S 2936 ISCommentsClose CommentsPermalink

To amend title XXI of the Social Security Act to reauthorize the State Children's Health Insurance Program, to limit income eligibility expansions under that program until the lowest income eligible individuals are enrolled, and for other purposes.CommentsClose CommentsPermalink

April 29, 2008

Mrs. DOLE introduced the following bill; which was read twice and referred to the Committee on FinanceCommentsClose CommentsPermalink

To amend title XXI of the Social Security Act to reauthorize the State Children's Health Insurance Program, to limit income eligibility expansions under that program until the lowest income eligible individuals are enrolled, and for other purposes.CommentsClose CommentsPermalink

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,CommentsClose CommentsPermalink

SECTION 1. SHORT TITLE; REFERENCES; TABLE OF CONTENTS.

(a) Short Title- This Act may be cited as the `Responsible Expansion of the State Children's Health Insurance Program Act of 2008'.CommentsClose CommentsPermalink





(b) References to SCHIP; Secretary- In this Act:CommentsClose CommentsPermalink





(1) SCHIP- The term `SCHIP' means the State Children's Health Insurance Program established under title XXI of the Social Security Act (42 U.S.C. 1397aa et seq.).CommentsClose CommentsPermalink





(2) SECRETARY- The term `Secretary' means the Secretary of Health and Human Services.CommentsClose CommentsPermalink





(c) Table of Contents- The table of contents of this Act is as follows:CommentsClose CommentsPermalink





Sec. 1. Short title; amendments to Social Security Act; references; table of contents.CommentsClose CommentsPermalink

TITLE I--SCHIP REAUTHORIZATION

Sec. 101. Reauthorization through fiscal year 2013.CommentsClose CommentsPermalink





Sec. 102. Requiring outreach and coverage before expansion of eligibility.CommentsClose CommentsPermalink





Sec. 103. Application of DRA Medicaid citizenship documentation requirements to SCHIP.CommentsClose CommentsPermalink





Sec. 104. Phase-out of coverage for nonpregnant adults under SCHIP.CommentsClose CommentsPermalink





Sec. 105. Preventing substitution of SCHIP coverage for private coverage.CommentsClose CommentsPermalink

TITLE II--REVENUE PROVISIONS

Sec. 201. Nonqualified deferred compensation from certain tax indifferent parties.CommentsClose CommentsPermalink





Sec. 202. Income of partners for performing investment management services treated as ordinary income received for performance of services.CommentsClose CommentsPermalink

TITLE I--SCHIP REAUTHORIZATION

SEC. 101. REAUTHORIZATION THROUGH FISCAL YEAR 2013.

(a) In General- Section 2104 of the Social Security Act (42 U.S.C. 1397dd(a)), as amended by section 201(a)(1) of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (Public Law 110-173) is amended--CommentsClose CommentsPermalink





(1) in subsection (a)--CommentsClose CommentsPermalink





(A) by striking `and' at the end of paragraph (10);CommentsClose CommentsPermalink





(B) in paragraph (11)--CommentsClose CommentsPermalink





(i) by striking `each of fiscal years 2008 and 2009' and inserting `fiscal year 2008'; andCommentsClose CommentsPermalink





(ii) by striking the period at the end and inserting a semicolon; andCommentsClose CommentsPermalink





(C) by adding at the end the following new paragraphs:CommentsClose CommentsPermalink





`(12) for fiscal year 2009, $7,000,000,000;CommentsClose CommentsPermalink





`(13) for fiscal year 2010, $8,000,000,000; andCommentsClose CommentsPermalink





`(14) for each of fiscal years 2011 through 2013, $9,000,000,000.'; andCommentsClose CommentsPermalink





(2) in subsection (c)(4)(B), by striking `2009' and inserting `2013'.CommentsClose CommentsPermalink





(b) Repeal of Limitation on Availability of Funding for Fiscal Years 2008 and 2009- Section 201 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (Public Law 110-173) is amended--CommentsClose CommentsPermalink





(1) in subsection (a), by striking paragraph (2) and redesignating paragraphs (3) and (4), as paragraphs (2) and (3) respectively; andCommentsClose CommentsPermalink





(2) in subsection (b), by striking paragraph (2) and redesignating paragraph (3) as paragraph (2).CommentsClose CommentsPermalink

SEC. 102. REQUIRING OUTREACH AND COVERAGE BEFORE EXPANSION OF ELIGIBILITY.

(a) State Plan Required To Specify How It Will Achieve Coverage for 85 Percent of Targeted Low-Income Children-CommentsClose CommentsPermalink





(1) IN GENERAL- Section 2102(a) of the Social Security Act (42 U.S.C. 1397bb(a)) is amended--CommentsClose CommentsPermalink





(A) in paragraph (6), by striking `and' at the end;CommentsClose CommentsPermalink





(B) in paragraph (7), by striking the period at the end and inserting `; and'; andCommentsClose CommentsPermalink





(C) by adding at the end the following new paragraph:CommentsClose CommentsPermalink





`(8) how the eligibility and benefits provided for under the plan for each fiscal year (beginning with fiscal year 2009) will allow for the State's annual funding allotment to cover at least 85 percent of the eligible targeted low-income children in the State.'.CommentsClose CommentsPermalink





(2) EFFECTIVE DATE- The amendments made by paragraph (1) shall apply to State child health plans for fiscal years beginning with fiscal year 2009.CommentsClose CommentsPermalink





(b) Limitation on Program Expansions Until Lowest Income Eligible Individuals Enrolled- Section 2105(c) of such Act (42 U.S.C. 1397dd(c)) is amended by adding at the end the following new paragraph:CommentsClose CommentsPermalink





`(8) LIMITATION ON INCREASED COVERAGE OF HIGHER INCOME CHILDREN- For child health assistance furnished in any fiscal year beginning with fiscal year 2009:CommentsClose CommentsPermalink





`(A) NO PAYMENT FOR CHILDREN WITH FAMILY INCOME ABOVE 300 PERCENT OF POVERTY LINE- Payment shall not be made under this section for child health assistance for a targeted low-income child in a family the income of which exceeds 300 percent of the poverty line applicable to a family of the size involved.CommentsClose CommentsPermalink





