[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[H.R. 9985 Introduced in House (IH)]
<DOC>
118th CONGRESS
2d Session
H. R. 9985
To subject certain private funds to joint and several liability with
respect to the liabilities of firms acquired and controlled by those
funds, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
October 11, 2024
Mr. Pocan (for himself, Ms. Jayapal, Mr. Grijalva, Mr. Larsen of
Washington, Ms. Lee of California, Ms. Norton, Mrs. Ramirez, Ms.
Schakowsky, and Ms. Ocasio-Cortez) introduced the following bill; which
was referred to the Committee on Ways and Means, and in addition to the
Committees on Financial Services, the Judiciary, and Education and the
Workforce, for a period to be subsequently determined by the Speaker,
in each case for consideration of such provisions as fall within the
jurisdiction of the committee concerned
_______________________________________________________________________
A BILL
To subject certain private funds to joint and several liability with
respect to the liabilities of firms acquired and controlled by those
funds, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Stop Wall Street
Looting Act''.
(b) Table of Contents.--The table of contents for this Act is as
follows:
Sec. 1. Short title; table of contents.
Sec. 2. Findings.
Sec. 3. Definitions.
TITLE I--CORPORATE RESPONSIBILITY
Sec. 101. Joint and several liability for controlling private funds and
holders of active interests in controlling
private funds.
Sec. 102. Indemnification void as against public policy.
TITLE II--ANTI-LOOTING
Sec. 201. Limitations on post-acquisition dividends, distributions,
redemptions, buybacks, and outsourcing.
Sec. 202. Prevention of fraudulent transfers.
Sec. 203. Surtax on certain amounts received by investment firms from
controlled target firms.
Sec. 204. Limitation on deduction for business interest of certain
businesses owned by private funds.
Sec. 205. Guardrails around accessing public funds.
Sec. 206. Prohibiting payments from Federal health care programs to
entities that sell assets to or use assets
as collateral for a loan with a real estate
investment trust.
Sec. 207. Repeal of special rule for taxable REIT subsidiaries with
interests in certain health care property.
Sec. 208. Elimination of qualified REIT dividends from qualified
business income.
Sec. 209. Protections for striking workers.
TITLE III--PROTECTING WORKERS WHEN COMPANIES GO BANKRUPT
Sec. 301. Increased priority for wages.
Sec. 302. Priority for severance pay and contributions to employee
welfare benefit plans.
Sec. 303. Priority for violations of Federal and State laws.
Sec. 304. Limitation on executive compensation enhancements.
Sec. 305. Prohibition against special compensation payments.
Sec. 306. Executive compensation upon exit from bankruptcy.
Sec. 307. Collateral surcharge for employee obligations.
Sec. 308. Voidability of preferential compensation transfers.
Sec. 309. Protection for employees in a sale of assets.
Sec. 310. Protection of gift card purchasers.
Sec. 311. Commercial real estate.
TITLE IV--CLOSING TAX LOOPHOLES
Sec. 401. Amendment of 1986 Code.
Sec. 402. Partnership interests transferred in connection with
performance of services.
Sec. 403. Special rules for partners providing investment management
services to partnerships.
TITLE V--INVESTOR PROTECTION AND MARKET TRANSPARENCY
Sec. 501. Disclosure of fees and returns.
Sec. 502. Fiduciary obligations.
Sec. 503. Disclosures relating to the marketing of private equity
funds.
Sec. 504. Greater visibility into non-bank direct lending and private
credit.
TITLE VI--RESTRICTIONS ON SECURITIZING RISKY CORPORATE DEBT
Sec. 601. Risk retention requirements for securitization of corporate
debt.
TITLE VII--MISCELLANEOUS
Sec. 701. Anti-evasion.
Sec. 702. Severability.
SEC. 2. FINDINGS.
Congress finds the following:
(1) During the 20-year period preceding the date of
enactment of this Act, activity by private equity funds has
exploded.
(2) Millions of people in communities across the United
States rely on companies that are owned by private equity
funds, including nearly 12,000,000 individuals who work for
companies owned by those funds. For millions of additional
individuals, a private investment fund acts as a landlord, a
lender, or an owner of a local grocery store, newspaper, or
hospital. Many pension funds are also investors in private
investment funds.
(3) Private investment funds have taken controlling stakes
in companies in a wide variety of industries, including the
financial services, real estate, media, and healthcare
industries, but some of the largest impacts from private
investment funds have been in the retail sector. In the 10
years preceding the date of enactment of this Act, cases have
been commenced under title 11, United States Code, with respect
to dozens of retailers in the United States, including Sears,
Toys ``R'' Us, Shopko, Payless ShoeSource, Charlotte Russe,
Bon-Ton, Nine West, David's Bridal, Claire's, J. Crew, Neiman
Marcus, Guitar Center, Art Van Furniture, and Southeastern
Grocers, which was the parent company for BI-LO and Winn-Dixie.
(4) Private investment funds have also targeted entities
that serve low-income or vulnerable populations, including
affordable housing developments, for-profit colleges, payday
lenders, medical providers, and nursing homes.
(5) While private investment funds often purport to take
over struggling companies and make those companies viable, the
opposite is often true. Leveraged buyouts impose enormous debt
loads on otherwise viable companies and then strip those
companies of assets, hobbling the operations of those companies
and preventing them from making necessary investments for
future growth. If an investment goes well, the fund reaps most
of the rewards, but if the investment does not go well, workers
and customers of the company, and the community relying on the
company, suffer.
(6) Regardless of the performance of a private investment
fund, the managers of the fund often make profits through fees,
dividends, and other financial engineering. Private funds
should have a stake in the outcome of their investments,
enjoying returns if those investments are successful but
absorbing losses if those investments fail.
(7) When a case is commenced under title 11, United States
Code, with respect to a portfolio company, workers not only
lose jobs, but also lose wages and benefits that are owed,
severance pay that has been promised, and pensions that have
been earned. Workers should not be sent to the back of the line
behind other creditors if, through no fault of those workers,
an investment fails.
(8) The performance of private investment funds is often
cloaked in secrecy. Those funds have full control over the
information that the funds disclose to investors, which allows
the funds to manufacture their own performance metrics and
makes it difficult for an investor to compare the returns to
other investment options. Funds also increasingly require
investors to waive the fiduciary obligations applicable to the
funds. Investors should have the information and bargaining
power to take control over their own investments.
(9) An increasing amount of risky debt is being introduced
into the market and the quality of that debt is deteriorating,
raising concerns with regulators and lawmakers about systemic
risk. The institutions that make and securitize risky loans
collect large fees and then pass on risk to unwitting
investors. The financial system should not bear all of the risk
while lenders and securitizers reap the rewards.
(10) The Federal Government should--
(A) protect workers, companies, consumers, and
investors in the United States; and
(B) put an end to the practice of looting
economically viable companies for the enrichment of
private investment fund managers.
SEC. 3. DEFINITIONS.
Except as otherwise expressly provided, in this Act:
(1) Affiliate.--The term ``affiliate'' means--
(A) a person that directly or indirectly owns,
controls, or holds with power to vote, 5 percent or
more of the outstanding voting securities of another
entity, other than a person that holds such
securities--
(i) in a fiduciary or agency capacity
without sole discretionary power to vote such
securities; or
(ii) solely to secure a debt, if such
entity has not in fact exercised such power to
vote;
(B) a corporation, 5 percent or more of whose
outstanding voting securities are directly or
indirectly owned, controlled, or held with power to
vote, by another entity (referred to in this
subparagraph as a ``covered entity''), or by an entity
that directly or indirectly owns, controls, or holds
with power to vote, 5 percent or more of the
outstanding voting securities of the covered entity,
other than an entity that holds such securities--
(i) in a fiduciary or agency capacity
without sole discretionary power to vote such
securities; or
(ii) solely to secure a debt, if such
entity has not in fact exercised such power to
vote;
(C) a person whose business is operated under a
lease or operating agreement by another entity, or
person substantially all of whose property is operated
under an operating agreement with that other entity; or
(D) an entity that operates the business or
substantially all of the property of another entity
under a lease or operating agreement.
(2) Capital distribution.--The term ``capital
distribution'' means--
(A) a cash or share dividend;
(B) a share repurchase;
(C) a share redemption;
(D) a share buyback;
(E) a payment of interest or fee on a share of
stock; and
(F) any other transaction similar to a transaction
described in any of subparagraphs (A) through (E).
(3) Change in control.--The term ``change in control''
means a change in a legal right with respect to--
(A) the power to vote more than 5 per centum of any
class of voting securities of a corporation that
engages in interstate commerce; or
(B) any lesser per centum of any class of voting
securities of a corporation that engages in interstate
commerce that is sufficient to make the acquirer of
such an interest a person that has the ability to
direct the actions of that corporation.
(4) Change in control transaction.--The term ``change in
control transaction'' means a transaction, or a set of related
transactions, that effectuates a change in control.
(5) Commission.--The term ``Commission'' means the
Securities and Exchange Commission.
