,i  #aag? ,,congress  #a/ ,session  ,h4 
,r4 #cijc  ,,9 ,,! ,,h\se ,,(           
,,repres5tatives  ,june #ae1 #bjba,mr4  
,gro?man introduc$ ! foll[+ bill2 :i* 0 
ref]r$ to ! ,committee on ,ways & ,means
  ,a ,,bill  ,to am5d ! ,int]nal ,rev5ue
 ,code ( #aihf to treat c]ta9 income )  
respect to p>tn]%ip int]e/s held 9      
connection ) ! p]=mance ( s]vices z     
ord9>y income4  #a4 ,%ort title ,?is    
,act may be cit$ z ! ,tax ,fairness ,act
 ( #bjba4  #b4 ,ord9>y income treatm5t 9
 ! case ( p>tn]%ip int]e/s held 9       
connection ) p]=mance ( s]vices  7a7 ,9 
g5]al ,section #ajfa ( ! ,int]nal       
,rev5ue ,code ( #aihf is am5d$ to read z
 foll[s3  #ajfa4 ,p>tn]%ip int]e/s held 
9 connection ) p]=mance ( s]vices  7a7  
,9 g5]al ,if "o or m applicable p>tn]%ip
 int]e/s are held by a taxpay] at any "t
 dur+ ! taxable ye>1 s mu* (-- 7#a7 !   
taxpay]'s net capital ga9 ) respect to  
su* int]e/s = su* taxable ye>1 z does n 
exce$  7#b7 ! taxpay]'s re*>act]ization 
acc\nt balance = su* taxable ye>1  %all 

be treat$ z ord9>y income4  7b7 ,net    
capital ga9  7#a7 ,9 g5]al ,= purposes (
 subsection 7a77#a71 net capital ga9    
%all be det]m9$ "u section #abbb1 except
 t su* section %all be appli$-- 7,a7 )\t
 reg>d to ! re*>act]ization ( any item z
 ord9>y income "u ?is section1  7,b7 by 
only tak+ into acc\nt items ( ga9 &     
loss-- 7i7 tak5 into acc\nt by ! taxpay]
 "u section #gjb ) respect to any       
applicable p>tn]%ip int]e/1  7ii7       
recogniz$ by ! taxpay] on ! disposition 
( any su* int]e/1 or  7iii7 recogniz$ by
 ! taxpay] "u p>agraph 7#d7 on a        
di/ribution ( prop]ty ) respect to su*  
int]e/1 &  7,c7 9 ! case ( a taxable ye>
 = :i* section #abca ga9s 7z def9$ 9    
section #abca7;a77#c77;,a77 exce$       
section #abca losses 7z def9$ 9 section 
#abca7;a77#c77;,b771 by treat+ prop]ty  
:i* is tak5 into acc\nt 9 det]m9+ su*   
ga9s & losses z capital assets held = m 
?an #a ye>4  7#b7 ,allocation to items (
 ga9 ,! am\nt treat$ z ord9>y income "u 
subsection 7a7 %all be allocat$ ratably 

among ! items ( long-t]m capital ga9    
tak5 into acc\nt 9 det]m9+ net capital  
ga9 "u p>agraph 7#a74  7#c7 ,recognition
 ( ga9 on disposition ( applicable      
p>tn]%ip int]e/s ,any ga9 on !          
disposition ( any applicable p>tn]%ip   
int]e/ %all be recogniz$ not)/&+ any o!r
 provision ( ?is title4  7#d7           
,recognition ( ga9 on di/ributions (    
p>tn]%ip prop]ty  7,a7 ,9 g5]al ,9 !    
case ( any di/ribution ( prop]ty by a   
p>tn]%ip ) respect to any applicable    
p>tn]%ip int]e/1 ! p>tn] receiv+ su*    
prop]ty %all recognize ga9 equal to !   
excess 7if any7 (-- 7i7 ! fair m>ket    
value ( su* prop]ty at ! "t ( su*       
di/ribution1 ov]  7ii7 ! adju/$ basis ( 
su* prop]ty 9 ! h&s ( su* p>tn] 7det]m9$
 )\t reg>d to subp>agraph 7,b774  7,b7  
,adju/m5t ( basis ,9 ! case ( a         
di/ribution to :i* subp>agraph 7,a7     
applies1 ! basis ( ! di/ribut$ prop]ty 9
 ! h&s ( ! di/ributee p>tn] %all be !   
am\nt det]m9$ "u subp>agraph 7,a77i74   
7c7 ,re*>act]ization acc\nt balance     

