tier partner-22
616	616	ship. 23
617	617	‘‘(5) E
618	618	XCEPTION FOR NO -SELF-CHARGED 24
619	619	CARRY AND MANAGEMENT FEE PROVISIONS .—Ex-25
620	620	VerDate Sep 11 2014 00:13 Mar 06, 2025 Jkt 059200 PO 00000 Frm 00020 Fmt 6652 Sfmt 6201 E:\BILLS\S445.IS S445
621	621	kjohnson on DSK7ZCZBW3PROD with $$_JOB 21
622	622	•S 445 IS
623	623	cept as otherwise provided by the Secretary, an in-1
624	624	terest shall not fail to be treated as satisfying the 2
625	625	requirement of paragraph (1)(A) merely because the 3
626	626	allocations made by the partnership to such interest 4
627	627	do not reflect the cost of services described in sub-5
628	628	section (c)(2) which are provided (directly or indi-6
629	629	rectly) to the partnership by the holder of such in-7
630	630	terest (or a related person). 8
631	631	‘‘(6) S
632	632	PECIAL RULE FOR DISPOSITIONS .—In the 9
633	633	case of any investment services partnership interest 10
634	634	any portion of which is a qualified capital interest, 11
635	635	subsection (b) shall not apply to so much of any 12
636	636	gain or loss as bears the same proportion to the en-13
637	637	tire amount of such gain or loss as— 14
638	638	‘‘(A) the distributive share of gain or loss 15
639	639	that would have been allocated to the qualified 16
640	640	capital interest (consistent with the require-17
641	641	ments of paragraph (1)) if the partnership had 18
642	642	sold all of its assets at fair market value imme-19
643	643	diately before the disposition, bears to 20
644	644	‘‘(B) the distributive share of gain or loss 21
645	645	that would have been so allocated to the invest-22
646	646	ment services partnership interest of which such 23
647	647	qualified capital interest is a part. 24
648	648	VerDate Sep 11 2014 00:13 Mar 06, 2025 Jkt 059200 PO 00000 Frm 00021 Fmt 6652 Sfmt 6201 E:\BILLS\S445.IS S445
649	649	kjohnson on DSK7ZCZBW3PROD with $$_JOB 22
650	650	•S 445 IS
651	651	‘‘(7) QUALIFIED CAPITAL INTEREST .—For pur-1
652	652	poses of this section— 2
653	653	‘‘(A) I
654	654	N GENERAL.—The term ‘qualified 3
655	655	capital interest’ means so much of a partner’s 4
656	656	interest in the capital of the partnership as is 5
657	657	attributable to— 6
658	658	‘‘(i) the fair market value of any 7
659	659	money or other property contributed to the 8
660	660	partnership in exchange for such interest 9
661	661	(determined without regard to section 10
662	662	752(a)), 11
663	663	‘‘(ii) any amounts which have been in-12
664	664	cluded in gross income under section 83 13
665	665	with respect to the transfer of such inter-14
666	666	est, and 15
667	667	‘‘(iii) the excess (if any) of— 16
668	668	‘‘(I) any items of income and 17
669	669	gain taken into account under section 18
670	670	702 with respect to such interest, over 19
671	671	‘‘(II) any items of deduction and 20
672	672	loss so taken into account. 21
673	673	‘‘(B) A
674	674	DJUSTMENT TO QUALIFIED CAPITAL 22
675	675	INTEREST.— 23
676	676	‘‘(i) D
677	677	ISTRIBUTIONS AND LOSSES .— 24
678	678	The qualified capital interest shall be re-25
679	679	VerDate Sep 11 2014 00:13 Mar 06, 2025 Jkt 059200 PO 00000 Frm 00022 Fmt 6652 Sfmt 6201 E:\BILLS\S445.IS S445
680	680	kjohnson on DSK7ZCZBW3PROD with $$_JOB 23
681	681	•S 445 IS
682	682	duced by distributions from the partner-1
683	683	ship with respect to such interest and by 2
684	684	the excess (if any) of the amount described 3
685	685	in subparagraph (A)(iii)(II) over the 4
686	686	amount described in subparagraph 5
687	687	(A)(iii)(I). 6
688	688	‘‘(ii) S
689	689	PECIAL RULE FOR CONTRIBU -7
690	690	TIONS OF PROPERTY.—In the case of any 8
691	691	contribution of property described in sub-9
692	692	paragraph (A)(i) with respect to which the 10
693	693	fair market value of such property is not 11
694	694	equal to the adjusted basis of such prop-12
695	695	erty immediately before such contribution, 13
696	696	proper adjustments shall be made to the 14
697	697	qualified capital interest to take into ac-15
698	698	count such difference consistent with such 16
699	699	regulations or other guidance as the Sec-17
700	700	retary may provide. 18
701	701	‘‘(C) M
702	702	ERGERS, CONSOLIDATIONS, ETC., 19
703	703	DISREGARDED.—No increase or decrease in the 20
704	704	qualified capital interest of any partner shall re-21
705	705	sult from a merger, consolidation, or division 22
706	706	described in section 708, or any similar trans-23
707	707	action. 24
708	708	‘‘(8) T
709	709	REATMENT OF CERTAIN LOANS .— 25
710	710	VerDate Sep 11 2014 00:13 Mar 06, 2025 Jkt 059200 PO 00000 Frm 00023 Fmt 6652 Sfmt 6201 E:\BILLS\S445.IS S445
