[Congressional Record Volume 161, Number 174 (Wednesday, December 2, 2015)]
[Senate]
[Pages S8313-S8318]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
SA 2887. Ms. HIRONO (for herself and Mr. Brown) submitted an
amendment intended to be proposed by her to the bill H.R. 3762, to
provide for reconciliation pursuant to section 2002 of the concurrent
resolution on the budget for fiscal year 2016; which was ordered to lie
on the table; as follows:
At the end of the bill, add the following:
SEC. ____. FEDERAL PELL GRANTS.
Section 401(b) of the Higher Education Act of 1965 (20
U.S.C. 1070a(b)) is amended--
(1) in paragraph (2)(A), by striking ``The amount'' and
inserting ``Except as provided in paragraph (8), the
amount''; and
(2) by adding at the end the following:
``(8) Mandatory funding for fiscal years 2016 through
2020.--
``(A) In general.--For each of fiscal years 2016 through
2020, there are authorized to be appropriated, and there are
appropriated $26,354,000,000 to carry out this section, which
amount shall be increased for each of such fiscal years by a
percentage equal to the percentage change in the Consumer
Price Index (as determined by the Secretary, using the
definition in section 478(f)) for the most recent calendar
year ending prior to the beginning of that fiscal year.
``(B) Prohibition of discretionary appropriations.--No
funds other than funds provided under subparagraph (A) shall
be appropriated to carry out this section for the period of
fiscal years described in subparagraph (A).''.
SEC. ___. SPECIAL RULES FOR PARTNERS PROVIDING INVESTMENT
MANAGEMENT SERVICES TO PARTNERSHIPS.
(a) In General.--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:
``SEC. 710. SPECIAL RULES FOR PARTNERS PROVIDING INVESTMENT
MANAGEMENT SERVICES TO PARTNERSHIPS.
``(a) Treatment of Distributive Share of Partnership
Items.--For purposes of this title, in the case of an
investment services partnership interest--
``(1) In general.--Notwithstanding section 702(b)--
``(A) an amount equal to the net capital gain with respect
to such interest for any partnership taxable year shall be
treated as ordinary income, and
``(B) subject to the limitation of paragraph (2), an amount
equal to the net capital loss with respect to such interest
for any partnership taxable year shall be treated as an
ordinary loss.
``(2) Recharacterization of losses limited to
recharacterized gains.--The amount treated as ordinary loss
under paragraph (1)(B) for any taxable year shall not exceed
the excess (if any) of--
``(A) the aggregate amount treated as ordinary income under
paragraph (1)(A) with respect to the investment services
partnership interest for all preceding partnership taxable
years to which this section applies, over
``(B) the aggregate amount treated as ordinary loss under
paragraph (1)(B) with respect to such interest for all
preceding partnership taxable years to which this section
applies.
``(3) Allocation to items of gain and loss.--
``(A) Net capital gain.--The amount treated as ordinary
income under paragraph (1)(A) shall be allocated ratably
among the items of long-term capital gain taken into account
in determining such net capital gain.
``(B) Net capital loss.--The amount treated as ordinary
loss under paragraph (1)(B) shall be allocated ratably among
the items of long-term capital loss and short-term capital
loss taken into account in determining such net capital loss.
``(4) Terms relating to capital gains and losses.--For
purposes of this section--
``(A) In general.--Net capital gain, long-term capital
gain, and long-term capital loss, with respect to any
investment services partnership interest for any taxable
year, shall be determined under section 1222, except that
such section shall be applied--
``(i) without regard to the recharacterization of any item
as ordinary income or ordinary loss under this section,
[[Page S8314]]
``(ii) by only taking into account items of gain and loss
taken into account by the holder of such interest under
section 702 (other than subsection (a)(9) thereof) with
respect to such interest for such taxable year, and
``(iii) by treating property which is taken into account in
determining gains and losses to which section 1231 applies as
capital assets held for more than 1 year.
``(B) Net capital loss.--The term `net capital loss' means
the excess of the losses from sales or exchanges of capital
assets over the gains from such sales or exchanges. Rules
similar to the rules of clauses (i) through (iii) of
subparagraph (A) shall apply for purposes of the preceding
sentence.
``(5) Special rule for dividends.--Any dividend allocated
with respect to any investment services partnership interest
shall not be treated as qualified dividend income for
purposes of section 1(h).
``(6) Special rule for qualified small business stock.--
Section 1202 shall not apply to any gain from the sale or
exchange of qualified small business stock (as defined in
section 1202(c)) allocated with respect to any investment
services partnership interest.
``(b) Dispositions of Partnership Interests.--
``(1) Gain.--
``(A) In general.--Any gain on the disposition of an
investment services partnership interest shall be--
``(i) treated as ordinary income, and
``(ii) recognized notwithstanding any other provision of
this subtitle.
``(B) Gift and transfers at death.--In the case of a
disposition of an investment services partnership interest by
gift or by reason of death of the taxpayer--
``(i) subparagraph (A) shall not apply,
``(ii) such interest shall be treated as an investment
services partnership interest in the hands of the person
acquiring such interest, and
``(iii) any amount that would have been treated as ordinary
income under this subsection had the decedent sold such
interest immediately before death shall be treated as an item
of income in respect of a decedent under section 691.
