,i #aafth ,,congress #ast ,session ,h4 ,r4 #chdh ,,in ,,the ,,house ,,of ,,representatives ,july #ah1 #bjai,mr4 ,pocan 7for himself1 ,ms4 ,jayapal1 ,mr4 ,garca of ,illinois1 ,mr4 ,grijalva1 ,mr4 ,khanna1 ,ms4 ,lee of ,california1 ,ms4 ,pressley1 ,ms4 ,schakowsky1 and ,ms4 ,tlaib7 introduced the following bill2 which was referred to the ,committee on ,ways and ,means1 and in addition to the ,committees on ,financial ,services1 the ,judiciary1 and ,education and ,labor1 for a period to be subsequently determined by the ,speaker1 in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned ,a ,,bill ,to require the ,securities and ,exchange ,commission to issue rules requiring private funds to publicly disclose certain information1 and for other purposes4 #a4 ,short title2 table of contents 7a7 ,short title ,this ,act may be cited as the ,stop ,wall ,street ,looting ,act4 7b7 ,table of contents ,the table of contents for this ,act is as follows3 ,sec4 #a4 ,short title2 table of contents4 ,sec4 #b4 ,findings4 ,sec4 #c4 ,definitions4 ,,title ,i--,corporate responsibility ,sec4 #aja4 ,joint and several liability for controlling private funds4 ,sec4 #ajb4 ,joint and several liability for holders of economic interests in controlling private funds4 ,sec4 #ajc4 ,indemnification void as against public policy4 ,,title ,,ii--,anti-looting ,sec4 #bja4 ,limitations on post-acquisition dividends1 distributions1 redemptions1 and buybacks4 ,sec4 #bjb4 ,prevention of fraudulent transfers4 ,sec4 #bjc4 ,surtax on certain amounts received by investment firms from controlled target firms4 ,sec4 #bjd4 ,limitation on deduction for business interest of certain businesses owned by private funds4 ,,title ,,iii--,protecting workers when companies go bankrupt ,sec4 #cja4 ,increased priority for wages4 ,sec4 #cjb4 ,priority for severance pay and contributions to employee benefit plans4 ,sec4 #cjc4 ,priority for violations of ,federal and ,state laws4 ,sec4 #cjd4 ,limitation on executive compensation enhancements4 ,sec4 #cje4 ,prohibition against special compensation payments4 ,sec4 #cjf4 ,executive compensation upon exit from bankruptcy4 ,sec4 #cjg4 ,collateral surcharge for employee obligations4 ,sec4 #cjh4 ,voidability of preferential compensation transfers4 ,sec4 #cji4 ,protection for employees in a sale of assets4 ,sec4 #caj4 ,protection of gift card purchasers4 ,sec4 #caa4 ,commercial real estate4 ,,title ,,iv--,closing the carried interest loophole ,sec4 #dja4 ,amendment of #aihf ,code4 ,sec4 #djb4 ,partnership interests transferred in connection with performance of services4 ,sec4 #djc4 ,special rules for partners providing investment management services to partnerships4 ,,title ,v--,investor protection and market transparency ,sec4 #eja4 ,disclosure of fees and returns4 ,sec4 #ejb4 ,fiduciary obligations4 ,sec4 #ejc4 ,disclosures relating to the marketing of private equity funds4 ,,title ,,vi--,restrictions on securitizing risky corporate debt ,sec4 #fja4 ,risk retention requirements for securitization of corporate debt4 ,,title ,,vii--,miscellaneous ,sec4 #gja4 ,anti-evasion4 ,sec4 #gjb4 ,severability4 #b4 ,findings ,congress finds the following3 7#a7 ,during the #bj-year period preceding the date of enactment of this ,act1 activity by private equity funds has exploded4 7#b7 ,millions of people in communities across the ,united ,states rely on companies that are owned by private equity funds1 including almost #e1hjj1jjj individuals who work for companies owned by those funds4 ,for millions of additional individuals1 a private investment fund acts as a landlord1 a lender1 or an owner of a local grocery store1 newspaper1 or hospital4 ,many pension funds are also investors in private investment funds4 7#c7 ,private investment funds have taken controlling stakes in companies in a wide variety of industries1 including the financial services1 real estate1 media1 and healthcare industries1 but some of the largest impacts from private investment funds have been in the retail sector4 ,in the #b years preceding the date of enactment of this ,act1 cases have been commenced under title #aa1 ,united ,states ,code1 with respect to dozens of retailers in the ,united ,states1 including ,sears1 ,toys ,r ,us1 ,shopko1 ,payless ,shoe,source1 ,charlotte ,russe1 ,bon-,ton1 ,nine ,west1 ,david's ,bridal1 ,claire's1 and ,southeastern ,grocers1 which was the parent company for ,,bi-,,lo and ,winn-,dixie4 7#d7 ,private investment funds have also targeted entities that serve low-income or vulnerable populations1 including affordable housing developments1 for-profit colleges1 payday lenders1 medical providers1 and nursing homes4 7#e7 ,while private investment funds often purport to take over struggling companies and make those companies viable1 the opposite is often true4 ,leveraged buyouts impose enormous debt loads on otherwise viable companies and then strip those companies of assets1 hobbling the operations of those companies and preventing them from making necessary investments for future growth4 ,if an investment goes well1 the fund reaps most of the rewards1 but if the investment does not go well1 workers and customers of the company1 and the community relying on the company1 suffer4 7#f7 ,regardless of the performance of a private investment fund1 the managers of the fund often make profits through fees1 dividends1 and other financial engineering4 ,private funds should have a stake in the outcome of their investments1 enjoying returns if those investments are successful but absorbing losses if those investments fail4 7#g7 ,when a case is commenced under title #aa1 ,united ,states ,code1 with respect to a portfolio company1 workers not only lose jobs1 but also lose wages and benefits that are owed1 severance pay that has been promised1 and pensions that have been earned4 ,workers should not be sent to the back of the line behind other creditors if1 through no fault of those workers1 an investment fails4 7#h7 ,the performance of private investment funds is cloaked in secrecy4 ,those funds have full control over the information that the funds disclose to investors1 which allows the funds to manufacture their own performance metrics and makes it difficult for an investor to compare the returns to other investment options4 ,funds also increasingly require investors to waive the fiduciary obligations applicable to the funds4 ,investors should have the information and bargaining power to take control over their own investments4 7#i7 ,an increasing amount of risky debt is being introduced into the market and the quality of that debt is deteriorating1 raising concerns with regulators and lawmakers about systemic risk4 ,the institutions that make and securitize risky loans collect large fees and then pass on risk to unwitting investors4 ,the financial system should not bear all of the risk while lenders and securitizers reap the rewards4 7#aj7 ,the ,federal ,government should-- 7,a7 protect workers1 companies1 consumers1 and investors in the ,united ,states2 and 7,b7 put an end to the practice of looting of economically viable companies for the enrichment of private investment fund managers4 #c4 ,definitions ,in this ,act3 7#a7 ,affiliate ,the term affiliate means-- 7,a7 a person that directly or indirectly owns1 controls1 or holds with power to vote1 #bj percent or more of the outstanding voting securities of another entity1 other than a person that holds such securities-- 7i7 in a fiduciary or agency capacity without sole discretionary power to vote such securities2 or 7ii7 solely to secure a debt1 if such entity has not in fact exercised such power to vote2 7,b7 a corporation #bj percent or more of whose outstanding voting securities are directly or indirectly owned1 controlled1 or held with power to vote1 by another entity 7referred to in this subparagraph as a covered entity71 or by an entity that directly or indirectly owns1 controls1 or holds with power to vote1 #bj percent or more of the outstanding voting securities of the covered entity1 other than an entity that holds such securities-- 7i7 in a fiduciary or agency capacity without sole discretionary power to vote such securities2 or 7ii7 solely to secure a debt1 if such entity has not in fact exercised such power to vote2 7,c7 a person whose business is operated under a lease or operating agreement by another entity1 or person substantially all of whose property is operated under an operating agreement with that other entity2 or 7,d7 an entity that operates the business or substantially all of the property of another entity under a lease or operating agreement4 7#b7 ,capital distribution ,the term capital distribution means-- 7,a7 a cash or share dividend2 7,b7 a share repurchase2 7,c7 a share redemption2 7,d7 a share buyback2 7,e7 a payment of interest or fee on a share of stock2 and 7,f7 any other transaction similar to a transaction described in subparagraphs 7,a7 through 7,e74 7#c7 ,change in control ,the term change in control means a change of economic interest with respect to-- 7,a7 the power to vote more than #ej per centum of any class of voting securities of a corporation that engages in interstate commerce2 or 7,b7 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 corporation4 7#d7 ,change in control transaction ,the term change in control transaction means a transaction that effects a change in control4 7#e7 ,commission ,the term ,commission means the ,securities and ,exchange ,commission4 7#f7 ,control person ,the term control person-- 7,a7 means-- 7i7 a person-- 7,i7 that directly or indirectly owns1 controls1 or holds with power to vote1 including through coordination with other persons1 #bj percent or more of the outstanding voting interests of a target firm2 or 7,,ii7 that operates the business or substantially all of the property of a target firm under a lease or operating agreement2 7ii7 a corporation1 other than a target firm1 that has #bj percent or more of its outstanding voting interests directly or indirectly owned1 controlled1 or held with power to vote by a person that directly or indirectly owns1 controls1 or holds with power to vote1 including through coordination with other persons1 #bj percent or more of the outstanding voting interests of a target firm2 and 7iii7 a person that otherwise has the ability to direct the actions of a target firm2 and 7,b7 does not include a person that-- 7i7 holds the voting interests of a corporation solely-- 7,i7 in a fiduciary or agency capacity without sole discretionary power to vote the securities2 or 7,,ii7 to secure a debt1 if the person has not exercised the power to vote2 or 7ii7 7,i7 is a limited partner with respect to a person described in subparagraph 7,a7 that is a partnership2 and 7,,ii7 does not participate in the direction of the management or policy of a corporation4 7#g7 ,corporation ,the term corporation means-- 7,a7 a joint-stock company2 7,b7 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 association1 including a limited partnership and a limited liability company2 7,c7 a trust2 and 7,d7 an association having a power or privilege that a private corporation1 but not an individual or a partnership1 possesses4 7#h7 ,holder of an economic interest ,the term holder of an economic interest-- 7,a7 means a person that directly or indirectly has an economic interest in a corporation or a right to participate in the governance of a corporation1 without regard to the form or source of that interest or right2 7,b7 if the economic interest described in subparagraph 7,a7 is a security1 does not include-- 7i7 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 #aicc 7#ae ,u4,s4,c4 #gg;b7 until the date that is #dj days after the date on which that acquisition occurs2 or 7ii7 a member of a national securities exchange solely because that member is the record holder of that security and1 under the rules of that exchange-- 7,i7 may direct the vote of that security1 without instruction1 on-- 7aa7 other than