711	711	kjohnson on DSK7ZCZBW3PROD with $$_JOB 24
712	712	•S 445 IS
713	713	‘‘(A) PROCEEDS OF PARTNERSHIP LOANS 1
714	714	NOT TREATED AS QUALIFIED CAPITAL INTER -2
715	715	EST OF SERVICE PROVIDING PARTNERS .—For 3
716	716	purposes of this subsection, an investment serv-4
717	717	ices partnership interest shall not be treated as 5
718	718	a qualified capital interest to the extent that 6
719	719	such interest is acquired in connection with the 7
720	720	proceeds of any loan or other advance made or 8
721	721	guaranteed, directly or indirectly, by any other 9
722	722	partner or the partnership (or any person re-10
723	723	lated to any such other partner or the partner-11
724	724	ship). The preceding sentence shall not apply to 12
725	725	the extent the loan or other advance is repaid 13
726	726	before the date of the enactment of this section 14
727	727	unless such repayment is made with the pro-15
728	728	ceeds of a loan or other advance described in 16
729	729	the preceding sentence. 17
730	730	‘‘(B) R
731	731	EDUCTION IN ALLOCATIONS TO 18
732	732	QUALIFIED CAPITAL INTERESTS FOR LOANS 19
733	733	FROM NONSERVICE -PROVIDING PARTNERS TO 20
734	734	THE PARTNERSHIP.—For purposes of this sub-21
735	735	section, any loan or other advance to the part-22
736	736	nership made or guaranteed, directly or indi-23
737	737	rectly, by a partner not providing services de-24
738	738	scribed in subsection (c)(2) to the partnership 25
739	739	VerDate Sep 11 2014 00:13 Mar 06, 2025 Jkt 059200 PO 00000 Frm 00024 Fmt 6652 Sfmt 6201 E:\BILLS\S445.IS S445
740	740	kjohnson on DSK7ZCZBW3PROD with $$_JOB 25
741	741	•S 445 IS
742	742	(or any person related to such partner) shall be 1
743	743	taken into account in determining the qualified 2
744	744	capital interests of the partners in the partner-3
745	745	ship. 4
746	746	‘‘(9) S
747	747	PECIAL RULE FOR QUALIFIED FAMILY 5
748	748	PARTNERSHIPS.— 6
749	749	‘‘(A) I
750	750	N GENERAL.—In the case of any 7
751	751	specified family partnership interest, paragraph 8
752	752	(1)(A) shall be applied without regard to the 9
753	753	phrase ‘and who are not related to the partner 10
754	754	holding the qualified capital interest’. 11
755	755	‘‘(B) S
756	756	PECIFIED FAMILY PARTNERSHIP IN -12
757	757	TEREST.—For purposes of this paragraph, the 13
758	758	term ‘specified family partnership interest’ 14
759	759	means any investment services partnership in-15
760	760	terest if— 16
761	761	‘‘(i) such interest is an interest in a 17
762	762	qualified family partnership, 18
763	763	‘‘(ii) such interest is held by a natural 19
764	764	person or by a trust with respect to which 20
765	765	each beneficiary is a grantor or a person 21
766	766	whose relationship to the grantor is de-22
767	767	scribed in section 267(b)(1), and 23
768	768	‘‘(iii) all other interests in such quali-24
769	769	fied family partnership with respect to 25
770	770	VerDate Sep 11 2014 00:13 Mar 06, 2025 Jkt 059200 PO 00000 Frm 00025 Fmt 6652 Sfmt 6201 E:\BILLS\S445.IS S445
771	771	kjohnson on DSK7ZCZBW3PROD with $$_JOB 26
772	772	•S 445 IS
773	773	which significant allocations are made 1
774	774	(within the meaning of paragraph (1)(B) 2
775	775	and in comparison to the allocations made 3
776	776	to the interest described in clause (ii)) are 4
777	777	held by persons who— 5
778	778	‘‘(I) are related to the natural 6
779	779	person or trust referred to in clause 7
780	780	(ii), or 8
781	781	‘‘(II) provide services described 9
782	782	in subsection (c)(2). 10
783	783	‘‘(C) Q
784	784	UALIFIED FAMILY PARTNERSHIP .— 11
785	785	For purposes of this paragraph, the term 12
786	786	‘qualified family partnership’ means any part-13
787	787	nership if— 14
788	788	‘‘(i) all of the capital and profits in-15
789	789	terests of such partnership are held by— 16
790	790	‘‘(I) specified family members, 17
791	791	‘‘(II) any person closely related 18
792	792	(within the meaning of subsection 19
793	793	(c)(3)(C)(ii)) to a specified family 20
794	794	member, or 21
795	795	‘‘(III) any other person (not de-22
796	796	scribed in subclause (I) or (II)) if 23
797	797	such interest is an investment services 24
798	798	VerDate Sep 11 2014 00:13 Mar 06, 2025 Jkt 059200 PO 00000 Frm 00026 Fmt 6652 Sfmt 6201 E:\BILLS\S445.IS S445
799	799	kjohnson on DSK7ZCZBW3PROD with $$_JOB 27
800	800	•S 445 IS
801	801	partnership interest with respect to 1
802	802	such person, and 2
803	803	‘‘(ii) such partnership does not hold 3
804	804	itself out to the public as an investment 4
805	805	advisor. 5