``(2) Loss.--Any loss on the disposition of an investment
services partnership interest shall be treated as an ordinary
loss to the extent of the excess (if any) of--
``(A) the aggregate amount treated as ordinary income under
subsection (a) with respect to such interest for all
partnership taxable years to which this section applies, over
``(B) the aggregate amount treated as ordinary loss under
subsection (a) with respect to such interest for all
partnership taxable years to which this section applies.
``(3) Election with respect to certain exchanges.--
Paragraph (1)(A)(ii) shall not apply to the contribution of
an investment services partnership interest to a partnership
in exchange for an interest in such partnership if--
``(A) the taxpayer makes an irrevocable election to treat
the partnership interest received in the exchange as an
investment services partnership interest, and
``(B) the taxpayer agrees to comply with such reporting and
recordkeeping requirements as the Secretary may prescribe.
``(4) Distributions of partnership property.--
``(A) In general.--In the case of any distribution of
property by a partnership with respect to any investment
services partnership interest held by a partner, the partner
receiving such property shall recognize gain equal to the
excess (if any) of--
``(i) the fair market value of such property at the time of
such distribution, over
``(ii) the adjusted basis of such property in the hands of
such partner (determined without regard to subparagraph (C)).
``(B) Treatment of gain as ordinary income.--Any gain
recognized by such partner under subparagraph (A) shall be
treated as ordinary income to the same extent and in the same
manner as the increase in such partner's distributive share
of the taxable income of the partnership would be treated
under subsection (a) if, immediately prior to the
distribution, the partnership had sold the distributed
property at fair market value and all of the gain from such
disposition were allocated to such partner. For purposes of
applying subsection (a)(2), any gain treated as ordinary
income under this subparagraph shall be treated as an amount
treated as ordinary income under subsection (a)(1)(A).
``(C) Adjustment of basis.--In the case of a distribution
to which subparagraph (A) applies, the basis of the
distributed property in the hands of the distributee partner
shall be the fair market value of such property.
``(D) Special rules with respect to mergers, divisions, and
technical terminations.--In the case of a taxpayer which
satisfies requirements similar to the requirements of
subparagraphs (A) and (B) of paragraph (3), this paragraph
and paragraph (1)(A)(ii) shall not apply to the distribution
of a partnership interest if such distribution is in
connection with a contribution (or deemed contribution) of
any property of the partnership to which section 721 applies
pursuant to a transaction described in paragraph (1)(B) or
(2) of section 708(b).
``(c) Investment Services Partnership Interest.--For
purposes of this section--
``(1) In general.--The term `investment services
partnership interest' means any interest in an investment
partnership acquired or held by any person in connection with
the conduct of a trade or business described in paragraph (2)
by such person (or any person related to such person). An
interest in an investment partnership held by any person--
``(A) shall not be treated as an investment services
partnership interest for any period before the first date on
which it is so held in connection with such a trade or
business,
``(B) shall not cease to be an investment services
partnership interest merely because such person holds such
interest other than in connection with such a trade or
business, and
``(C) shall be treated as an investment services
partnership interest if acquired from a related person in
whose hands such interest was an investment services
partnership interest.
``(2) Businesses to which this section applies.--A trade or
business is described in this paragraph if such trade or
business primarily involves the performance of any of the
following services with respect to assets held (directly or
indirectly) by one or more investment partnerships referred
to in paragraph (1):
``(A) Advising as to the advisability of investing in,
purchasing, or selling any specified asset.
``(B) Managing, acquiring, or disposing of any specified
asset.
``(C) Arranging financing with respect to acquiring
specified assets.
``(D) Any activity in support of any service described in
subparagraphs (A) through (C).
``(3) Investment partnership.--
``(A) In general.--The term `investment partnership' means
any partnership if, at the end of any two consecutive
calendar quarters ending after the date of enactment of this
section--
``(i) substantially all of the assets of the partnership
are specified assets (determined without regard to any
section 197 intangible within the meaning of section 197(d)),
and
``(ii) less than 75 percent of the capital of the
partnership is attributable to qualified capital interests
which constitute property held in connection with a trade or
business of the owner of such interest.
``(B) Look-through of certain wholly owned entities for
purposes of determining assets of the partnership.--
``(i) In general.--For purposes of determining the assets
of a partnership under subparagraph (A)(i)--
``(I) any interest in a specified entity shall not be
treated as an asset of such partnership, and
``(II) such partnership shall be treated as holding its
proportionate share of each of the assets of such specified
entity.
``(ii) Specified entity.--For purposes of clause (i), the
term `specified entity' means, with respect to any
partnership (hereafter referred to as the upper-tier
partnership), any person which engages in the same trade or
business as the upper-tier partnership and is--
``(I) a partnership all of the capital and profits
interests of which are held directly or indirectly by the
upper-tier partnership, or
``(II) a foreign corporation which does not engage in a
trade or business in the United States and all of the stock
of which is held directly or indirectly by the upper-tier
partnership.
``(C) Special rules for determining if property held in
connection with trade or business.--
``(i) In general.--Except as otherwise provided by the
Secretary, solely for purposes of determining whether any
interest in a partnership constitutes property held in
connection with a trade or business under subparagraph
(A)(ii)--
``(I) a trade or business of any person closely related to
the owner of such interest shall be treated as a trade or
business of such owner,
``(II) such interest shall be treated as held by a person
in connection with a trade or business during any taxable
year if such interest was so held by such person during any 3
taxable years preceding such taxable year, and
``(III) paragraph (5)(B) shall not apply.
