1.Short
title; references; table of contents
(a)This Act may be cited
as the Responsible Expansion of the
State Children's Health Insurance Program Act of
2008
.
(b)References to
SCHIP; SecretaryIn this Act:
(1)The
term SCHIP means the State Children’s Health Insurance Program
established under title XXI of the Social Security Act (42 U.S.C. 1397aa et
seq.).
(2)The
term Secretary means the Secretary of Health and Human
Services.
(c)The table of contents of this Act is as
follows:
Sec. 1. Short title; amendments
to Social Security Act; references; table of contents.
TITLE I—SCHIP Reauthorization
Sec. 101. Reauthorization through fiscal year 2013.
Sec. 102. Requiring outreach and coverage before expansion of
eligibility.
Sec. 103. Application of DRA Medicaid citizenship documentation
requirements to SCHIP.
Sec. 104. Phase-out of coverage for nonpregnant adults under
SCHIP.
Sec. 105. Preventing substitution of SCHIP coverage for private
coverage.
TITLE II—Revenue Provisions
Sec. 201. Nonqualified deferred compensation from certain tax
indifferent parties.
Sec. 202. Income of partners for performing investment
management services treated as ordinary income received for performance of
services.
<enum>I</enum><header>SCHIP
Reauthorization</header>
<section commented="no" id="H45D7E9D152E247D2979EEE7F57122CF6"><enum>101.</enum><header>Reauthorization
through Fiscal Year 2013</header>
<subsection commented="no" id="id2F3C8166D33C4526BC86CA8AAA9BAD8E"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">Section 2104 of the
Social Security Act (<external-xref legal-doc="usc" parsable-cite="usc/42/1397dd">42 U.S.C. 1397dd(a)</external-xref>), as amended
by section 201(a)(1) of the Medicare, Medicaid, and SCHIP Extension Act of 2007
(Public Law 110–173) is amended—</text>
<paragraph commented="no" id="H153FC1733CD844C7A2421FDFB283007"><enum>(1)</enum><text>in subsection
(a)—</text>
<subparagraph commented="no" id="id8717C4605A614739B30568CB2B56584D"><enum>(A)</enum><text>by striking
<quote>and</quote> at the end of paragraph (10);</text>
</subparagraph><subparagraph commented="no" id="id6C2AA4F4BA8A4BD9A03492E9B68FE1B0"><enum>(B)</enum><text>in paragraph
(11)—</text>
<clause commented="no" id="id1C8934C666E34651B7E1EA6011F05D3C"><enum>(i)</enum><text>by striking
<quote>each of fiscal years 2008 and 2009</quote> and inserting <quote>fiscal
year 2008</quote>; and</text>
</clause><clause commented="no" id="id90B27CBF0485457BBBF84FBCCDD01A88"><enum>(ii)</enum><text>by striking the
period at the end and inserting a semicolon; and</text>
</clause></subparagraph><subparagraph commented="no" id="HD7676BF08EC843D999CC321C27B6DD9"><enum>(C)</enum><text>by adding at the
end the following new paragraphs:</text>
<quoted-block display-inline="no-display-inline" id="H443D40255C81439687D182F0A938E794" style="OLC">
<paragraph commented="no" id="HEE014733F15D48FAB1E0916804357F2"><enum>(12)</enum><text display-inline="yes-display-inline">for fiscal year 2009,
$7,000,000,000;</text>
</paragraph><paragraph commented="no" id="idF966D7E306AE44D7BA89A6ABB6A6F3C9"><enum>(13)</enum><text>for fiscal year
2010, $8,000,000,000; and</text>
</paragraph><paragraph commented="no" id="id146619B7977E473AB6A3BE9AD571C33C"><enum>(14)</enum><text>for each of
fiscal years 2011 through 2013,
$9,000,000,000.</text>
</paragraph><after-quoted-block>;
and</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph commented="no" id="id1C9003AE556A4ECEBD71BA8C5B5EE7B9"><enum>(2)</enum><text>in subsection
(c)(4)(B), by striking <quote>2009</quote> and inserting
<quote>2013</quote>.</text>
</paragraph></subsection><subsection commented="no" id="HEE54D9E178E940A69B75B7AD187BB259"><enum>(b)</enum><header>Repeal of
limitation on availability of funding for fiscal years 2008 and
2009</header><text>Section 201 of the Medicare, Medicaid, and SCHIP Extension
Act of 2007 (Public Law 110–173) is amended—</text>
<paragraph commented="no" display-inline="no-display-inline" id="id4BDA992351A3497FB859086E9A02F392"><enum>(1)</enum><text>in subsection
(a), by striking paragraph (2) and redesignating paragraphs (3) and (4), as
paragraphs (2) and (3) respectively; and</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="id64E92468C6634DECA1386B10347A8C6E"><enum>(2)</enum><text>in subsection
(b), by striking paragraph (2) and redesignating paragraph (3) as paragraph
(2).</text>
</paragraph></subsection></section><section id="H565AA506DEAB4565BA429E46F2CA566C"><enum>102.</enum><header>Requiring
outreach and coverage before expansion of eligibility</header>
<subsection id="H80DA6F1610F74070980063C187E55F15"><enum>(a)</enum><header>State plan
required To specify how it will achieve coverage for 85 percent of targeted
low-income children</header>
<paragraph id="HEEDA3E52B907470DBB2EF000F5ED2CA7"><enum>(1)</enum><header>In
general</header><text>Section 2102(a) of the Social Security Act (42 U.S.C.
1397bb(a)) is amended—</text>
<subparagraph id="HBC32635BCFBE47E0B1EFFC6FF0091C2"><enum>(A)</enum><text>in paragraph (6),
by striking <quote>and</quote> at the end;</text>
</subparagraph><subparagraph id="HB2A58AFE96E44C6697A3DE0000C82D25"><enum>(B)</enum><text>in paragraph (7),
by striking the period at the end and inserting <quote>; and</quote>;
and</text>
</subparagraph><subparagraph id="H97A68D0E7F3946E4A716135508CC6277"><enum>(C)</enum><text>by adding at the
end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H5B8C1B62F944438CBC19BAEC3B326BEF" style="OLC">
<paragraph id="H920149F4E38A4120872015706DE7A927"><enum>(8)</enum><text display-inline="yes-display-inline">how the eligibility and benefits provided
for under the plan for each fiscal year (beginning with fiscal year 2009) will
allow for the State's annual funding allotment to cover at least 85 percent of
the eligible targeted low-income children in the
State.</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph id="H758DF3D8B1D2400A9EC1CD569E7695F5"><enum>(2)</enum><header>Effective
date</header><text>The amendments made by paragraph (1) shall apply to State
child health plans for fiscal years beginning with fiscal year 2009.</text>
</paragraph></subsection><subsection id="H234E8C5D52E24C2BA0849BB627C61F48"><enum>(b)</enum><header>Limitation on
program expansions until lowest income eligible individuals
enrolled</header><text>Section 2105(c) of such Act (<external-xref legal-doc="usc" parsable-cite="usc/42/1397dd">42 U.S.C.
1397dd(c)</external-xref>) is amended by adding at the end the following new
paragraph:</text>
<quoted-block display-inline="no-display-inline" id="HECE909E6967E44B7899E6220A7AAF712" style="OLC">
<paragraph id="H05972A3C55F84FDC9F4E00C91F410984"><enum>(8)</enum><header>Limitation on
increased coverage of higher income children</header><text>For child health
assistance furnished in any fiscal year beginning with fiscal year 2009:</text>
<subparagraph id="HA4E4260251CF4D07A016C244005F915B"><enum>(A)</enum><header>No payment for
children with family income above 300 percent of poverty line</header><text display-inline="yes-display-inline">Payment shall not be made under this
section for child health assistance for a targeted low-income child in a family
the income of which exceeds 300 percent of the poverty line applicable to a
family of the size involved.</text>
</subparagraph><subparagraph id="H8BBB67E35D05480B93AA9FE5F1ED22F"><enum>(B)</enum><header>Special rules for
payment for children with family income above 200 percent of poverty
line</header><text display-inline="yes-display-inline">In the case of child
health assistance for a targeted low-income child in a family the income of
which exceeds 200 percent (but does not exceed 300 percent) of the poverty line
applicable to a family of the size involved no payment shall be made under this
section for such assistance unless the State demonstrates to the satisfaction
of the Secretary that—</text>
<clause id="HD9D077E088A74F638E6483B49C5B32FC"><enum>(i)</enum><text>the State has met
the 85 percent retrospective coverage test specified in subparagraph (C)(i) for
the previous fiscal year; and</text>
</clause><clause id="H89EC1D1AC48347AB9F69C63E647188ED"><enum>(ii)</enum><text>the State will
meet the 85 percent prospective coverage test specified in subparagraph (C)(ii)
for the fiscal year.</text>
</clause></subparagraph><subparagraph id="HB9A5C9E44E2B45E2A019F092AEEEE031"><enum>(C)</enum><header>85 percent
coverage tests</header>
<clause id="H54BAE6E0A086470399C3BBAEC7B360D3"><enum>(i)</enum><header>Retrospective
test</header><text>The 85 percent retrospective coverage test specified in this
clause is, for a State for a fiscal year, that on average during the fiscal
year, the State has enrolled under this title or title XIX at least 85 percent
of the individuals residing in the State who—</text>
<subclause id="HA831A3A276874DAEAE7E8D2CB5619D20"><enum>(I)</enum><text>are children under
19 years of age (or are pregnant women) and are eligible for medical assistance
under title XIX; or</text>
</subclause><subclause id="HD5CB120980824B32A66C7B31AD459EE8"><enum>(II)</enum><text>are targeted
low-income children whose family income does not exceed 200 percent of the
poverty line and who are eligible for child health assistance under this
title.</text>
</subclause></clause><clause id="HFDD42A4432604E51A051A8BEF41832A6"><enum>(ii)</enum><header>Prospective
test</header><text>The 85 percent prospective test specified in this clause is,
for a State for a fiscal year, that on average during the fiscal year, the
State will enroll under this title or title XIX at least 85 percent of the
individuals residing in the State who—</text>
<subclause id="HCF68B74917EB45DE88E75381CA109C49"><enum>(I)</enum><text>are children under
19 years of age (or are pregnant women) and are eligible for medical assistance
under title XIX; or</text>
</subclause><subclause id="HE0214D5536024DAEA4D6CAC400E8D2E7"><enum>(II)</enum><text display-inline="yes-display-inline">are targeted low-income children whose
family income does not exceed such percent of the poverty line (in excess of
200 percent) as the State elects consistent with this paragraph and who are
eligible for child health assistance under this title.</text>
</subclause></clause></subparagraph><subparagraph id="id96113732B5C34766AE6AE5D1B1AD99C9"><enum>(D)</enum><header>Phase-in