(6) Control person.--The term ``control person''--
(A) means--
(i) a person--
(I) that directly or indirectly
owns, controls, or holds with power to
vote, including through coordination
with other persons, 5 percent or more
of the outstanding voting interests of
a corporation; or
(II) that operates the business or
substantially all of the property of a
corporation under a lease or an
operating or management agreement;
(ii) a corporation, other than a target
firm, that has 5 percent or more of its
outstanding voting interests directly or
indirectly owned, controlled, or held with
power to vote by a person that directly or
indirectly owns, controls, or holds with power
to vote, including through coordination with
other persons, 5 percent or more of the
outstanding voting interests of another
corporation; or
(iii) a person that otherwise has the
ability to direct the actions of a corporation;
and
(B) does not include a person that--
(i)(I) is a limited partner with respect to
a controlling private fund that is a
partnership;
(II) does not participate in the direction
of the management or policy of a corporation;
and
(III) is not an insider with respect to the
controlling private fund described in subclause
(I);
(ii) is a pension fund or employee welfare
benefit plan, if neither the fund nor plan (as
applicable), nor any beneficiary or affiliate
of the benefit or plan, is an insider with
respect to a controlling private fund; or
(iii) holds the voting interests of a
corporation solely--
(I) in a fiduciary or agency
capacity without sole discretionary
power to vote the securities; or
(II) to secure a debt, if the
person has not--
(aa) exercised the power to
vote; or
(bb) exercised any other
governance rights with respect
to the corporation.
(7) Controlling private fund.--The term ``controlling
private fund'' means a private fund that, directly or through
an affiliate, becomes a control person with respect to a target
firm through the change in control transaction with respect to
the target firm.
(8) Corporation.--The term ``corporation'' means--
(A) a joint-stock company;
(B) a company or partnership association organized
under a law that makes only the capital subscribed or
callable up to a specified amount responsible for the
debts of the association, including a limited
partnership and a limited liability company;
(C) a trust; and
(D) an association having a power or privilege that
a private corporation, but not an individual or a
partnership, possesses.
(9) Employee welfare benefit plan.--The term ``employee
welfare benefit plan'' has the meaning given the term in
section 3 of the Employee Retirement Income Security Act of
1974 (29 U.S.C. 1002).
(10) Holder of an active interest.--The term ``holder of an
active interest''--
(A) subject to subparagraph (B)(ii), means--
(i) a person that directly or indirectly
has the right to participate in the governance
of a controlling private fund, without regard
to the form or source of that right; and
(ii) any insider with respect to a
controlling private fund; and
(B) does not include--
(i) a person that--
(I) holds an economic interest
solely to secure a debt, if that person
does not exercise any voting or other
governance right with respect to the
interest;
(II)(aa) is a limited partner with
respect to a controlling private fund
that is a partnership;
(bb) does not participate in the
direction of the management or policy
of a corporation; and
(cc) is not an insider with respect
to the controlling private fund
described in item (aa); or
(III) is a pension fund or employee
welfare benefit plan, if neither the
pension fund nor employee welfare
benefit plan (as applicable), nor any
affiliate or beneficiary of the pension
fund or employee welfare benefit plan,
is an insider with respect to, or
affiliate of, a controlling private
fund; or
(ii) if the source of the right described
in subparagraph (A)(i) is a security--
(I) a person that is engaged in
business as an underwriter of
securities and that acquires that
security through the good faith
participation of the person in a firm
commitment underwriting registered
under the Securities Act of 1933 (15
U.S.C. 77a et seq.), until the date
that is 40 days after the date on which
that acquisition occurs; or
(II) a member of a national
securities exchange solely because that
member is the record holder of that
security and, under the rules of that
exchange--
(aa) may direct the vote of
that security, without
instruction, on--
(AA) other than
contested matters; or
(BB) matters that
may substantially
affect the rights or
privileges of the
holders of the security
to be voted; and
(bb) is otherwise precluded
from voting without
instruction.
(11) Insider.--The term ``insider'' means any--
(A) director of a corporation;
(B) officer of a corporation;
(C) managing agent of a corporation;
(D) control person with respect to a corporation;
(E) affiliate of a corporation;
(F) general partner of a corporation that is a
partnership;
(G) consultant or contractor retained by a
corporation;
(H) affiliate, relative, or agent of a person
described in any of subparagraphs (A) through (F); or
(I) affiliate, relative, or agent of a person
described in subparagraph (H).
(12) Investment adviser.--The term ``investment adviser''
has the meaning given the term in section 202(a) of the
Investment Advisers Act of 1940 (15 U.S.C. 80b-2(a)).
(13) Issuer.--The term ``issuer'' has the meaning given the
term in section 3(a) of the Securities Exchange Act of 1934 (15
U.S.C. 78c(a)).
(14) National securities exchange.--The term ``national
securities exchange'' means an exchange that is registered as a
national securities exchange under section 6 of the Securities
Exchange Act of 1934 (15 U.S.C. 78f).
(15) Pension fund.--The term ``pension fund'' has the
meaning given the term ``pension plan'' in section 3 of the
Employee Retirement Security Act of 1974 (29 U.S.C. 1002).
(16) Private fund.--The term ``private fund'' means a
corporation that--
(A) would be considered an investment company under
section 3 of the Investment Company Act of 1940 (15
U.S.C. 80a-3) but for the application of paragraph (1)
or (7) of subsection (c) of such section 3;
(B) is not a venture capital fund, as defined in
section 275.203(l)-1 of title 17, Code of Federal
Regulations, as in effect on the date of enactment of
this Act; and
(C) is not an institution selected under section
107 of the Community Development Banking and Financial
Institutions Act of 1994 (12 U.S.C. 4706).
(17) Relative.--The term ``relative'' means an individual
related by affinity or consanguinity within the third degree as
determined by the common law, or individual in a step or
adoptive relationship within such third degree.
(18) Security.--The term ``security'' has the meaning given
the term in section 2(a) of the Securities Act of 1933 (15
U.S.C. 77b(a)).
(19) Target firm.--The term ``target firm'' means a
corporation that is acquired in a change in control
transaction.
TITLE I--CORPORATE RESPONSIBILITY
SEC. 101. JOINT AND SEVERAL LIABILITY FOR CONTROLLING PRIVATE FUNDS AND
HOLDERS OF ACTIVE INTERESTS IN CONTROLLING PRIVATE FUNDS.
(a) In General.--Notwithstanding any other provision of law, or the
terms of any contract or agreement, a controlling private fund, and any
holder of an active interest with respect to a controlling private
fund, shall be jointly and severally liable for all liabilities of each
target firm for which the controlling private fund is a control person,
and for all liabilities of any affiliate of each such target firm,
including--
(1) any debt incurred by the target firm or an affiliate of
the target firm, including as part of the acquisition of the
target firm by the controlling private fund;
(2) any Federal or State civil monetary penalty, or
obligation under a settlement or consent order with a Federal
or State governmental agency or instrumentality, including a
consumer restitution obligation, for which the target firm, or
an affiliate of the target firm, is liable;
(3) any liability resulting from a violation of section 3
of the Worker Adjustment and Retraining Notification Act (29
U.S.C. 2102) by the target firm or an affiliate of the target
firm;
(4) any withdrawal liability determined under part 1 of
subtitle E of title IV of the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1381 et seq.) that is incurred
by the target firm or an affiliate of the target firm; and
(5) any claim for unfunded benefit liabilities owed to the
Pension Benefit Guaranty Corporation under subtitle D of title
IV of the Employee Retirement Income Security Act of 1974 (29
U.S.C. 1361 et seq.) with respect to the termination of a
pension plan sponsored by the target firm or an affiliate of
the target firm.
(b) Rule of Construction.--Nothing in this section may be construed
to diminish existing, as of the date of enactment of this Act,
controlled group liability under the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1001 et seq.).
SEC. 102. INDEMNIFICATION VOID AS AGAINST PUBLIC POLICY.
It shall be void as against public policy for a target firm, or an
affiliate of a target firm, to indemnify a controlling private fund
with respect to--
(1) the target firm;
(2) any affiliate of the target firm; or
(3) any person that is the holder of an active interest in
the controlling private fund with respect to the liabilities of
that person under section 101.
TITLE II--ANTI-LOOTING
SEC. 201. LIMITATIONS ON POST-ACQUISITION DIVIDENDS, DISTRIBUTIONS,
REDEMPTIONS, BUYBACKS, AND OUTSOURCING.
(a) In General.--No target firm may, directly or indirectly, after
the closing date of a change in control transaction that results in a
private fund becoming a controlling private fund with respect to the
target firm--
(1) for a 4-year period, make a capital distribution or
similarly reduce the equity capital of the target firm;
(2) make a capital distribution greater than 10 percent of
the sum of all financial obligations of the target firm for
each of the previous 2 years or similarly reduce the equity
capital of the target firm;
(3) incur an obligation that commits the target firm to
making a capital distribution of greater than 10 percent of the
new sum of all financial obligations of the firm or a similar
reduction of the equity capital of the target firm for each of
the following 2 years; or
(4) order a plant closing or mass layoff (as defined in
section 2(a) of the Worker Adjustment and Retraining
Notification Act (29 U.S.C. 2101(a))) and relocate the trade or
business conducted by the employees in the United States to one
or more facilities outside the United States, in accordance
with regulations issued by the Secretary of Labor.