806	806	‘‘(D) S
807	807	PECIFIED FAMILY MEMBERS .—For 6
808	808	purposes of subparagraph (C), individuals shall 7
809	809	be treated as specified family members if such 8
810	810	individuals would be treated as one person 9
811	811	under the rules of section 1361(c)(1) if the ap-10
812	812	plicable date (within the meaning of subpara-11
813	813	graph (B)(iii) thereof) were the latest of— 12
814	814	‘‘(i) the date of the establishment of 13
815	815	the partnership, 14
816	816	‘‘(ii) the earliest date that the com-15
817	817	mon ancestor holds a capital or profits in-16
818	818	terest in the partnership, or 17
819	819	‘‘(iii) the date of the enactment of this 18
820	820	section. 19
821	821	‘‘(e) O
822	822	THERINCOME AND GAIN INCONNECTION 20
823	823	W
824	824	ITHINVESTMENTMANAGEMENTSERVICES.— 21
825	825	‘‘(1) I
826	826	N GENERAL.—If— 22
827	827	‘‘(A) a person performs (directly or indi-23
828	828	rectly) investment management services for any 24
829	829	VerDate Sep 11 2014 00:13 Mar 06, 2025 Jkt 059200 PO 00000 Frm 00027 Fmt 6652 Sfmt 6201 E:\BILLS\S445.IS S445
830	830	kjohnson on DSK7ZCZBW3PROD with $$_JOB 28
831	831	•S 445 IS
832	832	investment entity or special purpose acquisition 1
833	833	company, 2
834	834	‘‘(B) such person holds (directly or indi-3
835	835	rectly) a disqualified interest with respect to 4
836	836	such entity or such company (as the case may 5
837	837	be), and 6
838	838	‘‘(C) the value of such interest (or pay-7
839	839	ments thereunder) is substantially related to 8
840	840	the amount of income or gain (whether or not 9
841	841	realized) from the assets with respect to which 10
842	842	the investment management services are per-11
843	843	formed, 12
844	844	any income or gain with respect to such interest 13
845	845	shall be treated as ordinary income. Rules similar to 14
846	846	the rules of subsections (a)(5) and (d) shall apply 15
847	847	for purposes of this subsection. 16
848	848	‘‘(2) D
849	849	EFINITIONS.—For purposes of this sub-17
850	850	section— 18
851	851	‘‘(A) D
852	852	ISQUALIFIED INTEREST.— 19
853	853	‘‘(i) I
854	854	N GENERAL.—The term ‘dis-20
855	855	qualified interest’ means, with respect to 21
856	856	any investment entity— 22
857	857	‘‘(I) any interest in such entity 23
858	858	other than indebtedness, 24
859	859	VerDate Sep 11 2014 00:13 Mar 06, 2025 Jkt 059200 PO 00000 Frm 00028 Fmt 6652 Sfmt 6201 E:\BILLS\S445.IS S445
860	860	kjohnson on DSK7ZCZBW3PROD with $$_JOB 29
861	861	•S 445 IS
862	862	‘‘(II) convertible or contingent 1
863	863	debt of such entity, 2
864	864	‘‘(III) any option or other right 3
865	865	to acquire property described in sub-4
866	866	clause (I) or (II), and 5
867	867	‘‘(IV) any derivative instrument 6
868	868	entered into (directly or indirectly) 7
869	869	with such entity or any investor in 8
870	870	such entity. 9
871	871	‘‘(ii) E
872	872	XCEPTIONS.—Such term shall 10
873	873	not include— 11
874	874	‘‘(I) a partnership interest, 12
875	875	‘‘(II) except as provided by the 13
876	876	Secretary, any interest in a taxable 14
877	877	corporation (other than a special pur-15
878	878	pose acquisition company), and 16
879	879	‘‘(III) except as provided by the 17
880	880	Secretary, stock in an S corporation. 18
881	881	‘‘(B) T
882	882	AXABLE CORPORATION .—The term 19
883	883	‘taxable corporation’ means— 20
884	884	‘‘(i) a domestic C corporation, or 21
885	885	‘‘(ii) a foreign corporation substan-22
886	886	tially all of the income of which is— 23
887	887	VerDate Sep 11 2014 00:13 Mar 06, 2025 Jkt 059200 PO 00000 Frm 00029 Fmt 6652 Sfmt 6201 E:\BILLS\S445.IS S445
888	888	kjohnson on DSK7ZCZBW3PROD with $$_JOB 30
889	889	•S 445 IS
890	890	‘‘(I) effectively connected with 1
891	891	the conduct of a trade or business in 2
892	892	the United States, or 3
893	893	‘‘(II) subject to a comprehensive 4
894	894	foreign income tax (as defined in sec-5
895	895	tion 457A(d)(2)). 6
896	896	‘‘(C) I
897	897	NVESTMENT MANAGEMENT SERV -7
898	898	ICES.—The term ‘investment management serv-8
899	899	ices’ means a substantial quantity of any of the 9
900	900	services described in subsection (c)(2). 10
901	901	‘‘(D) I
902	902	NVESTMENT ENTITY .—The term ‘in-11
903	903	vestment entity’ means any entity which, if it 12
904	904	were a partnership, would be an investment 13
905	905	partnership. 14
906	906	‘‘(E) S
907	907	PECIAL PURPOSE ACQUISITION COM -15
908	908	PANY.—The term ‘special purpose acquisition 16
909	909	company’ means any corporation that— 17
910	910	‘‘(i) is formed for the purpose of ac-18
911	911	quiring a privately held company, 19