``(ii) Closely related persons.--For purposes of clause
(i)(I), a person shall be treated as closely related to
another person if, taking into account the rules of section
267(c), the relationship between such persons is described
in--
``(I) paragraph (1) or (9) of section 267(b), or
``(II) section 267(b)(4), but solely in the case of a trust
with respect to which each current beneficiary is the grantor
or a person whose relationship to the grantor is described in
paragraph (1) or (9) of section 267(b).
``(D) Antiabuse rules.--The Secretary may issue regulations
or other guidance which prevent the avoidance of the purposes
of subparagraph (A), including regulations or other guidance
which treat convertible and contingent debt (and other debt
having the attributes of equity) as a capital interest in the
partnership.
``(E) Controlled groups of entities.--
``(i) In general.--In the case of a controlled group of
entities, if an interest in the partnership received in
exchange for a contribution to the capital of the partnership
by any member of such controlled group would (in the hands of
such member) constitute property held in connection with a
trade or business, then any interest in such partnership held
by any member of such group shall be treated for purposes of
subparagraph (A) as constituting (in the hands of such
member) property held in connection with a trade or business.
[[Page S8315]]
``(ii) Controlled group of entities.--For purposes of
clause (i), the term `controlled group of entities' means a
controlled group of corporations as defined in section
1563(a)(1), applied without regard to subsections (a)(4) and
(b)(2) of section 1563. A partnership or any other entity
(other than a corporation) shall be treated as a member of a
controlled group of entities if such entity is controlled
(within the meaning of section 954(d)(3)) by members of such
group (including any entity treated as a member of such group
by reason of this sentence).
``(F) Special rule for corporations.--For purposes of this
paragraph, in the case of a corporation, the determination of
whether property is held in connection with a trade or
business shall be determined as if the taxpayer were an
individual.
``(4) Specified asset.--The term `specified asset' means
securities (as defined in section 475(c)(2) without regard to
the last sentence thereof), real estate held for rental or
investment, interests in partnerships, commodities (as
defined in section 475(e)(2)), cash or cash equivalents, or
options or derivative contracts with respect to any of the
foregoing.
``(5) Related persons.--
``(A) In general.--A person shall be treated as related to
another person if the relationship between such persons is
described in section 267(b) or 707(b).
``(B) Attribution of partner services.--Any service
described in paragraph (2) which is provided by a partner of
a partnership shall be treated as also provided by such
partnership.
``(d) Exception for Certain Capital Interests.--
``(1) In general.--In the case of any portion of an
investment services partnership interest which is a qualified
capital interest, all items of gain and loss (and any
dividends) which are allocated to such qualified capital
interest shall not be taken into account under subsection (a)
if--
``(A) allocations of items are made by the partnership to
such qualified capital interest in the same manner as such
allocations are made to other qualified capital interests
held by partners who do not provide any services described in
subsection (c)(2) and who are not related to the partner
holding the qualified capital interest, and
``(B) the allocations made to such other interests are
significant compared to the allocations made to such
qualified capital interest.
``(2) Authority to provide exceptions to allocation
requirements.--To the extent provided by the Secretary in
regulations or other guidance--
``(A) Allocations to portion of qualified capital
interest.--Paragraph (1) may be applied separately with
respect to a portion of a qualified capital interest.
``(B) No or insignificant allocations to nonservice
providers.--In any case in which the requirements of
paragraph (1)(B) are not satisfied, items of gain and loss
(and any dividends) shall not be taken into account under
subsection (a) to the extent that such items are properly
allocable under such regulations or other guidance to
qualified capital interests.
``(C) Allocations to service providers' qualified capital
interests which are less than other allocations.--Allocations
shall not be treated as failing to meet the requirement of
paragraph (1)(A) merely because the allocations to the
qualified capital interest represent a lower return than the
allocations made to the other qualified capital interests
referred to in such paragraph.
``(3) Special rule for changes in services and capital
contributions.--In the case of an interest in a partnership
which was not an investment services partnership interest and
which, by reason of a change in the services with respect to
assets held (directly or indirectly) by the partnership or by
reason of a change in the capital contributions to such
partnership, becomes an investment services partnership
interest, the qualified capital interest of the holder of
such partnership interest immediately after such change shall
not, for purposes of this subsection, be less than the fair
market value of such interest (determined immediately before
such change).
``(4) Special rule for tiered partnerships.--Except as
otherwise provided by the Secretary, in the case of tiered
partnerships, all items which are allocated in a manner which
meets the requirements of paragraph (1) to qualified capital
interests in a lower-tier partnership shall retain such
character to the extent allocated on the basis of qualified
capital interests in any upper-tier partnership.
``(5) Exception for no-self-charged carry and management
fee provisions.--Except as otherwise provided by the
Secretary, an interest shall not fail to be treated as
satisfying the requirement of paragraph (1)(A) merely because
the allocations made by the partnership to such interest do
not reflect the cost of services described in subsection
(c)(2) which are provided (directly or indirectly) to the
partnership by the holder of such interest (or a related
person).
``(6) Special rule for dispositions.--In the case of any
investment services partnership interest any portion of which
is a qualified capital interest, subsection (b) shall not
apply to so much of any gain or loss as bears the same
proportion to the entire amount of such gain or loss as--
``(A) the distributive share of gain or loss that would
have been allocated to the qualified capital interest
(consistent with the requirements of paragraph (1)) if the
partnership had sold all of its assets at fair market value
immediately before the disposition, bears to
``(B) the distributive share of gain or loss that would
have been so allocated to the investment services partnership
interest of which such qualified capital interest is a part.