7#a7 ,9 g5]al ,= purposes ( ?is section1
 ! t]m re*>act]ization acc\nt balance   
means1 ) respect to any taxpay] = any   
taxable ye>1 ! excess 7if any7 (-- 7,a7 
! sum (-- 7i7 ! taxpay]'s aggregate     
annual re*>act]ization am\nts ) respect 
to applicable p>tn]%ip int]e/s = su*    
taxable ye>1 plus  7ii7 ! taxpay]'s     
re*>act]ization acc\nt balance = !      
taxable ye> prec$+ su* taxable ye>1 ov] 
7,b7 ! sum (-- 7i7 ! taxpay]'s net      
ord9>y income ) respect to applicable   
p>tn]%ip int]e/s = su* taxable ye>      
7det]m9$ )\t reg>d to ?is section71 plus
  7ii7 ! am\nt treat$ z ord9>y income ( 
! taxpay] "u ?is section = ! taxable ye>
 prec$+ su* taxable ye>4  7#b7 ,annual  
re*>act]ization am\nt ,= purposes ( ?is 
subsection-- 7,a7 ,9 g5]al ,! t]m annual
 re*>act]ization am\nt means1 ) respect 
to any applicable p>tn]%ip int]e/ = any 
p>tn]%ip taxable ye>1 an am\nt equal to 
! product (-- 7i7 ! specifi$ rate       
det]m9$ "u subp>agraph 7,b7 = ! cal5d>  
ye> 9 :i* su* taxable ye> beg9s1        

multipli$ by  7ii7 ! excess 7if any7 (--
 7,i7 an am\nt equal to ! applicable    
p]c5tage ( ! p>tn]%ip's aggregate inve/$
 capital = su* taxable ye>1 ov]  7,,ii7 
! specifi$ capital contribution ( !     
p>tn] ) respect to ! applicable p>tn]%ip
 int]e/ = su* taxable ye>4  ,if a       
taxpay] holds an applicable p>tn]%ip    
int]e/ = less ?an ! entire taxable ye>1 
! am\nt det]m9$ "u ! prec$+ s5t5ce %all 
be ratably r$uc$4  7,b7 ,specifi$ rate  
,= purposes ( subp>agraph 7,a71 ! t]m   
specifi$ rate means1 ) respect to any   
cal5d> ye>1 a p]c5tage equal to-- 7i7 ! 
,f$]al long-t]m rate det]m9$ "u section 
#abgd7;d77#a7 = ! la/ mon? ( ! cal5d>   
ye>1 plus  7ii7 #aj p]c5tage po9ts4     
7,c7 ,applicable p]c5tage  7i7 ,9 g5]al 
,! t]m applicable p]c5tage means1 )     
respect to any applicable p>tn]%ip      
int]e/1 ! highe/ p]c5tage ( pr(its ( !  
p>tn]%ip t c\ld be allocat$ ) respect to
 su* int]e/ = ! taxable ye> 7consi/5t ) 
! p>tn]%ip agreem5t & assum+ su* facts &
 circum/ances ) respect to su* taxable  

ye> z w\ld result 9 su* highe/          
p]c5tage74  7ii7 ,secret>ial au?ority ,!
 ,secret>y %all prescribe rules = !     
det]m9ation ( ! applicable p]c5tage 9   
cases 9 :i* ! p]c5tage ( pr(its ( a     
p>tn]%ip t are to be allocat$ ) respect 
to an applicable p>tn]%ip int]e/ v>ies  
on ! basis ( ! aggregate am\nt ( su*    
pr(its4 ,su* rules may provide a        
p]c5tage :i* may be us$ 9 lieu ( !      
highe/ p]c5tage det]m9$ "u clause 7i7 9 
cases :]e su* o!r p]c5tage is consi/5t )
 ! purposes ( ?is section4  7,d7        
,aggregate inve/$ capital  7i7 ,9 g5]al 
,! t]m aggregate inve/$ capital means1 )
 respect to any taxable ye>1 ! av]age   
daily am\nt ( inve/$ capital ( !        
p>tn]%ip = su* taxable ye>4  7ii7       
,inve/$ capital ,! t]m inve/$ capital   
means1 ) respect to any p>tn]%ip z ( any
 day1 ! total cumulative value1 det]m9$ 
at ! "t ( contribution1 ( all money or  
o!r prop]ty contribut$ to ! p>tn]%ip on 
or be=e su* day4  7iii7 ,r$uction =     
liquidation ( p>tn]%ip int]e/s ,! inve/$