912	912	‘‘(ii) is publicly traded on an estab-20
913	913	lished securities market or its interests are 21
914	914	readily tradable on a secondary market (or 22
915	915	the substantial equivalent thereof), and 23
916	916	‘‘(iii) is required to report an acquisi-24
917	917	tion under Item 2.01 or make a disclosure 25
918	918	VerDate Sep 11 2014 00:13 Mar 06, 2025 Jkt 059200 PO 00000 Frm 00030 Fmt 6652 Sfmt 6201 E:\BILLS\S445.IS S445
919	919	kjohnson on DSK7ZCZBW3PROD with $$_JOB 31
920	920	•S 445 IS
921	921	under Item 5.06 of Form 8-K (or any suc-1
922	922	cessor form) with the Securities and Ex-2
923	923	change Commission. 3
924	924	‘‘(f) E
925	925	XCEPTION FORDOMESTICC CORPORATIONS.— 4
926	926	Except as otherwise provided by the Secretary, in the case 5
927	927	of a domestic C corporation (other than a special purpose 6
928	928	acquisition company, as defined in subsection (e)(2)(E))— 7
929	929	‘‘(1) subsections (a) and (b) shall not apply to 8
930	930	any item allocated to such corporation with respect 9
931	931	to any investment services partnership interest (or 10
932	932	to any gain or loss with respect to the disposition of 11
933	933	such an interest), and 12
934	934	‘‘(2) subsection (e) shall not apply. 13
935	935	‘‘(g) R
936	936	EGULATIONS.—The Secretary shall prescribe 14
937	937	such regulations or other guidance as is necessary or ap-15
938	938	propriate to carry out the purposes of this section, includ-16
939	939	ing regulations or other guidance to— 17
940	940	‘‘(1) require such reporting and recordkeeping 18
941	941	by any person in such manner and at such time as 19
942	942	the Secretary may prescribe for purposes of enabling 20
943	943	the partnership to meet the requirements of section 21
944	944	6031 with respect to any item described in section 22
945	945	702(a)(9), 23
946	946	‘‘(2) provide modifications to the application of 24
947	947	this section (including treating related persons as 25
948	948	VerDate Sep 11 2014 00:13 Mar 06, 2025 Jkt 059200 PO 00000 Frm 00031 Fmt 6652 Sfmt 6201 E:\BILLS\S445.IS S445
949	949	kjohnson on DSK7ZCZBW3PROD with $$_JOB 32
950	950	•S 445 IS
951	951	not related to one another) to the extent such modi-1
952	952	fication is consistent with the purposes of this sec-2
953	953	tion, 3
954	954	‘‘(3) prevent the avoidance of the purposes of 4
955	955	this section (including through the use of qualified 5
956	956	family partnerships), and 6
957	957	‘‘(4) coordinate this section with the other pro-7
958	958	visions of this title. 8
959	959	‘‘(h) C
960	960	ROSSREFERENCE.—For 40 percent penalty on 9
961	961	certain underpayments due to the avoidance of this sec-10
962	962	tion, see section 6662.’’. 11
963	963	(b) A
964	964	PPLICATION OFSECTION751 TOINDIRECTDIS-12
965	965	POSITIONS OFINVESTMENTSERVICESPARTNERSHIPIN-13
966	966	TERESTS.— 14
967	967	(1) I
968	968	N GENERAL.—Subsection (a) of section 15
969	969	751 is amended by striking ‘‘or’’ at the end of para-16
970	970	graph (1), by inserting ‘‘or’’ at the end of paragraph 17
971	971	(2), and by inserting after paragraph (2) the fol-18
972	972	lowing new paragraph: 19
973	973	‘‘(3) investment services partnership interests 20
974	974	held by the partnership,’’. 21
975	975	(2) C
976	976	ERTAIN DISTRIBUTIONS TREATED AS 22
977	977	SALES OR EXCHANGES .—Subparagraph (A) of sec-23
978	978	tion 751(b)(1) is amended by striking ‘‘or’’ at the 24
979	979	end of clause (i), by inserting ‘‘or’’ at the end of 25
980	980	VerDate Sep 11 2014 00:13 Mar 06, 2025 Jkt 059200 PO 00000 Frm 00032 Fmt 6652 Sfmt 6201 E:\BILLS\S445.IS S445
981	981	kjohnson on DSK7ZCZBW3PROD with $$_JOB 33
982	982	•S 445 IS
983	983	clause (ii), and by inserting after clause (ii) the fol-1
984	984	lowing new clause: 2
985	985	‘‘(iii) investment services partnership 3
986	986	interests held by the partnership,’’. 4
987	987	(3) A
988	988	PPLICATION OF SPECIAL RULES IN THE 5
989	989	CASE OF TIERED PARTNERSHIPS .—Subsection (f) of 6
990	990	section 751 is amended— 7
991	991	(A) by striking ‘‘or’’ at the end of para-8
992	992	graph (1), by inserting ‘‘or’’ at the end of para-9
993	993	graph (2), and by inserting after paragraph (2) 10
994	994	the following new paragraph: 11
995	995	‘‘(3) an investment services partnership interest 12
996	996	held by the partnership,’’, and 13
997	997	(B) by striking ‘‘partner.’’ and inserting 14
998	998	‘‘partner (other than a partnership in which it 15
999	999	holds an investment services partnership inter-16
1000	1000	est).’’. 17
1001	1001	(4) I
1002	1002	NVESTMENT SERVICES PARTNERSHIP IN -18