(b) Void.--Any transfer made or obligation incurred by a target
firm or an affiliate with respect to a target firm in violation of
subsection (a) shall be void.
(c) Joint and Several Liability for Aiders and Abettors.--Any
controlling private fund, any holder of an active interest in a
controlling private fund, or any affiliate of a target firm that aids,
abets, facilitates, supports, or instructs a target firm's violation of
subsection (a) shall be jointly and severally liable under this
subsection for any transfer made or obligation incurred, including for
reasonable attorney's fees and costs awarded to a plaintiff under
subsection (d)(2).
(d) Cause of Action.--
(1) In general.--Any employee or creditor, or
representative of an employee or creditor, of a target firm
that is a debtor under title 11, United States Code, or of an
affiliate of a target firm that is such a debtor, may bring an
action in an appropriate district court of the United States
against the direct or indirect transferee or obligee or
beneficiary of the transfer or obligation to void the transfer
or obligation and recover any transferred property for the
target firm.
(2) Award.--In a successful action to recover a transfer,
the court shall also award the plaintiff reasonable attorney's
fees and costs.
SEC. 202. PREVENTION OF FRAUDULENT TRANSFERS.
(a) Limitation on Safe Harbors.--Section 546(e) of title 11, United
States Code, is amended by inserting after ``548(b) of this title,''
the following: ``and except in the case of a transfer made in
connection with a change in control transaction, as defined in section
3 of the Stop Wall Street Looting Act, or during the protected period,
as defined in section 548(f) of this title,''.
(b) Presumption of Insolvency in Transfers Undertaken in Connection
With Change in Control Transactions.--Section 548 of title 11, United
States Code, is amended by adding at the end the following:
``(f)(1) In this subsection--
``(A) the terms `change in control transaction',
`control person', and `target firm' have the meanings
given those terms in section 3 of the Stop Wall Street
Looting Act; and
``(B) the term `protected period' means the shorter
of--
``(i) the 15-year period beginning on the
date on which a change in control transaction
closed; or
``(ii) the period beginning on the date on
which a change in control transaction closed
and ending on the earliest subsequent date on
which a public offering of a controlling share
of the common equity securities of the target
firm occurs.
``(2) For purposes of this section, if the debtor is a
target firm, the debtor is presumed to have made a transfer or
incurred an obligation described in subparagraphs (A) and (B)
of subsection (a)(1) if--
``(A) the transfer was made to or obligation was
incurred by the debtor or an affiliate in connection
with a change in control transaction; or
``(B) during a protected period--
``(i) the transfer was made by the debtor
or an affiliate to a control person, an
affiliate, or an insider; or
``(ii) the obligation was incurred by the
debtor or an affiliate from a control person,
an affiliate, or an insider.
``(3) For the purposes of this section, a court shall, in
analyzing related transactions, link together as a single
transaction any interrelated yet formally distinct steps in an
integrated transaction (commonly known as the `step transaction
doctrine').''.
(c) Statute of Limitations.--
(1) Title 11.--Section 548 of title 11, United States Code,
is amended--
(A) in subsection (a)(1), by striking paragraph
``that was made or incurred on or within 15 years
before the date of the filing of the petition'' and
inserting ``that was made or incurred during the period
described in subsection (g)''; and
(B) adding at the end the following:
``(g) The trustee may avoid under subsection (a) a transfer of an
interest of the debtor in property or any obligation incurred by the
debtor on or within--
``(1) 15 years before the date of the filing of the
petition if the transfer was made or obligation incurred in
connection with a change in control transaction, as defined in
section 3 of the Stop Wall Street Looting Act; or
``(2) 15 years before the date of the filing of the
petition for all other transfers and obligations.''.
(2) Title 28.--Section 3306(b) of title 28, United States
Code, is amended--
(A) in paragraph (2), by striking ``or'' at the
end;
(B) in paragraph (3), by striking the period at the
end and inserting ``; or''; and
(C) by adding at the end the following:
``(4) within 15 years after the transfer was made or the
obligation was incurred, if the transfer was made or the
obligation was incurred--
``(A) in connection with a change in control
transaction, as defined in section 3 of the Stop Wall
Street Looting Act; or
``(B) during a protected period, as defined in
section 548(f) of title 11.''.
(d) Powers and Duties of Committees.--Section 1103(c) of title 11,
United States Code, is amended--
(1) by redesignating paragraphs (3) through (5) as
paragraphs (4) through (6), respectively; and
(2) by inserting after paragraph (2) the following:
``(3) upon motion, undertake an examination of a director,
officer, general partner, or person in control of the debtor
regarding potential conflicts of interest;''.
(e) Elimination of Sham Independent Directors.--Section 1107 of
title 11, United States Code, is amended--
(1) in subsection (a), by striking ``Subject to'' and
inserting, ``Except as provided in subsection (c), subject
to''; and
(2) by adding at the end the following:
``(c) Notwithstanding subsection (a), if a debtor in possession is
serving in a case under this title, a committee of creditors appointed
under section 1102 of this title shall have the exclusive right of a
trustee serving in a case under this chapter to bring or settle on
behalf of the estate--
``(1) an action under section 544, 547, 548, or 553 to
avoid a transfer made or obligation incurred by the debtor in
connection with a change of control transaction, as defined in
section 3 of the Stop Wall Street Looting Act; or
``(2) an action against an insider, a former insider, or an
agent or aider and abettor of an insider or former insider.''.
SEC. 203. SURTAX ON CERTAIN AMOUNTS RECEIVED BY INVESTMENT FIRMS FROM
CONTROLLED TARGET FIRMS.
(a) Imposition of Tax.--Subchapter A of chapter 1 of the Internal
Revenue Code of 1986 is amended by adding at the end the following new
part:
``PART VIII--SURTAX ON CERTAIN AMOUNTS RECEIVED BY INVESTMENT FIRMS
``Sec. 59B. Surtax on certain amounts received by investment firms from
controlled target firms.
``SEC. 59B. SURTAX ON CERTAIN AMOUNTS RECEIVED BY INVESTMENT FIRMS FROM
CONTROLLED TARGET FIRMS.
``(a) Imposition of Tax.--
``(1) In general.--If one or more applicable payments are
included in the gross income of a taxpayer for any taxable
year, then there is hereby imposed on the taxpayer for the
taxable year a tax equal to the applicable percentage of the
aggregate amount of such payments. Such tax shall be in
addition to any other tax imposed by this subtitle.
``(2) Applicable percentage.--For purposes of this
subsection, the term `applicable percentage' means 100 percent,
minus the highest rate of tax under section 1 or 11 (whichever
is applicable) for the taxable year.
``(b) Applicable Payment.--For purposes of this section--
``(1) In general.--The term `applicable payment' means any
amount paid or incurred by an applicable entity (or any person
related within the meaning of section 267(b) or 707(b) to such
entity) to any other person which, at the time such amount is
paid or incurred, is an applicable controlling entity. An
amount shall be treated as an applicable payment without regard
to whether it is paid or incurred to the taxpayer including it
in gross income and to which subsection (a) applies.
``(2) Exceptions.--Such term shall not include any of the
following:
``(A) Interest.--Any amount paid or incurred which
is treated as interest for purposes of this chapter.
``(B) Distributions of property with respect to
stock.--Any distribution of property (as defined in
section 317(a)) to which section 301(a) applies.
``(c) Definitions Relating to Entities.--For purposes of this
section--
``(1) Applicable entity.--The term `applicable entity'
means any person--
``(A) which is engaged in the active conduct of a
trade or business, and
``(B) with respect to which any other person
conducts activities in connection with an applicable
trade or business.
``(2) Applicable controlling entity.--The term `applicable
controlling entity' means, with respect to any applicable
entity, any person--
``(A) which is engaged in an applicable trade or
business some or all of the activities of which are
conducted in connection with the applicable entity, and
``(B) which controls (or is related within the
meaning of section 267(b) or 707(b) to a person which
controls) the applicable entity.
``(3) Applicable trade or business.--The term `applicable
trade or business' means any activity conducted on a regular,
continuous, and substantial basis which, regardless of whether
the activity is conducted in one or more entities, consists, in
whole or in part, of--
``(A) raising or returning capital, and
``(B) either--
``(i) investing in or disposing of
specified assets (or identifying specified
assets for such investing or disposition), or
``(ii) developing specified assets.
``(4) Specified asset.--The term `specified asset' means--
``(A) securities (as defined in section 475(c)(2)
but without regard to the phrase `widely held or
publicly traded' in subparagraph (B) thereof and
without regard to the last sentence thereof), and
``(B) real estate held for rental or investment.