`(B) SPECIAL RULES FOR PAYMENT FOR CHILDREN WITH FAMILY INCOME ABOVE 200 PERCENT OF POVERTY LINE- In the case of child health assistance for a targeted low-income child in a family the income of which exceeds 200 percent (but does not exceed 300 percent) of the poverty line applicable to a family of the size involved no payment shall be made under this section for such assistance unless the State demonstrates to the satisfaction of the Secretary that--CommentsClose CommentsPermalink





`(i) the State has met the 85 percent retrospective coverage test specified in subparagraph (C)(i) for the previous fiscal year; andCommentsClose CommentsPermalink





`(ii) the State will meet the 85 percent prospective coverage test specified in subparagraph (C)(ii) for the fiscal year.CommentsClose CommentsPermalink





`(C) 85 PERCENT COVERAGE TESTS-CommentsClose CommentsPermalink





`(i) RETROSPECTIVE TEST- The 85 percent retrospective coverage test specified in this clause is, for a State for a fiscal year, that on average during the fiscal year, the State has enrolled under this title or title XIX at least 85 percent of the individuals residing in the State who--CommentsClose CommentsPermalink





`(I) are children under 19 years of age (or are pregnant women) and are eligible for medical assistance under title XIX; orCommentsClose CommentsPermalink





`(II) are targeted low-income children whose family income does not exceed 200 percent of the poverty line and who are eligible for child health assistance under this title.CommentsClose CommentsPermalink





`(ii) PROSPECTIVE TEST- The 85 percent prospective test specified in this clause is, for a State for a fiscal year, that on average during the fiscal year, the State will enroll under this title or title XIX at least 85 percent of the individuals residing in the State who--CommentsClose CommentsPermalink





`(I) are children under 19 years of age (or are pregnant women) and are eligible for medical assistance under title XIX; orCommentsClose CommentsPermalink





`(II) are targeted low-income children whose family income does not exceed such percent of the poverty line (in excess of 200 percent) as the State elects consistent with this paragraph and who are eligible for child health assistance under this title.CommentsClose CommentsPermalink





`(D) PHASE-IN REQUIREMENT FOR EXPANDED COVERAGE IF 85 PERCENT TESTS MET FOR LOW-INCOME COVERAGE- With respect to a fiscal year, if a State meets both of the coverage tests specified in clauses (i) and (ii) of subparagraph (C) for such year--CommentsClose CommentsPermalink





`(i) payment may be made to the State under this section for child health assistance for a targeted low-income child in a family the income of which exceeds 200 percent, but does not exceed 250 percent poverty line applicable to a family of the size involved; andCommentsClose CommentsPermalink





`(ii) payment may be made to the State under this section child health assistance for a targeted low-income child in a family the income of which 250 percent, but does not exceed 300 percent of the poverty line applicable to a family of the size involved only if the State can also meet the retrospective test applied under clause (i) of subparagraph (C) for the previous fiscal year by substituting `250' for `200' in subclause (II) of such clause.CommentsClose CommentsPermalink





`(E) TREATMENT OF PREGNANT WOMEN- In this paragraph and sections 2102(a)(8) and 2104(a)(2), the term `targeted low-income child' includes an individual under age 19, including the period from conception to birth, who is eligible for child health assistance under this title by virtue of the definition of the term `child' under section 457.10 of title 42, Code of Federal Regulations.'.CommentsClose CommentsPermalink





(c) Standardization of Income Determinations-CommentsClose CommentsPermalink





(1) IN GENERAL- Section 2110(d) of such Act (42 U.S.C. 1397jj) is amended by adding at the end the following new subsection:CommentsClose CommentsPermalink





`(d) Standardization of Income Determinations- In determining family income under this title (including in the case of a State child health plan that provides health benefits coverage in the manner described in section 2101(a)(2)), a State shall base such determination on gross income (including amounts that would be included in gross income if they were not exempt from income taxation) and may only take into consideration such income disregards as the Secretary shall develop and specify on a uniform national basis.'.CommentsClose CommentsPermalink





(2) EFFECTIVE DATE- (A) Subject to subparagraph (B), the amendment made by paragraph (1) shall apply to determinations (and redeterminations) of income made on or after October 1, 2008.CommentsClose CommentsPermalink





(B) In the case of a State child health plan under title XXI of the Social Security Act which the Secretary of Health and Human Services determines requires State legislation (other than legislation appropriating funds) in order for the plan to meet the additional requirement imposed by the amendment made by paragraph (1), the State child health plan shall not be regarded as failing to comply with the requirements of such title solely on the basis of its failure to meet this additional requirement before the first day of the first calendar quarter beginning after the close of the first regular session of the State legislature that begins after the date of the enactment of this Act. For purposes of the previous sentence, in the case of a State that has a 2-year legislative session, each year of such session shall be deemed to be a separate regular session of the State legislature.CommentsClose CommentsPermalink

SEC. 103. APPLICATION OF DRA MEDICAID CITIZENSHIP DOCUMENTATION REQUIREMENTS TO SCHIP.

(a) In General- Section 2105(c) of the Social Security Act (42 U.S.C. 1397dd(c)), as amended by section 102(b), is amended by adding at the end the following new paragraph:CommentsClose CommentsPermalink





`(9) APPLICATION OF CITIZENSHIP DOCUMENTATION REQUIREMENTS-CommentsClose CommentsPermalink





`(A) IN GENERAL- Subject to subparagraph (B), no payment may be made under this section to a State with respect to amounts expended for child health assistance for an individual who declares under section 1137(d)(1)(A) to be a citizen or national of the United States for purposes of establishing eligibility for benefits under this title, unless the requirement of section 1903(x) is met.CommentsClose CommentsPermalink





`(B) TREATMENT OF PREGNANT WOMEN- For purposes of applying subparagraph (A) in the case of a pregnant woman who qualifies for child health assistance by virtue of the application of section 457.10 of title 42, Code of Federal Regulations, the requirement of section 1903(x) shall be deemed to be satisfied by the presentation of documentation of personal identity described in section 274A(b)(1)(D) of the Immigration and Nationality Act or any other documentation of personal identity of such other type as the Secretary finds, by regulation, provides a reliable means of identification.'.CommentsClose CommentsPermalink





(b) Effective Date- The amendment made by paragraph (1) shall apply to eligibility determinations and redeterminations made after the date of enactment of this Act.CommentsClose CommentsPermalink

SEC. 104. PHASE-OUT OF COVERAGE FOR NONPREGNANT ADULTS UNDER SCHIP.