requirement for expanded coverage if 85 percent tests met for low-income
coverage</header><text>With respect to a fiscal year, if a State meets both of
the coverage tests specified in clauses (i) and (ii) of subparagraph (C) for
such year—</text>
<clause id="idB32BD38D46F24F85AFC3C3A7D7FC845C"><enum>(i)</enum><text>payment may be
made to the State under this section for child health assistance for a targeted
low-income child in a family the income of which exceeds 200 percent, but does
not exceed 250 percent poverty line applicable to a family of the size
involved; and</text>
</clause><clause id="id3F48D8FE6DF14821A0FEA032C26DDA7F"><enum>(ii)</enum><text>payment may be
made to the State under this section child health assistance for a targeted
low-income child in a family the income of which 250 percent, but does not
exceed 300 percent of the poverty line applicable to a family of the size
involved only if the State can also meet the retrospective test applied under
clause (i) of subparagraph (C) for the previous fiscal year by substituting
<quote>250</quote> for <quote>200</quote> in subclause (II) of such
clause.</text>
</clause></subparagraph><subparagraph id="H8AD2D1C397524BD59655334ED9005827"><enum>(E)</enum><header>Treatment of
pregnant women</header><text display-inline="yes-display-inline">In this
paragraph and sections 2102(a)(8) and 2104(a)(2), the term <term>targeted
low-income child</term> includes an individual under age 19, including the
period from conception to birth, who is eligible for child health assistance
under this title by virtue of the definition of the term <term>child</term>
under <external-xref legal-doc="usc" parsable-cite="usc/42/457">section
457.10</external-xref> of title 42, Code of Federal
Regulations.</text>
</subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HC9A4FA97CDE6429EA5D16E0656B8F98F"><enum>(c)</enum><header>Standardization
of income determinations</header>
<paragraph id="H81B1F2663EF54FC1A8FE32C2FE4E45BF"><enum>(1)</enum><header>In
general</header><text>Section 2110(d) of such Act (<external-xref legal-doc="usc" parsable-cite="usc/42/1397jj">42 U.S.C. 1397jj</external-xref>)
is amended by adding at the end the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="H29CEBF09F2FD4E7BA7008EC3B67595FA" style="OLC">
<subsection id="HCB8B7002179C4DF28E09CC5C64190091"><enum>(d)</enum><header>Standardization
of income determinations</header><text>In determining family income under this
title (including in the case of a State child health plan that provides health
benefits coverage in the manner described in section 2101(a)(2)), a State shall
base such determination on gross income (including amounts that would be
included in gross income if they were not exempt from income taxation) and may
only take into consideration such income disregards as the Secretary shall
develop and specify on a uniform national
basis.</text>
</subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="H5A4051AEDE3743A3AD9DD6ECCE2D3E0"><enum>(2)</enum><header>Effective
date</header><subparagraph commented="no" display-inline="yes-display-inline" id="HBE6A10DC7102481095ACE5F1D7E424E5"><enum>(A)</enum><text>Subject to subparagraph
(B), the amendment made by paragraph (1) shall apply to determinations (and
redeterminations) of income made on or after October 1, 2008.</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="HEBC40BE6D8444371838C66E5EAC51B6F" indent="up1"><enum>(B)</enum><text display-inline="yes-display-inline">In the case of a State child health plan
under title XXI of the Social Security Act which the Secretary of Health and
Human Services determines requires State legislation (other than legislation
appropriating funds) in order for the plan to meet the additional requirement
imposed by the amendment made by paragraph (1), the State child health plan
shall not be regarded as failing to comply with the requirements of such title
solely on the basis of its failure to meet this additional requirement before
the first day of the first calendar quarter beginning after the close of the
first regular session of the State legislature that begins after the date of
the enactment of this Act. For purposes of the previous sentence, in the case
of a State that has a 2-year legislative session, each year of such session
shall be deemed to be a separate regular session of the State
legislature.</text>
</subparagraph></paragraph></subsection></section><section id="idE058DC106C8F492FBAC934E559949A9B"><enum>103.</enum><header>Application of
DRA Medicaid citizenship documentation requirements to SCHIP</header>
<subsection id="H29CDAF69C87647ADB4205B61BCA192B"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">Section 2105(c) of
the Social Security Act (42 U.S.C. 1397dd(c)), as amended by section 102(b), is
amended by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H3D706C2C81B241D79238FD04235C22C" style="OLC">
<paragraph id="HA5F5D986295D484B8D64154CDD4D88CC"><enum>(9)</enum><header>Application of
citizenship documentation requirements</header>
<subparagraph id="HFA9D64CFFC14442AB3583B2F06AAF352"><enum>(A)</enum><header>In
general</header><text display-inline="yes-display-inline">Subject to
subparagraph (B), no payment may be made under this section to a State with
respect to amounts expended for child health assistance for an individual who
declares under section 1137(d)(1)(A) to be a citizen or national of the United
States for purposes of establishing eligibility for benefits under this title,
unless the requirement of section 1903(x) is met.</text>
</subparagraph><subparagraph id="HC449BF3CB108464A8B42DACA2BD5DE22"><enum>(B)</enum><header>Treatment of
pregnant women</header><text display-inline="yes-display-inline">For purposes
of applying subparagraph (A) in the case of a pregnant woman who qualifies for
child health assistance by virtue of the application of section 457.10 of title
42, Code of Federal Regulations, the requirement of section 1903(x) shall be
deemed to be satisfied by the presentation of documentation of personal
identity described in section 274A(b)(1)(D) of the Immigration and Nationality
Act or any other documentation of personal identity of such other type as the
Secretary finds, by regulation, provides a reliable means of
identification.</text>
</subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HFF1AD057527E4EA9B3A79EBC99659851"><enum>(b)</enum><header>Effective
date</header><text>The amendment made by paragraph (1) shall apply to
eligibility determinations and redeterminations made after the date of
enactment of this Act.</text>
</subsection></section><section display-inline="no-display-inline" id="id7FBDDD7231C341B9959BC91B13D3B682" section-type="subsequent-section"><enum>104.</enum><header>Phase-out of
coverage for nonpregnant adults under SCHIP</header>
<subsection id="id3F03D48B2F744BCDA6990EF02B930DD5"><enum>(a)</enum><header>In
general</header><text>Title XXI of the Social Security Act (42 U.S.C. 1397aa et
seq.) is amended by adding at the end the following new section:</text>
<quoted-block id="idE00BEB8674DE45888C082354AD742DA1" style="OLC">
<section id="idE8F10737107546F7B93716C46267FBA9"><enum>2111.</enum><header>Phase-out of
coverage for nonpregnant adults</header>
<subsection id="id735161E6E26541DA894FFF70EEB4A63D"><enum>(a)</enum><header>Termination of
Coverage for Nonpregnant Adults</header>
<paragraph id="idB3237934A6294623A0C3F7862215C2E7"><enum>(1)</enum><header>No new SCHIP
waivers; automatic extensions at state option through December
2008</header><text>Notwithstanding section 1115 or any other provision of this
title, except as provided in this subsection—</text>
<subparagraph id="idF8E0B6C21AA64429B0ABD40FFC8E2B72"><enum>(A)</enum><text>the Secretary
shall not on or after the date of the enactment of the
<short-title>Responsible Expansion of the State Children's
Health Insurance Program Act of 2008</short-title>, approve or renew a waiver,
experimental, pilot, or demonstration project that would allow funds made
available under this title to be used to provide child health assistance or
other health benefits coverage to a nonpregnant adult; and</text>
</subparagraph><subparagraph id="idE44312FE993A42A593F0E9FB45F27540"><enum>(B)</enum><text>notwithstanding
the terms and conditions of an applicable existing waiver, the provisions of
paragraph (2) shall apply for purposes of any period beginning on or after
January 1, 2009, in determining the period to which the waiver applies, the
individuals eligible to be covered by the waiver, and the amount of the Federal
payment under this title.</text>
</subparagraph></paragraph><paragraph id="id4536337D653B4806BE2BF4EA4B083DAA"><enum>(2)</enum><header>Termination of
SCHIP coverage under applicable existing waivers at the end of 2008</header>
<subparagraph id="id12FD7B89E99F41ECB5CDDFE917E7CD31"><enum>(A)</enum><header>In
general</header><text>No funds shall be available under this title for child
health assistance or other health benefits coverage that is provided to a
nonpregnant adult under an applicable existing waiver after December 31,
2008.</text>
</subparagraph><subparagraph id="ID6bbc005638484d54bb6c29bc44be4b93"><enum>(B)</enum><header>Extension upon
state request</header><text>If an applicable existing waiver described in
subparagraph (A) would otherwise expire before January 1, 2009, and the State
requests an extension of such waiver, the Secretary shall grant such an
extension, but only through December 31, 2008.</text>
</subparagraph><subparagraph id="idB1F4497C3810478F9F25F8F9C27F882D"><enum>(C)</enum><header>Application of
enhanced fmap</header><text>The enhanced FMAP determined under section 2105(b)
shall apply to expenditures under an applicable existing waiver for the
provision of child health assistance or other health benefits coverage to a
nonpregnant childless adult during the period beginning on the date of the
enactment of this subsection and ending on December 31, 2008.</text>
</subparagraph></paragraph></subsection><subsection id="idE9B85B246025477ABC2301314395E571"><enum>(b)</enum><header>Applicable
Existing Waiver</header><text>For purposes of this section—</text>
<paragraph id="idC24508FD66BE43408E041D854E121F25"><enum>(1)</enum><header>In