``(d) Rules and Definitions Relating to Ownership Attribution and
Control.--For purposes of this section--
``(1) Constructive ownership rules used in determining
related party.--In determining whether persons are related
within the meaning of section 267(b) or 707(b), the
constructive ownership rules of section 318 shall apply in lieu
of the constructive ownership rules which would otherwise
apply, except that in applying such rules the term `stock'
shall include capital, profits, or other beneficial interests
in persons other than corporations.
``(2) Control.--
``(A) Corporations.--In the case of a corporation,
the term `control' has the meaning given such term by
section 304(c) (without regard to paragraph (3)(B)
thereof).
``(B) Other entities.--In the case of a person
other than a corporation, such term means the
ownership, directly or indirectly, of at least 50
percent of the capital, profits, or other beneficial
interests in the person.
``(e) Regulations.--The Secretary shall prescribe such regulations
or other guidance as may be necessary or appropriate to carry out the
provisions of this section, including regulations--
``(1) providing for such adjustments to the application of
this section as are necessary to prevent the avoidance of the
purposes of this section, including through the use of
unrelated persons, or conduit transactions, and
``(2) modifying the constructive ownership rules under
section 318 to the extent necessary to apply such rules to
capital, profits, or other beneficial interests as well as
stock.''.
(b) Disallowance of Credits Against Tax.--Subparagraph (B) of
section 26(b)(2) of the Internal Revenue Code of 1986 is amended by
inserting ``or section 59B (relating to surtax on certain amounts
received by investment firms from controlled target firms)'' after
``anti-abuse tax)''.
(c) Conforming Amendments.--
(1) The table of parts for subchapter A of chapter 1 of the
Internal Revenue Code of 1986 is amended by adding after the
item relating to part VII the following new item:
``Part VIII. Surtax on Certain Amounts Received by Investment Firms''.
(2) Section 871(b)(1) of such Code is amended by inserting
``, and as provided in section 59B on applicable payments
included in gross income which are effectively connected with
the conduct of a trade or business within the United States''
before the period.
(3) Section 882(a)(1) of such Code is amended--
(A) by striking ``59A,'' and inserting ``59A''; and
(B) by inserting ``, and as provided in section 59B
on applicable payments included in gross income which
are effectively connected with the conduct of a trade
or business within the United States'' before the
period.
(4) Subparagraph (A) of section 6425(c)(1) of such Code is
amended by striking ``plus'' at the end of clause (i), by
striking ``plus'' at the end of clause (ii), by striking
``over'' at the end of clause (iii) and inserting ``and'', and
by adding at the end the following new clause:
``(iv) the tax imposed by section 59B,
over''.
(5) Paragraph (1) of section 6654(f) of such Code is
amended by striking ``tax'' each place it appears and inserting
``taxes''.
(6) Subparagraph (A) of section 6655(g)(1) of such Code is
amended by striking ``plus'' at the end of clause (iii), by
redesignating clause (iv) as clause (v), and by inserting after
clause (iii) the following new clause:
``(iv) the tax imposed by section 59B,
and''.
(d) Effective Date.--The amendments made by this section shall
apply to applicable payments (as defined in section 59B(b) of the
Internal Revenue Code of 1986, as added by this section) paid or
accrued on or after the date of the enactment of this Act.
SEC. 204. LIMITATION ON DEDUCTION FOR BUSINESS INTEREST OF CERTAIN
BUSINESSES OWNED BY PRIVATE FUNDS.
(a) In General.--Section 163(j) of the Internal Revenue Code of
1986 is amended by redesignating paragraph (11) as paragraph (12) and
by inserting after paragraph (10) the following new paragraph:
``(11) Modification of limitation for certain businesses
owned by private firms.--
``(A) In general.--In the case of a taxpayer which
is an applicable entity controlled by an applicable
controlling entity (or any person related within the
meaning of section 267(b) or 707(b) to such entity) at
any time during the taxable year--
``(i) if the ratio of debt to equity of the
taxpayer as of the close of the taxable year
(or on any other day during the taxable year as
the Secretary may prescribe in regulations)
exceeds 1, then paragraph (1) shall be applied
by substituting a percentage that the Secretary
determines appropriate (and which shall be not
less than 30 percent) for `30 percent', and
``(ii) in the case of the election under
paragraph (7)(B) to treat any trade or business
of the taxpayer as an electing real property
trade or business--
``(I) the taxpayer may not make any
such election during such taxable year,
and
``(II) any such election of the
taxpayer in effect as of the close of
the taxable year preceding such taxable
year with respect to a trade or
business shall be revoked, effective
for such taxable year and all
succeeding taxable years.
``(B) Ratio of debt to equity.--For purposes of
this paragraph, the term `ratio of debt to equity'
means, with respect to any taxpayer, the ratio which
the total indebtedness of the taxpayer bears to the sum
of the taxpayer's money and all other assets reduced
(but not below zero) by such total indebtedness. For
purposes of the preceding sentence--
``(i) the amount taken into account with
respect to any asset shall be the adjusted
basis thereof for purposes of determining gain,
``(ii) the amount taken into account with
respect to any indebtedness with original issue
discount shall be its issue price plus the
portion of the original issue discount
previously accrued as determined under the
rules of section 1272 (determined without
regard to subsection (a)(7) or (b)(4) thereof),
and
``(iii) there shall be such other
adjustments as the Secretary may by regulations
prescribe.
``(C) Coordination with depreciation rules.--If the
alternative depreciation system under section 168(g)
applies to property by reason of an election under
paragraph (7)(B) which is revoked under subparagraph
(A)(ii)(II), then the depreciation deduction under
section 167(a) with respect to such property for the
taxable year of revocation and all succeeding taxable
years shall be determined under section 168 in the same
manner as if such revocation were a change in use of
the property under section 168(i)(5) and the
regulations thereunder.
``(D) Definitions and rules.--For purposes of this
paragraph--
``(i) any term used in this paragraph which
is also used in section 59B shall have the same
meaning as when used in such section, and
``(ii) the constructive ownership rules of
section 318 shall apply in the same manner as
such rules apply for purposes of section
59B.''.
(b) Effective Dates.--
(1) In general.--The amendments made by this section shall
apply to taxable years beginning on or after the date of
enactment of this Act.
(2) Revocation of elections.--Subparagraphs (A)(ii)(II) and
(C) of section 163(j)(11) of the Internal Revenue Code of 1986,
as added by this section, shall apply to taxable years
beginning on or after the date of enactment of this Act, with
respect to elections under section 163(j)(7)(B) of such Code
made before, on, or after such date.
SEC. 205. GUARDRAILS AROUND ACCESSING PUBLIC FUNDS.
The Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.) is
amended by adding at the end the following:
``SEC. 66. DISCLOSURES.
``Any person described in paragraph (1) or (7) of section 3(c) that
receives funds from a Federal or State agency--
``(1) shall publicly disclose--
``(A) the total funds received from the agency;
``(B) the workforce demographics of the person;
``(C) the amount of loans, grants, or other
benefits provided;
``(D) the use of the proceeds;
``(E) how many jobs were saved or wages preserved;
``(F) any loans forgiven or discharged;
``(G) the beneficial owners of the person;
``(H) the pay ratio between the chief executive
officer and the median pay of employees; and
``(2) may not, during the 2-year period beginning on the
date on which the person receives the funds--
``(A) acquire any company; or
``(B) make any distribution to a shareholder of the
person.''.
SEC. 206. PROHIBITING PAYMENTS FROM FEDERAL HEALTH CARE PROGRAMS TO
ENTITIES THAT SELL ASSETS TO OR USE ASSETS AS COLLATERAL
FOR A LOAN WITH A REAL ESTATE INVESTMENT TRUST.
Section 1128(a) of the Social Security Act (42 U.S.C. 1320a-7(a))
is amended by adding at the end the following new paragraph:
``(5) Selling assets to or using assets as collateral for a
loan with a real estate investment trust.--
``(A) In general.--Any individual or entity that,
on or after the date of enactment of this paragraph,
sells any assets to, or newly pledges any assets as
collateral for a loan with, a real estate investment
trust (as defined in section 856(a) of the Internal
Revenue Code of 1986).
``(B) Clarification.--Subparagraph (A) shall not
apply in the case where an individual or entity agreed
to pledge an asset as collateral for a loan with a real
estate investment trust prior to the date of enactment
of this paragraph, including with respect to any future
agreement between the individual or entity and the real
estate investment trust regarding that same asset.''.
SEC. 207. REPEAL OF SPECIAL RULE FOR TAXABLE REIT SUBSIDIARIES WITH
INTERESTS IN CERTAIN HEALTH CARE PROPERTY.
(a) In General.--Section 856(d)(8)(B) of the Internal Revenue Code
of 1986 is amended--
(1) by striking ``or a qualified health care property (as
defined in subsection (e)(6)(D)(i))'', and
(2) by striking ``qualified health care property or''.