``(7) Qualified capital interest.--For purposes of this
section--
``(A) In general.--The term `qualified capital interest'
means so much of a partner's interest in the capital of the
partnership as is attributable to--
``(i) the fair market value of any money or other property
contributed to the partnership in exchange for such interest
(determined without regard to section 752(a)),
``(ii) any amounts which have been included in gross income
under section 83 with respect to the transfer of such
interest, and
``(iii) the excess (if any) of--
``(I) any items of income and gain taken into account under
section 702 with respect to such interest, over
``(II) any items of deduction and loss so taken into
account.
``(B) Adjustment to qualified capital interest.--
``(i) Distributions and losses.--The qualified capital
interest shall be reduced by distributions from the
partnership with respect to such interest and by the excess
(if any) of the amount described in subparagraph (A)(iii)(II)
over the amount described in subparagraph (A)(iii)(I).
``(ii) Special rule for contributions of property.--In the
case of any contribution of property described in
subparagraph (A)(i) with respect to which the fair market
value of such property is not equal to the adjusted basis of
such property immediately before such contribution, proper
adjustments shall be made to the qualified capital interest
to take into account such difference consistent with such
regulations or other guidance as the Secretary may provide.
``(C) Technical terminations, etc., disregarded.--No
increase or decrease in the qualified capital interest of any
partner shall result from a termination, merger,
consolidation, or division described in section 708, or any
similar transaction.
``(8) Treatment of certain loans.--
``(A) Proceeds of partnership loans not treated as
qualified capital interest of service providing partners.--
For purposes of this subsection, an investment services
partnership interest shall not be treated as a qualified
capital interest to the extent that such interest is acquired
in connection with the proceeds of any loan or other advance
made or guaranteed, directly or indirectly, by any other
partner or the partnership (or any person related to any such
other partner or the partnership). The preceding sentence
shall not apply to the extent the loan or other advance is
repaid before the date of the enactment of this section
unless such repayment is made with the proceeds of a loan or
other advance described in the preceding sentence.
``(B) Reduction in allocations to qualified capital
interests for loans from nonservice-providing partners to the
partnership.--For purposes of this subsection, any loan or
other advance to the partnership made or guaranteed, directly
or indirectly, by a partner not providing services described
in subsection (c)(2) to the partnership (or any person
related to such partner) shall be taken into account in
determining the qualified capital interests of the partners
in the partnership.
``(9) Special rule for qualified family partnerships.--
``(A) In general.--In the case of any specified family
partnership interest, paragraph (1)(A) shall be applied
without regard to the phrase `and who are not related to the
partner holding the qualified capital interest'.
``(B) Specified family partnership interest.--For purposes
of this paragraph, the term `specified family partnership
interest' means any investment services partnership interest
if--
``(i) such interest is an interest in a qualified family
partnership,
``(ii) such interest is held by a natural person or by a
trust with respect to which each beneficiary is a grantor or
a person whose relationship to the grantor is described in
section 267(b)(1), and
``(iii) all other interests in such qualified family
partnership with respect to which significant allocations are
made (within the meaning of paragraph (1)(B) and in
comparison to the allocations made to the interest described
in clause (ii)) are held by persons who--
``(I) are related to the natural person or trust referred
to in clause (ii), or
``(II) provide services described in subsection (c)(2).
``(C) Qualified family partnership.--For purposes of this
paragraph, the term `qualified family partnership' means any
partnership if--
``(i) all of the capital and profits interests of such
partnership are held by--
``(I) specified family members,
``(II) any person closely related (within the meaning of
subsection (c)(3)(C)(ii)) to a specified family member, or
``(III) any other person (not described in subclause (I) or
(II)) if such interest is an investment services partnership
interest with respect to such person, and
``(ii) such partnership does not hold itself out to the
public as an investment advisor.
``(D) Specified family members.--For purposes of
subparagraph (C), individuals shall
[[Page S8316]]
be treated as specified family members if such individuals
would be treated as one person under the rules of section
1361(c)(1) if the applicable date (within the meaning of
subparagraph (B)(iii) thereof) were the latest of--
``(i) the date of the establishment of the partnership,
``(ii) the earliest date that the common ancestor holds a
capital or profits interest in the partnership, or
``(iii) the date of the enactment of this section.
``(e) Other Income and Gain in Connection With Investment
Management Services.--
``(1) In general.--If--
``(A) a person performs (directly or indirectly) investment
management services for any investment entity,
``(B) such person holds (directly or indirectly) a
disqualified interest with respect to such entity, and
``(C) the value of such interest (or payments thereunder)
is substantially related to the amount of income or gain
(whether or not realized) from the assets with respect to
which the investment management services are performed,
any income or gain with respect to such interest shall be
treated as ordinary income. Rules similar to the rules of
subsections (a)(5) and (d) shall apply for purposes of this
subsection.
``(2) Definitions.--For purposes of this subsection--
``(A) Disqualified interest.--
``(i) In general.--The term `disqualified interest' means,
with respect to any investment entity--
``(I) any interest in such entity other than indebtedness,
``(II) convertible or contingent debt of such entity,
``(III) any option or other right to acquire property
described in subclause (I) or (II), and
``(IV) any derivative instrument entered into (directly or
indirectly) with such entity or any investor in such entity.