(a) In General- Title XXI of the Social Security Act (42 U.S.C. 1397aa et seq.) is amended by adding at the end the following new section:CommentsClose CommentsPermalink

`SEC. 2111. PHASE-OUT OF COVERAGE FOR NONPREGNANT ADULTS.

`(a) Termination of Coverage for Nonpregnant Adults-CommentsClose CommentsPermalink





`(1) NO NEW SCHIP WAIVERS; AUTOMATIC EXTENSIONS AT STATE OPTION THROUGH DECEMBER 2008- Notwithstanding section 1115 or any other provision of this title, except as provided in this subsection--CommentsClose CommentsPermalink





`(A) the Secretary shall not on or after the date of the enactment of the Responsible Expansion of the State Children's Health Insurance Program Act of 2008, approve or renew a waiver, experimental, pilot, or demonstration project that would allow funds made available under this title to be used to provide child health assistance or other health benefits coverage to a nonpregnant adult; andCommentsClose CommentsPermalink





`(B) notwithstanding the terms and conditions of an applicable existing waiver, the provisions of paragraph (2) shall apply for purposes of any period beginning on or after January 1, 2009, in determining the period to which the waiver applies, the individuals eligible to be covered by the waiver, and the amount of the Federal payment under this title.CommentsClose CommentsPermalink





`(2) TERMINATION OF SCHIP COVERAGE UNDER APPLICABLE EXISTING WAIVERS AT THE END OF 2008-CommentsClose CommentsPermalink





`(A) IN GENERAL- No funds shall be available under this title for child health assistance or other health benefits coverage that is provided to a nonpregnant adult under an applicable existing waiver after December 31, 2008.CommentsClose CommentsPermalink





`(B) EXTENSION UPON STATE REQUEST- If an applicable existing waiver described in subparagraph (A) would otherwise expire before January 1, 2009, and the State requests an extension of such waiver, the Secretary shall grant such an extension, but only through December 31, 2008.CommentsClose CommentsPermalink





`(C) APPLICATION OF ENHANCED FMAP- The enhanced FMAP determined under section 2105(b) shall apply to expenditures under an applicable existing waiver for the provision of child health assistance or other health benefits coverage to a nonpregnant childless adult during the period beginning on the date of the enactment of this subsection and ending on December 31, 2008.CommentsClose CommentsPermalink





`(b) Applicable Existing Waiver- For purposes of this section--CommentsClose CommentsPermalink





`(1) IN GENERAL- The term `applicable existing waiver' means a waiver, experimental, pilot, or demonstration project under section 1115, grandfathered under section 6102(c)(3) of the Deficit Reduction Act of 2005, or otherwise conducted under authority that--CommentsClose CommentsPermalink





`(A) would allow funds made available under this title to be used to provide child health assistance or other health benefits coverage to--CommentsClose CommentsPermalink





`(i) a parent of a targeted low-income child;CommentsClose CommentsPermalink





`(ii) a nonpregnant childless adult; orCommentsClose CommentsPermalink





`(iii) individuals described in both clauses (i) and (ii); andCommentsClose CommentsPermalink





`(B) was in effect on October 1, 2007.CommentsClose CommentsPermalink





`(2) DEFINITIONS- The term `nonpregnant adult' means any individual who is not a targeted low-income pregnant woman (as defined in section 2112(d)(2)) or a targeted low-income child.'.CommentsClose CommentsPermalink





(b) Conforming Amendments-CommentsClose CommentsPermalink





(1) Section 2107(f) of such Act (42 U.S.C. 1397gg(f)) is amended--CommentsClose CommentsPermalink





(A) by striking `, the Secretary' and inserting `:CommentsClose CommentsPermalink





`(1) The Secretary';CommentsClose CommentsPermalink





(B) in the first sentence, by striking `childless';CommentsClose CommentsPermalink





(C) by striking the second sentence; andCommentsClose CommentsPermalink





(D) by adding at the end the following new paragraph:CommentsClose CommentsPermalink





`(2) The Secretary may not approve, extend, renew, or amend a waiver, experimental, pilot, or demonstration project with respect to a State after the date of enactment of the Responsible Expansion of the State Children's Health Insurance Program Act of 2008 that would waive or modify the requirements of section 2111.'.CommentsClose CommentsPermalink





(2) Section 6102(c) of the Deficit Reduction Act of 2005 (Public Law 109-171; 120 Stat. 131) is amended by striking `Nothing' and inserting `Subject to section 2111 of the Social Security Act, as added by section 104 of the Responsible Expansion of the State Children's Health Insurance Program Act of 2008, nothing'.CommentsClose CommentsPermalink

SEC. 105. PREVENTING SUBSTITUTION OF SCHIP COVERAGE FOR PRIVATE COVERAGE.

(a) Findings-CommentsClose CommentsPermalink





(1) Congress agrees with the President that low-income children should be the first priority of all States in providing child health assistance under SCHIP.CommentsClose CommentsPermalink





(2) Congress agrees with the President and the Congressional Budget Office that the substitution of SCHIP coverage for private coverage occurs more frequently for children in families at higher income levels.CommentsClose CommentsPermalink





(3) Congress agrees with the President that it is appropriate that States that expand SCHIP eligibility to children at higher income levels should have achieved a high level of health benefits coverage for low-income children and should implement strategies to address such substitution.CommentsClose CommentsPermalink





(4) Congress concludes that the policies specified in this section (and the amendments made by this section) are the appropriate policies to address these issues.CommentsClose CommentsPermalink





(b) Analyses of Best Practices and Methodology in Addressing Crowd-Out-CommentsClose CommentsPermalink





(1) GAO REPORT- Not later than 18 months after the date of the enactment of this Act, the Comptroller General of the United States shall submit to the Committee on Finance of the Senate and the Committee on Energy and Commerce of the House of Representatives and the Secretary a report describing the best practices by States in addressing the issue of SCHIP crowd-out. Such report shall include--CommentsClose CommentsPermalink





(A) analyses of--CommentsClose CommentsPermalink





(i) the impact of different geographic areas, including urban and rural areas, on SCHIP crowd-out;CommentsClose CommentsPermalink