contested matters2 or 7bb7 matters that may substantially affect the rights or privileges of the holders of the security to be voted2 and 7,,ii7 is otherwise precluded from voting without instruction2 and 7,c7 does not include-- 7i7 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 interest2 or 7ii7 a person that is not an insider with respect to a control person4 7#i7 ,insider ,the term insider means any-- 7,a7 director of a corporation2 7,b7 officer of a corporation2 7,c7 managing agent of a corporation2 7,d7 control person with respect to a corporation2 7,e7 affiliate of a corporation2 7,f7 consultant or contractor retained by a corporation2 7,g7 affiliate1 relative1 or agent of a person described in any of subparagraphs 7,a7 through 7,e72 and 7,h7 affiliate1 relative1 or agent of a person described in subparagraph 7,g74 7#aj7 ,investment adviser ,the term investment adviser has the meaning given the term in section #bjb7;a7 of the ,investment ,advisers ,act of #aidj 7#ae ,u4,s4,c4 #hj;b-#b7;a774 7#aa7 ,issuer ,the term issuer has the meaning given the term in section #c7;a7 of the ,securities ,exchange ,act of #aicd 7#ae ,u4,s4,c4 #gh;c7a774 7#ab7 ,national securities exchange ,the term national securities exchange means an exchange that is registered as a national securities exchange under section #f of the ,securities ,exchange ,act of #aicd 7#ae ,u4,s4,c4 #gh;f74 7#ac7 ,private fund ,except as otherwise expressly provided1 the term private fund-- 7,a7 means a company or partnership that-- 7i7 would be considered an investment company under section #c of the ,investment ,company ,act of #aidj 7#ae ,u4,s4,c4 #hj;a-#c7 but for the application of paragraph 7#a7 or 7#g7 of subsection 7c7 of such section #c2 7ii7 directly or through an affiliate1 acts as a control person2 and 7iii7 is not a venture capital fund1 as defined in section #bge4bjc7l7-#a of title #ag1 ,code of ,federal ,regulations1 as in effect on the date of enactment of this ,act2 and 7,b7 does not include an institution selected under section #ajg of the ,community ,development ,banking and ,financial ,institutions ,act of #aiid 7#ab ,u4,s4,c4 #dgjf74 7#ad7 ,relative ,the term relative has the meaning given the term in section #aja of title #aa1 ,united ,states ,code4 7#ae7 ,target firm ,the term target firm means a corporation that is acquired in a change in control transaction4 ,i ,corporate responsibility #aja4 ,joint and several liability for controlling private funds 7a7 ,in general ,notwithstanding any other provision of law1 or the terms of any contract or agreement1 a private fund shall be jointly and severally liable for all liabilities of each target firm with respect to the private fund1 and any affiliate of such a target firm1 including-- 7#a7 any debt incurred by the target firm or an affiliate of the target firm1 including as part of the acquisition of the target firm by the private fund2 7#b7 any ,federal or ,state civil monetary penalty1 or obligation under a settlement or consent order with a ,federal or ,state governmental agency or instrumentality1 including a consumer restitution obligation1 for which the target firm1 or an affiliate of the target firm1 is liable2 7#c7 any liability resulting from a violation of section #c of the ,worker ,adjustment and ,retraining ,notification ,act 7#bi ,u4,s4,c4 #bajb7 by the target firm or an affiliate of the target firm2 7#d7 any withdrawal liability determined under part #a of subtitle ,e of title ,,iv of the ,employee ,retirement ,income ,security ,act of #aigd 7#bi ,u4,s4,c4 #acha et seq47 that is incurred by the target firm or an affiliate of the target firm2 and 7#e7 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 #aigd 7#bi ,u4,s4,c4 #acfa et seq47 with respect to the termination of a pension plan sponsored by the target firm or an affiliate of the target firm4 7b7 ,rule of construction ,nothing in this section may be construed to diminish existing1 as of the date of this ,act1 controlled group liability under the ,employee ,retirement ,income ,security ,act of #aigd 7#bi ,u4,s4,c4 #ajja et seq474 #ajb4 ,joint and several liability for holders of economic interests in controlling private funds 7a7 ,in general ,notwithstanding any other provision of law1 or the terms of any contract or agreement1 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 fund1 and any affiliate of such a target firm1 including-- 7#a7 any debt incurred by the target firm or an affiliate of the target firm1 including as part of the acquisition of the target firm by the private fund2 7#b7 any ,federal or ,state civil monetary penalty1 or obligation under a settlement or consent order with a ,federal or ,state governmental agency or instrumentality1 including a consumer restitution obligation1 for which the target firm1 or an affiliate of the target firm1 is liable2 7#c7 any liability resulting from a violation of section #c of the ,worker ,adjustment and ,retraining ,notification ,act 7#bi ,u4,s4,c4 #bajb7 by the target firm or an affiliate of the target firm2 7#d7 any withdrawal liability determined under part #a of subtitle ,e of title ,,iv of the ,employee ,retirement ,income ,security ,act of #aigd 7#bi ,u4,s4,c4 #acha et seq47 that is incurred by the target firm or an affiliate of the target firm2 and 7#e7 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 #aigd 7#bi ,u4,s4,c4 #acfa et seq47 with respect to the termination of a pension plan sponsored by the target firm or an affiliate of the target firm4 7b7 ,rule of construction ,nothing in this section may be construed to diminish existing1 as of the date of this ,act1 controlled group liability under the ,employee ,retirement ,income ,security ,act of #aigd 7#bi ,u4,s4,c4 #ajja et seq474 #ajc4 ,indemnification void as against public policy ,it shall be void as against public policy for a target firm1 or an affiliate of a target firm1 to indemnify a private fund that is a control person with respect to the target firm1 or any affiliate of the target firm1 with respect to the liabilities of the fund or the affiliate1 as applicable1 under sections #aja and #ajb4 ,,ii ,anti-looting #bja4 ,limitations on post-acquisition dividends1 distributions1 redemptions1 and buybacks 7a7 ,in general ,no target firm may1 during the #b-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-- 7#a7 make a capital distribution or similarly reduce the equity capital of the target firm2 or 7#b7 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 #b-year period4 7b7 ,void ,any transfer made or obligation incurred by a target firm or an affiliate with respect to a target firm in violation of subsection 7a7 shall be void4 7c7 ,joint and several liability for aiders and abettors ,any control person that is a private fund1 any holder of an economic interest in a control person that is a private fund1 or any affiliate of a target firm that aids1 abets1 facilitates1 supports1 or instructs any violation of subsection 7a7 shall be jointly and severally liable under this subsection for any transfer made or obligation incurred1 including for reasonable attorney's fees and costs awarded to a plaintiff under subsection 7d77#b74 7d7 ,cause of action 7#a7 ,in general ,any employee or creditor1 or representative of an employee or creditor1 of a target firm that is a debtor under title #aa1 ,united ,states ,code1 or of an affiliate of a target firm that is such a debtor1 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 firm4 7#b7 ,award ,in a successful action to recover a transfer1 the court shall also award the plaintiff reasonable attorney's fees and costs4 #bjb4 ,prevention of fraudulent transfers 7a7 ,limitation on safe harbors ,section #edf7;e7 of title #aa1 ,united ,states ,code1 is amended by inserting after #edh7;b7 of this title1 the following3 and except in the case of a transfer made in connection with a change in control transaction1 as defined in section #c of the ,stop ,wall ,street ,looting ,act1 or during the protected period1 as defined in section #edh7;f7 of this title14 7b7 ,presumption of insolvency in transfers undertaken in connection with change in control transactions ,section #edh of title #aa1 ,united ,states ,code1 is amended by adding at the end the following3 7f7 7#a7 ,in this subsection-- 7,a7 the terms change in control transaction1 control person1 and target firm have the meanings given those terms in section #c of the ,stop ,wall ,street ,looting ,act2 and 7,b7 the term protected period means the shorter of-- 7i7 the #h-year period beginning on the date on which a change in control transaction closed2 or 7ii7 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 occurs4 7#b7 ,for purposes of this section1 the debtor is presumed to have made a transfer or incurred an obligation described in subparagraphs 7,a7 and 7,b7 of subsection 7a77#a7 if-- 7,a7 the transfer is made to or obligation is incurred by a target firm or an affiliate in connection with a change in control transaction2 or 7,b7 the transfer is made to a target firm or an affiliate by1 or obligation is incurred by a target firm or an affiliate from1 a control person1 an affiliate1 or an insider during a protected period4 7#c7 ,for the purposes of this section1 a court shall1 in analyzing related transactions1 link together as a single transaction any interrelated yet formally distinct steps in an integrated transaction 7commonly known as the step transaction doctrine74 4 7c7 ,statute of limitations ,section #ccjf7;b7 of title #bh1 ,united ,states ,code1 is amended-- 7#a7 in paragraph 7#b71 by striking or at the end2 7#b7 in paragraph 7#c71 by striking the period at the end and inserting 2 or2 and 7#c7 by adding at the end the following3 7#d7 within #h years after the transfer was made or the obligation was incurred1 if the transfer was made or the obligation was incurred-- 7,a7 in connection with a change in control transaction1 as defined in section #c of the ,stop ,wall ,street ,looting ,act2 or 7,b7 during a protected period1 as defined in section #edh7;f7 of title #aa4 4 #bjc4 ,surtax on certain amounts received by investment firms from controlled target firms 7a7 ,imposition of tax ,subchapter ,a of chapter #a of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new part3 ,,viii ,surtax on certain amounts received by investment firms ,sec4 #ei;,b4 ,surtax on certain amounts received by investment firms from controlled target firms4 #ei;,b4 ,surtax on certain amounts received by investment firms from controlled target firms 7a7 ,imposition of tax 7#a7 ,in general ,if one or more applicable payments are included in the gross income of a taxpayer for any taxable year1 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 payments4 ,such tax shall be in addition to any other tax imposed by this subtitle4 7#b7 ,applicable percentage ,for purposes of this subsection1 the term applicable percentage means #ajj percent1 minus the highest rate of tax under section #a or #aa 7whichever is applicable7 for the taxable year4 7b7 ,applicable payment ,for purposes of this section-- 7#a7 ,in general ,the term applicable payment means any amount paid or incurred by an applicable entity 7or any person related within the meaning of section #bfg7;b7 or #gjg7;b7 to such entity7 to any other person which1 at the time such amount is paid or incurred1 is an applicable controlling entity4 ,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 7a7 applies4 7#b7 ,exceptions ,such term shall not include any of the following3 7,a7 ,interest ,any amount paid or incurred which is treated as interest for purposes of this chapter4 7,b7 ,distributions of property with respect to stock ,any distribution of property 7as defined in section #cag7;a77 to which section #cja7;a7 applies4 7c7 ,definitions relating to entities ,for purposes of this section-- 7#a7 ,applicable entity ,the term applicable entity means any person-- 7,a7 which is engaged in the active conduct of a trade or business1 and 7,b7 