(b) Conforming Amendments.--Section 856(d)(9) of such Code is
amended--
(1) in subparagraph (A)--
(A) by striking ``or a qualified health care
property (as defined in subsection (e)(6)(D)(i))'',
(B) by striking ``or qualified health care
property'', and
(C) by striking ``or qualified health care
properties'', and
(2) in subparagraph (B)--
(A) by striking ``or qualified health care property
(as so defined)'', and
(B) by striking ``or qualified health care
property'' each place it appears in clauses (i), (ii),
and (iii)(II).
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after the date of the enactment of
this Act.
SEC. 208. ELIMINATION OF QUALIFIED REIT DIVIDENDS FROM QUALIFIED
BUSINESS INCOME.
(a) In General.--Paragraph (1) of section 199A(b) of the Internal
Revenue Code of 1986 is amended to read as follows:
``(1) In general.--The term `combined qualified business
income amount' means, with respect to any taxable year, an
amount equal to the sum of the amounts determined under
paragraph (2) for each qualified trade or business carried on
by the taxpayer.''.
(b) Conforming Amendments.--
(1) Section 199A(c)(1) of such Code is amended by striking
the last sentence.
(2) Section 199A(e) of such Code is amended by striking
paragraph (3) and by redesignating paragraph (4) as paragraph
(3).
(c) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after the date of the enactment of
this Act.
SEC. 209. PROTECTIONS FOR STRIKING WORKERS.
(a) In General.--Section 8 of the National Labor Relations Act (29
U.S.C. 158) is amended--
(1) in subsection (a)--
(A) in paragraph (5), by striking the period and
inserting ``;''; and
(B) by adding at the end the following:
``(6) to promise, threaten, or take any action--
``(A) to permanently replace an employee who
participates in a strike as defined by section 501(2)
of the Labor Management Relations Act, 1947 (29 U.S.C.
142(2));
``(B) to discriminate against an employee who is
working or has unconditionally offered to return to
work for the employer because the employee supported or
participated in such a strike; or
``(C) to lockout, suspend, or otherwise withhold
employment from employees in order to influence the
position of such employees or the representative of
such employees in collective bargaining prior to a
strike; and
``(7) to communicate or misrepresent to an employee under
section 2(3) that such employee is excluded from the definition
of employee under section 2(3).'';
(2) in subsection (b)--
(A) by striking paragraphs (4) and (7);
(B) by redesignating paragraphs (5) and (6) as
paragraphs (4) and (5), respectively;
(C) in paragraph (4), as so redesignated, by
striking ``affected;'' and inserting ``affected; and'';
and
(D) in paragraph (5), as so redesignated, by
striking ``; and'' and inserting a period;
(3) in subsection (c), by striking the period at the end
and inserting the following: ``: Provided, That it shall be an
unfair labor practice under subsection (a)(1) for any employer
to require or coerce an employee to attend or participate in
such employer's campaign activities unrelated to the employee's
job duties, including activities that are subject to the
requirements under section 203(b) of the Labor-Management
Reporting and Disclosure Act of 1959 (29 U.S.C. 433(b)).''; and
(4) in subsection (d), in the matter preceding paragraph
(1), by inserting ``and to maintain current wages, hours, and
terms and conditions of employment pending an agreement'' after
``arising thereunder''.
(b) Conforming Amendments.--The National Labor Relations Act is
amended--
(1) in section 8(e) (29 U.S.C. 158(e)), by striking ``and
section 8(b)(4)(B)''; and
(2) in section 10 (29 U.S.C. 160)--
(A) by repealing subsection (k); and
(B) in subsection (l)--
(i) by striking ``of paragraph'' and all
that follows through ``the preliminary'' and
inserting ``of section 8(e), the preliminary'';
(ii) by striking the second proviso; and
(iii) by striking the final sentence.
TITLE III--PROTECTING WORKERS WHEN COMPANIES GO BANKRUPT
SEC. 301. INCREASED PRIORITY FOR WAGES.
Section 507(a) of title 11, United States Code, is amended--
(1) in paragraph (4)--
(A) by redesignating subparagraphs (A) and (B) as
clauses (i) and (ii), respectively;
(B) in the matter preceding clause (i), as so
redesignated, by inserting ``(A)'' before ``Fourth'';
(C) in subparagraph (A), as so designated, in the
matter preceding clause (i), as so redesignated--
(i) by striking ``$10,000'' and inserting
``$20,000'';
(ii) by striking ``within 180 days''; and
(iii) by striking ``or the date of the
cessation of the debtor's business, whichever
occurs first''; and
(D) by adding at the end the following:
``(B) Severance pay described in subparagraph (A)(i) shall
be deemed earned in full upon the layoff or termination of
employment of the individual to whom the severance pay is
owed.''; and
(2) in paragraph (5)--
(A) in subparagraph (A)--
(i) by striking ``within 180 days''; and
(ii) by striking ``or the date of the
cessation of the debtor's business, whichever
occurs first''; and
(B) by striking subparagraph (B) and inserting the
following:
``(B) for each such plan, to the extent of the
number of employees covered by each such plan
multiplied by $20,000.''.
SEC. 302. PRIORITY FOR SEVERANCE PAY AND CONTRIBUTIONS TO EMPLOYEE
WELFARE BENEFIT PLANS.
Section 503(b) of title 11, United States Code, is amended--
(1) in paragraph (8)(B), by striking ``and'' at the end;
(2) in paragraph (9), by striking the period and inserting
a semicolon; and
(3) by adding at the end the following:
``(10) severance pay owed to employees of the debtor (other
than to an insider of the debtor or a senior executive officer
of the debtor), under a plan, program, or policy generally
applicable to employees of the debtor (but not under an
individual contract of employment), or owed pursuant to a
collective bargaining agreement, for layoff or termination on
or after the date of the filing of the petition, which pay
shall be deemed earned in full upon such layoff or termination
of employment; and
``(11) any contribution due on or after the date of the
filing of the petition under an employee welfare benefit plan,
as defined in section 3 of the Stop Wall Street Looting Act.''.
SEC. 303. PRIORITY FOR VIOLATIONS OF FEDERAL AND STATE LAWS.
(a) Allowance of Administrative Expenses in Bankruptcy Cases.--
Section 503(b)(1)(A)(ii) of title 11, United States Code, is amended by
inserting after ``(ii)'' the following: ``any back pay, civil penalty,
or damages for a violation of any Federal or State labor and employment
law, including the Worker Adjustment and Retraining Notification Act
(29 U.S.C. 2101 et seq.) and any comparable State law, and''.
(b) Administration and Enforcement of Worker Adjustment and
Retraining Notification Requirements.--Section 5(a)(1) of the Worker
Adjustment and Retraining Notification Act (29 U.S.C. 2104(a)(1)) is
amended, in the matter following subparagraph (B)--
(1) by inserting ``which for purposes of this sentence
shall consist of the days, in the notification period, that are
or that follow the date of the prohibited closing or layoff
under this Act,'' after ``period of the violation,''; and
(2) by inserting ``calendar'' after ``60''.
SEC. 304. LIMITATION ON EXECUTIVE COMPENSATION ENHANCEMENTS.
Section 503(c) of title 11, United States Code, is amended--
(1) in the matter preceding paragraph (1), by inserting
``and subject to section 363(b)(3),'' after ``Notwithstanding
subsection (b),'';
(2) in paragraph (1), in the matter preceding subparagraph
(A)--
(A) by inserting ``, a senior executive officer of
the debtor, or any of the 20 next most highly
compensated employees of the debtor, department or
division managers of the debtor, or consultants
providing services to the debtor (regardless of whether
the executive officer, employee, manager, or consultant
is an insider)'' after ``insider of the debtor'';
(B) by inserting ``or for the payment of
performance or incentive compensation, a bonus of any
kind, or any other financial return designed to replace
or enhance incentive, stock, or other compensation in
effect before the date of the commencement of the
case,'' after ``remain with the debtor's business,'';
and
(C) by inserting ``clear and convincing'' before
``evidence in the record'';
(3) in paragraph (2), in the matter preceding subparagraph
(A), by inserting ``, a senior executive officer of the debtor,
or any of the 20 next most highly compensated employees of the
debtor, department or division managers of the debtor, or
consultants providing services to the debtor (regardless of
whether the executive officer, employee, manager, or consultant
is an insider)'' after ``an insider of the debtor''; and
(4) by striking paragraph (3) and inserting the following:
``(3) any other transfer or obligation to or for the
benefit of an insider of the debtor, a senior executive officer
of the debtor, or any of the 20 next most highly compensated
employees of the debtor, department or division managers of the
debtor, or consultants providing services to the debtor
(regardless of whether the executive officer, employee,
manager, or consultant is an insider), absent a finding by the
court, based upon clear and convincing evidence in the record,
and without deference to a request by the debtor for such
payment, that--
``(A) because of the essential and particularized
nature of the services provided by the insider,
executive officer, employee, manager, or consultant,
the transfer or obligation is essential to--
``(i) the survival of the business of the
debtor; or
``(ii) in a case in which some or all of
the assets of the debtor are liquidated, the
orderly liquidation of the assets;
``(B) in the case of a transfer or obligation under
an incentive program, the transfer or obligation is
part of a workforce incentive program generally
applicable to the nonmanagement workforce of the
debtor; and
``(C) the cost of the transfer or obligation--
``(i) is reasonable;
``(ii) is not excessive in the context of
the financial circumstances of the debtor; and
``(iii) is not disproportionate in light of
any economic loss incurred by the nonmanagement
workforce of the debtor during the case.''.