general</header><text>The term <term>applicable existing waiver</term> means a
waiver, experimental, pilot, or demonstration project under section 1115,
grandfathered under section 6102(c)(3) of the Deficit Reduction Act of 2005, or
otherwise conducted under authority that—</text>
<subparagraph id="idB68B96E863EF4BAB8AC1FD7A26857BC2"><enum>(A)</enum><text>would allow funds
made available under this title to be used to provide child health assistance
or other health benefits coverage to—</text>
<clause id="idB52B83520035469F93D53F5C0A3D9E8A"><enum>(i)</enum><text>a
parent of a targeted low-income child;</text>
</clause><clause id="id892B87E39E58492383A9592CFC2D7393"><enum>(ii)</enum><text>a nonpregnant
childless adult; or</text>
</clause><clause id="id0A40B71A4E794CC7AAACD01F784C931D"><enum>(iii)</enum><text>individuals
described in both clauses (i) and (ii); and</text>
</clause></subparagraph><subparagraph id="idC93CBB1E61F5496586A88C9CDAD11F6D"><enum>(B)</enum><text>was in effect on
October 1, 2007.</text>
</subparagraph></paragraph><paragraph id="id84E9471EFB2E4DFCB420D369D61F54E2"><enum>(2)</enum><header>Definitions</header><text display-inline="yes-display-inline">The term <term>nonpregnant adult</term>
means any individual who is not a targeted low-income pregnant woman (as
defined in section 2112(d)(2)) or a targeted low-income
child.</text>
</paragraph></subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H6EDC9C3E4EDD4D059C93489792EDD2CE"><enum>(b)</enum><header>Conforming
amendments</header>
<paragraph id="H6DD0A00A528849B6A0502569F5D64153"><enum>(1)</enum><text>Section 2107(f) of
such Act (42 U.S.C. 1397gg(f)) is amended—</text>
<subparagraph id="H9FED7CDC43404B970000701BC984D4DC"><enum>(A)</enum><text>by striking “, the
Secretary” and inserting “:</text>
<quoted-block id="HEEAB6F8EF14E4D9180190064B8576995" style="OLC">
<paragraph id="HABA6878AE927420E90022D74E7518891"><enum>(1)</enum><text>The
Secretary</text>
</paragraph><after-quoted-block>;</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="H7358E311DFDF4E8AB29B1BA18B1414A4"><enum>(B)</enum><text>in the first
sentence, by striking <quote>childless</quote>;</text>
</subparagraph><subparagraph id="HCE5BEC0CC4394371B11638591F1EA926"><enum>(C)</enum><text>by striking the
second sentence; and</text>
</subparagraph><subparagraph id="H3686DFCCDF47469D80E2FEB648CC10A"><enum>(D)</enum><text>by adding at the
end the following new paragraph:</text>
<quoted-block id="HEA21982B69FC4BB3B47B9C45126E3B82" style="OLC">
<paragraph id="H3458EBC23D924E018911ECB01784D2F9"><enum>(2)</enum><text>The Secretary may
not approve, extend, renew, or amend a waiver, experimental, pilot, or
demonstration project with respect to a State after the date of enactment of
the <short-title>Responsible Expansion of the State
Children's Health Insurance Program Act of 2008</short-title> that would waive
or modify the requirements of section
2111.</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph id="H088DAD21D550410AAB10DB1C4E502BE8"><enum>(2)</enum><text>Section 6102(c) of
the Deficit Reduction Act of 2005 (Public Law 109–171; 120 Stat. 131) is
amended by striking <quote>Nothing</quote> and inserting <quote>Subject to
section 2111 of the <act-name parsable-cite="SSA">Social Security
Act</act-name>, as added by section 104 of the
<short-title>Responsible Expansion of the State Children's
Health Insurance Program Act of 2008</short-title>, nothing</quote>.</text>
</paragraph></subsection></section><section display-inline="no-display-inline" id="H056C23D394544966886EF5C000FFFC4" section-type="subsequent-section"><enum>105.</enum><header>Preventing
substitution of SCHIP coverage for private coverage</header>
<subsection id="H11280C425CC84FF898B9DFE7BD16DFFD"><enum>(a)</enum><header>Findings</header>
<paragraph id="H81A696F561CB41D99122CB95FD8F0043"><enum>(1)</enum><text>Congress agrees
with the President that low-income children should be the first priority of all
States in providing child health assistance under SCHIP.</text>
</paragraph><paragraph id="HD911E20F12AC4BE8A47E4FB230759DF4"><enum>(2)</enum><text display-inline="yes-display-inline">Congress agrees with the President and the
Congressional Budget Office that the substitution of SCHIP coverage for private
coverage occurs more frequently for children in families at higher income
levels.</text>
</paragraph><paragraph id="H7688854656FE4B10B3D4C336E3E1BD1F"><enum>(3)</enum><text>Congress agrees
with the President that it is appropriate that States that expand SCHIP
eligibility to children at higher income levels should have achieved a high
level of health benefits coverage for low-income children and should implement
strategies to address such substitution.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="H192AF45C1E264892B7D2F55D310880B7"><enum>(4)</enum><text>Congress concludes
that the policies specified in this section (and the amendments made by this
section) are the appropriate policies to address these issues.</text>
</paragraph></subsection><subsection id="H37175BC6AC4940BC9200004FDE5B7D3C"><enum>(b)</enum><header>Analyses of best
practices and methodology in addressing crowd-out</header>
<paragraph id="H4085048984A94E949448DAC1D6D6458"><enum>(1)</enum><header>GAO
report</header><text display-inline="yes-display-inline">Not later than 18
months after the date of the enactment of this Act, the Comptroller General of
the United States shall submit to the Committee on Finance of the Senate and
the Committee on Energy and Commerce of the House of Representatives and the
Secretary a report describing the best practices by States in addressing the
issue of SCHIP crowd-out. Such report shall include—</text>
<subparagraph id="id6A481BDC04704722909013BC8F5BE1CF"><enum>(A)</enum><text display-inline="yes-display-inline">analyses of—</text>
<clause id="H0DD6B41144CE43F08DFD8B41FE0727C9"><enum>(i)</enum><text>the
impact of different geographic areas, including urban and rural areas, on SCHIP
crowd-out;</text>
</clause><clause id="HCB4CBED089844A0399FA00FA5460689"><enum>(ii)</enum><text>the
impact of different State labor markets on SCHIP crowd-out;</text>
</clause><clause id="HD9AC1B8C1505456D91DAA0191FC07EC4"><enum>(iii)</enum><text>the impact of
different strategies for addressing SCHIP crowd-out;</text>
</clause><clause id="H6EECCEAFC323476181BA244791D84C19"><enum>(iv)</enum><text>the
incidence of crowd-out for children with different levels of family income;
and</text>
</clause><clause id="H6537BBB2FA5240A58308ABF93003999E"><enum>(v)</enum><text display-inline="yes-display-inline">the relationship (if any) between changes
in the availability and affordability of dependent coverage under
employer-sponsored health insurance and SCHIP crowd-out; and</text>
</clause></subparagraph><subparagraph id="id2BCFBF7C9A714EFE9C7EBAC999F38B99"><enum>(B)</enum><text>recommendations
for such legislative changes as the Comptroller General determines are likely
to most effective for addressing the issue of SCHIP crowd-out, together with
proposed legislative language.</text>
</subparagraph></paragraph><paragraph id="H4F34B6FA7D88424BB9512229814C091F"><enum>(2)</enum><header>IOM report on
methodology</header><text display-inline="yes-display-inline">The Secretary
shall enter into an arrangement with the Institute of Medicine under which the
Institute submits to the Committee on Finance of the Senate and the Committee
on Energy and Commerce of the House of Representatives and the Secretary, not
later than 18 months after the date of the enactment of this Act, a report
on—</text>
<subparagraph id="H04CC3CFF3A2C45B3B64E6E0041B6523"><enum>(A)</enum><text>the most accurate,
reliable, and timely way to measure—</text>
<clause id="H65AEFE97333F432AADCDD0E22551E508"><enum>(i)</enum><text display-inline="yes-display-inline">on a State-by-State basis, the rate of
public and private health benefits coverage among low-income children with
family income that does not exceed 200 percent of the poverty line; and</text>
</clause><clause id="HE1FD4495436D4F7E9FEB2F74D684DE01"><enum>(ii)</enum><text display-inline="yes-display-inline">SCHIP crowd-out, including in the case of
children with family income that exceeds 200 percent of the poverty line;
and</text>
</clause></subparagraph><subparagraph id="H624C1A7778F14C5B908F473B01EECC00"><enum>(B)</enum><text>the least
burdensome way to gather the necessary data to conduct the measurements
described in subparagraph (A).</text>
</subparagraph><continuation-text continuation-text-level="paragraph">Out of any
money in the Treasury not otherwise appropriated, there are hereby appropriated
$2,000,000 to carry out this paragraph for the period ending September 30,
2009.</continuation-text></paragraph><paragraph commented="no" display-inline="no-display-inline" id="HA523878897A14AF2AD1225AE21D9C9DB"><enum>(3)</enum><header>Incorporation of
definitions</header><text>In this section, the terms <term>SCHIP
crowd-out</term>, <term>children</term>, <term>poverty line</term>, and
<term>State</term> have the meanings given such terms for purposes of
SCHIP.</text>
</paragraph><paragraph id="H8AFA9A7E64C94BC6B81D55F677FA7700"><enum>(4)</enum><header>Definition of
SCHIP crowd-out</header><text>Section 2110(c) of the Social Security Act
(<external-xref legal-doc="usc" parsable-cite="usc/42/1397jj">42 U.S.C.
1397jj(c)</external-xref>) is amended by adding at the end the
following:</text>
<quoted-block display-inline="no-display-inline" id="HADFA61020A0E4D10A0013CED99FD7A7" style="OLC">
<paragraph commented="no" id="H27CB77D0E575481AABEF18746BFA30C6"><enum>(9)</enum><header>SCHIP
crowd-out</header><text>The term <term>SCHIP crowd-out</term> means the
substitution of—</text>
<subparagraph id="HF015B5A433544A82A5904F60D9BA0015"><enum>(A)</enum><text>health benefits
coverage for a child under this title, for</text>
</subparagraph><subparagraph id="H6A11C254BBB64419A631ABAF800A8C2"><enum>(B)</enum><text>health benefits
coverage for the child other than under this title or title
XIX.</text>
</subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="HA6DB8AE342FF4F3BA1A1A54508E200D7"><enum>(c)</enum><header>Development of
best practice recommendations</header><text>Section 2107 of such Act
(<external-xref legal-doc="usc" parsable-cite="usc/42/1397gg">42 U.S.C.