with respect to which any other person conducts activities in connection with an applicable trade or business4 7#b7 ,applicable controlling entity ,the term applicable controlling entity means1 with respect to any applicable entity1 any person-- 7,a7 which is engaged in an applicable trade or business some or all of the activities of which are conducted in connection with the applicable entity1 and 7,b7 which controls 7or is related within the meaning of section #bfg7;b7 or #gjg7;b7 to a person which controls7 the applicable entity4 7#c7 ,applicable trade or business ,the term applicable trade or business means any activity conducted on a regular1 continuous1 and substantial basis which1 regardless of whether the activity is conducted in one or more entities1 consists1 in whole or in part1 of-- 7,a7 raising or returning capital1 and 7,b7 either-- 7i7 investing in or disposing of specified assets 7or identifying specified assets for such investing or disposition71 or 7ii7 developing specified assets4 7#d7 ,specified asset ,the term specified asset means-- 7,a7 securities 7as defined in section #dge7;c77#b7 but without regard to the phrase widely held or publicly traded in subparagraph 7,b7 thereof and without regard to the last sentence thereof71 and 7,b7 real estate held for rental or investment4 7d7 ,rules and definitions relating to ownership attribution and control ,for purposes of this section-- 7#a7 ,constructive ownership rules used in determining related party ,in determining whether persons are related within the meaning of section #bfg7;b7 or #gjg7;b71 the constructive ownership rules of section #cah shall apply in lieu of the constructive ownership rules which would otherwise apply1 except that in applying such rules the term stock shall include capital1 profits1 or other beneficial interests in persons other than corporations4 7#b7 ,control 7,a7 ,corporations ,in the case of a corporation1 the term control has the meaning given such term by section #cjd7;c7 7without regard to paragraph 7#c77;,b7 thereof74 7,b7 ,other entities ,in the case of a person other than a corporation1 such term means the ownership1 directly or indirectly1 of at least #ej percent of the capital1 profits1 or other beneficial interests in the person4 7e7 ,regulations ,the ,secretary shall prescribe such regulations or other guidance as may be necessary or appropriate to carry out the provisions of this section1 including regulations-- 7#a7 providing for such adjustments to the application of this section as are necessary to prevent the avoidance of the purposes of this section1 including through the use of unrelated persons1 or conduit transactions1 and 7#b7 modifying the constructive ownership rules under section #cah to the extent necessary to apply such rules to capital1 profits1 or other beneficial interests as well as stock4 4 7b7 ,disallowance of credits against tax ,subparagraph 7,b7 of section #bf7;b77#b7 of the ,internal ,revenue ,code of #aihf is amended by inserting or section #ei;,b 7relating to surtax on certain amounts received by investment firms from controlled target firms7 after anti-abuse tax74 7c7 ,conforming amendments 7#a7 ,the table of parts for subchapter ,a of chapter #a of the ,internal ,revenue ,code of #aihf is amended by adding after the item relating to part ,,vii the following new item3 ,part ,,viii4 ,surtax on certain amounts received by investment firms 4 7#b7 ,section #hga7;b77#a7 of such ,code is amended by inserting and shall be taxable as provided in section #ei;,b 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 ,states4 7#c7 ,section #hhb7;a77#a7 of such ,code is amended by inserting and shall be taxable as provided in section #ei;,b 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 ,states4 7#d7 ,subparagraph 7,a7 of section #fdbe7;c77#a7 of such ,code is amended by striking plus at the end of clause 7i71 by striking over at the end of clause 7ii7 and inserting plus and by adding at the end the following new clause3 7iii7 the tax imposed by section #ei;,b1 over 4 7#e7 ,paragraph 7#a7 of section #ffed7;f7 of such ,code is amended by striking tax each place it appears and inserting taxes4 7#f7 ,subparagraph 7,a7 of section #ffee7;g77#a7 of such ,code is amended by striking plus at the end of clause 7ii71 by redesignating clause 7iii7 as clause 7iv71 and by inserting after clause 7ii7 the following new clause3 7iii7 the tax imposed by section #ei;,b1 plus 4 7d7 ,effective date ,the amendments made by this section shall apply to applicable payments 7as defined in section #ei;,b7b7 of the ,internal ,revenue ,code of #aihf1 as added by this section7 paid or accrued on or after the date of enactment of this ,act4 #bjd4 ,limitation on deduction for business interest of certain businesses owned by private funds 7a7 ,in general ,section #afc7;j7 of the ,internal ,revenue ,code of #aihf is amended by redesignating paragraph 7#aj7 as paragraph 7#aa7 and by inserting after paragraph 7#i7 the following new paragraph3 7#aj7 ,modification of limitation for certain businesses owned by private firms 7,a7 ,in general ,in the case of a taxpayer which is an applicable entity controlled by an applicable controlling entity 7or any person related within the meaning of section #bfg7;b7 or #gjg7;b7 to such entity7 at any time during the taxable year-- 7i7 if the ratio of debt to equity of the taxpayer as of the close of the taxable year 7or on any other day during the taxable year as the ,secretary may prescribe in regulations7 exceeds #a1 then paragraph 7#a7 shall be applied by substituting percent for #cj percent1 and 7ii7 in the case of the election under paragraph 7#g77;,b7 to treat any trade or business of the taxpayer as an electing real property trade or business-- 7,i7 the taxpayer may not make any such election during such taxable year1 and 7,,ii7 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 revoked1 effective for such taxable year and all succeeding taxable years4 7,b7 ,ratio of debt to equity ,for purposes of this paragraph1 the term ratio of debt to equity means1 with respect to any taxpayer1 the ratio which the total indebtedness of the taxpayer bears to the sum of the taxpayer's money and all other assets reduced 7but not below zero7 by such total indebtedness4 ,for purposes of the preceding sentence-- 7i7 the amount taken into account with respect to any asset shall be the adjusted basis thereof for purposes of determining gain1 7ii7 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 #abgb 7determined without regard to subsection 7a77#g7 or 7b77#d7 thereof71 and 7iii7 there shall be such other adjustments as the ,secretary may by regulations prescribe4 7,c7 ,coordination with depreciation rules ,if the alternative depreciation system under section #afh7;g7 applies to property by reason of an election under paragraph 7#g77;,b7 which is revoked under subparagraph 7,a77ii77,,ii71 then the depreciation deduction under section #afg7;a7 with respect to such property for the taxable year of revocation and all succeeding taxable years shall be determined under section #afh in the same manner as if such revocation were a change in use of the property under section #afh7;i77#e7 and the regulations thereunder4 7,d7 ,definitions and rules ,for purposes of this paragraph-- 7i7 any term used in this paragraph which is also used in section #ei;,b shall have the same meaning as when used in such section1 and 7ii7 the constructive ownership rules of section #cah shall apply in the same manner as such rules apply for purposes of section #ei;,b4 4 7b7 ,effective dates 7#a7 ,in general ,the amendments made by this section shall apply to taxable years beginning on or after the date of enactment of this ,act4 7#b7 ,revocation of elections ,subparagraphs 7,a77ii77,,ii7 and 7,c7 of section #afc7;j77#aj7 of the ,internal ,revenue ,code of #aihf1 as added by this section1 shall apply to taxable years beginning on or after the date of enactment of this ,act1 with respect to elections under section #afc7;j77#g77;,b7 of such ,code made before1 on1 or after such date4 ,,iii ,protecting workers when companies go bankrupt #cja4 ,increased priority for wages ,section #ejg7;a7 of title #aa1 ,united ,states ,code1 is amended-- 7#a7 in paragraph 7#d7-- 7,a7 by redesignating subparagraphs 7,a7 and 7,b7 as clauses 7i7 and 7ii71 respectively2 7,b7 in the matter preceding clause 7i71 as so redesignated1 by inserting 7,a7 before ,fourth2 7,c7 in subparagraph 7,a71 as so designated1 in the matter preceding clause 7i71 as so redesignated-- 7i7 by striking #aj1jjj and inserting #bj1jjj2 7ii7 by striking within #ahj days2 and 7iii7 by striking or the date of the cessation of the debtor's business1 whichever occurs first2 and 7,d7 by adding at the end the following3 7,b7 ,severance pay described in subparagraph 7,a77i7 shall be deemed earned in full upon the layoff or termination of employment of the individual to whom the severance pay is owed4 2 and 7#b7 in paragraph 7#e7-- 7,a7 in subparagraph 7,a7-- 7i7 by striking within #ahj days2 and 7ii7 by striking or the date of the cessation of the debtor's business1 whichever occurs first2 and 7,b7 by striking subparagraph 7,b7 and inserting the following3 7,b7 for each such plan1 to the extent of the number of employees covered by each such plan multiplied by #bj1jjj4 4 #cjb4 ,priority for severance pay and contributions to employee benefit plans ,section #ejc7;b7 of title #aa1 ,united ,states ,code1 is amended-- 7#a7 in paragraph 7#h77;,b71 by striking and at the end2 7#b7 in paragraph 7#i71 by striking the period and inserting a semicolon2 and 7#c7 by adding at the end the following3 7#aj7 severance pay owed to employees of the debtor 7other than to an insider of the debtor or a senior executive officer of the debtor71 under a plan1 program1 or policy generally applicable to employees of the debtor 7but not under an individual contract of employment71 or owed pursuant to a collective bargaining agreement1 for layoff or termination on or after the date of the filing of the petition1 which pay shall be deemed earned in full upon such layoff or termination of employment2 and 7#aa7 any contribution due on or after the date of the filing of the petition under an employee benefit plan4 4 #cjc4 ,priority for violations of ,federal and ,state laws 7a7 ,allowance of administrative expenses in bankruptcy cases ,section #ejc7;b77#a77;,a77ii7 of title #aa1 ,united ,states ,code1 is amended by inserting after 7ii7 the following3 any back pay1 civil penalty1 or damages for a violation of any ,federal or ,state labor and employment law1 including the ,worker ,adjustment and ,retraining ,notification ,act 7#bi ,u4,s4,c4 #baja et seq47 and any comparable ,state law1 and4 7b7 ,administration and enforcement of worker adjustment and retraining notification requirements ,section #e7;a77#a7 of the ,worker ,adjustment and ,retraining ,notification ,act 7#bi ,u4,s4,c4 #bajd7;a77#a77 is amended1 in the matter following subparagraph 7,b7-- 7#a7 by inserting which for purposes of this sentence shall consist of the days1 in the notification period1 that are or that follow the date of the prohibited closing or layoff under this ,act1 after period of the violation12 and 7#b7 by inserting calendar after #fj4 #cjd4 ,limitation on executive compensation enhancements ,section #ejc7;c7 of title #aa1 ,united ,states ,code1 is amended-- 7#a7 in the matter preceding paragraph 7#a71 by inserting and subject to section #cfc7;b77#c71 after ,notwithstanding subsection 7b712 7#b7 in paragraph 7#a71 in the matter preceding subparagraph 7,a7-- 7,a7 by inserting 1 a senior executive officer of the debtor1 or any of the #bj next most highly compensated employees of the debtor1 department or division managers of the debtor1 or consultants providing services to the debtor 7regardless of whether the executive officer1 employee1 manager1 or consultant is an insider7 after insider of the debtor2 7,b7 by inserting