SEC. 305. PROHIBITION AGAINST SPECIAL COMPENSATION PAYMENTS.
Section 363 of title 11, United States Code, is amended--
(1) in subsection (b), by adding at the end the following:
``(3) No plan, program, or other transfer or obligation to or for
the benefit of an insider of the debtor, a senior executive officer of
the debtor, or any of the 20 next most highly compensated employees of
the debtor, department or division managers of the debtor, or
consultants providing services to the debtor (regardless of whether the
executive officer, employee, manager, or consultant is an insider)
shall be approved if the debtor has, on or after the date that is 1
year before the date of the filing of the petition--
``(A) discontinued any plan, program, policy or practice of
paying severance pay to the nonmanagement workforce of the
debtor; or
``(B) modified any plan, program, policy, or practice
described in subparagraph (A) in order to reduce benefits under
the plan, program, policy or practice.''; and
(2) in subsection (c)(1), by inserting before the period at
the end the following: ``, except that, for any transaction
that constitutes a transfer or obligation subject to section
503(c), the trustee shall be required to obtain the prior
approval of the court after notice and an opportunity for a
hearing''.
SEC. 306. EXECUTIVE COMPENSATION UPON EXIT FROM BANKRUPTCY.
Section 1129(a) of title 11, United States Code, is amended--
(1) in paragraph (4), by adding at the end the following:
``Except for compensation subject to review under paragraph
(5), any payment or other distribution under the plan to or for
the benefit of an insider of the debtor, a senior executive
officer of the debtor, or any of the 20 next most highly
compensated employees of the debtor, department or division
managers of the debtor, or consultants providing services to
the debtor (regardless of whether the executive officer,
employee, manager, or consultant is an insider), shall not be
approved by the court except as part of a program of payments
or distributions generally applicable to employees of the
debtor, and only to the extent that the court determines that
the payment or other distribution is not excessive or
disproportionate in comparison to payments or other
distributions to the nonmanagement workforce of the debtor.'';
and
(2) in paragraph (5)--
(A) in subparagraph (A)(ii), by striking ``and'' at
the end;
(B) in subparagraph (B), by striking the period at
the end and inserting ``; and''; and
(C) by adding at the end the following:
``(C) the compensation disclosed pursuant to subparagraph
(B) has been approved by, or is subject to the approval of, the
court as--
``(i) reasonable in comparison to compensation paid
to individuals holding comparable positions at
comparable companies in the same industry; and
``(ii) not disproportionate in light of any
economic concession made by the nonmanagement workforce
of the debtor during the case.''.
SEC. 307. COLLATERAL SURCHARGE FOR EMPLOYEE OBLIGATIONS.
Section 506(c) of title 11, United States Code, is amended--
(1) by inserting ``(1)'' before ``The trustee''; and
(2) by adding at the end the following:
``(2) If one or more employees of the debtor have not received
wages, accrued vacation, severance, or any other compensation owed
under a plan, program, policy, or practice of the debtor, or pursuant
to the terms of a collective bargaining agreement, for services
rendered on or after the date of the commencement of the case, or the
debtor has not made a contribution due under an employee welfare
benefit plan, as defined in section 3 of the Stop Wall Street Looting
Act, on or after the date of the commencement of the case, such unpaid
obligations shall be--
``(A) deemed--
``(i) reasonable, necessary costs and expenses of
preserving, or disposing of, property securing an
allowed secured claim; and
``(ii) benefiting the holder of the allowed secured
claim; and
``(B) recovered by the trustee for payment to the employees
or the employee welfare benefit plan, as defined in section 3
of the Stop Wall Street Looting Act, as applicable, even if the
trustee, or a predecessor or successor in interest, has
otherwise waived the provisions of this subsection under an
agreement with the holder of the allowed secured claim or a
successor or predecessor in interest of the holder of the
allowed secured claim.''.
SEC. 308. VOIDABILITY OF PREFERENTIAL COMPENSATION TRANSFERS.
Section 547 of title 11, United States Code, is amended by adding
at the end the following:
``(j)(1) The trustee may avoid a transfer to or for the benefit of
an insider of the debtor, a senior executive officer of the debtor, or
any of the 20 next most highly compensated employees of the debtor,
department or division managers of the debtor, or consultants providing
services to the debtor (regardless of whether the executive officer,
employee, manager, or consultant is an insider), that--
``(A) is made or incurred under a retention, bonus, or
incentive plan devised before the date of the filing of the
petition; and
``(B) does not meet the requirements under section
363(b)(3) or 503(c).
``(2) Subsection (c) shall not constitute a defense against the
recovery of a transfer under paragraph (1) of this subsection.
``(3)(A) The trustee, or a committee appointed under section 1102,
may commence an action to recover a transfer under paragraph (1) of
this subsection.
``(B) If neither the trustee nor a committee commences an action to
recover a transfer under subparagraph (A) before the date of the
commencement of a hearing on the confirmation of a plan, any party in
interest may apply to the court for authority to recover the transfer
for the benefit of the estate, in which case the costs of recovery
shall be borne by the estate.''.
SEC. 309. PROTECTION FOR EMPLOYEES IN A SALE OF ASSETS.
(a) Requirement Relating To Preserving Jobs and Maintaining Terms
and Conditions Relating to Employment.--Section 363 of title 11, United
States Code, is amended by adding at the end the following:
``(q)(1) In approving a sale or lease of property of the estate
under this section, or under a plan under chapter 11, the court shall
give substantial weight to the extent to which a prospective purchaser
or lessee, respectively, of the property will--
``(A) preserve the jobs of the workforce of the debtor; and
``(B) maintain the terms and conditions of employment of
the workforce of the debtor.
``(2) If there are two or more offers to purchase or lease property
of the estate under this section, or under a plan under chapter 11,
that qualify under the procedures for the sale or lease, respectively,
approved by the court, the court shall approve the offer that best--
``(A) preserves the jobs of the workforce of the debtor;
and
``(B) maintains the terms and conditions of employment of
the workforce of the debtor.
``(r)(1) Any party seeking to purchase or lease property of the
estate under this section, or under a plan under chapter 11, shall
represent to the court the effect of such a transaction with respect
to--
``(A) the preservation of the jobs of the workforce of the
debtor; and
``(B) the maintenance of the terms and conditions of
employment of the workforce of the debtor.
``(2) The court shall expressly include in an order approving a
purchase or lease of property of the estate under this section, or
under a plan under chapter 11, any representation made by a purchaser
or lessee of the property under paragraph (1).
``(3) With respect to a purchase or lease of property of the estate
under this section, or under a plan under chapter 11--
``(A) the court shall have jurisdiction over the purchaser
or lessee of the property in order to enforce the terms of the
order approving the purchase or lease;
``(B) the purchaser or lessee shall promptly disclose to
the court any material noncompliance with the terms of the
order described in subparagraph (A) and explain the basis for
such noncompliance; and
``(C) with respect to material noncompliance described in
subparagraph (B), the court may impose any appropriate remedy,
including injunctive relief, to address the noncompliance.''.
(b) Plans Under Chapter 11.--
(1) Contents of plan.--Section 1123(b)(4) of title 11,
United States Code, is amended by inserting ``, which sale
shall be subject to the requirements under subsections (q) and
(r) of section 363 of this title,'' after ``property of the
estate''.
(2) Confirmation of plan.--Section 1129(a) of title 11,
United States Code, is amended by adding at the end the
following:
``(17) If the plan provides for the sale of all or
substantially all of the property of the estate, the sale meets
the requirements under subsections (q) and (r) of section 363
of this title.''.
SEC. 310. PROTECTION OF GIFT CARD PURCHASERS.
(a) Definition of Gift Card.--Section 101(a) of title 11, United
States Code, is amended by inserting after paragraph (26) the
following:
``(26A) The term `gift card' means a paper or electronic
promise, plastic card, or other payment code or device that
is--
``(A) redeemable at--
``(i) a single merchant; or
``(ii) an affiliated group of merchants
that share the same name, mark, or logo;
``(B) issued in a specified amount, regardless of
whether that amount may be increased in value or
reloaded at the request of the holder;
``(C) purchased on a prepaid basis in exchange for
payment; and
``(D) honored by the single merchant or affiliated
group of merchants described in subparagraph (A) upon
presentation for goods or services.''.
(b) Consumer Deposit.--Section 507(a) of title 11, United States
Code, is amended by striking paragraph (7) and inserting the following:
``(7) Seventh, allowed unsecured claims of individuals, to
the extent of $1,800 for each such individual, arising from the
deposit, before the commencement of the case, of money in
connection with--
``(A) the purchase, lease, or rental of property;
``(B) the purchase of services, for the personal,
family, or household use of such individuals, that were
not delivered or provided; or
``(C) the purchase of a gift card with respect to
which funds exist that have not been redeemed.''.