``(ii) Exceptions.--Such term shall not include--
``(I) a partnership interest,
``(II) except as provided by the Secretary, any interest in
a taxable corporation, and
``(III) except as provided by the Secretary, stock in an S
corporation.
``(B) Taxable corporation.--The term `taxable corporation'
means--
``(i) a domestic C corporation, or
``(ii) a foreign corporation substantially all of the
income of which is--
``(I) effectively connected with the conduct of a trade or
business in the United States, or
``(II) subject to a comprehensive foreign income tax (as
defined in section 457A(d)(2)).
``(C) Investment management services.--The term `investment
management services' means a substantial quantity of any of
the services described in subsection (c)(2).
``(D) Investment entity.--The term `investment entity'
means any entity which, if it were a partnership, would be an
investment partnership.
``(f) Exception for Domestic C Corporations.--Except as
otherwise provided by the Secretary, in the case of a
domestic C corporation--
``(1) subsections (a) and (b) shall not apply to any item
allocated to such corporation with respect to any investment
services partnership interest (or to any gain or loss with
respect to the disposition of such an interest), and
``(2) subsection (e) shall not apply.
``(g) Regulations.--The Secretary shall prescribe such
regulations or other guidance as is necessary or appropriate
to carry out the purposes of this section, including
regulations or other guidance to--
``(1) require such reporting and recordkeeping by any
person in such manner and at such time as the Secretary may
prescribe for purposes of enabling the partnership to meet
the requirements of section 6031 with respect to any item
described in section 702(a)(9),
``(2) provide modifications to the application of this
section (including treating related persons as not related to
one another) to the extent such modification is consistent
with the purposes of this section,
``(3) prevent the avoidance of the purposes of this section
(including through the use of qualified family partnerships),
and
``(4) coordinate this section with the other provisions of
this title.
``(h) Cross Reference.--For 40-percent penalty on certain
underpayments due to the avoidance of this section, see
section 6662.''.
(b) Application of Section 751 to Indirect Dispositions of
Investment Services Partnership Interests.--
(1) In general.--Subsection (a) of section 751 of the
Internal Revenue Code of 1986 is amended by striking ``or''
at the end of paragraph (1), by inserting ``or'' at the end
of paragraph (2), and by inserting after paragraph (2) the
following new paragraph:
``(3) investment services partnership interests held by the
partnership,''.
(2) Certain distributions treated as sales or exchanges.--
Subparagraph (A) of section 751(b)(1) of such Code is amended
by striking ``or'' at the end of clause (i), by inserting
``or'' at the end of clause (ii), and by inserting after
clause (ii) the following new clause:
``(iii) investment services partnership interests held by
the partnership,''.
(3) Application of special rules in the case of tiered
partnerships.--Subsection (f) of section 751 of such Code is
amended--
(A) by striking ``or'' at the end of paragraph (1), by
inserting ``or'' at the end of paragraph (2), and by
inserting after paragraph (2) the following new paragraph:
``(3) an investment services partnership interest held by
the partnership,'', and
(B) by striking ``partner.'' and inserting ``partner (other
than a partnership in which it holds an investment services
partnership interest).''.
(4) Investment services partnership interests; qualified
capital interests.--Section 751 of such Code is amended by
adding at the end the following new subsection:
``(g) Investment Services Partnership Interests.--For
purposes of this section--
``(1) In general.--The term `investment services
partnership interest' has the meaning given such term by
section 710(c).
``(2) Adjustments for qualified capital interests.--The
amount to which subsection (a) applies by reason of paragraph
(3) thereof shall not include so much of such amount as is
attributable to any portion of the investment services
partnership interest which is a qualified capital interest
(determined under rules similar to the rules of section
710(d)).
``(3) Exception for publicly traded partnerships.--Except
as otherwise provided by the Secretary, in the case of an
exchange of an interest in a publicly traded partnership (as
defined in section 7704) to which subsection (a) applies--
``(A) this section shall be applied without regard to
subsections (a)(3), (b)(1)(A)(iii), and (f)(3), and
``(B) such partnership shall be treated as owning its
proportionate share of the property of any other partnership
in which it is a partner.
``(4) Recognition of gains.--Any gain with respect to which
subsection (a) applies by reason of paragraph (3) thereof
shall be recognized notwithstanding any other provision of
this title.
``(5) Coordination with inventory items.--An investment
services partnership interest held by the partnership shall
not be treated as an inventory item of the partnership.
``(6) Prevention of double counting.--Under regulations or
other guidance prescribed by the Secretary, subsection (a)(3)
shall not apply with respect to any amount to which section
710 applies.
``(7) Valuation methods.--The Secretary shall prescribe
regulations or other guidance which provide the acceptable
methods for valuing investment services partnership interests
for purposes of this section.''.
(c) Treatment for Purposes of Section 7704.--Subsection (d)
of section 7704 of the Internal Revenue Code of 1986 is
amended by adding at the end the following new paragraph:
``(6) Income from certain carried interests not
qualified.--
``(A) In general.--Specified carried interest income shall
not be treated as qualifying income.
``(B) Specified carried interest income.--For purposes of
this paragraph--
``(i) In general.--The term `specified carried interest
income' means--
``(I) any item of income or gain allocated to an investment
services partnership interest (as defined in section 710(c))
held by the partnership,
``(II) any gain on the disposition of an investment
services partnership interest (as so defined) or a
partnership interest to which (in the hands of the
partnership) section 751 applies, and
``(III) any income or gain taken into account by the
partnership under subsection (b)(4) or (e) of section 710.