or for the payment of performance or incentive compensation1 a bonus of any kind1 or any other financial return designed to replace or enhance incentive1 stock1 or other compensation in effect before the date of the commencement of the case1 after remain with the debtor's business12 and 7,c7 by inserting clear and convincing before evidence in the record2 7#c7 in paragraph 7#b71 in the matter preceding subparagraph 7,a71 by inserting 1 a senior executive officer of the debtor1 or any of the #bj next most highly compensated employees of the debtor1 department or division managers of the debtor1 or consultants providing services to the debtor 7regardless of whether the executive officer1 employee1 manager1 or consultant is an insider7 after an insider of the debtor2 and 7#d7 by striking paragraph 7#c7 and inserting the following3 7#c7 any other transfer or obligation to or for the benefit of an insider of the debtor1 a senior executive officer of the debtor1 or any of the #bj next most highly compensated employees of the debtor1 department or division managers of the debtor1 or consultants providing services to the debtor 7regardless of whether the executive officer1 employee1 manager1 or consultant is an insider71 absent a finding by the court1 based upon clear and convincing evidence in the record1 and without deference to a request by the debtor for such payment1 that-- 7,a7 because of the essential and particularized nature of the services provided by the insider1 executive officer1 employee1 manager1 or consultant1 the transfer or obligation is essential to-- 7i7 the survival of the business of the debtor2 or 7ii7 in a case in which some or all of the assets of the debtor are liquidated1 the orderly liquidation of the assets2 7,b7 in the case of a transfer or obligation under an incentive program1 the transfer or obligation is part of a workforce incentive program generally applicable to the nonmanagement workforce of the debtor2 and 7,c7 the cost of the transfer or obligation-- 7i7 is reasonable2 7ii7 is not excessive in the context of the financial circumstances of the debtor2 and 7iii7 is not disproportionate in light of any economic loss incurred by the nonmanagement workforce of the debtor during the case4 4 #cje4 ,prohibition against special compensation payments ,section #cfc of title #aa1 ,united ,states ,code1 is amended-- 7#a7 in subsection 7b71 by adding at the end the following3 7#c7 ,no plan1 program1 or other transfer or obligation to or for the benefit of an insider of the debtor1 a senior executive officer of the debtor1 or any of the #bj next most highly compensated employees of the debtor1 department or division managers of the debtor1 or consultants providing services to the debtor 7regardless of whether the executive officer1 employee1 manager1 or consultant is an insider7 shall be approved if the debtor has1 on or after the date that is #a year before the date of the filing of the petition-- 7,a7 discontinued any plan1 program1 policy or practice of paying severance pay to the nonmanagement workforce of the debtor2 or 7,b7 modified any plan1 program1 policy1 or practice described in subparagraph 7,a7 in order to reduce benefits under the plan1 program1 policy or practice4 2 and 7#b7 in subsection 7c77#a71 by inserting before the period at the end the following3 1 except that1 for any transaction that constitutes a transfer or obligation subject to section #ejc7;c71 the trustee shall be required to obtain the prior approval of the court after notice and an opportunity for a hearing4 #cjf4 ,executive compensation upon exit from bankruptcy ,section #aabi7;a7 of title #aa1 ,united ,states ,code1 is amended-- 7#a7 in paragraph 7#d71 by adding at the end the following3 ,except for compensation subject to review under paragraph 7#e71 any payment or other distribution under the plan to or for the benefit of an insider of the debtor1 a senior executive officer of the debtor1 or any of the #bj next most highly compensated employees of the debtor1 department or division managers of the debtor1 or consultants providing services to the debtor 7regardless of whether the executive officer1 employee1 manager1 or consultant is an insider71 shall not be approved by the court except as part of a program of payments or distributions generally applicable to employees of the debtor1 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 debtor42 and 7#b7 in paragraph 7#e7-- 7,a7 in subparagraph 7,a77ii71 by striking and at the end2 7,b7 in subparagraph 7,b71 by striking the period at the end and inserting 2 and2 and 7,c7 by adding at the end the following3 7,c7 the compensation disclosed pursuant to subparagraph 7,b7 has been approved by1 or is subject to the approval of1 the court as-- 7i7 reasonable in comparison to compensation paid to individuals holding comparable positions at comparable companies in the same industry2 and 7ii7 not disproportionate in light of any economic concession made by the nonmanagement workforce of the debtor during the case4 4 #cjg4 ,collateral surcharge for employee obligations ,section #ejf7;c7 of title #aa1 ,united ,states ,code1 is amended-- 7#a7 by inserting 7#a7 before ,the trustee2 and 7#b7 by adding at the end the following3 7#b7 ,if one or more employees of the debtor have not received wages1 accrued vacation1 severance1 or any other compensation owed under a plan1 program1 policy1 or practice of the debtor1 or pursuant to the terms of a collective bargaining agreement1 for services rendered on or after the date of the commencement of the case1 or the debtor has not made a contribution due under an employee benefit plan on or after the date of the commencement of the case1 such unpaid obligations shall be-- 7,a7 deemed-- 7i7 reasonable1 necessary costs and expenses of preserving1 or disposing of1 property securing an allowed secured claim2 and 7ii7 benefiting the holder of the allowed secured claim2 and 7,b7 recovered by the trustee for payment to the employees or the employee benefit plan1 as applicable1 even if the trustee1 or a predecessor or successor in interest1 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 claim4 4 #cjh4 ,voidability of preferential compensation transfers ,section #edg of title #aa1 ,united ,states ,code1 is amended by adding at the end the following3 7j7 7#a7 ,the trustee may avoid a transfer to or for the benefit of an insider of the debtor1 a senior executive officer of the debtor1 or any of the #bj next most highly compensated employees of the debtor1 department or division managers of the debtor1 or consultants providing services to the debtor 7regardless of whether the executive officer1 employee1 manager1 or consultant is an insider71 that-- 7,a7 is made or incurred under a retention1 bonus1 or incentive plan devised before the date of the filing of the petition2 and 7,b7 does not meet the requirements under section #cfc7;b77#c7 or #ejc7;c74 7#b7 ,subsection 7c7 shall not constitute a defense against the recovery of a transfer under paragraph 7#a7 of this subsection4 7#c7 7,a7 ,the trustee1 or a committee appointed under section #aajb1 may commence an action to recover a transfer under paragraph 7#a7 of this subsection4 7,b7 ,if neither the trustee nor a committee commences an action to recover a transfer under subparagraph 7,a7 before the date of the commencement of a hearing on the confirmation of a plan1 any party in interest may apply to the court for authority to recover the transfer for the benefit of the estate1 in which case the costs of recovery shall be borne by the estate4 4 #cji4 ,protection for employees in a sale of assets 7a7 ,requirement relating to preserving jobs and maintaining terms and conditions relating to employment ,section #cfc of title #aa1 ,united ,states ,code1 is amended by adding at the end the following3 7q7 7#a7 ,in approving a sale or lease of property of the estate under this section1 or under a plan under chapter #aa1 the court shall give substantial weight to the extent to which a prospective purchaser or lessee1 respectively1 of the property will-- 7,a7 preserve the jobs of the workforce of the debtor2 and 7,b7 maintain the terms and conditions of employment of the workforce of the debtor4 7#b7 ,if there are #b or more offers to purchase or lease property of the estate under this section1 or under a plan under chapter #aa1 that qualify under the procedures for the sale or lease1 respectively1 approved by the court1 the court shall approve the offer that best-- 7,a7 preserves the jobs of the workforce of the debtor2 and 7,b7 maintains the terms and conditions of employment of the workforce of the debtor4 7r7 7#a7 ,any party seeking to purchase or lease property of the estate under this section1 or under a plan under chapter #aa1 shall represent to the court the effect of such a transaction with respect to-- 7,a7 the preservation of the jobs of the workforce of the debtor2 and 7,b7 the maintenance of the terms and conditions of employment of the workforce of the debtor4 7#b7 ,the court shall expressly include in an order approving a purchase or lease of property of the estate under this section1 or under a plan under chapter #aa1 any representation made by a purchaser or lessee of the property under paragraph 7#a74 7#c7 ,with respect to a purchase or lease of property of the estate under this section1 or under a plan under chapter #aa-- 7,a7 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 lease2 7,b7 the purchaser or lessee shall promptly disclose to the court any material noncompliance with the terms of the order described in subparagraph 7,a7 and explain the basis for such noncompliance2 and 7,c7 with respect to material noncompliance described in subparagraph 7,b71 the court may impose any appropriate remedy1 including injunctive relief1 to address the noncompliance4 4 7b7 ,plans under chapter #aa 7#a7 ,contents of plan ,section #aabc7;b77#d7 of title #aa1 ,united ,states ,code1 is amended by inserting 1 which sale shall be subject to the requirements under subsections 7q7 and 7r7 of section #cfc of this title1 after property of the estate4 7#b7 ,confirmation of plan ,section #aabi7;a7 of title #aa1 ,united ,states ,code1 is amended by adding at the end the following3 7#ag7 ,if the plan provides for the sale of all or substantially all of the property of the estate1 the sale meets the requirements under subsections 7q7 and 7r7 of section #cfc of this title4 4 #caj4 ,protection of gift card purchasers 7a7 ,definition of gift card ,section #aja7;a7 of title #aa1 ,united ,states ,code1 is amended by inserting after paragraph 7#bf7 the following3 7#bf;,a7 ,the term gift card means a paper or electronic promise1 plastic card1 or other payment code or device that is-- 7,a7 redeemable at-- 7i7 a single merchant2 or 7ii7 an affiliated group of merchants that share the same name1 mark1 or logo2 7,b7 issued in a specified amount1 regardless of whether that amount may be increased in value or reloaded at the request of the holder2 7,c7 purchased on a prepaid basis in exchange for payment2 and 7,d7 honored by the single merchant or affiliated group of merchants described in subparagraph 7,a7 upon presentation for goods or services4 4 7b7 ,consumer deposit ,section #ejg7;a7 of title #aa1 ,united ,states ,code1 is amended by striking paragraph 7#g7 and inserting the following3 7#g7 ,seventh1 allowed unsecured claims of individuals1 to the extent of #a1hjj for each such individual1 arising from the deposit1 before the commencement of the case1 of money in connection with-- 7,a7 the purchase1 lease1 or rental of property2 7,b7 the purchase of services1 for the personal1 family1 or household use of such individuals1 that were not delivered or provided2 or 7,c7 the purchase of a gift card with respect to which funds exist that have not been redeemed4 4 #caa4 ,commercial real estate ,section #cfe7;d7 of title #aa1 ,united ,states ,code1 is amended-- 7#a7 by striking paragraph 7#d72 and 7#b7 