1397gg</external-xref>) is amended by adding at the end the following:</text>
<quoted-block display-inline="no-display-inline" id="H9389599307CF45549310B5F2A9DB00DD" style="OLC">
<subsection id="HFE9591AC195D437CBFF969D3D5B9C27"><enum>(g)</enum><header>Development of
best practice recommendations</header><text>Within 6 months after the date of
receipt of the reports under subsections (a) and (b) of section 105 of the
<short-title>Responsible Expansion of the State Children's
Health Insurance Program Act of 2008</short-title>, the Secretary, in
consultation with States, including Medicaid and SCHIP directors in States,
shall publish in the Federal Register, and post on the public website for the
Department of Health and Human Services—</text>
<paragraph id="HE19AA6CC77A54132997B436EF100225B"><enum>(1)</enum><text>recommendations
regarding best practices for States to use to address SCHIP crowd-out;
and</text>
</paragraph><paragraph id="H7BA5921326314F7DB888AD936B686245"><enum>(2)</enum><text display-inline="yes-display-inline">uniform standards for data collection by
States to measure and report—</text>
<subparagraph id="H0170910343274036848CC78F1D9752C5"><enum>(A)</enum><text>health benefits
coverage for children with family income below 200 percent of the poverty line;
and</text>
</subparagraph><subparagraph id="HD85C6A0298B94171A3001304B97C9200"><enum>(B)</enum><text display-inline="yes-display-inline">on SCHIP crowd-out, including for children
with family income that exceeds 200 percent of the poverty line.</text>
</subparagraph></paragraph><continuation-text commented="no" continuation-text-level="subsection">The Secretary, in consultation with
States, including Medicaid and SCHIP directors in States, may from time to time
update the best practice recommendations and uniform standards set published
under paragraphs (1) and (2) and shall provide for publication and posting of
such updated recommendations and
standards.</continuation-text></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H8EFA30FEDED2429196F9021546F63E8D"><enum>(d)</enum><header>Requirement To
address SCHIP crowd-out; Secretarial review</header><text>Section 2106 of such
Act (42 U.S.C. 1397ff) is amended by adding at the end the following:</text>
<quoted-block display-inline="no-display-inline" id="HB7FD72D8402348A184D5B8F5A5A5D3B1" style="OLC">
<subsection id="HBB91CD603A394F899CEBA0BCE62D1398"><enum>(f)</enum><header>Requirement To
address SCHIP crowd-out; Secretarial review</header>
<paragraph id="HB0F703A103F14E62A495C8556893006D"><enum>(1)</enum><header>In
general</header><text display-inline="yes-display-inline">Not later than 6
months after the best practice application date described in paragraph (2),
each State that has a State child health plan shall submit to the Secretary a
State plan amendment describing how the State—</text>
<subparagraph id="H4D3409F21DDF4224BAEB45CFD1AA7AC"><enum>(A)</enum><text>will address SCHIP
crowd-out; and</text>
</subparagraph><subparagraph id="HE3B218DEFB004F838808B140DD2F9BD0"><enum>(B)</enum><text>will incorporate
recommended best practices referred to in such paragraph.</text>
</subparagraph></paragraph><paragraph id="H47DFDCC176264A4297A775CC00B1A97"><enum>(2)</enum><header>Best practice
application date</header><text display-inline="yes-display-inline">The best
practice application date described in this paragraph is the date that is 6
months after the date of publication of recommendations regarding best
practices under section 2107(g)(1).</text>
</paragraph><paragraph id="HF046C20B2B2246F3ACBA362DA84FDD10"><enum>(3)</enum><header>Secretarial
review</header><text>The Secretary shall—</text>
<subparagraph id="H088372F7561D4687917327300474EBBB"><enum>(A)</enum><text>review each State
plan amendment submitted under paragraph (1);</text>
</subparagraph><subparagraph id="H469F22A4BDF240AAB0D873E9E2861ED8"><enum>(B)</enum><text>determine whether
the amendment incorporates recommended best practices referred to in paragraph
(2);</text>
</subparagraph><subparagraph id="HA521AE7B17E548908778E5BA61A0C7C5"><enum>(C)</enum><text>in the case of a
higher income eligibility State (as defined in section 2105(c)(10)(B)),
determine whether the State meets the enrollment targets required under
reference section 2105(c)(10)(C); and</text>
</subparagraph><subparagraph commented="no" display-inline="no-display-inline" id="H63481962E0034853811494D51E9DFA5"><enum>(D)</enum><text>notify the State of
such
determinations.</text>
</subparagraph></paragraph></subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H4C35E09B182C4793BFB1FCAD246B456F"><enum>(e)</enum><header>Limitation on
payments for States covering higher income children</header>
<paragraph id="H213F34C534FC4317AA2C678E8FFDB5A4"><enum>(1)</enum><header>In
general</header><text>Section 2105(c) of such Act (<external-xref legal-doc="usc" parsable-cite="usc/42/1397ee">42 U.S.C.
1397ee(c)</external-xref>), as amended by sections 102(b) and 103(a), is
amended by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="HD3DF1674854648909BE897BA72C0500" style="OLC">
<paragraph id="HA2D23B6137044B65B8F8B58B38F16FC7"><enum>(10)</enum><header>Limitation on
payments for States covering higher income children</header>
<subparagraph id="HDDE9021F93D2470C8595D37B484BDC9E"><enum>(A)</enum><header>Determinations</header>
<clause id="HE228D7ADED304B4490A49EE777D054EB"><enum>(i)</enum><header>In
general</header><text>The Secretary shall determine within 6 months of the date
of the submission of a State plan amendment to provide child health assistance
to higher income children (or, in the case of any State that is a higher income
eligibility State on the date of enactment of this paragraph, within 6 months
of such date of enactment), whether the State meets the target rate of coverage
of low-income children required under subparagraphs (C) and (D) of paragraph
(8) and shall notify the State of such determination.</text>
</clause><clause id="H37D7B98701EA43E58BB1A38C7726A2AC"><enum>(ii)</enum><header>Determination
of failure</header><text>If the Secretary determines that a State does not meet
such target rate of coverage, no payment shall be made under this section for
child health assistance provided for higher-income children (as defined in
subparagraph (C)) under the State child health plan (beginning, in the case of
any State that is determined to be a higher income eligibility State within of
the date of enactment of this paragraph, on January 1, 2009) unless and until
the State establishes it is in compliance with such requirement.</text>
</clause></subparagraph><subparagraph display-inline="no-display-inline" id="HE84D73A04D884ABDBA6BACCBDABDA100"><enum>(B)</enum><header>Higher income
eligibility state</header><text>A higher income eligibility State described in
this clause is a State that—</text>
<clause id="HA41A31AE436747B9902000699FEB8E45"><enum>(i)</enum><text display-inline="yes-display-inline">applies under its State child health plan
an eligibility income standard for targeted low-income children that exceeds
200 percent of the poverty line; or</text>
</clause><clause id="HF78AE1C5472A4580AC106EA6948286C8"><enum>(ii)</enum><text display-inline="yes-display-inline">because of the application of a general
exclusion of a block of income that is not determined by type of expense or
type of income, applies an effective income standard under the State child
health plan for such children that exceeds 200 percent of the poverty line.
<italic></italic></text>
</clause></subparagraph><subparagraph id="H1D80367151254CF2A973DD6FC1071B06"><enum>(C)</enum><header>Higher-income
child</header><text display-inline="yes-display-inline">For purposes of this
paragraph, the term <term>higher income child</term> means, with respect to a
State child health plan, a targeted low-income child whose family
income—</text>
<clause id="H871B360C3B834C10A92FE220C8433E83"><enum>(i)</enum><text>exceeds 200
percent of the poverty line; or</text>
</clause><clause id="HC2B07D04AFC04DE2A3CEC742B6B0AE72"><enum>(ii)</enum><text>would exceed 200
percent of the poverty line if there were not taken into account any general
exclusion described in subparagraph (B)(ii).</text>
</clause></subparagraph><subparagraph id="H934E8BF92B624ABAA5EC9B69FB5DA2EA"><enum>(D)</enum><header>Notice and
opportunity to comply with target rate</header><text>If the Secretary makes a
determination that a State does not meet the target rate of coverage of
low-income children required under subparagraphs (C) and (D) of paragraph (8),
the Secretary—</text>
<clause id="HFDC73F9669944A5E813BF9A949A63C57"><enum>(i)</enum><text>shall provide the
State with the opportunity to submit and implement a corrective action plan for
the State to come into compliance with the requirement of subparagraphs (C) and
(D) of paragraph (8) before October 1 of any year; and</text>
</clause><clause id="H2B80ABE13D8C4F8289C6F2B9F67EE343"><enum>(ii)</enum><text>shall not effect
a denial of payment under subparagraph (A) on the basis of a determination that
a State has not come into compliance with such requirement before December 31
of such
year.</text>
</clause></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="H96D7FE756FC843458203343BBABA59A2"><enum>(2)</enum><header>Construction</header><text display-inline="yes-display-inline">Nothing in the amendment made by paragraph
(1) or this section this shall be construed as authorizing the Secretary of
Health and Human Services to limit payments under title XXI of the Social
Security Act in the case of a State that is not a higher income eligibility
State (as defined in section 2105(c)(10)(B) of such Act, as added by paragraph
(1)).</text>
</paragraph></subsection><subsection id="H3B4DCE95A15145178E295F902C37F9C9"><enum>(f)</enum><header>Treatment of
medical support orders</header><text>Section 2102(b) of such Act
(<external-xref legal-doc="usc" parsable-cite="usc/42/1397bb">42 U.S.C.