``(ii) Exception for qualified capital interests.--A rule
similar to the rule of section 710(d) shall apply for
purposes of clause (i).
``(C) Coordination with other provisions.--Subparagraph (A)
shall not apply to any item described in paragraph (1)(E) (or
so much of paragraph (1)(F) as relates to paragraph (1)(E)).
``(D) Special rules for certain partnerships.--
``(i) Certain partnerships owned by real estate investment
trusts.--Subparagraph (A) shall not apply in the case of a
partnership which meets each of the following requirements:
``(I) Such partnership is treated as publicly traded under
this section solely by reason of interests in such
partnership being convertible into interests in a real estate
investment trust which is publicly traded.
``(II) Fifty percent or more of the capital and profits
interests of such partnership are owned, directly or
indirectly, at all times during the taxable year by such real
estate investment trust (determined with the application of
section 267(c)).
``(III) Such partnership meets the requirements of
paragraphs (2), (3), and (4) of section 856(c).
``(ii) Certain partnerships owning other publicly traded
partnerships.--Subparagraph (A) shall not apply in the case
of a partnership which meets each of the following
requirements:
``(I) Substantially all of the assets of such partnership
consist of interests in one or more publicly traded
partnerships (determined without regard to subsection
(b)(2)).
``(II) Substantially all of the income of such partnership
is ordinary income or section 1231 gain (as defined in
section 1231(a)(3)).
``(E) Transitional rule.--Subparagraph (A) shall not apply
to any taxable year of the partnership beginning before the
date which
[[Page S8317]]
is 10 years after the date of the enactment of this
paragraph.''.
(d) Imposition of Penalty on Underpayments.--
(1) In general.--Subsection (b) of section 6662 of the
Internal Revenue Code of 1986 is amended by inserting after
paragraph (7) the following new paragraph:
``(8) The application of section 710(e) or the regulations
or other guidance prescribed under section 710(g) to prevent
the avoidance of the purposes of section 710.''.
(2) Amount of penalty.--
(A) In general.--Section 6662 of such Code is amended by
adding at the end the following new subsection:
``(k) Increase in Penalty in Case of Property Transferred
for Investment Management Services.--In the case of any
portion of an underpayment to which this section applies by
reason of subsection (b)(8), subsection (a) shall be applied
with respect to such portion by substituting `40 percent' for
`20 percent'.''.
(B) Conforming amendment.--Subparagraph (B) of section
6662A(e)(2) of such Code is amended by striking ``or (i)''
and inserting ``, (i), or (k)''.
(3) Special rules for application of reasonable cause
exception.--Subsection (c) of section 6664 of such Code is
amended--
(A) by redesignating paragraphs (3) and (4) as paragraphs
(4) and (5), respectively;
(B) by striking ``paragraph (3)'' in paragraph (5)(A), as
so redesignated, and inserting ``paragraph (4)''; and
(C) by inserting after paragraph (2) the following new
paragraph:
``(3) Special rule for underpayments attributable to
investment management services.--
``(A) In general.--Paragraph (1) shall not apply to any
portion of an underpayment to which section 6662 applies by
reason of subsection (b)(8) unless--
``(i) the relevant facts affecting the tax treatment of the
item are adequately disclosed,
``(ii) there is or was substantial authority for such
treatment, and
``(iii) the taxpayer reasonably believed that such
treatment was more likely than not the proper treatment.
``(B) Rules relating to reasonable belief.--Rules similar
to the rules of subsection (d)(3) shall apply for purposes of
subparagraph (A)(iii).''.
(e) Income and Loss From Investment Services Partnership
Interests Taken Into Account in Determining Net Earnings From
Self-Employment.--
(1) Internal revenue code.--
(A) In general.--Section 1402(a) of the Internal Revenue
Code of 1986 is amended by striking ``and'' at the end of
paragraph (16), by striking the period at the end of
paragraph (17) and inserting ``; and'', and by inserting
after paragraph (17) the following new paragraph:
``(18) notwithstanding the preceding provisions of this
subsection, in the case of any individual engaged in the
trade or business of providing services described in section
710(c)(2) with respect to any entity, investment services
partnership income or loss (as defined in subsection (m)) of
such individual with respect to such entity shall be taken
into account in determining the net earnings from self-
employment of such individual.''.
(B) Investment services partnership income or loss.--
Section 1402 of such Code is amended by adding at the end the
following new subsection:
``(m) Investment Services Partnership Income or Loss.--For
purposes of subsection (a)--
``(1) In general.--The term `investment services
partnership income or loss' means, with respect to any
investment services partnership interest (as defined in
section 710(c)) or disqualified interest (as defined in
section 710(e)), the net of--
``(A) the amounts treated as ordinary income or ordinary
loss under subsections (b) and (e) of section 710 with
respect to such interest,
``(B) all items of income, gain, loss, and deduction
allocated to such interest, and
``(C) the amounts treated as realized from the sale or
exchange of property other than a capital asset under section
751 with respect to such interest.
``(2) Exception for qualified capital interests.--A rule
similar to the rule of section 710(d) shall apply for
purposes of applying paragraph (1)(B).''.