1003	1003	TERESTS; QUALIFIED CAPITAL INTERESTS .—Section 19
1004	1004	751 is amended by adding at the end the following 20
1005	1005	new subsection: 21
1006	1006	‘‘(g) I
1007	1007	NVESTMENTSERVICESPARTNERSHIPINTER-22
1008	1008	ESTS.—For purposes of this section— 23
1009	1009	VerDate Sep 11 2014 00:13 Mar 06, 2025 Jkt 059200 PO 00000 Frm 00033 Fmt 6652 Sfmt 6201 E:\BILLS\S445.IS S445
1010	1010	kjohnson on DSK7ZCZBW3PROD with $$_JOB 34
1011	1011	•S 445 IS
1012	1012	‘‘(1) IN GENERAL.—The term ‘investment serv-1
1013	1013	ices partnership interest’ has the meaning given 2
1014	1014	such term by section 710(c). 3
1015	1015	‘‘(2) A
1016	1016	DJUSTMENTS FOR QUALIFIED CAPITAL 4
1017	1017	INTERESTS.—The amount to which subsection (a) 5
1018	1018	applies by reason of paragraph (3) thereof shall not 6
1019	1019	include so much of such amount as is attributable 7
1020	1020	to any portion of the investment services partnership 8
1021	1021	interest which is a qualified capital interest (deter-9
1022	1022	mined under rules similar to the rules of section 10
1023	1023	710(d)). 11
1024	1024	‘‘(3) E
1025	1025	XCEPTION FOR PUBLICLY TRADED PART -12
1026	1026	NERSHIPS.—Except as otherwise provided by the 13
1027	1027	Secretary, in the case of an exchange of an interest 14
1028	1028	in a publicly traded partnership (as defined in sec-15
1029	1029	tion 7704) to which subsection (a) applies— 16
1030	1030	‘‘(A) this section shall be applied without 17
1031	1031	regard to subsections (a)(3), (b)(1)(A)(iii), and 18
1032	1032	(f)(3), and 19
1033	1033	‘‘(B) such partnership shall be treated as 20
1034	1034	owning its proportionate share of the property 21
1035	1035	of any other partnership in which it is a part-22
1036	1036	ner. 23
1037	1037	‘‘(4) R
1038	1038	ECOGNITION OF GAINS .—Any gain with 24
1039	1039	respect to which subsection (a) applies by reason of 25
1040	1040	VerDate Sep 11 2014 00:13 Mar 06, 2025 Jkt 059200 PO 00000 Frm 00034 Fmt 6652 Sfmt 6201 E:\BILLS\S445.IS S445
1041	1041	kjohnson on DSK7ZCZBW3PROD with $$_JOB 35
1042	1042	•S 445 IS
1043	1043	paragraph (3) thereof shall be recognized notwith-1
1044	1044	standing any other provision of this title. 2
1045	1045	‘‘(5) C
1046	1046	OORDINATION WITH INVENTORY 3
1047	1047	ITEMS.—An investment services partnership interest 4
1048	1048	held by the partnership shall not be treated as an 5
1049	1049	inventory item of the partnership. 6
1050	1050	‘‘(6) P
1051	1051	REVENTION OF DOUBLE COUNTING .— 7
1052	1052	Under regulations or other guidance prescribed by 8
1053	1053	the Secretary, subsection (a)(3) shall not apply with 9
1054	1054	respect to any amount to which section 710 applies. 10
1055	1055	‘‘(7) V
1056	1056	ALUATION METHODS .—The Secretary 11
1057	1057	shall prescribe regulations or other guidance which 12
1058	1058	provide the acceptable methods for valuing invest-13
1059	1059	ment services partnership interests for purposes of 14
1060	1060	this section.’’. 15
1061	1061	(c) T
1062	1062	REATMENT FOR PURPOSES OF SECTION 16
1063	1063	7704.—Subsection (d) of section 7704 is amended by add-17
1064	1064	ing at the end the following new paragraph: 18
1065	1065	‘‘(6) I
1066	1066	NCOME FROM CERTAIN CARRIED INTER -19
1067	1067	ESTS NOT QUALIFIED.— 20
1068	1068	‘‘(A) I
1069	1069	N GENERAL.—Specified carried in-21
1070	1070	terest income shall not be treated as qualifying 22
1071	1071	income. 23
1072	1072	‘‘(B) S
1073	1073	PECIFIED CARRIED INTEREST IN -24
1074	1074	COME.—For purposes of this paragraph— 25
1075	1075	VerDate Sep 11 2014 00:13 Mar 06, 2025 Jkt 059200 PO 00000 Frm 00035 Fmt 6652 Sfmt 6201 E:\BILLS\S445.IS S445
1076	1076	kjohnson on DSK7ZCZBW3PROD with $$_JOB 36
1077	1077	•S 445 IS
1078	1078	‘‘(i) IN GENERAL.—The term ‘speci-1
1079	1079	fied carried interest income’ means— 2
1080	1080	‘‘(I) any item of income or gain 3
1081	1081	allocated to an investment services 4
1082	1082	partnership interest (as defined in 5
1083	1083	section 710(c)) held by the partner-6
1084	1084	ship, 7
1085	1085	‘‘(II) any gain on the disposition 8
1086	1086	of an investment services partnership 9
1087	1087	interest (as so defined) or a partner-10
1088	1088	ship interest to which (in the hands of 11
1089	1089	the partnership) section 751 applies, 12
1090	1090	and 13
1091	1091	‘‘(III) any income or gain taken 14
1092	1092	into account by the partnership under 15
1093	1093	subsection (b)(4) or (e) of section 16
1094	1094	710. 17
1095	1095	‘‘(ii) E
1096	1096	XCEPTION FOR QUALIFIED CAP -18
1097	1097	ITAL INTERESTS.—A rule similar to the 19