by redesignating paragraph 7#e7 as paragraph 7#d74 ,,iv ,closing the carried interest loophole #dja4 ,amendment of #aihf ,code ,except as otherwise expressly provided1 whenever in this title an amendment or repeal is expressed in terms of an amendment to1 or repeal of1 a section or other provision1 the reference shall be considered to be made to a section or other provision of the ,internal ,revenue ,code of #aihf4 #djb4 ,partnership interests transferred in connection with performance of services 7a7 ,modification to election ,to include partnership interest in gross income in year of transfer ,subsection 7c7 of section #hc is amended by redesignating paragraph 7#d7 as paragraph 7#e7 and by inserting after paragraph 7#c7 the following new paragraph3 7#d7 ,partnership interests ,except as provided by the ,secretary-- 7,a7 ,in general ,in the case of any transfer of an interest in a partnership in connection with the provision of services to 7or for the benefit of7 such partnership-- 7i7 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 7at the time of the transfer7 all of its assets at fair market value and distributed the proceeds of such sale 7reduced by the liabilities of the partnership7 to its partners in liquidation of the partnership1 and 7ii7 the person receiving such interest shall be treated as having made the election under subsection 7b77#a7 unless such person makes an election under this paragraph to have such subsection not apply4 7,b7 ,election ,the election under subparagraph 7,a77ii7 shall be made under rules similar to the rules of subsection 7b77#b74 4 7b7 ,effective date ,the amendments made by this section shall apply to interests in partnerships transferred after the date of enactment of this ,act4 #djc4 ,special rules for partners providing investment management services to partnerships 7a7 ,in general ,part ,i of subchapter ,k of chapter #a is amended by adding at the end the following new section3 #gaj4 ,special rules for partners providing investment management services to partnerships 7a7 ,treatment of distributive share of partnership items ,for purposes of this title1 in the case of an investment services partnership interest-- 7#a7 ,in general ,notwithstanding section #gjb7;b7-- 7,a7 an amount equal to the net capital gain with respect to such interest for any partnership taxable year shall be treated as ordinary income1 and 7,b7 subject to the limitation of paragraph 7#b71 an amount equal to the net capital loss with respect to such interest for any partnership taxable year shall be treated as an ordinary loss4 7#b7 ,recharacterization of losses limited to recharacterized gains ,the amount treated as ordinary loss under paragraph 7#a77;,b7 for any taxable year shall not exceed the excess 7if any7 of-- 7,a7 the aggregate amount treated as ordinary income under paragraph 7#a77;,a7 with respect to the investment services partnership interest for all preceding partnership taxable years to which this section applies1 over 7,b7 the aggregate amount treated as ordinary loss under paragraph 7#a77;,b7 with respect to such interest for all preceding partnership taxable years to which this section applies4 7#c7 ,allocation to items of gain and loss 7,a7 ,net capital gain ,the amount treated as ordinary income under paragraph 7#a77;,a7 shall be allocated ratably among the items of long-term capital gain taken into account in determining such net capital gain4 7,b7 ,net capital loss ,the amount treated as ordinary loss under paragraph 7#a77;,b7 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 loss4 7#d7 ,terms relating to capital gains and losses ,for purposes of this section-- 7,a7 ,in general ,net capital gain1 long-term capital gain1 and long-term capital loss1 with respect to any investment services partnership interest for any taxable year1 shall be determined under section #abbb1 except that such section shall be applied-- 7i7 without regard to the recharacterization of any item as ordinary income or ordinary loss under this section1 7ii7 by only taking into account items of gain and loss taken into account by the holder of such interest under section #gjb 7other than subsection 7a77#i7 thereof7 with respect to such interest for such taxable year1 and 7iii7 by treating property which is taken into account in determining gains and losses to which section #abca applies as capital assets held for more than #a year4 7,b7 ,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 exchanges4 ,rules similar to the rules of clauses 7i7 through 7iii7 of subparagraph 7,a7 shall apply for purposes of the preceding sentence4 7#e7 ,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 #a7;h74 7#f7 ,special rule for qualified small business stock ,section #abjb shall not apply to any gain from the sale or exchange of qualified small business stock 7as defined in section #abjb7;c77 allocated with respect to any investment services partnership interest4 7b7 ,dispositions of partnership interests 7#a7 ,gain 7,a7 ,in general ,any gain on the disposition of an investment services partnership interest shall be-- 7i7 treated as ordinary income1 and 7ii7 recognized notwithstanding any other provision of this subtitle4 7,b7 ,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-- 7i7 subparagraph 7,a7 shall not apply1 7ii7 such interest shall be treated as an investment services partnership interest in the hands of the person acquiring such interest1 and 7iii7 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 #fia4 7#b7 ,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 7if any7 of-- 7,a7 the aggregate amount treated as ordinary income under subsection 7a7 with respect to such interest for all partnership taxable years to which this section applies1 over 7,b7 the aggregate amount treated as ordinary loss under subsection 7a7 with respect to such interest for all partnership taxable years to which this section applies4 7#c7 ,election with respect to certain exchanges ,paragraph 7#a77;,a77ii7 shall not apply to the contribution of an investment services partnership interest to a partnership in exchange for an interest in such partnership if-- 7,a7 the taxpayer makes an irrevocable election to treat the partnership interest received in the exchange as an investment services partnership interest1 and 7,b7 the taxpayer agrees to comply with such reporting and recordkeeping requirements as the ,secretary may prescribe4 7#d7 ,distributions of partnership property 7,a7 ,in general ,in the case of any distribution of property by a partnership with respect to any investment services partnership interest held by a partner1 the partner receiving such property shall recognize gain equal to the excess 7if any7 of-- 7i7 the fair market value of such property at the time of such distribution1 over 7ii7 the adjusted basis of such property in the hands of such partner 7determined without regard to subparagraph 7,c774 7,b7 ,treatment of gain as ordinary income ,any gain recognized by such partner under subparagraph 7,a7 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 7a7 if1 immediately prior to the distribution1 the partnership had sold the distributed property at fair market value and all of the gain from such disposition were allocated to such partner4 ,for purposes of applying subsection 7a77#b71 any gain treated as ordinary income under this subparagraph shall be treated as an amount treated as ordinary income under subsection 7a77#a77;,a74 7,c7 ,adjustment of basis ,in the case a distribution to which subparagraph 7,a7 applies1 the basis of the distributed property in the hands of the distributee partner shall be the fair market value of such property4 7,d7 ,special rules with respect to mergers and divisions ,in the case of a taxpayer which satisfies requirements similar to the requirements of subparagraphs 7,a7 and 7,b7 of paragraph 7#c71 this paragraph and paragraph 7#a77;,a77ii7 shall not apply to the distribution of a partnership interest if such distribution is in connection with a contribution 7or deemed contribution7 of any property of the partnership to which section #gba applies pursuant to a transaction described in section #gjh7;b77#b74 7c7 ,investment services partnership interest ,for purposes of this section-- 7#a7 ,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 7#b7 by such person 7or any person related to such person74 ,an interest in an investment partnership held by any person-- 7,a7 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 business1 7,b7 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 business1 and 7,c7 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 interest4 7#b7 ,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 7directly or indirectly7 by one or more investment partnerships referred to in paragraph 7#a73 7,a7 ,advising as to the advisability of investing in1 purchasing1 or selling any specified asset4 7,b7 ,managing1 acquiring1 or disposing of any specified asset4 7,c7 ,arranging financing with respect to acquiring specified assets4 7,d7 ,any activity in support of any service described in subparagraphs 7,a7 through 7,c74 7#c7 ,investment partnership 7,a7 ,in general ,the term investment partnership means any partnership if1 at the end of any two consecutive calendar quarters ending after the date of enactment of this section-- 7i7 substantially all of the assets of the partnership are specified assets 7determined without regard to any section #aig intangible within the meaning of section #aig7;d771 and 7ii7 less than #ge 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 interest4 7,b7 ,look-through of certain wholly owned entities for purposes of determining assets of the partnership 7i7 ,in general ,for purposes of determining the assets of a partnership under subparagraph 7,a77i7-- 7,i7 any interest in a specified entity shall not be treated as an asset of such partnership1 and 7,,ii7 such partnership shall be treated as holding its proportionate share of each of the assets of such specified entity4 7ii7 ,specified entity ,for purposes of clause 7i71 the term specified entity means1 with respect to any partnership 7hereafter referred to as the upper-tier partnership71 any person which engages in the same trade or business as the upper-tier partnership and is-- 7,i7 a partnership all of the capital and profits interests of which are held directly or indirectly by the upper-tier partnership1 or 7,,ii7 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 partnership4 7,c7 ,special rules for determining if property held in connection with trade or business 7i7 ,in general ,except as otherwise provided by the ,secretary1 solely for purposes of determining whether any interest in a partnership constitutes property held in connection with a trade or business under subparagraph 7,a77ii7-- 7,i7 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 owner1 7,,ii7 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 #c taxable years preceding such taxable year1 and 7,,iii7 paragraph 7#e77;,b7 shall not apply4 7ii7 ,closely related persons ,for purposes of clause 7i77,i71 a person shall be treated as closely related to another person if1 taking into account the rules of section #bfg7;c71 the relationship between such persons is described in-- 7,i7 paragraph 7#a7 or 7#i7 of section #bfg7;b71 or 7,,ii7 section #bfg7;b77#d71 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 7#a7 or 7#i7 of section #bfg7;b74 7,d7 ,anti-abuse rules ,the ,secretary may issue regulations or other guidance which prevent the avoidance of the purposes of subparagraph 7,a71 including regulations or other guidance which treat convertible and contingent debt 7and other debt having the attributes of equity7 as a capital interest in the partnership4 7,e7 ,controlled groups of entities 7i7 ,in general ,in the case of a controlled group of entities1 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 7in the hands of such member7 constitute property held in