(ii) the impact of different State labor markets on SCHIP crowd-out;CommentsClose CommentsPermalink





(iii) the impact of different strategies for addressing SCHIP crowd-out;CommentsClose CommentsPermalink





(iv) the incidence of crowd-out for children with different levels of family income; andCommentsClose CommentsPermalink





(v) the relationship (if any) between changes in the availability and affordability of dependent coverage under employer-sponsored health insurance and SCHIP crowd-out; andCommentsClose CommentsPermalink





(B) recommendations for such legislative changes as the Comptroller General determines are likely to most effective for addressing the issue of SCHIP crowd-out, together with proposed legislative language.CommentsClose CommentsPermalink





(2) IOM REPORT ON METHODOLOGY- The Secretary shall enter into an arrangement with the Institute of Medicine under which the Institute submits to the Committee on Finance of the Senate and the Committee on Energy and Commerce of the House of Representatives and the Secretary, not later than 18 months after the date of the enactment of this Act, a report on--CommentsClose CommentsPermalink





(A) the most accurate, reliable, and timely way to measure--CommentsClose CommentsPermalink





(i) on a State-by-State basis, the rate of public and private health benefits coverage among low-income children with family income that does not exceed 200 percent of the poverty line; andCommentsClose CommentsPermalink





(ii) SCHIP crowd-out, including in the case of children with family income that exceeds 200 percent of the poverty line; andCommentsClose CommentsPermalink





(B) the least burdensome way to gather the necessary data to conduct the measurements described in subparagraph (A).CommentsClose CommentsPermalink





Out of any money in the Treasury not otherwise appropriated, there are hereby appropriated $2,000,000 to carry out this paragraph for the period ending September 30, 2009.CommentsClose CommentsPermalink





(3) INCORPORATION OF DEFINITIONS- In this section, the terms `SCHIP crowd-out', `children', `poverty line', and `State' have the meanings given such terms for purposes of SCHIP.CommentsClose CommentsPermalink





(4) DEFINITION OF SCHIP CROWD-OUT- Section 2110(c) of the Social Security Act (42 U.S.C. 1397jj(c)) is amended by adding at the end the following:CommentsClose CommentsPermalink





`(9) SCHIP CROWD-OUT- The term `SCHIP crowd-out' means the substitution of--CommentsClose CommentsPermalink





`(A) health benefits coverage for a child under this title, forCommentsClose CommentsPermalink





`(B) health benefits coverage for the child other than under this title or title XIX.'.CommentsClose CommentsPermalink





(c) Development of Best Practice Recommendations- Section 2107 of such Act (42 U.S.C. 1397gg) is amended by adding at the end the following:CommentsClose CommentsPermalink





`(g) Development of Best Practice Recommendations- Within 6 months after the date of receipt of the reports under subsections (a) and (b) of section 105 of the Responsible Expansion of the State Children's Health Insurance Program Act of 2008, the Secretary, in consultation with States, including Medicaid and SCHIP directors in States, shall publish in the Federal Register, and post on the public website for the Department of Health and Human Services--CommentsClose CommentsPermalink





`(1) recommendations regarding best practices for States to use to address SCHIP crowd-out; andCommentsClose CommentsPermalink





`(2) uniform standards for data collection by States to measure and report--CommentsClose CommentsPermalink





`(A) health benefits coverage for children with family income below 200 percent of the poverty line; andCommentsClose CommentsPermalink





`(B) on SCHIP crowd-out, including for children with family income that exceeds 200 percent of the poverty line.CommentsClose CommentsPermalink





The Secretary, in consultation with States, including Medicaid and SCHIP directors in States, may from time to time update the best practice recommendations and uniform standards set published under paragraphs (1) and (2) and shall provide for publication and posting of such updated recommendations and standards.'.CommentsClose CommentsPermalink





(d) Requirement To Address SCHIP Crowd-Out; Secretarial Review- Section 2106 of such Act (42 U.S.C. 1397ff) is amended by adding at the end the following:CommentsClose CommentsPermalink





`(f) Requirement To Address SCHIP Crowd-Out; Secretarial Review-CommentsClose CommentsPermalink





`(1) IN GENERAL- Not later than 6 months after the best practice application date described in paragraph (2), each State that has a State child health plan shall submit to the Secretary a State plan amendment describing how the State--CommentsClose CommentsPermalink





`(A) will address SCHIP crowd-out; andCommentsClose CommentsPermalink





`(B) will incorporate recommended best practices referred to in such paragraph.CommentsClose CommentsPermalink





`(2) BEST PRACTICE APPLICATION DATE- The best practice application date described in this paragraph is the date that is 6 months after the date of publication of recommendations regarding best practices under section 2107(g)(1).CommentsClose CommentsPermalink





`(3) SECRETARIAL REVIEW- The Secretary shall--CommentsClose CommentsPermalink





`(A) review each State plan amendment submitted under paragraph (1);CommentsClose CommentsPermalink





`(B) determine whether the amendment incorporates recommended best practices referred to in paragraph (2);CommentsClose CommentsPermalink





`(C) in the case of a higher income eligibility State (as defined in section 2105(c)(10)(B)), determine whether the State meets the enrollment targets required under reference section 2105(c)(10)(C); andCommentsClose CommentsPermalink





`(D) notify the State of such determinations.'.CommentsClose CommentsPermalink





(e) Limitation on Payments for States Covering Higher Income Children-CommentsClose CommentsPermalink





(1) IN GENERAL- Section 2105(c) of such Act (42 U.S.C. 1397ee(c)), as amended by sections 102(b) and 103(a), is amended by adding at the end the following new paragraph:CommentsClose CommentsPermalink





`(10) LIMITATION ON PAYMENTS FOR STATES COVERING HIGHER INCOME CHILDREN-CommentsClose CommentsPermalink





`(A) DETERMINATIONS-CommentsClose CommentsPermalink





`(i) IN GENERAL- The Secretary shall determine within 6 months of the date of the submission of a State plan amendment to provide child health assistance to higher income children (or, in the case of any State that is a higher income eligibility State on the date of enactment of this paragraph, within 6 months of such date of enactment), whether the State meets the target rate of coverage of low-income children required under subparagraphs (C) and (D) of paragraph (8) and shall notify the State of such determination.CommentsClose CommentsPermalink