1098	1098	rule of section 710(d) shall apply for pur-20
1099	1099	poses of clause (i). 21
1100	1100	‘‘(C) C
1101	1101	OORDINATION WITH OTHER PROVI -22
1102	1102	SIONS.—Subparagraph (A) shall not apply to 23
1103	1103	any item described in paragraph (1)(E) (or so 24
1104	1104	VerDate Sep 11 2014 00:13 Mar 06, 2025 Jkt 059200 PO 00000 Frm 00036 Fmt 6652 Sfmt 6201 E:\BILLS\S445.IS S445
1105	1105	kjohnson on DSK7ZCZBW3PROD with $$_JOB 37
1106	1106	•S 445 IS
1107	1107	much of paragraph (1)(F) as relates to para-1
1108	1108	graph (1)(E)). 2
1109	1109	‘‘(D) S
1110	1110	PECIAL RULES FOR CERTAIN PART -3
1111	1111	NERSHIPS.— 4
1112	1112	‘‘(i) C
1113	1113	ERTAIN PARTNERSHIPS OWNED 5
1114	1114	BY REAL ESTATE INVESTMENT TRUSTS .— 6
1115	1115	Subparagraph (A) shall not apply in the 7
1116	1116	case of a partnership which meets each of 8
1117	1117	the following requirements: 9
1118	1118	‘‘(I) Such partnership is treated 10
1119	1119	as publicly traded under this section 11
1120	1120	solely by reason of interests in such 12
1121	1121	partnership being convertible into in-13
1122	1122	terests in a real estate investment 14
1123	1123	trust which is publicly traded. 15
1124	1124	‘‘(II) Fifty percent or more of 16
1125	1125	the capital and profits interests of 17
1126	1126	such partnership are owned, directly 18
1127	1127	or indirectly, at all times during the 19
1128	1128	taxable year by such real estate in-20
1129	1129	vestment trust (determined with the 21
1130	1130	application of section 267(c)). 22
1131	1131	‘‘(III) Such partnership meets 23
1132	1132	the requirements of paragraphs (2), 24
1133	1133	(3), and (4) of section 856(c). 25
1134	1134	VerDate Sep 11 2014 00:13 Mar 06, 2025 Jkt 059200 PO 00000 Frm 00037 Fmt 6652 Sfmt 6201 E:\BILLS\S445.IS S445
1135	1135	kjohnson on DSK7ZCZBW3PROD with $$_JOB 38
1136	1136	•S 445 IS
1137	1137	‘‘(ii) CERTAIN PARTNERSHIPS OWN -1
1138	1138	ING OTHER PUBLICLY TRADED PARTNER -2
1139	1139	SHIPS.—Subparagraph (A) shall not apply 3
1140	1140	in the case of a partnership which meets 4
1141	1141	each of the following requirements: 5
1142	1142	‘‘(I) Substantially all of the as-6
1143	1143	sets of such partnership consist of in-7
1144	1144	terests in one or more publicly traded 8
1145	1145	partnerships (determined without re-9
1146	1146	gard to subsection (b)(2)). 10
1147	1147	‘‘(II) Substantially all of the in-11
1148	1148	come of such partnership is ordinary 12
1149	1149	income or section 1231 gain (as de-13
1150	1150	fined in section 1231(a)(3)). 14
1151	1151	‘‘(E) T
1152	1152	RANSITIONAL RULE .—Subpara-15
1153	1153	graph (A) shall not apply to any taxable year 16
1154	1154	of the partnership beginning before the date 17
1155	1155	which is 10 years after the date of the enact-18
1156	1156	ment of this paragraph.’’. 19
1157	1157	(d) I
1158	1158	MPOSITION OF PENALTY ON UNDERPAY-20
1159	1159	MENTS.— 21
1160	1160	(1) I
1161	1161	N GENERAL.—Subsection (b) of section 22
1162	1162	6662 is amended by inserting after paragraph (10) 23
1163	1163	the following new paragraph: 24
1164	1164	VerDate Sep 11 2014 00:13 Mar 06, 2025 Jkt 059200 PO 00000 Frm 00038 Fmt 6652 Sfmt 6201 E:\BILLS\S445.IS S445
1165	1165	kjohnson on DSK7ZCZBW3PROD with $$_JOB 39
1166	1166	•S 445 IS
1167	1167	‘‘(11) The application of section 710(e) or the 1
1168	1168	regulations or other guidance prescribed under sec-2
1169	1169	tion 710(g) to prevent the avoidance of the purposes 3
1170	1170	of section 710.’’. 4
1171	1171	(2) A
1172	1172	MOUNT OF PENALTY .— 5
1173	1173	(A) I
1174	1174	N GENERAL.—Section 6662 is amend-6
1175	1175	ed by adding at the end the following new sub-7
1176	1176	section: 8
1177	1177	‘‘(m) I
1178	1178	NCREASE INPENALTY INCASE OFPROPERTY 9
1179	1179	T
1180	1180	RANSFERRED FOR INVESTMENT MANAGEMENT SERV-10
1181	1181	ICES.—In the case of any portion of an underpayment to 11
1182	1182	which this section applies by reason of subsection (b)(10), 12
1183	1183	subsection (a) shall be applied with respect to such portion 13
1184	1184	by substituting ‘40 percent’ for ‘20 percent’.’’. 14
1185	1185	(B) C
1186	1186	ONFORMING AMENDMENT .—Subpara-15
1187	1187	graph (B) of section 6662A(e)(2) is amended 16
1188	1188	by striking ‘‘or (i)’’ and inserting ‘‘, (i), or 17
1189	1189	(m)’’. 18
1190	1190	(3) S
1191	1191	PECIAL RULES FOR APPLICATION OF REA -19
1192	1192	SONABLE CAUSE EXCEPTION .—Subsection (c) of sec-20
1193	1193	tion 6664 is amended— 21
1194	1194	(A) by redesignating paragraphs (3) and 22
1195	1195	(4) as paragraphs (4) and (5), respectively; 23