 capital ( a p>tn]%ip %all be r$uc$ by !
 aggregate am\nt di/ribut$ 9 liquidation
 ( int]e/s 9 ! p>tn]%ip4  7iv7 ,treatm5t
 ( c]ta9 indebt$ness z inve/$ capital ,!
 foll[+ am\nts %all be treat$ z inve/$  
capital3 7,i7 ,p>tn] loans ,! aggregate 
value 7det]m9$ z ( ! "t ( ! loan7 (     
money or o!r prop]ty :i* a p>tn] loans  
to ! p>tn]%ip4  7,,ii7 ,indebt$ness     
eligible to %>e 9 equity ( ! p>tn]%ip ,!
 face am\nt ( any conv]tible debt ( !   
p>tn]%ip or any debt obligation provid+ 
equity p>ticipation 9 ! p>tn]%ip4  7,e7 
,specifi$ capital contribution  7i7 ,9  
g5]al ,! t]m specifi$ capital           
contribution means1 ) respect to any    
applicable p>tn]%ip int]e/ = any taxable
 ye>1 ! av]age daily am\nt ( contribut$ 
capital ) respect to su* int]e/ = su*   
ye>4  7ii7 ,contribut$ capital ,! t]m   
contribut$ capital means1 ) respect to  
any applicable p>tn]%ip int]e/ z ( any  
day1 ! excess 7if any7 (-- 7,i7 ! total 
cumulative value1 det]m9$ at ! "t (     
contribution1 ( all money or o!r prop]ty

 contribut$ by ! p>tn] to ! p>tn]%ip )  
respect to su* int]e/ z ( su* day1 ov]  
7,,ii7 ! total cumulative value1 det]m9$
 at ! "t ( di/ribution1 ( all money or  
o!r prop]ty di/ribut$ by ! p>tn]%ip to !
 p>tn] ) respect to su* int]e/ z ( su*  
day4  7iii7 ,treatm5t ( relat$ p>ty     
borr[+s ,any am\nt borr[$ directly or   
indirectly f ! p>tn]%ip or any o!r p>tn]
 ( ! p>tn]%ip or any p]son relat$ to su*
 o!r p>tn] or su* p>tn]%ip %all n be    
tak5 into acc\nt "u ?is subp>agraph4 ,= 
purposes ( ! prec$+ s5t5ce1 a p]son %all
 be treat$ z relat$ to ano!r p]son if ! 
relation%ip betwe5 su* p]sons w\ld be   
describ$ 9 section #bfg7;b7 or #gjg7;b7 
if su* sections & section #bfg7;f7 7    
appli$ by sub/itut+ #aj p]c5t = #ej     
p]c5t ea* place x appe>s4  7,f7         
,multiple int]e/s ,if at any "t dur+ a  
taxable ye> a taxpay] holds directly or 
indirectly m ?an #a applicable p>tn]%ip 
int]e/ 9 a s+le p>tn]%ip1 su* int]e/s   
%all be treat$ z #a applicable p>tn]%ip 
int]e/ = purposes ( apply+ ?is p>agraph4

  7#c7 ,net ord9>y income ,= purposes ( 
?is subsection1 ! net ord9>y income )   
respect to applicable p>tn]%ip int]e/s =
 any taxable ye> is ! excess 7if any7   
(-- 7,a7 ! taxpay]'s di/ributive %>e (  
items ( income & ga9 "u section #gjb )  
respect to applicable p>tn]%ip int]e/s =
 su* taxable ye> 7det]m9$ )\t reg>d to  
any items ( ga9 tak5 into acc\nt 9      
det]m9+ net capital ga9 "u subsection   
7b77#a771 ov]  7,b7 ! taxpay]'s         
di/ributive %>e ( items ( d$uction &    
loss "u section #gjb ) respect to su*   
int]e/s = su* taxable ye> 7det]m9$ )\t  
reg>d to any items ( loss tak5 into     
acc\nt 9 det]m9+ net capital ga9 "u     
subsection 7b77#a774  7d7 ,applicable   
p>tn]%ip int]e/ ,= purposes ( ?is       
section-- 7#a7 ,9 g5]al ,! t]m          
applicable p>tn]%ip int]e/ means any    
int]e/ 9 a p>tn]%ip :i*1 directly or    
indirectly1 is transf]r$ to 7or is held 
by7 ! taxpay] 9 connection ) ! p]=mance 
( s]vices by ! taxpay]1 or any o!r      
p]son1 9 any applicable trade or        