SEC. 311. COMMERCIAL REAL ESTATE.
Section 365(d) of title 11, United States Code, is amended--
(1) by striking paragraph (4); and
(2) by redesignating paragraph (5) as paragraph (4).
TITLE IV--CLOSING TAX LOOPHOLES
SEC. 401. AMENDMENT OF 1986 CODE.
Except as otherwise expressly provided, whenever in this title an
amendment or repeal is expressed in terms of an amendment to, or repeal
of, a section or other provision, the reference shall be considered to
be made to a section or other provision of the Internal Revenue Code of
1986.
SEC. 402. PARTNERSHIP INTERESTS TRANSFERRED IN CONNECTION WITH
PERFORMANCE OF SERVICES.
(a) Modification to Election To Include Partnership Interest in
Gross Income in Year of Transfer.--Subsection (c) of section 83 is
amended by redesignating paragraph (4) as paragraph (5) and by
inserting after paragraph (3) the following new paragraph:
``(4) Partnership interests.--Except as provided by the
Secretary--
``(A) In general.--In the case of any transfer of
an interest in a partnership in connection with the
provision of services to (or for the benefit of) such
partnership--
``(i) the fair market value of such
interest shall be treated for purposes of this
section as being equal to the amount of the
distribution which the partner would receive if
the partnership sold (at the time of the
transfer) all of its assets at fair market
value and distributed the proceeds of such sale
(reduced by the liabilities of the partnership)
to its partners in liquidation of the
partnership, and
``(ii) the person receiving such interest
shall be treated as having made the election
under subsection (b)(1) unless such person
makes an election under this paragraph to have
such subsection not apply.
``(B) Election.--The election under subparagraph
(A)(ii) shall be made under rules similar to the rules
of subsection (b)(2).''.
(b) Effective Date.--The amendments made by this section shall
apply to interests in partnerships transferred after the date of
enactment of this Act.
SEC. 403. SPECIAL RULES FOR PARTNERS PROVIDING INVESTMENT MANAGEMENT
SERVICES TO PARTNERSHIPS.
(a) In General.--Part I of subchapter K of chapter 1 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,
``(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 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 and
divisions.--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 section 708(b)(2).
``(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) Anti-abuse 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.
``(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
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 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 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 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) 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 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 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 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 is 10 years after the
date of enactment of this paragraph.''.
(d) Imposition of Penalty on Underpayments.--
(1) In general.--Subsection (b) of section 6662 is amended
by inserting after paragraph (9) the following new paragraph:
``(10) 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 is amended by adding
at the end the following new subsection:
``(m) 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)(10), 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) is amended by striking ``or (i)''
and inserting ``, (i), or (m)''.
(3) Special rules for application of reasonable cause
exception.--Subsection (c) of section 6664 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)(10) 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)(4) 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) 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 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) 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 is amended by inserting
``section 710(b)(4) (relating to distributions of partnership
property),'' after ``to the extent otherwise provided by''.
(2) Section 741 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 is amended by adding at the end the following new
item:
``Sec. 710. Special rules for partners providing investment management
services to partnerships.''.
(4)(A) Part IV of subchapter O of chapter 1 is amended by
striking section 1061.
(B) The table of sections for part IV of subchapter O of
chapter 1 is amended by striking the item relating to section
1061.
(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 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 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 enactment of this Act.
(B) Indirect dispositions.--The amendments made by
subsection (b) shall apply to transactions after the
date of 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 enactment of
this Act.
TITLE V--INVESTOR PROTECTION AND MARKET TRANSPARENCY
SEC. 501. DISCLOSURE OF FEES AND RETURNS.
The Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.), as
amended by this Act, is amended by adding at the end the following:
``SEC. 67. DISCLOSURE OF FEES AND RETURNS.
``(a) Definitions.--In this section--
``(1) the terms `controlling private fund', `private fund',
and `target firm' have the meanings given the terms in section
3 of the Stop Wall Street Looting Act; and
``(2) the term `expenditure for political activities'--
``(A) means--
``(i) an independent expenditure, as that
term is defined in section 301(17) of the
Federal Election Campaign Act of 1971 (52
U.S.C. 30101(17));
``(ii) a disbursement for an electioneering
communication, as that term is defined in
section 304(f)(3) of the Federal Election
Campaign Act of 1971 (52 U.S.C. 30104(f)(3)) or
any other public communication, as defined in
section 301(22) of that Act (52 U.S.C.
30101(22)), that would be an electioneering
communication if it were a broadcast, cable, or
satellite communication; or
``(iii) dues or other payments to trade
associations or organizations described in
section 501(c) of the Internal Revenue Code of
1986 and exempt from tax under section 501(a)
of that Code that are, or could reasonably be
anticipated to be, used or transferred to
another association or organization for the
purposes described in clause (i) or (ii); and
``(B) does not include an expenditure for--
``(i) direct lobbying efforts through
registered lobbyists employed or hired by a
controlling private fund;
``(ii) communications by a controlling
private fund to--
``(I) a partner of the fund or
executive or administrative personnel
with respect to the fund; or
``(II) a family member of any
individual described in subclause (I);
or
``(iii) the establishment and
administration of contributions to a separate
segregated private fund to be utilized for
political purposes by a controlling private
fund.
``(b) Rules.--Not later than 1 year after the date of enactment of
this section, the Commission shall issue final rules that require a
controlling private fund to, using generally accepted accounting
principles, annually report the following information with respect to
that controlling private fund:
``(1) The name, address, and vintage year of the fund.
``(2) The name of each general partner of the fund.
``(3) The name of each limited partner of the fund.
``(4) A list of each entity with respect to which the fund
owns an equity interest.
``(5) In dollars, the total amount of regulatory assets
under management by the fund.
``(6) In dollars, the total amount of net assets under
management by the fund.
``(7) The percentage of fund equity contributed by the
general partners of the fund and the percentage of fund equity
contributed by the limited partners of the fund.
``(8) Information on the debt owed by the fund, including--
``(A) the dollar amount of total debt;
``(B) the percentage of debt for which the creditor
is a financial institution in the United States;
``(C) the percentage of debt for which the creditor
is a financial institution outside of the United
States;
``(D) the percentage of debt for which the creditor
is an entity that is located in the United States and
is not a financial institution; and
``(E) the percentage of debt for which the creditor
is an entity that is located outside of the United
States and is not a financial institution.
``(9) The gross performance of the fund during the year
covered by the report.
``(10) For the year covered by the report, the difference
obtained by subtracting the financial gains of the fund by the
fees that the general partners of the fund charged to the
limited partners of the fund (commonly referred to as the
`performance net of fees').
``(11) For the year covered by the report, an annual
financial statement, which shall include income statements, a
balance sheet, and cash flow statements.
``(12) The average debt-to-equity ratio of each target firm
with respect to the fund and the debt-to-equity ratio of each
such target firm.
``(13) The total gross asset value of each target firm with
respect to the fund and the gross asset value of each such
target firm.
``(14) The total amount of debt held by each target firm
with respect to the fund and the total amount of debt held by
each such target firm.
``(15) The total amount of debt held by each target firm
with respect to the fund that, as of the date on which the
report is submitted, are categorized as liabilities, long-term
liabilities, and payment in kind or zero coupon debt.
``(16) The total number of target firms with respect to the
fund that experienced default during the period covered by the
report, including the name of any such target firm.
``(17) The total number of the target firms with respect to
the fund with respect to which a case was commenced under title
11, United States Code, during the period covered by the
report, including the name of any such target firm.
``(18) The percentage of the equity of the fund that is
owned by--
``(A) citizens of the United States;
``(B) individuals who are not citizens of the
United States;
``(C) brokers or dealers;
``(D) insurance companies;
``(E) investment companies that are registered with
the Commission under this Act;
``(F) private funds and other investment companies
not required to be registered with the Commission;
``(G) nonprofit organizations;
``(H) pension plans maintained by State or local
governments (or an agency or instrumentality of
either);
``(I) pension plans maintained by nongovernmental
employers;
``(J) State or municipal government entities;
``(K) banking or thrift institutions;
``(L) sovereign wealth funds; and
``(M) other investors.
``(19) The total dollar amount of aggregate fees and
expenses collected by the fund, the manager of the fund, or
related parties from target firms for which the fund is a
controlling private fund, which shall--
``(A) be categorized by the type of fee; and
``(B) include a description of the purpose of the
fees.
``(20) The total dollar amount of aggregate fees and
expenses collected by the fund, the manager of the fund, or
related parties from the limited partners of the fund, which
shall--
``(A) be categorized by the type of fee; and
``(B) include a description of the purpose of the
fees.
``(21) The total carried interest claimed by the fund, the
manager of the fund, or related parties and the total dollar
amount of carried interest distributed to the limited partners
of the fund.
``(22) A description of, during the year covered by the
report, any material changes in risk factors at the fund level,
including--
``(A) concentration risk;
``(B) foreign exchange risk; and
``(C) extra-financial risk, including
environmental, social, and corporate governance risk.