1397bb(c)</external-xref>) is amended by adding at the end the
following:</text>
<quoted-block display-inline="no-display-inline" id="HDEF2CAF1AA7D47B7A0BEDF144DA036B3" style="OLC">
<paragraph id="H74E162924D0F48DF997BC800A6FB9033"><enum>(5)</enum><header>Treatment of
medical support orders</header>
<subparagraph id="HDE230D718B2D46DA853CE9700620E2ED"><enum>(A)</enum><header>In
general</header><text display-inline="yes-display-inline">Nothing in this title
shall be construed to allow the Secretary to require that a State deny
eligibility for child health assistance to a child who is otherwise eligible on
the basis of the existence of a valid medical support order being in
effect.</text>
</subparagraph><subparagraph id="HD2E39650960543EC9C92C87D52737F67"><enum>(B)</enum><header>State
election</header><text>A State may elect to limit eligibility for child health
assistance to a targeted low-income child on the basis of the existence of a
valid medical support order on the child’s behalf, but only if the State does
not deny such eligibility for a child on such basis if the child asserts that
the order is not being complied with for any of the reasons described in
subparagraph (C) unless the State demonstrates that none of such reasons
applies in the case involved.</text>
</subparagraph><subparagraph id="H5810749115294283BAF710DD5EE5576F"><enum>(C)</enum><header>Reasons for
noncompliance</header><text>The reasons described in this subparagraph for
noncompliance with a medical support order with respect to a child are that the
child is not being provided health benefits coverage pursuant to such order
because—</text>
<clause id="HFB733A940E874E4391BC85B39FA29205"><enum>(i)</enum><text>of
failure of the noncustodial parent to comply with the order;</text>
</clause><clause id="HE5CBD43BCAFA46DEAECB10B2652C6600"><enum>(ii)</enum><text>of the failure of
an employer, group health plan or health insurance issuer to comply with such
order; or</text>
</clause><clause id="H5D045BEA565145A18754546526889EB"><enum>(iii)</enum><text>the child resides
in a geographic area in which benefits under the health benefits coverage are
generally
unavailable.</text>
</clause></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection commented="no" display-inline="no-display-inline" id="HCCB3AE729CBE4D09B217FB36832B3B23"><enum>(g)</enum><header>Effective date
of amendments; consistency of policies</header><text display-inline="yes-display-inline">The amendments made by this section shall
take effect as if enacted on August 16, 2007. The Secretary may not impose (or
continue in effect) any requirement, prevent the implementation of any
provision, or condition the approval of any provision under any State child
health plan, State plan amendment, or waiver request on the basis of any policy
or interpretation relating to SCHIP crowd-out, coordination with other sources
of coverage, target rate of coverage, or medical support order other than under
the amendments made by this section. In the case of a State plan amendment
which was denied on or after August 16, 2007, on the basis of any such policy
or interpretation in effect before the date of the enactment of this Act, if
the State submits a modification of such State plan amendment that complies
with title XXI of the Social Security Act as amended by this Act, such
submitted State plan amendment, as so modified, shall be considered as if it
had been submitted (as so modified) as of the date of its original submission,
but such State plan amendment shall not be effective before the date of the
enactment of this Act.</text>
</subsection></section><enum>II</enum><header>Revenue
Provisions</header>
<section display-inline="no-display-inline" id="H3DF9B750BF8044CF8D6D0551E455B9B" section-type="subsequent-section"><enum>201.</enum><header>Nonqualified
deferred compensation from certain tax indifferent parties</header>
<subsection id="H0F26B87B70114E22BB223904B7C84FD8"><enum>(a)</enum><header>In
general</header><text>Subpart B of part II of subchapter E of chapter 1 of the
Internal Revenue Code of 1986 (relating to taxable year for which items of
gross income included) is amended by inserting after section 457 the following
new section:</text>
<quoted-block display-inline="no-display-inline" id="HB93CCE29555940E7A3FB246D9F1B00AB" style="OLC">
<section id="H0639B16AEF11455DA693741EA0EA2F59"><enum>457A.</enum><header>Nonqualified
deferred compensation from certain tax indifferent parties</header>
<subsection id="H4BC8001B098C4EC48C38286B0700A4E6"><enum>(a)</enum><header>In
general</header><text display-inline="yes-display-inline">Any compensation
which is deferred under a nonqualified deferred compensation plan of a
nonqualified entity shall be taken into account for purposes of this chapter
when there is no substantial risk of forfeiture of the rights to such
compensation.</text>
</subsection><subsection id="H1DB7393E7B1E44F0A57D5E1BF662A81"><enum>(b)</enum><header>Nonqualified
entity</header><text>For purposes of this section, the term <term>nonqualified
entity</term> means—</text>
<paragraph id="HAB9EBE8A76EC4D91A963DCA72DEDD7BC"><enum>(1)</enum><text display-inline="yes-display-inline">any foreign corporation unless
substantially all of such income is—</text>
<subparagraph id="HD35D501CD7684E3D8752C7890763FF7C"><enum>(A)</enum><text>effectively
connected with the conduct of a trade or business in the United States,
or</text>
</subparagraph><subparagraph id="H5514B010D19A43CC825BEBBF7C4C4300"><enum>(B)</enum><text>subject to a
comprehensive foreign income tax, and</text>
</subparagraph></paragraph><paragraph display-inline="no-display-inline" id="H4125E16D703B400EA8B84B5CD32F82BA"><enum>(2)</enum><text display-inline="yes-display-inline">any partnership unless substantially all of
such income is allocated to persons other than—</text>
<subparagraph id="HC05F05190BD2445BA697B81D001FEDFD"><enum>(A)</enum><text>foreign persons
with respect to whom such income is not subject to a comprehensive foreign
income tax, and</text>
</subparagraph><subparagraph id="H2A7E04C5C385464DB3B1A232EC46A7EB"><enum>(B)</enum><text>organizations
which are exempt from tax under this title.</text>
</subparagraph></paragraph></subsection><subsection id="HB19090BD439543FB9315D18D6C1E8E45"><enum>(c)</enum><header>Ascertainability
of amounts of compensation</header>
<paragraph id="H71B5DEF677804592A6C246D9CC57D8C6"><enum>(1)</enum><header>In
general</header><text>If the amount of any compensation is not ascertainable at
the time that such compensation is otherwise to be taken into account under
subsection (a)—</text>
<subparagraph id="H6731D0BD8F4A4531989B7981555064E3"><enum>(A)</enum><text>such amount shall
be so taken into account when ascertainable, and</text>
</subparagraph><subparagraph id="H591D3D3BA94F4221997FDFAA96253E"><enum>(B)</enum><text>the tax imposed
under this chapter for the taxable year in which such compensation is taken
into account under subparagraph (A) shall be increased by the sum of—</text>
<clause id="H6245C19967994BFDB65BFA842DBCC04D"><enum>(i)</enum><text>the amount of
interest determined under paragraph (2), and</text>
</clause><clause id="HAEC8AE3E3D424EE7A2B3E8DE55A26C99"><enum>(ii)</enum><text>an amount equal
to 20 percent of the amount of such compensation.</text>
</clause></subparagraph></paragraph><paragraph id="H8BF4A9672AD845F1B4DEC00A0C8CA22"><enum>(2)</enum><header>Interest</header><text display-inline="yes-display-inline">For purposes of paragraph (1)(B)(i), the
interest determined under this paragraph for any taxable year is the amount of
interest at the underpayment rate under section 6621 plus 1 percentage point on
the underpayments that would have occurred had the deferred compensation been
includible in gross income for the taxable year in which first deferred or, if
later, the first taxable year in which such deferred compensation is not
subject to a substantial risk of forfeiture.</text>
</paragraph></subsection><subsection id="HB0520291CF104534A7009C05F8EF4B30"><enum>(d)</enum><header>Other
definitions and special rules</header><text>For purposes of this
section—</text>
<paragraph display-inline="no-display-inline" id="HF9CA6430170F4700B706CC655637AF28"><enum>(1)</enum><header>Substantial risk
of forfeiture</header>
<subparagraph display-inline="no-display-inline" id="idA23040FDB1DF4CFD8DA29DA7260F5284"><enum>(A)</enum><header>In
general</header><text>The rights of a person to compensation shall be treated
as subject to a substantial risk of forfeiture only if such person’s rights to
such compensation are conditioned upon the future performance of substantial
services by any individual.</text>
</subparagraph><subparagraph id="H1670ADE90CB1413199DF6697EC68AFBB"><enum>(B)</enum><header>Exception for
compensation based on gain recognized on an investment asset</header>
<clause id="H976D8D86AAF54A219D80A3712990F6E9"><enum>(i)</enum><header>In
general</header><text>To the extent provided in regulations prescribed by the
Secretary, if compensation is determined solely by reference to the amount of
gain recognized on the disposition of an investment asset, such compensation
shall be treated as subject to a substantial risk of forfeiture until the date
of such disposition.</text>
</clause><clause id="H3CB8853FB34C49C288E100B200007DD8"><enum>(ii)</enum><header>Investment
asset</header><text>For purposes of clause (i), the term <quote>investment
asset</quote> means any single asset (other than an investment fund or similar
entity)—</text>
<subclause id="H2451B273D72349029F39921D92BD5BD8"><enum>(I)</enum><text>acquired directly
by an investment fund or similar entity,</text>
</subclause><subclause id="H9FA17605E4044D1A9D03BB448D7411EC"><enum>(II)</enum><text>with respect to
which such entity does not (nor does any person related to such entity)
participate in the active management of such asset (or if such asset is an
interest in an entity, in the active management of the activities of such
entity), and</text>
</subclause><subclause id="H01186045112F418681797B6171F740C6"><enum>(III)</enum><text>substantially
all of any gain on the disposition of which (other than such deferred
compensation) is allocated to investors in such entity.</text>
</subclause></clause><clause id="H6E0485133C714B1FB3DE8DFF03F4E0F4"><enum>(iii)</enum><header>Coordination
with special rule for short-term deferrals of
compensation</header><text>Paragraph (3)(B) shall not apply to any compensation
to which clause (i) applies.</text>
</clause></subparagraph></paragraph><paragraph id="HB92B04B80FED4A5EBA0067674CDC4E3D"><enum>(2)</enum><header>Comprehensive
foreign income tax</header><text>The term <term>comprehensive foreign income
tax</term> means, with respect to any foreign person, the income tax of a
foreign country if—</text>
<subparagraph id="HD4570F845D5C4A7898C3CDFDE1D0F9DC"><enum>(A)</enum><text>such person is
eligible for the benefits of a comprehensive income tax treaty between such
foreign country and the United States, or</text>
</subparagraph><subparagraph id="H189B7AB2027A4676B627D276BDFBC9B2"><enum>(B)</enum><text>such person
demonstrates to the satisfaction of the Secretary that such foreign country has
a comprehensive income tax.</text>
</subparagraph><continuation-text continuation-text-level="paragraph">Such term
shall not include any tax unless such tax includes rules for the deductibility
of deferred compensation which are similar to the rules of this title.</continuation-text></paragraph><paragraph id="H9150ABF0899C44A48490F4BBD6989981"><enum>(3)</enum><header>Nonqualified
deferred compensation plan</header>
<subparagraph id="id99FC7CD0BFC149899AF9DA207004E428"><enum>(A)</enum><header>In
general</header><text>The term <term>nonqualified deferred compensation
plan</term> has the meaning given such term under section 409A(d), except that
such term shall include any plan that provides a right to compensation based on