1196	1196	VerDate Sep 11 2014 00:13 Mar 06, 2025 Jkt 059200 PO 00000 Frm 00039 Fmt 6652 Sfmt 6201 E:\BILLS\S445.IS S445
1197	1197	kjohnson on DSK7ZCZBW3PROD with $$_JOB 40
1198	1198	•S 445 IS
1199	1199	(B) by striking ‘‘paragraph (3)’’ in para-1
1200	1200	graph (5)(A), as so redesignated, and inserting 2
1201	1201	‘‘paragraph (4)’’; and 3
1202	1202	(C) by inserting after paragraph (2) the 4
1203	1203	following new paragraph: 5
1204	1204	‘‘(3) S
1205	1205	PECIAL RULE FOR UNDERPAYMENTS AT -6
1206	1206	TRIBUTABLE TO INVESTMENT MANAGEMENT SERV -7
1207	1207	ICES.— 8
1208	1208	‘‘(A) I
1209	1209	N GENERAL.—Paragraph (1) shall 9
1210	1210	not apply to any portion of an underpayment to 10
1211	1211	which section 6662 applies by reason of sub-11
1212	1212	section (b)(11) unless— 12
1213	1213	‘‘(i) the relevant facts affecting the 13
1214	1214	tax treatment of the item are adequately 14
1215	1215	disclosed, 15
1216	1216	‘‘(ii) there is or was substantial au-16
1217	1217	thority for such treatment, and 17
1218	1218	‘‘(iii) the taxpayer reasonably believed 18
1219	1219	that such treatment was more likely than 19
1220	1220	not the proper treatment. 20
1221	1221	‘‘(B) R
1222	1222	ULES RELATING TO REASONABLE 21
1223	1223	BELIEF.—Rules similar to the rules of sub-22
1224	1224	section (d)(4) shall apply for purposes of sub-23
1225	1225	paragraph (A)(iii).’’. 24
1226	1226	VerDate Sep 11 2014 00:13 Mar 06, 2025 Jkt 059200 PO 00000 Frm 00040 Fmt 6652 Sfmt 6201 E:\BILLS\S445.IS S445
1227	1227	kjohnson on DSK7ZCZBW3PROD with $$_JOB 41
1228	1228	•S 445 IS
1229	1229	(e) INCOME ANDLOSSFROMINVESTMENTSERVICES 1
1230	1230	P
1231	1231	ARTNERSHIPINTERESTSTAKENINTOACCOUNT INDE-2
1232	1232	TERMININGNETEARNINGSFROMSELF-EMPLOYMENT.— 3
1233	1233	(1) I
1234	1234	NTERNAL REVENUE CODE .— 4
1235	1235	(A) I
1236	1236	N GENERAL.—Section 1402(a) is 5
1237	1237	amended by striking ‘‘and’’ at the end of para-6
1238	1238	graph (16), by striking the period at the end of 7
1239	1239	paragraph (17) and inserting ‘‘; and’’, and by 8
1240	1240	inserting after paragraph (17) the following 9
1241	1241	new paragraph: 10
1242	1242	‘‘(18) notwithstanding the preceding provisions 11
1243	1243	of this subsection, in the case of any individual en-12
1244	1244	gaged in the trade or business of providing services 13
1245	1245	described in section 710(c)(2) with respect to any 14
1246	1246	entity, investment services partnership income or 15
1247	1247	loss (as defined in subsection (m)) of such individual 16
1248	1248	with respect to such entity shall be taken into ac-17
1249	1249	count in determining the net earnings from self-em-18
1250	1250	ployment of such individual.’’. 19
1251	1251	(B) I
1252	1252	NVESTMENT SERVICES PARTNERSHIP 20
1253	1253	INCOME OR LOSS.—Section 1402 is amended by 21
1254	1254	adding at the end the following new subsection: 22
1255	1255	‘‘(m) I
1256	1256	NVESTMENTSERVICESPARTNERSHIPINCOME 23
1257	1257	ORLOSS.—For purposes of subsection (a)— 24
1258	1258	VerDate Sep 11 2014 00:13 Mar 06, 2025 Jkt 059200 PO 00000 Frm 00041 Fmt 6652 Sfmt 6201 E:\BILLS\S445.IS S445
1259	1259	kjohnson on DSK7ZCZBW3PROD with $$_JOB 42
1260	1260	•S 445 IS
1261	1261	‘‘(1) IN GENERAL.—The term ‘investment serv-1
1262	1262	ices partnership income or loss’ means, with respect 2
1263	1263	to any investment services partnership interest (as 3
1264	1264	defined in section 710(c)) or disqualified interest (as 4
1265	1265	defined in section 710(e)), the net of— 5
1266	1266	‘‘(A) the amounts treated as ordinary in-6
1267	1267	come or ordinary loss under subsections (b) and 7
1268	1268	(e) of section 710 with respect to such interest, 8
1269	1269	‘‘(B) all items of income, gain, loss, and 9
1270	1270	deduction allocated to such interest, and 10
1271	1271	‘‘(C) the amounts treated as realized from 11
1272	1272	the sale or exchange of property other than a 12
1273	1273	capital asset under section 751 with respect to 13
1274	1274	such interest. 14
1275	1275	‘‘(2) E
1276	1276	XCEPTION FOR QUALIFIED CAPITAL IN -15
1277	1277	TERESTS.—A rule similar to the rule of section 16
1278	1278	710(d) shall apply for purposes of applying para-17
1279	1279	graph (1)(B).’’. 18
1280	1280	(2) S
1281	1281	OCIAL SECURITY ACT.—Section 211(a) of 19
1282	1282	the Social Security Act is amended by striking 20
1283	1283	‘‘and’’ at the end of paragraph (15), by striking the 21
1284	1284	period at the end of paragraph (16) and inserting ‘‘; 22
1285	1285	and’’, and by inserting after paragraph (16) the fol-23
1286	1286	lowing new paragraph: 24
1287	1287	VerDate Sep 11 2014 00:13 Mar 06, 2025 Jkt 059200 PO 00000 Frm 00042 Fmt 6652 Sfmt 6201 E:\BILLS\S445.IS S445