`(ii) DETERMINATION OF FAILURE- If the Secretary determines that a State does not meet such target rate of coverage, no payment shall be made under this section for child health assistance provided for higher-income children (as defined in subparagraph (C)) under the State child health plan (beginning, in the case of any State that is determined to be a higher income eligibility State within of the date of enactment of this paragraph, on January 1, 2009) unless and until the State establishes it is in compliance with such requirement.CommentsClose CommentsPermalink





`(B) HIGHER INCOME ELIGIBILITY STATE- A higher income eligibility State described in this clause is a State that--CommentsClose CommentsPermalink





`(i) applies under its State child health plan an eligibility income standard for targeted low-income children that exceeds 200 percent of the poverty line; orCommentsClose CommentsPermalink





`(ii) because of the application of a general exclusion of a block of income that is not determined by type of expense or type of income, applies an effective income standard under the State child health plan for such children that exceeds 200 percent of the poverty line.CommentsClose CommentsPermalink





`(C) HIGHER-INCOME CHILD- For purposes of this paragraph, the term `higher income child' means, with respect to a State child health plan, a targeted low-income child whose family income--CommentsClose CommentsPermalink





`(i) exceeds 200 percent of the poverty line; orCommentsClose CommentsPermalink





`(ii) would exceed 200 percent of the poverty line if there were not taken into account any general exclusion described in subparagraph (B)(ii).CommentsClose CommentsPermalink





`(D) NOTICE AND OPPORTUNITY TO COMPLY WITH TARGET RATE- If the Secretary makes a determination that a State does not meet the target rate of coverage of low-income children required under subparagraphs (C) and (D) of paragraph (8), the Secretary--CommentsClose CommentsPermalink





`(i) shall provide the State with the opportunity to submit and implement a corrective action plan for the State to come into compliance with the requirement of subparagraphs (C) and (D) of paragraph (8) before October 1 of any year; andCommentsClose CommentsPermalink





`(ii) shall not effect a denial of payment under subparagraph (A) on the basis of a determination that a State has not come into compliance with such requirement before December 31 of such year.'.CommentsClose CommentsPermalink





(2) CONSTRUCTION- Nothing in the amendment made by paragraph (1) or this section this shall be construed as authorizing the Secretary of Health and Human Services to limit payments under title XXI of the Social Security Act in the case of a State that is not a higher income eligibility State (as defined in section 2105(c)(10)(B) of such Act, as added by paragraph (1)).CommentsClose CommentsPermalink





(f) Treatment of Medical Support Orders- Section 2102(b) of such Act (42 U.S.C. 1397bb(c)) is amended by adding at the end the following:CommentsClose CommentsPermalink





`(5) TREATMENT OF MEDICAL SUPPORT ORDERS-CommentsClose CommentsPermalink





`(A) IN GENERAL- Nothing in this title shall be construed to allow the Secretary to require that a State deny eligibility for child health assistance to a child who is otherwise eligible on the basis of the existence of a valid medical support order being in effect.CommentsClose CommentsPermalink





`(B) STATE ELECTION- A State may elect to limit eligibility for child health assistance to a targeted low-income child on the basis of the existence of a valid medical support order on the child's behalf, but only if the State does not deny such eligibility for a child on such basis if the child asserts that the order is not being complied with for any of the reasons described in subparagraph (C) unless the State demonstrates that none of such reasons applies in the case involved.CommentsClose CommentsPermalink





`(C) REASONS FOR NONCOMPLIANCE- The reasons described in this subparagraph for noncompliance with a medical support order with respect to a child are that the child is not being provided health benefits coverage pursuant to such order because--CommentsClose CommentsPermalink





`(i) of failure of the noncustodial parent to comply with the order;CommentsClose CommentsPermalink





`(ii) of the failure of an employer, group health plan or health insurance issuer to comply with such order; orCommentsClose CommentsPermalink





`(iii) the child resides in a geographic area in which benefits under the health benefits coverage are generally unavailable.'.CommentsClose CommentsPermalink





(g) Effective Date of Amendments; Consistency of Policies- The amendments made by this section shall take effect as if enacted on August 16, 2007. The Secretary may not impose (or continue in effect) any requirement, prevent the implementation of any provision, or condition the approval of any provision under any State child health plan, State plan amendment, or waiver request on the basis of any policy or interpretation relating to SCHIP crowd-out, coordination with other sources of coverage, target rate of coverage, or medical support order other than under the amendments made by this section. In the case of a State plan amendment which was denied on or after August 16, 2007, on the basis of any such policy or interpretation in effect before the date of the enactment of this Act, if the State submits a modification of such State plan amendment that complies with title XXI of the Social Security Act as amended by this Act, such submitted State plan amendment, as so modified, shall be considered as if it had been submitted (as so modified) as of the date of its original submission, but such State plan amendment shall not be effective before the date of the enactment of this Act.CommentsClose CommentsPermalink

TITLE II--REVENUE PROVISIONS

SEC. 201. NONQUALIFIED DEFERRED COMPENSATION FROM CERTAIN TAX INDIFFERENT PARTIES.

(a) In General- Subpart B of part II of subchapter E of chapter 1 of the Internal Revenue Code of 1986 (relating to taxable year for which items of gross income included) is amended by inserting after section 457 the following new section:CommentsClose CommentsPermalink

`SEC. 457A. NONQUALIFIED DEFERRED COMPENSATION FROM CERTAIN TAX INDIFFERENT PARTIES.