the appreciation in value of a specified number of equity units of the service
recipient.</text>
</subparagraph><subparagraph commented="no" id="H409F5B275A384F869073CEA674F2BA00"><enum>(B)</enum><header>Exception for
short-term deferrals</header><text display-inline="yes-display-inline">Compensation shall not be treated as
deferred for purposes of this section if the service provider receives payment
of such compensation not later than 12 months after the end of the taxable year
of the service recipient during which the right to the payment of such
compensation is no longer subject to a substantial risk of forfeiture.</text>
</subparagraph></paragraph><paragraph id="H9D9EC8EE668B4190AFA711A156CC2170"><enum>(4)</enum><header>Exception for
certain compensation with respect to effectively connected income</header><text display-inline="yes-display-inline">In the case a foreign corporation with
income which is taxable under section 882, this section shall not apply to
compensation which, had such compensation had been paid in cash on the date
that such compensation ceased to be subject to a substantial risk of
forfeiture, would have been deductible by such foreign corporation against such
income.</text>
</paragraph><paragraph id="H1513375644D64864A420F8A620EE782F"><enum>(5)</enum><header>Application of
rules</header><text display-inline="yes-display-inline">Rules similar to the
rules of paragraphs (5) and (6) of section 409A(d) shall apply.</text>
</paragraph></subsection><subsection id="H72D6538B611C4AEDAA7DFDD8FF44DF2E"><enum>(e)</enum><header>Regulations</header><text display-inline="yes-display-inline">The Secretary shall prescribe such
regulations as may be necessary or appropriate to carry out the purposes of
this section, including regulations disregarding a substantial risk of
forfeiture in cases where necessary to carry out the purposes of this
section.</text>
</subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HBBB07FADDCF849D69FF9E31839BBE287"><enum>(b)</enum><header>Conforming
amendment</header><text>Section 26(b)(2) of such Code is amended by striking
<quote>and</quote> at the end of subparagraph (U), by striking the period at
the end of subparagraph (V) and inserting <quote>, and</quote>, and by adding
at the end the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="H8F69DF6320664B4F807510D612003119" style="OLC">
<subparagraph id="H36F29D0BFBA84FC2ABCADF4DF57D1C3F"><enum>(W)</enum><text display-inline="yes-display-inline">section 457A(c)(1)(B) (relating to
ascertainability of amounts of
compensation).</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HE1FC56F3279C49DDAC163FDFFFBD8867"><enum>(c)</enum><header>Clerical
amendment</header><text display-inline="yes-display-inline">The table of
sections of subpart B of part II of subchapter E of chapter 1 of such Code is
amended by inserting after the item relating to section 457 the following new
item:</text>
<quoted-block display-inline="no-display-inline" id="HF829D94FD8D0409B877438E2E89DC3B" style="OLC">
<toc container-level="quoted-block-container" idref="HB93CCE29555940E7A3FB246D9F1B00AB" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="H0639B16AEF11455DA693741EA0EA2F59" level="section">Sec. 457A. Nonqualified deferred compensation from certain tax
indifferent
parties.</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="HD8E7798CD13C4392A1058FE00349D621"><enum>(d)</enum><header>Effective
date</header>
<paragraph id="H3367797655574EDEB4B6A70019F41395"><enum>(1)</enum><header>In
general</header><text>Except as otherwise provided in this subsection, the
amendments made by this section shall apply to amounts deferred which are
attributable to services performed after the date of enactment of this
Act.</text>
</paragraph><paragraph id="HD6349B4D46E14C79ABF52CEB85A46BA2"><enum>(2)</enum><header>Application to
existing deferrals</header><text>In the case of any amount deferred to which
the amendments made by this section do not apply solely by reason of the fact
that the amount is attributable to services performed before the date of
enactment of this Act, to the extent such amount is not includible in gross
income in a taxable year beginning before 2017, such amounts shall be
includible in gross income in the later of—</text>
<subparagraph id="HB45BF4CEF3B947829CDE431F11B563C8"><enum>(A)</enum><text>the last taxable
year beginning before 2017, or</text>
</subparagraph><subparagraph id="HF9FDCFD744934BB39D80F8144DBB4459"><enum>(B)</enum><text>the taxable year
in which there is no substantial risk of forfeiture of the rights to such
compensation (determined in the same manner as determined for purposes of
section 457A of the Internal Revenue Code of 1986, as added by this
section).</text>
</subparagraph></paragraph><paragraph id="H07758B0AA1854D24A163FF9D72F4A436"><enum>(3)</enum><header>Accelerated
payments</header><text display-inline="yes-display-inline">No later than 60
days after the date of the enactment of this Act, the Secretary shall issue
guidance providing a limited period of time during which a nonqualified
deferred compensation arrangement attributable to services performed on or
before the date of enactment of this Act, may, without violating the
requirements of section 409A(a) of the Internal Revenue Code of 1986, be
amended to conform the date of distribution to the date the amounts are
required to be included in income.</text>
</paragraph><paragraph id="HF8D52D9479B042F8BB0246B29E7FA208"><enum>(4)</enum><header>Certain
back-to-back arrangements</header><text>If the taxpayer is also a service
recipient and maintains one or more nonqualified deferred compensation
arrangements for its service providers under which any amount is attributable
to services performed on or before the date of the enactment of this Act, the
guidance issued under paragraph (3) shall permit such arrangements to be
amended to conform the dates of distribution under such arrangement to the date
amounts are required to be included in the income of such taxpayer under this
subsection.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="H3087AE9791A94C73A771002B58165FB3"><enum>(5)</enum><header>Accelerated
payment not treated as material modification</header><text>Any amendment to a
nonqualified deferred compensation arrangement made pursuant to paragraph (3)
or (4) shall not be treated as a material modification of the arrangement for
purposes of <external-xref legal-doc="usc" parsable-cite="usc/26/409A">section
409A</external-xref> of the Internal Revenue Code of 1986.</text>
</paragraph></subsection></section><section display-inline="no-display-inline" id="H22B0DD2563604FEEB7E036007222CA7F" section-type="subsequent-section"><enum>202.</enum><header>Income of partners
for performing investment management services treated as ordinary income
received for performance of services</header>
<subsection id="H672FB9D702B44D9F0089CBC3727B41E1"><enum>(a)</enum><header>In
general</header><text>Part I of subchapter K of chapter 1 of the Internal
Revenue Code of 1986 is amended by adding at the end the following new
section:</text>
<quoted-block display-inline="no-display-inline" id="H2137B2ABF8FA4A6FB7767B73B9FE003F" style="OLC">
<section id="HB1C16CAB8C5744E4A0C8562DC551C161"><enum>710.</enum><header>Special rules
for partners providing investment management services to partnership</header>
<subsection id="H8C720FD9E7F5492397B1DF846000B530"><enum>(a)</enum><header>Treatment of
distributive share of partnership items</header><text display-inline="yes-display-inline">For purposes of this title, in the case of
an investment services partnership interest—</text>
<paragraph id="H1389970B511B418787853C6896F66695"><enum>(1)</enum><header>In
general</header><text>Notwithstanding section 702(b)—</text>
<subparagraph id="H8E3E5A604BE84A0E8500BC9523457BCB"><enum>(A)</enum><text>any net income
with respect to such interest for any partnership taxable year shall be treated
as ordinary income for the performance of services, and</text>
</subparagraph><subparagraph id="HA19EF03F4AEA42C39711C3AB908153FF"><enum>(B)</enum><text>any net loss with
respect to such interest for such year, to the extent not disallowed under
paragraph (2) for such year, shall be treated as an ordinary loss.</text>
</subparagraph></paragraph><paragraph id="H077EBD6269164C0AB529D4DB94E0952E"><enum>(2)</enum><header>Treatment of
losses</header>
<subparagraph id="H0F7C07AE05194F31A79CBEE76783D00"><enum>(A)</enum><header>Limitation</header><text>Any
net loss with respect to such interest shall be allowed for any partnership
taxable year only to the extent that such loss does not exceed the excess (if
any) of—</text>
<clause id="HDABE2F4DC8564BB0BA74551452D4ACBA"><enum>(i)</enum><text>the aggregate net
income with respect to such interest for all prior partnership taxable years,
over</text>
</clause><clause id="HC3A59B0784034D04AE3131CF425EF79"><enum>(ii)</enum><text>the aggregate net
loss with respect to such interest not disallowed under this subparagraph for
all prior partnership taxable years.</text>
</clause></subparagraph><subparagraph id="H7FD135654E0E4662AFC7F8B81DA514F"><enum>(B)</enum><header>Carryforward</header><text>Any
net loss for any partnership taxable year which is not allowed by reason of
subparagraph (A) shall be treated as an item of loss with respect to such
partnership interest for the succeeding partnership taxable year.</text>
</subparagraph><subparagraph id="HA95C4221377C42CD93006F3919D89063"><enum>(C)</enum><header>Basis
adjustment</header><text>No adjustment to the basis of a partnership interest
shall be made on account of any net loss which is not allowed by reason of
subparagraph (A).</text>
</subparagraph><subparagraph id="H96BA3079FEBF42BF004C274F4769DF1C"><enum>(D)</enum><header>Exception for
basis attributable to purchase of a partnership interest</header><text>In the
case of an investment services partnership interest acquired by purchase,
paragraph (1)(B) shall not apply to so much of any net loss with respect to
such interest for any taxable year as does not exceed the excess of—</text>
<clause id="H6FCF7C4D69F043848E2F0179BB38C5AF"><enum>(i)</enum><text>the basis of such
interest immediately after such purchase, over</text>
</clause><clause id="HBD75E0E134D848B09FE51CEA6EA897A8"><enum>(ii)</enum><text>the aggregate net
loss with respect to such interest to which paragraph (1)(B) did not apply by
reason of this subparagraph for all prior taxable years.</text>
</clause><continuation-text continuation-text-level="subparagraph">Any net
loss to which paragraph (1)(B) does not apply by reason of this subparagraph
shall not be taken into account under subparagraph (A).</continuation-text></subparagraph><subparagraph id="H5372284BBFF3455C828D002736AE174C"><enum>(E)</enum><header>Prior
partnership years</header><text>Any reference in this paragraph to prior
partnership taxable years shall only include prior partnership taxable years to
which this section applies.</text>
</subparagraph></paragraph><paragraph id="H35973C27ABC0472B91D35983460538F"><enum>(3)</enum><header>Net income and
loss</header><text>For purposes of this section—</text>
<subparagraph id="H0BFBAE1B34E44429ABD300697EB3AD53"><enum>(A)</enum><header>Net
income</header><text>The term <term>net income</term> means, with respect to
any investment services partnership interest, for any partnership taxable year,
the excess (if any) of—</text>
<clause id="H71C128FC8D2844B4B2B1C166126B14B4"><enum>(i)</enum><text>all items of
income and gain taken into account by the holder of such interest under section
702 with respect to such interest for such year, over</text>
</clause><clause id="H557AC135743C4114A2A59C9CCB32CF12"><enum>(ii)</enum><text>all items of
deduction and loss so taken into account.</text>
</clause></subparagraph><subparagraph id="HF09BBCB04D074D85A629008BF7531F0"><enum>(B)</enum><header>Net
loss</header><text>The term <term>net loss</term> means with respect to such