connection with a trade or business1 then any interest in such partnership held by any member of such group shall be treated for purposes of subparagraph 7,a7 as constituting 7in the hands of such member7 property held in connection with a trade or business4 7ii7 ,controlled group of entities ,for purposes of clause 7i71 the term controlled group of entities means a controlled group of corporations as defined in section #aefc7;a77#a71 applied without regard to subsections 7a77#d7 and 7b77#b7 of section #aefc4 ,a partnership or any other entity 7other than a corporation7 shall be treated as a member of a controlled group of entities if such entity is controlled 7within the meaning of section #ied7;d77#c77 by members of such group 7including any entity treated as a member of such group by reason of this sentence74 7,f7 ,special rule for corporations ,for purposes of this paragraph1 in the case of a corporation1 the determination of whether property is held in connection with a trade or business shall be determined as if the taxpayer were an individual4 7#d7 ,specified asset ,the term specified asset means securities 7as defined in section #dge7;c77#b7 without regard to the last sentence thereof71 real estate held for rental or investment1 interests in partnerships1 commodities 7as defined in section #dge7;e77#b771 cash or cash equivalents1 or options or derivative contracts with respect to any of the foregoing4 7#e7 ,related persons 7,a7 ,in general ,a person shall be treated as related to another person if the relationship between such persons is described in section #bfg7;b7 or #gjg7;b74 7,b7 ,attribution of partner services ,any service described in paragraph 7#b7 which is provided by a partner of a partnership shall be treated as also provided by such partnership4 7d7 ,exception for certain capital interests 7#a7 ,in general ,in the case of any portion of an investment services partnership interest which is a qualified capital interest1 all items of gain and loss 7and any dividends7 which are allocated to such qualified capital interest shall not be taken into account under subsection 7a7 if-- 7,a7 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 7c77#b7 and who are not related to the partner holding the qualified capital interest1 and 7,b7 the allocations made to such other interests are significant compared to the allocations made to such qualified capital interest4 7#b7 ,authority to provide exceptions to allocation requirements ,to the extent provided by the ,secretary in regulations or other guidance-- 7,a7 ,allocations to portion of qualified capital interest ,paragraph 7#a7 may be applied separately with respect to a portion of a qualified capital interest4 7,b7 ,no or insignificant allocations to nonservice providers ,in any case in which the requirements of paragraph 7#a77;,b7 are not satisfied1 items of gain and loss 7and any dividends7 shall not be taken into account under subsection 7a7 to the extent that such items are properly allocable under such regulations or other guidance to qualified capital interests4 7,c7 ,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 7#a77;,a7 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 paragraph4 7#c7 ,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 which1 by reason of a change in the services with respect to assets held 7directly or indirectly7 by the partnership or by reason of a change in the capital contributions to such partnership1 becomes an investment services partnership interest1 the qualified capital interest of the holder of such partnership interest immediately after such change shall not1 for purposes of this subsection1 be less than the fair market value of such interest 7determined immediately before such change74 7#d7 ,special rule for tiered partnerships ,except as otherwise provided by the ,secretary1 in the case of tiered partnerships1 all items which are allocated in a manner which meets the requirements of paragraph 7#a7 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 partnership4 7#e7 ,exception for no-self-charged carry and management fee provisions ,except as otherwise provided by the ,secretary1 an interest shall not fail to be treated as satisfying the requirement of paragraph 7#a77;,a7 merely because the allocations made by the partnership to such interest do not reflect the cost of services described in subsection 7c77#b7 which are provided 7directly or indirectly7 to the partnership by the holder of such interest 7or a related person74 7#f7 ,special rule for dispositions ,in the case of any investment services partnership interest any portion of which is a qualified capital interest1 subsection 7b7 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-- 7,a7 the distributive share of gain or loss that would have been allocated to the qualified capital interest 7consistent with the requirements of paragraph 7#a77 if the partnership had sold all of its assets at fair market value immediately before the disposition1 bears to 7,b7 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 part4 7#g7 ,qualified capital interest ,for purposes of this section-- 7,a7 ,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-- 7i7 the fair market value of any money or other property contributed to the partnership in exchange for such interest 7determined without regard to section #geb7;a771 7ii7 any amounts which have been included in gross income under section #hc with respect to the transfer of such interest1 and 7iii7 the excess 7if any7 of-- 7,i7 any items of income and gain taken into account under section #gjb with respect to such interest1 over 7,,ii7 any items of deduction and loss so taken into account4 7,b7 ,adjustment to qualified capital interest 7i7 ,distributions and losses ,the qualified capital interest shall be reduced by distributions from the partnership with respect to such interest and by the excess 7if any7 of the amount described in subparagraph 7,a77iii77,,ii7 over the amount described in subparagraph 7,a77iii77,i74 7ii7 ,special rule for contributions of property ,in the case of any contribution of property described in subparagraph 7,a77i7 with respect to which the fair market value of such property is not equal to the adjusted basis of such property immediately before such contribution1 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 provide4 7,c7 ,technical terminations1 etc41 disregarded ,no increase or decrease in the qualified capital interest of any partner shall result from a termination1 merger1 consolidation1 or division described in section #gjh1 or any similar transaction4 7#h7 ,treatment of certain loans 7,a7 ,proceeds of partnership loans not treated as qualified capital interest of service providing partners ,for purposes of this subsection1 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 guaranteed1 directly or indirectly1 by any other partner or the partnership 7or any person related to any such other partner or the partnership74 ,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 sentence4 7,b7 ,reduction in allocations to qualified capital interests for loans from nonservice-providing partners to the partnership ,for purposes of this subsection1 any loan or other advance to the partnership made or guaranteed1 directly or indirectly1 by a partner not providing services described in subsection 7c77#b7 to the partnership 7or any person related to such partner7 shall be taken into account in determining the qualified capital interests of the partners in the partnership4 7#i7 ,special rule for qualified family partnerships 7,a7 ,in general ,in the case of any specified family partnership interest1 paragraph 7#a77;,a7 shall be applied without regard to the phrase and who are not related to the partner holding the qualified capital interest4 7,b7 ,specified family partnership interest ,for purposes of this paragraph1 the term specified family partnership interest means any investment services partnership interest if-- 7i7 such interest is an interest in a qualified family partnership1 7ii7 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 #bfg7;b77#a71 and 7iii7 all other interests in such qualified family partnership with respect to which significant allocations are made 7within the meaning of paragraph 7#a77;,b7 and in comparison to the allocations made to the interest described in clause 7ii77 are held by persons who-- 7,i7 are related to the natural person or trust referred to in clause 7ii71 or 7,,ii7 provide services described in subsection 7c77#b74 7,c7 ,qualified family partnership ,for purposes of this paragraph1 the term qualified family partnership means any partnership if-- 7i7 all of the capital and profits interests of such partnership are held by-- 7,i7 specified family members1 7,,ii7 any person closely related 7within the meaning of subsection 7c77#c77;,c77ii77 to a specified family member1 or 7,,iii7 any other person 7not described in subclause 7,i7 or 7,,ii77 if such interest is an investment services partnership interest with respect to such person1 and 7ii7 such partnership does not hold itself out to the public as an investment advisor4 7,d7 ,specified family members ,for purposes of subparagraph 7,c71 individuals shall be treated as specified family members if such individuals would be treated as one person under the rules of section #acfa7;c77#a7 if the applicable date 7within the meaning of subparagraph 7,b77iii7 thereof7 were the latest of-- 7i7 the date of the establishment of the partnership1 7ii7 the earliest date that the common ancestor holds a capital or profits interest in the partnership1 or 7iii7 the date of enactment of this section4 7e7 ,other income and gain in connection with investment management services 7#a7 ,in general ,if-- 7,a7 a person performs 7directly or indirectly7 investment management services for any investment entity1 7,b7 such person holds 7directly or indirectly7 a disqualified interest with respect to such entity1 and 7,c7 the value of such interest 7or payments thereunder7 is substantially related to the amount of income or gain 7whether or not realized7 from the assets with respect to which the investment management services are performed1 any income or gain with respect to such interest shall be treated as ordinary income4 ,rules similar to the rules of subsections 7a77#e7 and 7d7 shall apply for purposes of this subsection4 7#b7 ,definitions ,for purposes of this subsection-- 7,a7 ,disqualified interest 7i7 ,in general ,the term disqualified interest means1 with respect to any investment entity-- 7,i7 any interest in such entity other than indebtedness1 7,,ii7 convertible or contingent debt of such entity1 7,,iii7 any option or other right to acquire property described in subclause 7,i7 or 7,,ii71 and 7,,iv7 any derivative instrument entered into 7directly or indirectly7 with such entity or any investor in such entity4 7ii7 ,exceptions ,such term shall not include-- 7,i7 a partnership interest1 7,,ii7 except as provided by the ,secretary1 any interest in a taxable corporation1 and 7,,iii7 except as provided by the ,secretary1 stock in an ,s corporation4 7,b7 ,taxable corporation ,the term taxable corporation means-- 7i7 a domestic ,c corporation1 or 7ii7 a foreign corporation substantially all of the income of which is-- 7,i7 effectively connected with the conduct of a trade or business in the ,united ,states1 or 7,,ii7 subject to a comprehensive foreign income tax 7as defined in section #deg;,a7d77#b774 7,c7 ,investment management services ,the term investment management services means a substantial quantity of any of the services described in subsection 7c77#b74 7,d7 ,investment entity ,the term investment entity means any entity which1 if it were a partnership1 would be an investment partnership4 7f7 ,exception for domestic ,c corporations ,except as otherwise provided by the ,secretary1 in the case of a domestic ,c corporation-- 7#a7 subsections 7a7 and 7b7 shall not apply to any item allocated