``(23) Disclosures that satisfy the Recommendations of the
Task Force on Climate-related Financial Disclosures of the
Financial Stability Board, as reported in June 2017.
``(24) A description of the human capital management
practices of the fund, including--
``(A) fund workforce demographic information,
including the number of full-time employees, the number
of part-time employees, the number of contingent
workers (including temporary and contract workers), and
any policies or practices of the firm relating to
subcontracting, outsourcing, and insourcing;
``(B) fund workforce composition, including data on
the diversity of that workforce, including the racial
and gender composition of that workforce, and any
policies and audits relating to the diversity of that
workforce;
``(C) any incident of alleged workplace harassment
during the 5 years preceding the year in which the
report is submitted; and
``(D) any health or safety incident during the 5
years preceding the year in which the report is
submitted.
``(25) A description of any expenditure for political
activities made during the year preceding the year in which the
report is submitted, including--
``(A) the date on which each such expenditure for
political activities was made;
``(B) the amount of each such expenditure for
political activities;
``(C) if such an expenditure for political
activities was made in support of, or in opposition to,
a candidate, the name of the candidate, the office
sought by the candidate, and the political party
affiliation of the candidate;
``(D) a summary of--
``(i) each such expenditure for political
activities that is in amount that is not less
than $10,000; and
``(ii) each expenditure for political
activities with respect to a particular
election if the total amount of expenditures
for political activities by the firm with
respect to that election is in an amount that
is not less than $10,000;
``(E) a description of the specific nature of any
expenditure for political activities that the firm
intends to make for the year in which the report is
submitted, to the extent that the specific nature is
known to the firm; and
``(F) the total amount of expenditures for
political activities that the fund intends to make for
the year in which the report is submitted.
``(26) For the year preceding the year in which the report
is submitted, the total amount of Federal support, if any,
received by--
``(A) the fund; and
``(B) any entity with respect to which the fund is
a beneficial owner, as that term is defined in section
5336(a)(3) of title 31, United States Code.
``(27) Any other information that the Commission determines
is necessary and appropriate for the protection of investors.
``(c) Periodic Review.--The Commission shall, with respect to the
rules issued under subsection (b)--
``(1) review the rules once every 5 years; and
``(2) revise the rules as necessary to ensure that the
disclosures required under the rules reflect contemporary (as
of the date on which the rules are revised) trends and
characteristics with respect to private investment markets.
``(d) Public Availability.--Notwithstanding any provision of
section 204 of the Investment Advisers Act of 1940 (15 U.S.C. 80b-4),
the information disclosed under the rules issued under subsection (b)
shall be made available to the public.''.
SEC. 502. FIDUCIARY OBLIGATIONS.
(a) Fiduciary Duties Under ERISA.--
(1) Plan assets.--Section 401(b)(1) of the Employee
Retirement Income Security Act of 1974 (29 U.S.C. 1101(b)(1))
is amended--
(A) by inserting ``or a private fund (as defined in
section 3 of the Stop Wall Street Looting Act)'' before
``, the assets''; and
(B) by inserting ``or such private fund, as
applicable'' before the period at the end.
(2) Fiduciary obligations of fund managers.--Section
3(21)(A) of such Act (29 U.S.C. 1002(21)) is amended by
inserting ``, and, in the case of a plan which invests in a
security issued by a private fund (as such term is defined in
section 3 of the Stop Wall Street Looting Act), includes the
manager of such private fund'' before the period at the end.
(b) Prohibition Against Waiving Fiduciary Duties.--Section 211(h)
of the Investment Advisers Act of 1940 (15 U.S.C. 80b-11(h)) is
amended--
(1) in paragraph (1), by striking ``and'' at the end;
(2) in paragraph (2), by striking the period at the end and
inserting ``; and''; and
(3) by adding at the end the following:
``(3) promulgate rules that prohibit an investment adviser
from requiring any person to which the investment adviser
provides investment advice, including a pension plan (as
defined in section 3 of the Employee Retirement Income Security
Act of 1974 (29 U.S.C. 1002)) that is subject to title I of the
Employee Retirement Income Security Act of 1974 (29 U.S.C. 1001
et seq.), to, as a condition of the investment adviser
providing that advice, sign a contract or other agreement in
which that person waives a fiduciary duty owed by that person
to another person.''.
(c) Applicability of Benefits.--The general partner of a
controlling private fund that is a partnership may not provide any term
or benefit to any limited partner of the fund unless the general
partner provides that term or benefit to all limited partners of the
fund.
SEC. 503. DISCLOSURES RELATING TO THE MARKETING OF PRIVATE EQUITY
FUNDS.
Any investment adviser to a private fund shall disclose to
potential investors with respect to the other private funds, as defined
in section 202(a) of the Investment Advisers Act of 1940 (15 U.S.C.
80b-2(a)), managed by that investment adviser (referred to in this
section as ``managed firms'') the following information:
(1) A list of all managed firms with respect to the
investment adviser, including those managed firms that, as of
the date on which the disclosure is made--
(A) have active investments; and
(B) have liquidated the assets of the firms.
(2) For each managed firm listed under paragraph (1), the
following information:
(A) As applicable, the total term of the listed
firm beginning with the commencement of the commitment
period with respect to the firm and ending on the date
on which the firm is dissolved, including, with respect
to a listed firm that, as of the date on which the
disclosure is made, is actively investing--
(i) the term specified by any limited
partnership agreement; and
(ii) the nature of any provisions that
would allow for the extension of that term.
(B) The performance of the listed firm's net of
fees, as measured by the public market equivalent or a
similar measure.
(C) A list of target firms with respect to which
the listed firm was a control person, the nature of the
control person relationship, and the period of that
control.
(D) The number of employees at each target firm
identified under subparagraph (C), as of the date on
which the listed firm became a control person with
respect to the target firm, and the date on which the
listed firm ceased to be a control person with respect
to the target firm.
(E) A list of target firms with respect to the
listed firm with respect to which a case has been
commenced under title 11, United States Code.
(F) For each target firm with respect to the listed
firm, and with respect to which the listed firm is a
control person--
(i) a list of actions taken by any State or
local regulatory agency; and
(ii) any legal or regulatory penalties
paid, or settlements entered into, by the
general partners of the target firm or the
target firm itself.
(3) The percentage breakdown of the means employed by the
investment adviser to divest ownership or control of target
firms, including--
(A) the sale of target firms to other private
funds;
(B) the sale of target firms to private entities,
other than private funds;
(C) the sale of target firms to issuers, the
securities of which are traded on a national securities
exchange;
(D) the commencement of cases under title 11,
United States Code, with respect to target firms; and
(E) initial public offerings with respect to target
firms.
SEC. 504. GREATER VISIBILITY INTO NON-BANK DIRECT LENDING AND PRIVATE
CREDIT.
Not later than 180 days after the date of enactment of this Act,
the Commission shall amend the rules of the Commission to require
investment advisers required to submit the form described in section
279.9 of title 17, Code of Federal Regulations (commonly known as
``Form PF''), or any successor regulation, to report quarterly to the
Commission all--
(a) investments of the private funds advised by that investment
adviser; and
(b) loans made by the applicable investment adviser during the
period covered by the disclosure.
TITLE VI--RESTRICTIONS ON SECURITIZING RISKY CORPORATE DEBT
SEC. 601. RISK RETENTION REQUIREMENTS FOR SECURITIZATION OF CORPORATE
DEBT.
Section 15G of the Securities Exchange Act of 1934 (15 U.S.C. 78o-
11) is amended--
(1) in subsection (a)(3)--
(A) in subparagraph (A), by striking ``or'' at the
end;
(B) in subparagraph (B), by striking ``and'' at the
end and inserting ``or''; and
(C) by adding at the end the following:
``(C) a manager of a collateralized debt
obligation; and'';
(2) by redesignating subsection (i) as subsection (j); and
(3) by inserting after subsection (h) the following:
``(i) Rules of Construction.--With respect to a securitizer
described in subsection (a)(3)(C)--
``(1) any provision of this section that requires that
securitizer to retain a portion of the credit risk for an asset
that such securitizer does not hold, or has never held, shall
be construed as requiring that securitizer to--
``(A) obtain that portion of the credit risk for
that asset; and
``(B) retain that portion of the credit risk,
either directly by the securitizer or through a wholly-
owned affiliate of the securitizer; and
``(2) any reference in this section to an asset transferred
by the securitizer shall be construed to include any transfer
caused by the securitizer.''.
TITLE VII--MISCELLANEOUS
SEC. 701. ANTI-EVASION.
It shall be unlawful to conduct any activity, including by entering
into an agreement or contract, engaging in a transaction, or
structuring an entity, to willfully evade or attempt to evade any
provision of this Act.
SEC. 702. SEVERABILITY.
If any provision of this Act or the application of such a provision
to any person or circumstance is held to be invalid or
unconstitutional, the remainder of this Act and the application of the
provisions of this Act to any person or circumstance shall remain and
shall not be affected by that holding.
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