interest for such year, the excess (if any) of the amount described in
subparagraph (A)(ii) over the amount described in subparagraph (A)(i).</text>
</subparagraph></paragraph></subsection><subsection id="H27296C29A74643A6BBA2C02900321400"><enum>(b)</enum><header>Dispositions of
partnership interests</header>
<paragraph id="H33BB399FD42A499CA6F137F2FCBAF39F"><enum>(1)</enum><header>Gain</header><text>Any
gain on the disposition of an investment services partnership interest shall be
treated as ordinary income for the performance of services.</text>
</paragraph><paragraph id="HB886B76BDA2244929F8EB921FB00CC2C"><enum>(2)</enum><header>Loss</header><text>Any
loss on the disposition of an investment services partnership interest shall be
treated as an ordinary loss to the extent of the excess (if any) of—</text>
<subparagraph id="HC6EA7D4E9F484F50B0F9DFF5C12B1992"><enum>(A)</enum><text>the aggregate net
income with respect to such interest for all partnership taxable years,
over</text>
</subparagraph><subparagraph id="HCE4B2FA0565C4B0280D8EC892DB00D1"><enum>(B)</enum><text>the aggregate net
loss with respect to such interest allowed under subsection (a)(2) for all
partnership taxable years.</text>
</subparagraph></paragraph><paragraph id="HF933021BB56A4BC18E535F663D7BBE9E"><enum>(3)</enum><header>Disposition of
portion of interest</header><text>In the case of any disposition of an
investment services partnership interest, the amount of net loss which
otherwise would have (but for subsection (a)(2)(C)) applied to reduce the basis
of such interest shall be disregarded for purposes of this section for all
succeeding partnership taxable years.</text>
</paragraph><paragraph id="H083FA7F8E14048919E45A19D28933EF"><enum>(4)</enum><header>Distributions of
partnership property</header><text>In the case of any distribution of
appreciated property by a partnership with respect to any investment services
partnership interest, gain shall be recognized by the partnership in the same
manner as if the partnership sold such property at fair market value at the
time of the distribution. For purposes of this paragraph, the term
<term>appreciated property</term> means any property with respect to which gain
would be determined if sold as described in the preceding sentence.</text>
</paragraph><paragraph id="HA053E3ED64104E9FA954D2171199C528"><enum>(5)</enum><header>Application of
section 751</header><text>In applying section 751(a), an investment services
partnership interest shall be treated as an inventory item.</text>
</paragraph></subsection><subsection id="HC1802CB7D776440992AD56DAF8102522"><enum>(c)</enum><header>Investment
services partnership interest</header><text display-inline="yes-display-inline">For purposes of this section—</text>
<paragraph id="H7C66559D74EB448897A416C2518FDADF"><enum>(1)</enum><header>In
general</header><text display-inline="yes-display-inline">The term
<term>investment services partnership interest</term> means any interest in a
partnership which is held by any person if such person provides (directly or
indirectly) a substantial quantity of any of the following services with
respect to the assets of the partnership in the conduct of the trade or
business of providing such services:</text>
<subparagraph id="HBB6F2F57057E4DD690378470009B54E5"><enum>(A)</enum><text>Advising as to the
advisability of investing in, purchasing, or selling any specified
asset.</text>
</subparagraph><subparagraph id="H70F58EA60983459E97E91444DCD3DDA0"><enum>(B)</enum><text>Managing,
acquiring, or disposing of any specified asset.</text>
</subparagraph><subparagraph id="HB8730559A7384B8FAC847C0948B74E07"><enum>(C)</enum><text>Arranging
financing with respect to acquiring specified assets.</text>
</subparagraph><subparagraph id="H07AEBF695ECA4B44BFE71FB790071CB1"><enum>(D)</enum><text>Any activity in
support of any service described in subparagraphs (A) through (C).</text>
</subparagraph><continuation-text continuation-text-level="paragraph">For
purposes of this paragraph, the term <term>specified asset</term> means
securities (as defined in section 475(c)(2) without regard to the last sentence
thereof), real estate, commodities (as defined in section 475(e)(2)), or
options or derivative contracts with respect to securities (as so defined),
real estate, or commodities (as so defined).</continuation-text></paragraph><paragraph id="HB0E384F1F7444A3D8207ADA1A0A1D46"><enum>(2)</enum><header>Exception for
certain capital interests</header>
<subparagraph commented="no" id="H8BDDFE13C70A46B58E6E002722B3E2D9"><enum>(A)</enum><header>In
general</header><text>If—</text>
<clause commented="no" id="H7A77D29863A14334969CB2B8EA009B87"><enum>(i)</enum><text>a portion of an
investment services partnership interest is acquired on account of a
contribution of invested capital, and</text>
</clause><clause commented="no" id="HCDE0EB4CEAF24A4F8D870000FF53AD00"><enum>(ii)</enum><text>the partnership
makes a reasonable allocation of partnership items between the portion of the
distributive share that is with respect to invested capital and the portion of
such distributive share that is not with respect to invested capital,</text>
</clause><continuation-text continuation-text-level="subparagraph">then
subsection (a) shall not apply to the portion of the distributive share that is
with respect to invested capital. An allocation will not be treated as
reasonable for purposes of this subparagraph if such allocation would result in
the partnership allocating a greater portion of income to invested capital than
any other partner not providing services would have been allocated with respect
to the same amount of invested capital.</continuation-text></subparagraph><subparagraph id="HE69CBFACBD1B4D0A9F392FE068E792FB"><enum>(B)</enum><header>Special rule for
dispositions</header><text display-inline="yes-display-inline">In any case to
which subparagraph (A) applies, subsection (b) shall not apply to any gain or
loss allocable to invested capital. The portion of any gain or loss
attributable to invested capital is the proportion of such gain or loss which
is based on the distributive share of gain or loss that would have been
allocable to invested capital under subparagraph (A) if the partnership sold
all of its assets immediately before the disposition.</text>
</subparagraph><subparagraph id="HFA28C761A9B74F09A3A4E7547805226"><enum>(C)</enum><header>Invested
capital</header><text>For purposes of this paragraph, the term <term>invested
capital</term> means, the fair market value at the time of contribution of any
money or other property contributed to the partnership.</text>
</subparagraph><subparagraph id="H1DCF63C751804C0D8597188537F1F41"><enum>(D)</enum><header>Treatment of
certain loans</header>
<clause id="H396C52CAF27F4C5EA204CAE26EA900C0"><enum>(i)</enum><header>Proceeds of
partnership loans not treated as invested capital of service providing
partners</header><text>For purposes of this paragraph, an investment services
partnership interest shall not be treated as acquired on account of a
contribution of invested capital to the extent that such capital is
attributable to the proceeds of any loan or other advance made or guaranteed,
directly or indirectly, by any partner or the partnership.</text>
</clause><clause id="HC68DC51CE14542DCB4D25FFF632ABD9"><enum>(ii)</enum><header>Loans from
nonservice providing partners to the partnership treated as invested
capital</header><text>For purposes of this paragraph, any loan or other advance
to the partnership made or guaranteed, directly or indirectly, by a partner not
providing services to the partnership shall be treated as invested capital of
such partner and amounts of income and loss treated as allocable to invested
capital shall be adjusted accordingly.</text>
</clause></subparagraph></paragraph></subsection><subsection id="HCE65378D66E947868EB983D7BEF7DCC4"><enum>(d)</enum><header>Other income and
gain in connection with investment management services</header>
<paragraph id="HB0EEEAB243EB46C180D56B052B29AFCB"><enum>(1)</enum><header>In
general</header><text display-inline="yes-display-inline">If—</text>
<subparagraph id="H8A3D7A5490A143878456C6BC80C6D287"><enum>(A)</enum><text>a person performs
(directly or indirectly) investment management services for any entity,</text>
</subparagraph><subparagraph id="HB804A1D842264A07A3AD5865DFAE5F11"><enum>(B)</enum><text>such person holds
a disqualified interest with respect to such entity, and</text>
</subparagraph><subparagraph id="HFBA963F5BA1648689C9D823B27B7F700"><enum>(C)</enum><text display-inline="yes-display-inline">the value of such interest (or payments
thereunder) is substantially related to the amount of income or gain (whether
or not realized) from the assets with respect to which the investment
management services are performed,</text>
</subparagraph><continuation-text continuation-text-level="paragraph">any income
or gain with respect to such interest shall be treated as ordinary income for
the performance of services. Rules similar to the rules of subsection (c)(2)
shall apply where such interest was acquired on account of invested capital in
such entity.</continuation-text></paragraph><paragraph id="H86F5FC0AD39F49E8811B5ED99743E86C"><enum>(2)</enum><header>Definitions</header><text>For
purposes of this subsection—</text>
<subparagraph id="H61FDB3EF418647C8893CCE42FA13CFB3"><enum>(A)</enum><header>Disqualified
interest</header><text>The term <term>disqualified interest</term> means, with
respect to any entity—</text>
<clause id="HE5BFF01E8F6145938E25987514DDD8F5"><enum>(i)</enum><text>any interest in
such entity other than indebtedness,</text>
</clause><clause id="H223864CE7C174E968D83822015F2DAD1"><enum>(ii)</enum><text>convertible or
contingent debt of such entity,</text>
</clause><clause id="HF37A81D121B447798D3B1EB7C10BE74"><enum>(iii)</enum><text>any option or
other right to acquire property described in clause (i) or (ii), and</text>
</clause><clause id="H35CDFEEB20A0446F8EC6982FDCADA7D6"><enum>(iv)</enum><text>any derivative
instrument entered into (directly or indirectly) with such entity or any
investor in such entity.</text>
</clause><continuation-text continuation-text-level="subparagraph">Such
term shall not include a partnership interest and shall not include stock in a
taxable corporation.</continuation-text></subparagraph><subparagraph id="H4CA4FCCEF9EF47DABAE5EE7300C452A2"><enum>(B)</enum><header>Taxable
corporation</header><text>The term <term>taxable corporation</term>
means—</text>
<clause id="HAC2DCF6B596C438D9F3B005384717B1F"><enum>(i)</enum><text>a
domestic C corporation, or</text>
</clause><clause id="H422D9FB013BE4ABA8EC10961AC3BB74D"><enum>(ii)</enum><text>a
foreign corporation subject to a comprehensive foreign income tax (as defined
in section 457A(d)(4)).</text>
</clause></subparagraph><subparagraph id="HC11B4923B0B14D5BB32DB93E7D8705D"><enum>(C)</enum><header>Investment
management services</header><text>The term <term>investment management
services</term> means a substantial quantity of any of the services described
in subsection (c)(1) which are provided in the conduct of the trade or business
of providing such services.</text>
</subparagraph></paragraph></subsection><subsection commented="no" id="H754D6F00E199406F90FD21E8625E19A3"><enum>(e)</enum><header>Regulations</header><text>The
Secretary shall prescribe such regulations as are necessary or appropriate to
carry out the purposes of this section, including regulations to—</text>
<paragraph commented="no" id="H9DC434395AAC4015B985AB9D446F7E56"><enum>(1)</enum><text>prevent the
avoidance of the purposes of this section, and</text>
</paragraph><paragraph commented="no" id="HDEA831EF84D246B283062E0571DA9FD6"><enum>(2)</enum><text>coordinate this
section with the other provisions of this subchapter.</text>
</paragraph></subsection><subsection commented="no" id="HB38C1B5EB64C46DF006F00E4D974B1EA"><enum>(f)</enum><header>Cross
reference</header><text>For 40 percent no fault penalty on certain