`(a) In General- Any compensation which is deferred under a nonqualified deferred compensation plan of a nonqualified entity shall be taken into account for purposes of this chapter when there is no substantial risk of forfeiture of the rights to such compensation.CommentsClose CommentsPermalink





`(b) Nonqualified Entity- For purposes of this section, the term `nonqualified entity' means--CommentsClose CommentsPermalink





`(1) any foreign corporation unless substantially all of such income is--CommentsClose CommentsPermalink





`(A) effectively connected with the conduct of a trade or business in the United States, orCommentsClose CommentsPermalink





`(B) subject to a comprehensive foreign income tax, andCommentsClose CommentsPermalink





`(2) any partnership unless substantially all of such income is allocated to persons other than--CommentsClose CommentsPermalink





`(A) foreign persons with respect to whom such income is not subject to a comprehensive foreign income tax, andCommentsClose CommentsPermalink





`(B) organizations which are exempt from tax under this title.CommentsClose CommentsPermalink





`(c) Ascertainability of Amounts of Compensation-CommentsClose CommentsPermalink





`(1) IN GENERAL- If the amount of any compensation is not ascertainable at the time that such compensation is otherwise to be taken into account under subsection (a)--CommentsClose CommentsPermalink





`(A) such amount shall be so taken into account when ascertainable, andCommentsClose CommentsPermalink





`(B) the tax imposed under this chapter for the taxable year in which such compensation is taken into account under subparagraph (A) shall be increased by the sum of--CommentsClose CommentsPermalink





`(i) the amount of interest determined under paragraph (2), andCommentsClose CommentsPermalink





`(ii) an amount equal to 20 percent of the amount of such compensation.CommentsClose CommentsPermalink





`(2) INTEREST- For purposes of paragraph (1)(B)(i), the interest determined under this paragraph for any taxable year is the amount of interest at the underpayment rate under section 6621 plus 1 percentage point on the underpayments that would have occurred had the deferred compensation been includible in gross income for the taxable year in which first deferred or, if later, the first taxable year in which such deferred compensation is not subject to a substantial risk of forfeiture.CommentsClose CommentsPermalink





`(d) Other Definitions and Special Rules- For purposes of this section--CommentsClose CommentsPermalink





`(1) SUBSTANTIAL RISK OF FORFEITURE-CommentsClose CommentsPermalink





`(A) IN GENERAL- The rights of a person to compensation shall be treated as subject to a substantial risk of forfeiture only if such person's rights to such compensation are conditioned upon the future performance of substantial services by any individual.CommentsClose CommentsPermalink





`(B) EXCEPTION FOR COMPENSATION BASED ON GAIN RECOGNIZED ON AN INVESTMENT ASSET-CommentsClose CommentsPermalink





`(i) IN GENERAL- To the extent provided in regulations prescribed by the Secretary, if compensation is determined solely by reference to the amount of gain recognized on the disposition of an investment asset, such compensation shall be treated as subject to a substantial risk of forfeiture until the date of such disposition.CommentsClose CommentsPermalink





`(ii) INVESTMENT ASSET- For purposes of clause (i), the term `investment asset' means any single asset (other than an investment fund or similar entity)--CommentsClose CommentsPermalink





`(I) acquired directly by an investment fund or similar entity,CommentsClose CommentsPermalink





`(II) with respect to which such entity does not (nor does any person related to such entity) participate in the active management of such asset (or if such asset is an interest in an entity, in the active management of the activities of such entity), andCommentsClose CommentsPermalink





`(III) substantially all of any gain on the disposition of which (other than such deferred compensation) is allocated to investors in such entity.CommentsClose CommentsPermalink





`(iii) COORDINATION WITH SPECIAL RULE FOR SHORT-TERM DEFERRALS OF COMPENSATION- Paragraph (3)(B) shall not apply to any compensation to which clause (i) applies.CommentsClose CommentsPermalink





`(2) COMPREHENSIVE FOREIGN INCOME TAX- The term `comprehensive foreign income tax' means, with respect to any foreign person, the income tax of a foreign country if--CommentsClose CommentsPermalink





`(A) such person is eligible for the benefits of a comprehensive income tax treaty between such foreign country and the United States, orCommentsClose CommentsPermalink





`(B) such person demonstrates to the satisfaction of the Secretary that such foreign country has a comprehensive income tax.CommentsClose CommentsPermalink





Such term shall not include any tax unless such tax includes rules for the deductibility of deferred compensation which are similar to the rules of this title.CommentsClose CommentsPermalink





`(3) NONQUALIFIED DEFERRED COMPENSATION PLAN-CommentsClose CommentsPermalink





`(A) IN GENERAL- The term `nonqualified deferred compensation plan' has the meaning given such term under section 409A(d), except that such term shall include any plan that provides a right to compensation based on the appreciation in value of a specified number of equity units of the service recipient.CommentsClose CommentsPermalink





`(B) EXCEPTION FOR SHORT-TERM DEFERRALS- Compensation shall not be treated as deferred for purposes of this section if the service provider receives payment of such compensation not later than 12 months after the end of the taxable year of the service recipient during which the right to the payment of such compensation is no longer subject to a substantial risk of forfeiture.CommentsClose CommentsPermalink





`(4) EXCEPTION FOR CERTAIN COMPENSATION WITH RESPECT TO EFFECTIVELY CONNECTED INCOME- In the case a foreign corporation with income which is taxable under section 882, this section shall not apply to compensation which, had such compensation had been paid in cash on the date that such compensation ceased to be subject to a substantial risk of forfeiture, would have been deductible by such foreign corporation against such income.CommentsClose CommentsPermalink





`(5) APPLICATION OF RULES- Rules similar to the rules of paragraphs (5) and (6) of section 409A(d) shall apply.CommentsClose CommentsPermalink





`(e) Regulations- The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section, including regulations disregarding a substantial risk of forfeiture in cases where necessary to carry out the purposes of this section.'.CommentsClose CommentsPermalink





(b) Conforming Amendment- Section 26(b)(2) of such Code is amended by striking `and' at the end of subparagraph (U), by striking the period at the end of subparagraph (V) and inserting `, and', and by adding at the end the following new subparagraph:CommentsClose CommentsPermalink





`(W) section 457A(c)(1)(B) (relating to ascertainability of amounts of compensation).'.CommentsClose CommentsPermalink





(c) Clerical Amendment- The table of sections of subpart B of part II of subchapter E of chapter 1 of such Code is amended by inserting after the item relating to section 457 the following new item:CommentsClose CommentsPermalink





`Sec. 457A. Nonqualified deferred compensation from certain tax indifferent parties.'.CommentsClose CommentsPermalink





(d) Effective Date-CommentsClose CommentsPermalink





(1) IN GENERAL- Except as otherwise provided in this subsection, the amendments made by this section shall apply to amounts deferred which are attributable to services performed after the date of enactment of this Act.CommentsClose CommentsPermalink