1288	1288	kjohnson on DSK7ZCZBW3PROD with $$_JOB 43
1289	1289	•S 445 IS
1290	1290	‘‘(17) Notwithstanding the preceding provisions 1
1291	1291	of this subsection, in the case of any individual en-2
1292	1292	gaged in the trade or business of providing services 3
1293	1293	described in section 710(c)(2) of the Internal Rev-4
1294	1294	enue Code of 1986 with respect to any entity, invest-5
1295	1295	ment services partnership income or loss (as defined 6
1296	1296	in section 1402(m) of such Code) shall be taken into 7
1297	1297	account in determining the net earnings from self- 8
1298	1298	employment of such individual.’’. 9
1299	1299	(f) S
1300	1300	EPARATEACCOUNTING BYPARTNER.—Section 10
1301	1301	702(a) is amended by striking ‘‘and’’ at the end of para-11
1302	1302	graph (7), by striking the period at the end of paragraph 12
1303	1303	(8) and inserting ‘‘, and’’, and by inserting after para-13
1304	1304	graph (8) the following: 14
1305	1305	‘‘(9) any amount treated as ordinary income or 15
1306	1306	loss under subsection (a), (b), or (e) of section 16
1307	1307	710.’’. 17
1308	1308	(g) C
1309	1309	ONFORMINGAMENDMENTS.— 18
1310	1310	(1) Subsection (d) of section 731 is amended by 19
1311	1311	inserting ‘‘section 710(b)(4) (relating to distribu-20
1312	1312	tions of partnership property),’’ after ‘‘to the extent 21
1313	1313	otherwise provided by’’. 22
1314	1314	(2) Section 741 is amended by inserting ‘‘or 23
1315	1315	section 710 (relating to special rules for partners 24
1316	1316	VerDate Sep 11 2014 00:13 Mar 06, 2025 Jkt 059200 PO 00000 Frm 00043 Fmt 6652 Sfmt 6201 E:\BILLS\S445.IS S445
1317	1317	kjohnson on DSK7ZCZBW3PROD with $$_JOB 44
1318	1318	•S 445 IS
1319	1319	providing investment management services to part-1
1320	1320	nerships)’’ before the period at the end. 2
1321	1321	(3) The table of sections for part I of sub-3
1322	1322	chapter K of chapter 1 is amended by adding at the 4
1323	1323	end the following new item: 5
1324	1324	‘‘Sec. 710. Special rules for partners providing investment management services
1325	1325	to partnerships.’’.
1326	1326	(4)(A) Part IV of subchapter O of chapter 1 is 6
1327	1327	amended by striking section 1061. 7
1328	1328	(B) The table of sections for part IV of sub-8
1329	1329	chapter O of chapter 1 is amended by striking the 9
1330	1330	item relating to section 1061. 10
1331	1331	(h) E
1332	1332	FFECTIVEDATE.— 11
1333	1333	(1) I
1334	1334	N GENERAL.—Except as otherwise pro-12
1335	1335	vided in this subsection, the amendments made by 13
1336	1336	this section shall apply to taxable years ending after 14
1337	1337	the date of the enactment of this Act. 15
1338	1338	(2) P
1339	1339	ARTNERSHIP TAXABLE YEARS WHICH IN -16
1340	1340	CLUDE EFFECTIVE DATE .—In applying section 17
1341	1341	710(a) of the Internal Revenue Code of 1986 (as 18
1342	1342	added by this section) in the case of any partnership 19
1343	1343	taxable year which includes the date of the enact-20
1344	1344	ment of this Act, the amount of the net capital gain 21
1345	1345	referred to in such section shall be treated as being 22
1346	1346	the lesser of the net capital gain for the entire part-23
1347	1347	nership taxable year or the net capital gain deter-24
1348	1348	VerDate Sep 11 2014 00:13 Mar 06, 2025 Jkt 059200 PO 00000 Frm 00044 Fmt 6652 Sfmt 6201 E:\BILLS\S445.IS S445
1349	1349	kjohnson on DSK7ZCZBW3PROD with $$_JOB 45
1350	1350	•S 445 IS
1351	1351	mined by only taking into account items attributable 1
1352	1352	to the portion of the partnership taxable year which 2
1353	1353	is after such date. 3
1354	1354	(3) D
1355	1355	ISPOSITIONS OF PARTNERSHIP INTER -4
1356	1356	ESTS.— 5
1357	1357	(A) I
1358	1358	N GENERAL.—Section 710(b) of such 6
1359	1359	Code (as added by this section) shall apply to 7
1360	1360	dispositions and distributions after the date of 8
1361	1361	the enactment of this Act. 9
1362	1362	(B) I
1363	1363	NDIRECT DISPOSITIONS.—The amend-10
1364	1364	ments made by subsection (b) shall apply to 11
1365	1365	transactions after the date of the enactment of 12
1366	1366	this Act. 13
1367	1367	(4) O
1368	1368	THER INCOME AND GAIN IN CONNECTION 14
1369	1369	WITH INVESTMENT MANAGEMENT SERVICES .—Sec-15
1370	1370	tion 710(e) of such Code (as added by this section) 16
1371	1371	shall take effect on the date of the enactment of this 17
1372	1372	Act. 18
1373	1373	Æ
1374	1374	VerDate Sep 11 2014 00:13 Mar 06, 2025 Jkt 059200 PO 00000 Frm 00045 Fmt 6652 Sfmt 6301 E:\BILLS\S445.IS S445
1375	1375	kjohnson on DSK7ZCZBW3PROD with $$_JOB