underpayments due to the avoidance of this section, see section
6662.</text>
</subsection></section><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H690D75ED06C84554BFA261B5D1806F22"><enum>(b)</enum><header>Application to
real estate investment trusts</header><text>Subsection (c) of section 856 of
such Code is amended by adding at the end the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H61B87FC5CD64489FAE331CFC00CE04A2" style="OLC">
<paragraph id="H86CDFEF2DD974D1AAD531F83196B0037"><enum>(8)</enum><header>Exception from
recharacterization of income from investment services partnership
interests</header>
<subparagraph id="HA28731C3C7FB42D400602EE3BFCDE99"><enum>(A)</enum><header>In
general</header><text>Paragraphs (2), (3), and (4) shall be applied without
regard to section 710 (relating to special rules for partners providing
investment management services to partnership).</text>
</subparagraph><subparagraph id="H6C5EE9248DA744D4BD70F5DD7EE2FDE"><enum>(B)</enum><header>Special rule for
partnerships owned by REITs</header><text>Section 7704 shall be applied without
regard to section 710 in the case of a partnership which meets each of the
following requirements:</text>
<clause id="H94E1AB8D067F4A6AA921B629E65E7434"><enum>(i)</enum><text>Such partnership
is treated as publicly traded under section 7704 solely by reason of interests
in such partnership being convertible into interests in a real estate
investment trust which is publicly traded.</text>
</clause><clause id="H1391EEBABC0441E1A5CB9816D487FDF4"><enum>(ii)</enum><text display-inline="yes-display-inline">50 percent or more of the capital and
profits interests of such partnership are owned, directly or indirectly, at all
times during the taxable year by such real estate investment trust (determined
with the application of section 267(c)).</text>
</clause><clause id="HF243090EDB31458FAAA3ED5C57EB6982"><enum>(iii)</enum><text>Such partnership
meets the requirements of paragraphs (2), (3), and (4) (applied without regard
to section
710).</text>
</clause></subparagraph></paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subsection><subsection id="H567850D7D36A470993B6D3809192D6EB"><enum>(c)</enum><header>Imposition of
penalty on underpayments</header>
<paragraph id="H79995245614E48FEA7F6D4C314D400A9"><enum>(1)</enum><header>In
general</header><text>Subsection (b) of section 6662 of such Code is amended by
inserting after paragraph (5) the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="HD6FB078C43C64BE7B449CCE00296FD6" style="OLC">
<paragraph id="H0EC5EB4E18054BF7AEBD7C29186DAF05"><enum>(6)</enum><text>The application of
subsection (d) of section 710 or the regulations prescribed under section
710(e) to prevent the avoidance of the purposes of section
710.</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph><paragraph id="HE437781F136D4D429EB2C84562969085"><enum>(2)</enum><header>Amount of
penalty</header>
<subparagraph id="HABABB95EE07846FB84D3EA0083195DD8"><enum>(A)</enum><header>In
general</header><text>Section 6662 of such Code is amended by adding at the end
the following new subsection:</text>
<quoted-block display-inline="no-display-inline" id="HA4D48CEF776C45BFAA83566DFD00E5FB" style="OLC">
<subsection id="H7280797579424F88BDD527C1FA34B15B"><enum>(i)</enum><header>Increase in
penalty in case of property transferred for investment management
services</header><text>In the case of any portion of an underpayment to which
this section applies by reason of subsection (b)(6), subsection (a) shall be
applied with respect to such portion by substituting <quote>40 percent</quote>
for <quote>20
percent</quote>.</text>
</subsection><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph><subparagraph display-inline="no-display-inline" id="HFF30282557FC4B05A862B7D7D89749E2"><enum>(B)</enum><header>Conforming
amendments</header><text>Subparagraph (B) of section 6662A(e)(2) of such Code
is amended—</text>
<clause id="HA921D37733F24F1FA1CCE59DF305A13C"><enum>(i)</enum><text>by
striking <quote>section 6662(h)</quote> and inserting <quote>subsection (h) or
(i) of section 6662</quote>, and</text>
</clause><clause id="HD9FE77AA58894E95BE8BEC845C4BB200"><enum>(ii)</enum><text>by
striking <quote><header-in-text level="subparagraph" style="OLC">gross
valuation misstatement penalty</header-in-text></quote> in the heading and
inserting <quote><header-in-text level="subparagraph" style="OLC">certain
increased underpayment penalties</header-in-text></quote>.</text>
</clause></subparagraph></paragraph><paragraph display-inline="no-display-inline" id="HFD83153666174BBDAA857483A02B9B"><enum>(3)</enum><header>Reasonable cause
exception not applicable</header><text>Subsection (c) of section 6664 of such
Code is amended—</text>
<subparagraph id="H8BEB3A3C6E804C9B8C2F944D05A11361"><enum>(A)</enum><text>by redesignating
paragraphs (2) and (3) as paragraphs (3) and (4), respectively,</text>
</subparagraph><subparagraph id="H7E9B344BC8DA43FE9BE9CD0926CA0FF"><enum>(B)</enum><text>by striking
<quote>paragraph (2)</quote> in paragraph (4), as so redesignated, and
inserting <quote>paragraph (3)</quote>, and</text>
</subparagraph><subparagraph id="HA3251280BD014935BBE5BB6FC1B4C94C"><enum>(C)</enum><text>by inserting after
paragraph (1) the following new paragraph:</text>
<quoted-block display-inline="no-display-inline" id="H9AB932139CB243E5994E70B865414BA" style="OLC">
<paragraph id="H7AD4519FF1944C698850F7826F297825"><enum>(2)</enum><header>Exception</header><text>Paragraph
(1) shall not apply to any portion of an underpayment to which this section
applies by reason of subsection
(b)(6).</text>
</paragraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph></subsection><subsection id="HB014EFE05DC74463865BF1BB6349F46C"><enum>(d)</enum><header>Conforming
amendments</header>
<paragraph id="H0998048975B74A4CB68FA0E0FE578567"><enum>(1)</enum><text>Subsection (d) of
section 731 of such Code is amended by inserting <quote>section 710(b)(4)
(relating to distributions of partnership property),</quote> before
<quote>section 736</quote>.</text>
</paragraph><paragraph id="HF344245E13F445BABC6DE197E925696C"><enum>(2)</enum><text>Section 741 of
such Code is amended by inserting <quote>or section 710 (relating to special
rules for partners providing investment management services to
partnership)</quote> before the period at the end.</text>
</paragraph><paragraph id="H2B79373BD7E84C99A9C3A22C9C036EDA"><enum>(3)</enum><text>Paragraph (13) of
section 1402(a) of such Code is amended—</text>
<subparagraph id="HC3EC2DCAA12A493CA6601B213964CCD7"><enum>(A)</enum><text>by striking
<quote>other than guaranteed</quote> and
inserting</text>
<quoted-block display-inline="yes-display-inline" id="H7DDF557B0C57493F854FCCA629ECFFCB" style="OLC">
<text>other
than—</text><subparagraph id="HA402470D80D44E69931B3C492455D345"><enum>(A)</enum><text>guaranteed</text>
</subparagraph><after-quoted-block>,</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="HA09C8C7FAE504AE19F34C8B45B2E5700"><enum>(B)</enum><text>by striking the
semi-colon at the end and inserting <quote>, and</quote>, and</text>
</subparagraph><subparagraph id="H9E92790AAE9D445FA04EAF9FB703348"><enum>(C)</enum><text>by adding at the
end the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="H384C854BA653480B9E8075F9C04C9B50" style="OLC">
<subparagraph id="HFA09923559DE4FDA87E52EDD70FBF28"><enum>(B)</enum><text>any income treated
as ordinary income under section 710 received by an individual who provides
investment management services (as defined in section
710(d)(2));</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph display-inline="no-display-inline" id="H018E54813844410F822266B7985C0001"><enum>(4)</enum><text>Paragraph (12) of
section 211(a) of the Social Security Act is amended—</text>
<subparagraph id="H36A46DED29A84C73B75DBFF0A9F06C77"><enum>(A)</enum><text>by striking
<quote>other than guaranteed</quote> and
inserting</text>
<quoted-block display-inline="yes-display-inline" id="H7F6009A13C4C4F5B87DD05C2363D6474" style="OLC">
<text>other
than—</text><subparagraph id="HDDDCEFD1033F42EC84A6E0D971AB7100"><enum>(A)</enum><text>guaranteed</text>
</subparagraph><after-quoted-block>,</after-quoted-block></quoted-block>
</subparagraph><subparagraph id="H366262E15787464F9B4D9F74EB2941F7"><enum>(B)</enum><text>by striking the
semi-colon at the end and inserting <quote>, and</quote>, and</text>
</subparagraph><subparagraph id="HDCF2ECF5725F46FE8B384522F3091417"><enum>(C)</enum><text>by adding at the
end the following new subparagraph:</text>
<quoted-block display-inline="no-display-inline" id="HA76AE03CF1D0484088575CFCC9C6B5C3" style="OLC">
<subparagraph id="H17BB086EB68F414EA45BE754F1E97BD4"><enum>(B)</enum><text>any income treated
as ordinary income under section 710 of the Internal Revenue Code of 1986
received by an individual who provides investment management services (as
defined in section 710(d)(2) of such
Code);</text>
</subparagraph><after-quoted-block>.</after-quoted-block></quoted-block>
</subparagraph></paragraph><paragraph id="H21A2ECF120D84BB28E3DBD8692F49700"><enum>(5)</enum><text display-inline="yes-display-inline">The table of sections for part I of
subchapter K of chapter 1 of such Code is amended by adding at the end the
following new item:</text>
<quoted-block display-inline="no-display-inline" id="HAC21C18F3ED14F1DA6656B6416009500" style="OLC">
<toc container-level="quoted-block-container" idref="H2137B2ABF8FA4A6FB7767B73B9FE003F" lowest-bolded-level="division-lowest-bolded" lowest-level="section" quoted-block="no-quoted-block" regeneration="yes-regeneration">
<toc-entry idref="HB1C16CAB8C5744E4A0C8562DC551C161" level="section">Sec. 710. Special rules for partners providing investment
management services to
partnership.</toc-entry>
</toc>
<after-quoted-block>.</after-quoted-block></quoted-block>
</paragraph></subsection><subsection id="HBBDB19C0DEFA474C9C9865B24042B0C7"><enum>(e)</enum><header>Effective
date</header>
<paragraph id="H17F2D6893C9A4BB8BFAA746E93502633"><enum>(1)</enum><header>In
general</header><text>Except as otherwise provided in this subsection, the
amendments made by this section shall apply to taxable years ending after the
date of enactment of this Act.</text>
</paragraph><paragraph id="H9C919B12450245AD97127472A0558657"><enum>(2)</enum><header>Partnership
taxable years which include effective date</header><text>In applying section
710(a) of the Internal Revenue Code of 1986 (as added by this section) in the
case of any partnership taxable year which includes the date of enactment of
this Act, the amount of the net income referred to in such section shall be
treated as being the lesser of the net income for the entire partnership
taxable year or the net income determined by only taking into account items
attributable to the portion of the partnership taxable year which is after such
date.</text>
</paragraph><paragraph id="HAD5E94D1F69842B5B0DB66A0D84F7B0"><enum>(3)</enum><header>Dispositions of
partnership interests</header><text display-inline="yes-display-inline">Section
710(b) of the Internal Revenue Code of 1986 (as added by this section) shall
apply to dispositions and distributions after the date of enactment of this
Act.</text>
</paragraph><paragraph id="H7377D9FEBC67450BBA40932259796500"><enum>(4)</enum><header>Other income and
gain in connection with investment management services</header><text display-inline="yes-display-inline">Section 710(d) of such Code (as added by
this section) shall take effect on the date of enactment of this Act.</text>
</paragraph><paragraph commented="no" display-inline="no-display-inline" id="H5EC0446722F146799717BF4B90D4007F"><enum>(5)</enum><header>Publicly traded
partnerships</header><text>For purposes of applying section 7704, the
amendments made by this section shall apply to taxable years beginning after
December 31, 2009.</text>
</paragraph></subsection></section>