to such corporation with respect to any investment services partnership interest 7or to any gain or loss with respect to the disposition of such an interest71 and 7#b7 subsection 7e7 shall not apply4 7g7 ,regulations ,the ,secretary shall prescribe such regulations or other guidance as is necessary or appropriate to carry out the purposes of this section1 including regulations or other guidance to-- 7#a7 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 #fjca with respect to any item described in section #gjb7;a77#i71 7#b7 provide modifications to the application of this section 7including treating related persons as not related to one another7 to the extent such modification is consistent with the purposes of this section1 7#c7 prevent the avoidance of the purposes of this section 7including through the use of qualified family partnerships71 and 7#d7 coordinate this section with the other provisions of this title4 7h7 ,cross reference ,for #dj percent penalty on certain underpayments due to the avoidance of this section1 see section #fffb4 4 7b7 ,application of section #gea to indirect dispositions of investment services partnership interests 7#a7 ,in general ,subsection 7a7 of section #gea is amended by striking or at the end of paragraph 7#a71 by inserting or at the end of paragraph 7#b71 and by inserting after paragraph 7#b7 the following new paragraph3 7#c7 investment services partnership interests held by the partnership1 4 7#b7 ,certain distributions treated as sales or exchanges ,subparagraph 7,a7 of section #gea7;b77#a7 is amended by striking or at the end of clause 7i71 by inserting or at the end of clause 7ii71 and by inserting after clause 7ii7 the following new clause3 7iii7 investment services partnership interests held by the partnership1 4 7#c7 ,application of special rules in the case of tiered partnerships ,subsection 7f7 of section #gea is amended-- 7,a7 by striking or at the end of paragraph 7#a71 by inserting or at the end of paragraph 7#b71 and by inserting after paragraph 7#b7 the following new paragraph3 7#c7 an investment services partnership interest held by the partnership1 1 and 7,b7 by striking partner4 and inserting partner 7other than a partnership in which it holds an investment services partnership interest744 7#d7 ,investment services partnership interests2 qualified capital interests ,section #gea is amended by adding at the end the following new subsection3 7g7 ,investment services partnership interests ,for purposes of this section-- 7#a7 ,in general ,the term investment services partnership interest has the meaning given such term by section #gaj7;c74 7#b7 ,adjustments for qualified capital interests ,the amount to which subsection 7a7 applies by reason of paragraph 7#c7 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 7determined under rules similar to the rules of section #gaj7;d774 7#c7 ,exception for publicly traded partnerships ,except as otherwise provided by the ,secretary1 in the case of an exchange of an interest in a publicly traded partnership 7as defined in section #ggjd7 to which subsection 7a7 applies-- 7,a7 this section shall be applied without regard to subsections 7a77#c71 7b77#a77;,a77iii71 and 7f77#c71 and 7,b7 such partnership shall be treated as owning its proportionate share of the property of any other partnership in which it is a partner4 7#d7 ,recognition of gains ,any gain with respect to which subsection 7a7 applies by reason of paragraph 7#c7 thereof shall be recognized notwithstanding any other provision of this title4 7#e7 ,coordination with inventory items ,an investment services partnership interest held by the partnership shall not be treated as an inventory item of the partnership4 7#f7 ,prevention of double counting ,under regulations or other guidance prescribed by the ,secretary1 subsection 7a77#c7 shall not apply with respect to any amount to which section #gaj applies4 7#g7 ,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 section4 4 7c7 ,treatment for purposes of section #ggjd ,subsection 7d7 of section #ggjd is amended by adding at the end the following new paragraph3 7#f7 ,income from certain carried interests not qualified 7,a7 ,in general ,specified carried interest income shall not be treated as qualifying income4 7,b7 ,specified carried interest income ,for purposes of this paragraph-- 7i7 ,in general ,the term specified carried interest income means-- 7,i7 any item of income or gain allocated to an investment services partnership interest 7as defined in section #gaj7;c77 held by the partnership1 7,,ii7 any gain on the disposition of an investment services partnership interest 7as so defined7 or a partnership interest to which 7in the hands of the partnership7 section #gea applies1 and 7,,iii7 any income or gain taken into account by the partnership under subsection 7b77#d7 or 7e7 of section #gaj4 7ii7 ,exception for qualified capital interests ,a rule similar to the rule of section #gaj7;d7 shall apply for purposes of clause 7i74 7,c7 ,coordination with other provisions ,subparagraph 7,a7 shall not apply to any item described in paragraph 7#a77;,e7 7or so much of paragraph 7#a77;,f7 as relates to paragraph 7#a77;,e774 7,d7 ,special rules for certain partnerships 7i7 ,certain partnerships owned by real estate investment trusts ,subparagraph 7,a7 shall not apply in the case of a partnership which meets each of the following requirements3 7,i7 ,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 traded4 7,,ii7 ,fifty percent or more of the capital and profits interests of such partnership are owned1 directly or indirectly1 at all times during the taxable year by such real estate investment trust 7determined with the application of section #bfg7;c774 7,,iii7 ,such partnership meets the requirements of paragraphs 7#b71 7#c71 and 7#d7 of section #hef7;c74 7ii7 ,certain partnerships owning other publicly traded partnerships ,subparagraph 7,a7 shall not apply in the case of a partnership which meets each of the following requirements3 7,i7 ,substantially all of the assets of such partnership consist of interests in one or more publicly traded partnerships 7determined without regard to subsection 7b77#b774 7,,ii7 ,substantially all of the income of such partnership is ordinary income or section #abca gain 7as defined in section #abca7;a77#c774 7,e7 ,transitional rule ,subparagraph 7,a7 shall not apply to any taxable year of the partnership beginning before the date which is #aj years after the date of enactment of this paragraph4 4 7d7 ,imposition of penalty on underpayments 7#a7 ,in general ,subsection 7b7 of section #fffb is amended by inserting after paragraph 7#h7 the following new paragraph3 7#i7 ,the application of section #gaj7;e7 or the regulations or other guidance prescribed under section #gaj7;g7 to prevent the avoidance of the purposes of section #gaj4 4 7#b7 ,amount of penalty 7,a7 ,in general ,section #fffb is amended by adding at the end the following new subsection3 7l7 ,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 7b77#i71 subsection 7a7 shall be applied with respect to such portion by substituting #dj percent for #bj percent4 4 7,b7 ,conforming amendment ,subparagraph 7,b7 of section #fffb;,a7e77#b7 is amended by striking or 7i7 and inserting 1 7i71 or 7l74 7#c7 ,special rules for application of reasonable cause exception ,subsection 7c7 of section #fffd is amended-- 7,a7 by redesignating paragraphs 7#c7 and 7#d7 as paragraphs 7#d7 and 7#e71 respectively2 7,b7 by striking paragraph 7#c7 in paragraph 7#e77;,a71 as so redesignated1 and inserting paragraph 7#d72 and 7,c7 by inserting after paragraph 7#b7 the following new paragraph3 7#c7 ,special rule for underpayments attributable to investment management services 7,a7 ,in general ,paragraph 7#a7 shall not apply to any portion of an underpayment to which section #fffb applies by reason of subsection 7b77#i7 unless-- 7i7 the relevant facts affecting the tax treatment of the item are adequately disclosed1 7ii7 there is or was substantial authority for such treatment1 and 7iii7 the taxpayer reasonably believed that such treatment was more likely than not the proper treatment4 7,b7 ,rules relating to reasonable belief ,rules similar to the rules of subsection 7d77#d7 shall apply for purposes of subparagraph 7,a77iii74 4 7e7 ,income and loss from investment services partnership interests taken into account in determining net earnings from self-,employment 7#a7 ,internal ,revenue ,code 7,a7 ,in general ,section #adjb7;a7 is amended by striking and at the end of paragraph 7#af71 by striking the period at the end of paragraph 7#ag7 and inserting 2 and1 and by inserting after paragraph 7#ag7 the following new paragraph3 7#ah7 notwithstanding the preceding provisions of this subsection1 in the case of any individual engaged in the trade or business of providing services described in section #gaj7;c77#b7 with respect to any entity1 investment services partnership income or loss 7as defined in subsection 7m77 of such individual with respect to such entity shall be taken into account in determining the net earnings from self-employment of such individual4 4 7,b7 ,investment services partnership income or loss ,section #adjb is amended by adding at the end the following new subsection3 7m7 ,investment services partnership income or loss ,for purposes of subsection 7a7-- 7#a7 ,in general ,the term investment services partnership income or loss means1 with respect to any investment services partnership interest 7as defined in section #gaj7;c77 or disqualified interest 7as defined in section #gaj7;e771 the net of-- 7,a7 the amounts treated as ordinary income or ordinary loss under subsections 7b7 and 7e7 of section #gaj with respect to such interest1 7,b7 all items of income1 gain1 loss1 and deduction allocated to such interest1 and 7,c7 the amounts treated as realized from the sale or exchange of property other than a capital asset under section #gea with respect to such interest4 7#b7 ,exception for qualified capital interests ,a rule similar to the rule of section #gaj7;d7 shall apply for purposes of applying paragraph 7#a77;,b74 4 7#b7 ,social ,security ,act ,section #baa7;a7 of the ,social ,security ,act is amended by striking and at the end of paragraph 7#ae71 by striking the period at the end of paragraph 7#af7 and inserting 2 and1 and by inserting after paragraph 7#af7 the following new paragraph3 7#ag7 ,notwithstanding the preceding provisions of this subsection1 in the case of any individual engaged in the trade or business of providing services described in section #gaj7;c77#b7 of the ,internal ,revenue ,code of #aihf with respect to any entity1 investment services partnership income or loss 7as defined in section #adjb7m7 of such ,code7 shall be taken into account in determining the net earnings from self-employment of such individual4 4 7f7 ,separate accounting by partner ,section #gjb7;a7 is amended by striking and at the end of paragraph 7#g71 by striking the period at the end of paragraph 7#h7 and inserting 1 and1 and by inserting after paragraph 7#h7 the following3 7#i7 any amount treated as ordinary income or loss under subsection 7a71 7b71 or 7e7 of section #gaj4 4 7g7 ,conforming amendments 7#a7 ,subsection 7d7 of section #gca is amended by inserting section #gaj7;b77#d7 7relating to distributions of partnership property71 after to the extent otherwise provided by4 7#b7 ,section #gda is amended by inserting or section #gaj 7relating to special rules for partners providing investment management services to partnerships7 before the period at the end4 7#c7 ,the table of sections for part ,i of subchapter ,k of chapter #a is amended by adding at the end the following new item3 ,sec4 #gaj4 ,special rules for partners providing investment management services to partnerships4 4 7#d7 7,a7 ,part ,,iv of subchapter ,o of chapter #a is amended by striking section #ajfa4 7,b7 ,the table of sections for part ,,iv of subchapter ,o of chapter #a is amended by striking the item relating to section #ajfa4 7h7 ,effective date 7#a7 ,in general ,except as otherwise provided in this subsection1 the amendments made by this section shall apply to taxable years ending after the date of enactment of this ,act4 7#b7 ,partnership taxable years which include effective date ,in applying section #gaj7;a7 of the ,internal ,revenue ,code of #aihf 7as added by this section7 in the case of any partnership taxable year which includes the date of enactment of this ,act1 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 date4 7#c7 ,dispositions of partnership interests 7,a7 ,in general ,section #gaj7;b7 of such ,code 7as added by this section7 shall apply to dispositions and distributions after the date of enactment of this ,act4 7,b7 ,indirect dispositions ,the amendments made by subsection 7b7 shall apply to transactions after the date of enactment of this ,act4 7#d7 ,other income and gain in connection with investment management services ,section #gaj7;e7 of such ,code 7as added by this section7 shall take effect on the date of enactment of this ,act4 ,v ,investor protection and market transparency #eja4 ,disclosure of fees and returns ,the ,investment ,company ,act of #aidj 7#ae ,u4,s4,c4 #hj;a-#a et seq47 is amended by adding at the end the following3 #ff4 ,disclosure of fees and returns 7a7 ,definitions ,in this section1 the terms private fund and target firm have the meanings given the terms in section #c of the ,stop ,wall ,street ,looting ,act4 7b7 ,rules ,not later than #a year after the date of enactment of this section1 the ,commission shall issue final rules that require a private fund to1 using generally accepted accounting principles1 annually report the following information with respect to that private fund3 7#a7 ,the name1 address1 and vintage year of the fund4 7#b7 ,the name of each general partner of the fund4 7#c7 ,the name of each limited partner of the fund4 7#d7 ,a list of each entity with respect to which the fund owns a percentage4 7#e7 ,in dollars1 the total amount of regulatory assets under management by the fund4 7#f7 ,in dollars1 the total amount of net assets under management by the fund4 7#g7 ,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 fund4 7#h7 ,information on the debt held by the fund1 including-- 7,a7 the dollar amount of total debt2 7,b7 the percentage of debt for which the creditor is a financial institution in the ,united ,states2 7,c7 the percentage of debt for which the creditor is a financial institution outside of the ,united ,states2 7,d7 the percentage of debt for which the creditor is an entity that is located in the ,united ,states and is not a financial institution2 and 7,e7 the percentage of debt for which the creditor is an entity that is located outside of the ,united ,states and is not a financial institution4 7#i7 ,the gross performance of the fund during the year covered by the report4 7#aj7 ,for the year covered by the report1 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 7commonly referred to as the performance net of fees74 7#aa7 ,for the year covered by the report1 an annual financial statement1 which shall include income statements1 a balance sheet1 and cash flow statements4 7#ab7 ,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 firm4 7#ac7 ,the total gross asset value of each target firm with respect to the fund and the gross asset value of each such target firm4 7#ad7 ,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 firm4 7#ae7 ,the total amount of debt held by each target firm with respect to the fund that1 as of the date on which the report is submitted1 are categorized as liabilities1 long-term liabilities1 and payment in kind or zero coupon debt4 7#af7 ,the total number of target firms with respect to the fund that experienced default during the period covered by the report1 including the name of any such target firm4 7#ag7 ,the total number of the target firms with respect to the fund with respect to which a case was commenced under title #aa1 ,united ,states ,code1 during the period covered by the report1 including the name of any such target firm4 7#ah7 ,the percentage of the equity of the fund that is owned by-- 7,a7 citizens of the ,united ,states2 7,b7 individuals who are not citizens of the ,united ,states2 7,c7 brokers or dealers2 7,d7 insurance companies2 7,e7 investment companies that are registered with the ,commission under this ,act2 7,f7 private funds and other investment companies not required to be registered with the ,commission2 7,g7 nonprofit organizations2 7,h7 pension plans maintained by ,state or local governments 7or an agency or instrumentality of either72 7,i7 pension plans maintained by nongovernmental employers2 7,j7 ,state or municipal government entities2 7,k7 banking or thrift institutions2 7,l7 sovereign wealth funds2 and 7,m7 other investors4 7#ai7 ,the total dollar amount of aggregate fees and expenses collected by the fund1 the manager of the fund1 or related parties from target firms with respect to the fund1 which shall-- 7,a7 be categorized by the type of fee2 and 7,b7 include a description of the purpose of the fees4 7#bj7 ,the total dollar amount of aggregate fees and expenses collected by the fund1 the manager of the fund1 or related parties from the limited partners of the fund1 which shall-- 7,a7 be categorized by the type of fee2 and 7,b7 include a description of the purpose of the fees4 7#ba7 ,the total carried interest claimed by the fund1 the manager of the fund1 or related parties and the total dollar amount of carried interest distributed to the limited partners of the fund4 7#bb7 ,a description of1 during the year covered by the report1 any material changes in risk factors at the fund level1 including-- 7,a7 concentration risk2 7,b7 foreign exchange risk2 and 7,c7 extra-financial risk1 including environmental1 social1 and corporate governance risk4 7#bc7 ,any other information that the ,commission determines is necessary and appropriate for the protection of investors4 7c7 ,periodic review ,the ,commission shall1 with respect to the rules issued under subsection 7b7-- 7#a7 review the rules once every #e years2 and 7#b7 revise the rules as necessary to ensure that the disclosures required under the rules reflect contemporary 7as of the date on which the rules are revised7 trends and characteristics with respect to private investment markets4 7d7 ,public availability ,notwithstanding any provision of section #bjd of the ,investment ,advisers ,act of #aidj 7#ae ,u4,s4,c4 #hj;b-#d71 the information disclosed under the rules issued under subsection 7b7 shall be made available to the public4 4 #ejb4 ,fiduciary obligations 7a7 ,fiduciary duties under ,,erisa ,section #dja7;b77#a7 of the ,employee ,retirement ,income ,security ,act of #aigd 7#bi ,u4,s4,c4 #aaja7;b77#a77 is amended-- 7#a7 by inserting or a private fund 7as defined in section #c of the ,stop ,wall ,street ,looting ,act7 before 1 the assets2 and 7#b7 by inserting or such private fund1 as applicable before the period at the end4 7b7 ,prohibition against waiving fiduciary duties ,section #baa7;h7 of the ,investment ,advisers ,act of #aidj 7#ae ,u4,s4,c4 #hj;b-#aa7;h77 is amended-- 7#a7 in paragraph 7#a71 by striking and at the end2 7#b7 in paragraph 7#b71 by striking the period at the end and inserting 2 and2 and 7#c7 by adding at the end the following3 7#c7 promulgate rules that prohibit an investment adviser from requiring any person to which the investment adviser provides investment advice1 including a pension plan 7as defined in section #c of the ,employee ,retirement ,income ,security ,act of #aigd 7#bi ,u4,s4,c4 #ajjb77 that is subject to title ,i of the ,employee ,retirement ,income ,security ,act of #aigd 7#bi ,u4,s4,c4 #ajja et seq471 to1 as a condition of the investment adviser providing that advice1 sign a contract or other agreement in which that person waives a fiduciary duty owed by that person to another person4 4 7c7 ,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 fund4 #ejc4 ,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 funds1 as defined in section #bjb7;a7 of the ,investment ,advisers ,act of #aidj 7#ae ,u4,s4,c4 #hj;b-#b7;a771 managed by that investment adviser 7referred to in this section as managed firms7 the following information3 7#a7 ,a list of all managed firms with respect to the investment adviser1 including those managed firms that1 as of the date on which the disclosure is made-- 7,a7 have active investments2 and 7,b7 have liquidated the assets of the firms4 7#b7 ,for each managed firm listed under paragraph 7#a71 the following information3 7,a7 ,as applicable1 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 dissolved1 including1 with respect to a listed firm that1 as of the date on which the disclosure is made1 is actively investing-- 7i7 the term specified by any limited partnership agreement2 and 7ii7 the nature of any provisions that would allow for the extension of that term4 7,b7 ,the performance of the listed firm's net of fees1 as measured by the public market equivalent or a similar measure4 7,c7 ,a list of target firms with respect to which the listed firm was a control person and the period of that control4 7,d7 ,the number of employees at each target firm identified under subparagraph 7,c71 as of the date on which the listed firm became a control person with respect to the target firm1 and the date on which the listed firm ceased to be a control person with respect to the target firm4 7,e7 ,a list of target firms with respect to the listed firm with respect to which a case has been commenced under title #aa1 ,united ,states ,code4 7,f7 ,for each target firm with respect to the listed firm1 and with respect to which the listed firm is a control person-- 7i7 a list of actions taken by any ,state or local regulatory agency2 and 7ii7 any legal or regulatory penalties paid1 or settlements entered into1 by the general partners of the target firm or the target firm itself4 7#c7 ,the percentage breakdown of the means employed by the investment adviser to divest ownership or control of target firms1 including-- 7,a7 the sale of target firms to other private funds2 7,b7 the sale of target firms to private entities2 7,c7 the sale of target firms to issuers1 the securities of which are traded on a national securities exchange2 7,d7 the commencement of cases under title #aa1 ,united ,states ,code1 with respect to target firms2 and 7,e7 initial public offerings with respect to target firms4 ,,vi ,restrictions on securitizing risky corporate debt #fja4 ,risk retention requirements for securitization of corporate debt ,section #ae;,g of the ,securities ,exchange ,act of #aicd 7#ae ,u4,s4,c4 #gho-#aa7 is amended-- 7#a7 in subsection 7a77#c7-- 7,a7 in subparagraph 7,a71 by striking or at the end2 7,b7 in subparagraph 7,b71 by striking and at the end and inserting or2 and 7,c7 by adding at the end the following3 7,c7 a manager of a collateralized debt obligation2 and 2 7#b7 by redesignating subsection 7i7 as subsection 7j72 and 7#c7 by inserting after subsection 7h7 the following3 7i7 ,rules of construction ,with respect to a securitizer described in subsection 7a77#c77;,c7-- 7#a7 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 hold1 or has never held1 shall be construed as requiring that securitizer to obtain that portion of the credit risk for that asset2 and 7#b7 any reference in this section to an asset transferred by the securitizer shall be construed to include any transfer caused by the securitizer4 4 ,,vii ,miscellaneous #gja4 ,anti-evasion ,it shall be unlawful to conduct any activity1 including by entering into an agreement or contract1 engaging in a transaction1 or structuring an entity1 to willfully evade or attempt to evade any provision of this ,act4 #gjb4 ,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 unconstitutional1 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 holding4