(2) APPLICATION TO EXISTING DEFERRALS- In the case of any amount deferred to which the amendments made by this section do not apply solely by reason of the fact that the amount is attributable to services performed before the date of enactment of this Act, to the extent such amount is not includible in gross income in a taxable year beginning before 2017, such amounts shall be includible in gross income in the later of--CommentsClose CommentsPermalink





(A) the last taxable year beginning before 2017, orCommentsClose CommentsPermalink





(B) the taxable year in which there is no substantial risk of forfeiture of the rights to such compensation (determined in the same manner as determined for purposes of section 457A of the Internal Revenue Code of 1986, as added by this section).CommentsClose CommentsPermalink





(3) ACCELERATED PAYMENTS- No later than 60 days after the date of the enactment of this Act, the Secretary shall issue guidance providing a limited period of time during which a nonqualified deferred compensation arrangement attributable to services performed on or before the date of enactment of this Act, may, without violating the requirements of section 409A(a) of the Internal Revenue Code of 1986, be amended to conform the date of distribution to the date the amounts are required to be included in income.CommentsClose CommentsPermalink





(4) CERTAIN BACK-TO-BACK ARRANGEMENTS- If the taxpayer is also a service recipient and maintains one or more nonqualified deferred compensation arrangements for its service providers under which any amount is attributable to services performed on or before the date of the enactment of this Act, the guidance issued under paragraph (3) shall permit such arrangements to be amended to conform the dates of distribution under such arrangement to the date amounts are required to be included in the income of such taxpayer under this subsection.CommentsClose CommentsPermalink





(5) ACCELERATED PAYMENT NOT TREATED AS MATERIAL MODIFICATION- Any amendment to a nonqualified deferred compensation arrangement made pursuant to paragraph (3) or (4) shall not be treated as a material modification of the arrangement for purposes of section 409A of the Internal Revenue Code of 1986.CommentsClose CommentsPermalink

SEC. 202. INCOME OF PARTNERS FOR PERFORMING INVESTMENT MANAGEMENT SERVICES TREATED AS ORDINARY INCOME RECEIVED FOR PERFORMANCE OF SERVICES.

(a) In General- Part I of subchapter K of chapter 1 of the Internal Revenue Code of 1986 is amended by adding at the end the following new section:CommentsClose CommentsPermalink

`SEC. 710. SPECIAL RULES FOR PARTNERS PROVIDING INVESTMENT MANAGEMENT SERVICES TO PARTNERSHIP.

`(a) Treatment of Distributive Share of Partnership Items- For purposes of this title, in the case of an investment services partnership interest--CommentsClose CommentsPermalink





`(1) IN GENERAL- Notwithstanding section 702(b)--CommentsClose CommentsPermalink





`(A) any net income with respect to such interest for any partnership taxable year shall be treated as ordinary income for the performance of services, andCommentsClose CommentsPermalink





`(B) any net loss with respect to such interest for such year, to the extent not disallowed under paragraph (2) for such year, shall be treated as an ordinary loss.CommentsClose CommentsPermalink





`(2) TREATMENT OF LOSSES-CommentsClose CommentsPermalink





`(A) LIMITATION- Any net loss with respect to such interest shall be allowed for any partnership taxable year only to the extent that such loss does not exceed the excess (if any) of--CommentsClose CommentsPermalink





`(i) the aggregate net income with respect to such interest for all prior partnership taxable years, overCommentsClose CommentsPermalink





`(ii) the aggregate net loss with respect to such interest not disallowed under this subparagraph for all prior partnership taxable years.CommentsClose CommentsPermalink





`(B) CARRYFORWARD- Any net loss for any partnership taxable year which is not allowed by reason of subparagraph (A) shall be treated as an item of loss with respect to such partnership interest for the succeeding partnership taxable year.CommentsClose CommentsPermalink





`(C) BASIS ADJUSTMENT- No adjustment to the basis of a partnership interest shall be made on account of any net loss which is not allowed by reason of subparagraph (A).CommentsClose CommentsPermalink





`(D) EXCEPTION FOR BASIS ATTRIBUTABLE TO PURCHASE OF A PARTNERSHIP INTEREST- In the case of an investment services partnership interest acquired by purchase, paragraph (1)(B) shall not apply to so much of any net loss with respect to such interest for any taxable year as does not exceed the excess of--CommentsClose CommentsPermalink





`(i) the basis of such interest immediately after such purchase, overCommentsClose CommentsPermalink





`(ii) the aggregate net loss with respect to such interest to which paragraph (1)(B) did not apply by reason of this subparagraph for all prior taxable years.CommentsClose CommentsPermalink





Any net loss to which paragraph (1)(B) does not apply by reason of this subparagraph shall not be taken into account under subparagraph (A).CommentsClose CommentsPermalink





`(E) PRIOR PARTNERSHIP YEARS- Any reference in this paragraph to prior partnership taxable years shall only include prior partnership taxable years to which this section applies.CommentsClose CommentsPermalink





`(3) NET INCOME AND LOSS- For purposes of this section--CommentsClose CommentsPermalink





`(A) NET INCOME- The term `net income' means, with respect to any investment services partnership interest, for any partnership taxable year, the excess (if any) of--CommentsClose CommentsPermalink





`(i) all items of income and gain taken into account by the holder of such interest under section 702 with respect to such interest for such year, overCommentsClose CommentsPermalink





`(ii) all items of deduction and loss so taken into account.CommentsClose CommentsPermalink





`(B) NET LOSS- The term `net loss' means with respect to such interest for such year, the excess (if any) of the amount described in subparagraph (A)(ii) over the amount described in subparagraph (A)(i).CommentsClose CommentsPermalink





`(b) Dispositions of Partnership Interests-CommentsClose CommentsPermalink





`(1) GAIN- Any gain on the disposition of an investment services partnership interest shall be treated as ordinary income for the performance of services.CommentsClose CommentsPermalink





`(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--CommentsClose CommentsPermalink





`(A) the aggregate net income with respect to such interest for all partnership taxable years, overCommentsClose CommentsPermalink





`(B) the aggregate net loss with respect to such interest allowed under subsection (a)(2) for all partnership taxable years.CommentsClose CommentsPermalink





`(3) DISPOSITION OF PORTION OF INTEREST- In the case of any disposition of an investment services partnership interest, the amount of net loss which otherwise would have (but for subsection (a)(2)(C)) applied to reduce the basis of such interest shall be disregarded for purposes of this section for all succeeding partnership taxable years.CommentsClose CommentsPermalink