(2) Social security act.--Section 211(a) of the Social
Security Act is amended by striking ``and'' at the end of
paragraph (15), by striking the period at the end of
paragraph (16) and inserting ``; and'', and by inserting
after paragraph (16) the following new paragraph:
``(17) Notwithstanding the preceding provisions of this
subsection, in the case of any individual engaged in the
trade or business of providing services described in section
710(c)(2) of the Internal Revenue Code of 1986 with respect
to any entity, investment services partnership income or loss
(as defined in section 1402(m) of such Code) shall be taken
into account in determining the net earnings from self-
employment of such individual.''.
(f) Separate Accounting by Partner.--Section 702(a) of the
Internal Revenue Code of 1986 is amended by striking ``and''
at the end of paragraph (7), by striking the period at the
end of paragraph (8) and inserting ``, and'', and by
inserting after paragraph (8) the following:
``(9) any amount treated as ordinary income or loss under
subsection (a), (b), or (e) of section 710.''.
(g) Conforming Amendments.--
(1) Subsection (d) of section 731 of the Internal Revenue
Code of 1986 is amended by inserting ``section 710(b)(4)
(relating to distributions of partnership property),'' after
``to the extent otherwise provided by''.
(2) Section 741 of such Code is amended by inserting ``or
section 710 (relating to special rules for partners providing
investment management services to partnerships)'' before the
period at the end.
(3) The table of sections for part I of subchapter K of
chapter 1 of such Code is amended by adding at the end the
following new item:
``Sec. 710. Special rules for partners providing investment management
services to partnerships.''.
(h) Effective Date.--
(1) In general.--Except as otherwise provided in this
subsection, the amendments made by this section shall apply
to taxable years ending after the date of the enactment of
this Act.
(2) Partnership taxable years which include effective
date.--In applying section 710(a) of the Internal Revenue
Code of 1986 (as added by this section) in the case of any
partnership taxable year which includes the date of the
enactment of this Act, the amount of the net capital gain
referred to in such section shall be treated as being the
lesser of the net capital gain for the entire partnership
taxable year or the net capital gain determined by only
taking into account items attributable to the portion of the
partnership taxable year which is after such date.
(3) Dispositions of partnership interests.--
(A) In general.--Section 710(b) of such Code (as added by
this section) shall apply to dispositions and distributions
after the date of the enactment of this Act.
(B) Indirect dispositions.--The amendments made by
subsection (b) shall apply to transactions after the date of
the enactment of this Act.
(4) Other income and gain in connection with investment
management services.--Section 710(e) of such Code (as added
by this section) shall take effect on the date of the
enactment of this Act.
SEC. ___. FAIR SHARE TAX ON HIGH-INCOME TAXPAYERS.
(a) In General.--Subchapter A of chapter 1 of the Internal
Revenue Code of 1986 is amended by adding at the end the
following new part:
``PART VII--FAIR SHARE TAX ON HIGH-INCOME TAXPAYERS
``Sec. 59A. Fair share tax.
``SEC. 59A. FAIR SHARE TAX.
``(a) General Rule.--
``(1) Impositition of tax.--In the case of any high-income
taxpayer, there is hereby imposed for a taxable year (in
addition to any other tax imposed by this subtitle) a tax
equal to the product of--
``(A) the amount determined under paragraph (2), and
``(B) a fraction (not to exceed 1)--
``(i) the numerator of which is the excess of--
``(I) the taxpayer's adjusted gross income, over
``(II) the dollar amount in effect under subsection (c)(1),
and
``(ii) the denominator of which is the dollar amount in
effect under subsection (c)(1).
``(2) Amount of tax.--The amount of tax determined under
this paragraph is an amount equal to the excess (if any) of--
``(A) the tentative fair share tax for the taxable year,
over
``(B) the excess of--
``(i) the sum of--
``(I) the regular tax liability (as defined in section
26(b)) for the taxable year, determined without regard to any
tax liability determined under this section,
``(II) the tax imposed by section 55 for the taxable year,
plus
``(III) the payroll tax for the taxable year, over
``(ii) the credits allowable under part IV of subchapter A
(other than sections 27(a), 31, and 34).
``(b) Tentative Fair Share Tax.--For purposes of this
section--
``(1) In general.--The tentative fair share tax for the
taxable year is 30 percent of the excess of--
``(A) the adjusted gross income of the taxpayer, over
``(B) the modified charitable contribution deduction for
the taxable year.
``(2) Modified charitable contribution deduction.--For
purposes of paragraph (1)--
``(A) In general.--The modified charitable contribution
deduction for any taxable year is an amount equal to the
amount which bears the same ratio to the deduction allowable
under section 170 (section 642(c) in the case of a trust or
estate) for such taxable year as--
``(i) the amount of itemized deductions allowable under the
regular tax (as defined in section 55) for such taxable year,
determined after the application of section 68, bears to
``(ii) such amount, determined before the application of
section 68.
``(B) Taxpayer must itemize.--In the case of any individual
who does not elect to itemize deductions for the taxable
year, the modified charitable contribution deduction shall be
zero.
``(c) High-Income Taxpayer.--For purposes of this section--
[[Page S8318]]
``(1) In general.--The term `high-income taxpayer' means,
with respect to any taxable year, any taxpayer (other than a
corporation) with an adjusted gross income for such taxable
year in excess of $1,000,000 (50 percent of such amount in
the case of a married individual who files a separate
return).