bus9ess4  7#b7 ,applicable trade or     
bus9ess  7,a7 ,9 g5]al ,! t]m applicable
 trade or bus9ess means any trade or    
bus9ess conduct$ on a regul>1 cont9u\s1 
& sub/antial basis :i*1 reg>dless ( :e!r
 ! activities are conduct$ 9 "o or m    
entities1 consi/s1 9 :ole or 9 "p1 (--  
7i7 rais+ or return+ capital1  7ii7     
inve/+ 9 7or dispos+ (7 trades or       
bus9esses 7or id5tify+ trades or        
bus9esses = su* inve/+ or disposition71 
&  7iii7 develop+ su* trades or         
bus9esses4  7,b7 ,treatm5t ( rese>* &   
exp]im5tation activities ,any activity  
involv+ rese>* or exp]im5tation 7)9 !   
mean+ ( section #dfi7;c77#d77 %all be   
treat$ z a trade or bus9ess = purposes (
 clauses 7ii7 & 7iii7 ( subp>agraph     
7,a74  7e7 ,transf] ( applicable        
p>tn]%ip int]e/ to relat$ p]son  7#a7 ,9
 g5]al ,if a taxpay] transf]s any       
applicable p>tn]%ip int]e/1 directly or 
indirectly1 to a p]son relat$ to !      
taxpay]1 ! taxpay] %all include 9 gross 
income 7z ord9>y income7 s mu* ( !      

taxpay]'s re*>act]ization acc\nt balance
 = su* taxable ye> z is allocable to su*
 int]e/ 7det]m9$ 9 su* mann] z !        
,secret>y may provide & r$uc$ by any    
am\nt treat$ z ord9>y income "u         
subsection 7a7 ) respect to ! transf] ( 
su* int]e/74  7#b7 ,relat$ p]son ,=     
purposes ( ?is p>agraph1 a p]son is     
relat$ to ! taxpay] if-- 7,a7 ! p]son is
 a memb] ( ! taxpay]'s family )9 ! mean+
 ( section #cah7;a77#a71 or  7,b7 !     
p]son p]=m$ a s]vice )9 ! curr5t cal5d> 
ye> or ! prec$+ ?ree cal5d> ye>s 9 any  
applicable trade or bus9ess 9 :i* or =  
:i* ! taxpay] p]=m$ a s]vice4  7f7      
,report+ by entity ( taxpay]'s annual   
re*>act]ization am\nt ,a p>tn]%ip %all  
report to ! ,secret>y1 & include ) !    
in=mation requir$ to be furni%$ "u      
section #fjca7;b7 to ea* p>tn]1 ! am\nt 
( ! p>tn]'s annual re*>act]ization am\nt
 = ! taxable ye>1 if any4 ,a simil> rule
 applies to any entity t receives a     
report ( an annual re*>act]ization am\nt
 = ! taxable ye>4  7g7 ,regulations ,!  

,secret>y %all issue su* regulations or 
o!r guidance z necess>y to c>ry out ?is 
section1 includ+ regulations-- 7#a7 to  
prev5t ! abuse ( ! purposes ( ?is       
section1 includ+ ?r\gh-- 7,a7 !         
allocation ( income to tax indiff]5t    
p>ties1 or  7,b7 a r$uction 9 ! inve/$  
capital ( ! p>tn]%ip 7includ+ attempts  
to und]value contribut$ or loan$        
prop]ty71  7#b7 :i* provide t p>tn]%ip  
int]e/s %all n fail to be treat$ z      
transf]r$ or held 9 connection ) !      
p]=mance ( s]vices m]ely because !      
taxpay] also made contributions to !    
p>tn]%ip1  7#c7 :i* provide = !         
application ( ?is section 9 cases :]e ! 
taxpay] has m ?an #a applicable int]e/ 9
 a p>tn]%ip1 &  7#d7 :i* provide = !    
application ( ?is section 9 cases ( ti]$
 /ructures ( entities4  4  7b7          
,coord9ation ) section #hc ,subsection  
7e7 ( section #hc is am5d$ by /rik+ or  
at ! end ( p>agraph 7#d71 by /rik+ !    
p]iod at ! end ( p>agraph 7#e7 & ins]t+ 
1 or1 & by add+ at ! end ! foll[+ new   

p>agraph3  7#f7 a transf] ( a p>tn]%ip  
int]e/ to :i* section #ajfa applies4  4 
7c7 ,effective date ,! am5dm5ts made by 
?is section %all apply to taxable ye>s  
beg9n+ aft] ,decemb] #ca1 #bjba4