``(2) Inflation adjustment.--
``(A) In general.--In the case of a taxable year beginning
after 2016, the $1,000,000 amount under paragraph (1) shall
be increased by an amount equal to--
``(i) such dollar amount, multiplied by
``(ii) the cost-of-living adjustment determined under
section 1(f)(3) for the calendar year in which the taxable
year begins, determined by substituting `calendar year 2015'
for `calendar year 1992' in subparagraph (B) thereof.
``(B) Rounding.--If any amount as adjusted under
subparagraph (A) is not a multiple of $10,000, such amount
shall be rounded to the next lowest multiple of $10,000.
``(d) Payroll Tax.--For purposes of this section, the
payroll tax for any taxable year is an amount equal to the
excess of--
``(1) the taxes imposed on the taxpayer under sections
1401, 1411, 3101, 3201, and 3211(a) (to the extent such tax
is attributable to the rate of tax in effect under section
3101) with respect to such taxable year or wages or
compensation received during such taxable year, over
``(2) the deduction allowable under section 164(f) for such
taxable year.
``(e) Special Rule for Estates and Trusts.--For purposes of
this section, in the case of an estate or trust, adjusted
gross income shall be computed in the manner described in
section 67(e).
``(f) Not Treated as Tax Imposed by This Chapter for
Certain Purposes.--The tax imposed under this section shall
not be treated as tax imposed by this chapter for purposes of
determining the amount of any credit under this chapter
(other than the credit allowed under section 27(a)) or for
purposes of section 55.''.
(b) Clerical Amendment.--The table of parts for subchapter
A of chapter 1 of the Internal Revenue Code of 1986 is
amended by adding at the end the following new item:
``Part VII--Fair Share Tax on High-Income Taxpayers''.
(c) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2015.
SEC. ___. MODIFICATION OF LIMITATION ON EXCESSIVE
REMUNERATION.
(a) Repeal of Performance-based Compensation and Commission
Exceptions for Limitation on Excessive Remuneration.--
(1) In general.--Paragraph (4) of section 162(m) of the
Internal Revenue Code of 1986 is amended by striking
subparagraphs (B) and (C) and by redesignating subparagraphs
(D) through (G) as subparagraphs (B) through (E),
respectively.
(2) Conforming amendments.--
(A) Section 162(m)(5) of such Code is amended--
(i) by striking ``subparagraphs (B), (C), and (D) thereof''
in subparagraph (E) and inserting ``subparagraph (B)
thereof'', and
(ii) by striking ``subparagraphs (F) and (G)'' in
subparagraph (G) and inserting ``subparagraphs (D) and (E)''.
(B) Section 162(m)(6) of such Code is amended--
(i) by striking ``subparagraphs (B), (C), and (D) thereof''
in subparagraph (D) and inserting ``subparagraph (B)
thereof'', and
(ii) by striking ``subparagraphs (F) and (G)'' in
subparagraph (G) and inserting ``subparagraphs (D) and (E)''.
(b) Expansion of Applicable Employer.--Paragraph (2) of
section 162(m) of the Internal Revenue Code of 1986 is
amended to read as follows:
``(2) Publicly held corporation.--For purposes of this
subsection, the term `publicly held corporation' means any
corporation which is an issuer (as defined in section 3 of
the Securities Exchange Act of 1934 (15 U.S.C. 78c))--
``(A) the securities of which are registered under section
12 of such Act (15 U.S.C. 78l), or
``(B) that is required to file reports under section 15(d)
of such Act (15 U.S.C. 78o(d)).''.
(c) Application to All Current and Former Officers,
Directors, and Employees.--
(1) In general.--Section 162(m) of the Internal Revenue
Code of 1986, as amended by subsection (a), is amended--
(A) by striking ``covered employee'' each place it appears
in paragraphs (1) and (4) and inserting ``covered
individual'', and
(B) by striking ``such employee'' each place it appears in
subparagraphs (A) and (E) of paragraph (4) and inserting
``such individual''.
(2) Covered individual.--Paragraph (3) of section 162(m) of
such Code is amended to read as follows:
``(3) Covered individual.--For purposes of this subsection,
the term `covered individual' means any individual who is an
officer, director, or employee of the taxpayer or a former
officer, director, or employee of the taxpayer.''.
(3) Conforming amendments.--
(A) Section 48D(b)(3)(A) of such Code is amended by
inserting ``(as in effect for taxable years beginning before
January 1, 2016)'' after ``section 162(m)(3)''.
(B) Section 409A(b)(3)(D)(ii) of such Code is amended by
inserting ``(as in effect for taxable years beginning before
January 1, 2016)'' after ``section 162(m)(3)''.
(d) Special Rule for Remuneration Paid to Beneficiaries,
etc.--Paragraph (4) of section 162(m), as amended by
subsection (a), is amended by adding at the end the following
new subparagraph:
``(F) Special rule for remuneration paid to beneficiaries,
etc.--Remuneration shall not fail to be applicable employee
remuneration merely because it is includible in the income
of, or paid to, a person other than the covered individual,
including after the death of the covered individual.''.
(e) Regulatory Authority.--
(1) In general.--Section 162(m) of the Internal Revenue
Code of 1986 is amended by adding at the end the following
new paragraph:
``(7) Regulations.--The Secretary may prescribe such
guidance, rules, or regulations, including with respect to
reporting, as are necessary to carry out the purposes of this
subsection.''.
(2) Conforming amendment.--Paragraph (6) of section 162(m)
of such Code is amended by striking subparagraph (H).
(f) Effective Date.--The amendments made by this section
shall apply to taxable years beginning after December 31,
2015.
______