`(4) DISTRIBUTIONS OF PARTNERSHIP PROPERTY- In the case of any distribution of appreciated property by a partnership with respect to any investment services partnership interest, gain shall be recognized by the partnership in the same manner as if the partnership sold such property at fair market value at the time of the distribution. For purposes of this paragraph, the term `appreciated property' means any property with respect to which gain would be determined if sold as described in the preceding sentence.CommentsClose CommentsPermalink





`(5) APPLICATION OF SECTION 751- In applying section 751(a), an investment services partnership interest shall be treated as an inventory item.CommentsClose CommentsPermalink





`(c) Investment Services Partnership Interest- For purposes of this section--CommentsClose CommentsPermalink





`(1) IN GENERAL- The term `investment services partnership interest' means any interest in a partnership which is held by any person if such person provides (directly or indirectly) a substantial quantity of any of the following services with respect to the assets of the partnership in the conduct of the trade or business of providing such services:CommentsClose CommentsPermalink





`(A) Advising as to the advisability of investing in, purchasing, or selling any specified asset.CommentsClose CommentsPermalink





`(B) Managing, acquiring, or disposing of any specified asset.CommentsClose CommentsPermalink





`(C) Arranging financing with respect to acquiring specified assets.CommentsClose CommentsPermalink





`(D) Any activity in support of any service described in subparagraphs (A) through (C).CommentsClose CommentsPermalink





For purposes of this paragraph, the term `specified asset' means securities (as defined in section 475(c)(2) without regard to the last sentence thereof), real estate, commodities (as defined in section 475(e)(2)), or options or derivative contracts with respect to securities (as so defined), real estate, or commodities (as so defined).CommentsClose CommentsPermalink





`(2) EXCEPTION FOR CERTAIN CAPITAL INTERESTS-CommentsClose CommentsPermalink





`(A) IN GENERAL- If--CommentsClose CommentsPermalink





`(i) a portion of an investment services partnership interest is acquired on account of a contribution of invested capital, andCommentsClose CommentsPermalink





`(ii) the partnership makes a reasonable allocation of partnership items between the portion of the distributive share that is with respect to invested capital and the portion of such distributive share that is not with respect to invested capital,CommentsClose CommentsPermalink





then subsection (a) shall not apply to the portion of the distributive share that is with respect to invested capital. An allocation will not be treated as reasonable for purposes of this subparagraph if such allocation would result in the partnership allocating a greater portion of income to invested capital than any other partner not providing services would have been allocated with respect to the same amount of invested capital.CommentsClose CommentsPermalink





`(B) SPECIAL RULE FOR DISPOSITIONS- In any case to which subparagraph (A) applies, subsection (b) shall not apply to any gain or loss allocable to invested capital. The portion of any gain or loss attributable to invested capital is the proportion of such gain or loss which is based on the distributive share of gain or loss that would have been allocable to invested capital under subparagraph (A) if the partnership sold all of its assets immediately before the disposition.CommentsClose CommentsPermalink





`(C) INVESTED CAPITAL- For purposes of this paragraph, the term `invested capital' means, the fair market value at the time of contribution of any money or other property contributed to the partnership.CommentsClose CommentsPermalink





`(D) TREATMENT OF CERTAIN LOANS-CommentsClose CommentsPermalink





`(i) PROCEEDS OF PARTNERSHIP LOANS NOT TREATED AS INVESTED CAPITAL OF SERVICE PROVIDING PARTNERS- For purposes of this paragraph, an investment services partnership interest shall not be treated as acquired on account of a contribution of invested capital to the extent that such capital is attributable to the proceeds of any loan or other advance made or guaranteed, directly or indirectly, by any partner or the partnership.CommentsClose CommentsPermalink





`(ii) LOANS FROM NONSERVICE PROVIDING PARTNERS TO THE PARTNERSHIP TREATED AS INVESTED CAPITAL- For purposes of this paragraph, any loan or other advance to the partnership made or guaranteed, directly or indirectly, by a partner not providing services to the partnership shall be treated as invested capital of such partner and amounts of income and loss treated as allocable to invested capital shall be adjusted accordingly.CommentsClose CommentsPermalink





`(d) Other Income and Gain in Connection With Investment Management Services-CommentsClose CommentsPermalink





`(1) IN GENERAL- If--CommentsClose CommentsPermalink





`(A) a person performs (directly or indirectly) investment management services for any entity,CommentsClose CommentsPermalink





`(B) such person holds a disqualified interest with respect to such entity, andCommentsClose CommentsPermalink





`(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,CommentsClose CommentsPermalink





any income or gain with respect to such interest shall be treated as ordinary income for the performance of services. Rules similar to the rules of subsection (c)(2) shall apply where such interest was acquired on account of invested capital in such entity.CommentsClose CommentsPermalink





`(2) DEFINITIONS- For purposes of this subsection--CommentsClose CommentsPermalink





`(A) DISQUALIFIED INTEREST- The term `disqualified interest' means, with respect to any entity--CommentsClose CommentsPermalink





`(i) any interest in such entity other than indebtedness,CommentsClose CommentsPermalink





`(ii) convertible or contingent debt of such entity,CommentsClose CommentsPermalink





`(iii) any option or other right to acquire property described in clause (i) or (ii), andCommentsClose CommentsPermalink





`(iv) any derivative instrument entered into (directly or indirectly) with such entity or any investor in such entity.CommentsClose CommentsPermalink





Such term shall not include a partnership interest and shall not include stock in a taxable corporation.CommentsClose CommentsPermalink





`(B) TAXABLE CORPORATION- The term `taxable corporation' means--CommentsClose CommentsPermalink





`(i) a domestic C corporation, orCommentsClose CommentsPermalink





`(ii) a foreign corporation subject to a comprehensive foreign income tax (as defined in section 457A(d)(4)).CommentsClose CommentsPermalink





`(C) INVESTMENT MANAGEMENT SERVICES- The term `investment management services' means a substantial quantity of any of the services described in subsection (c)(1) which are provided in the conduct of the trade or business of providing such services.CommentsClose CommentsPermalink





`(e) Regulations- The Secretary shall prescribe such regulations as are necessary or appropriate to carry out the purposes of this section, including regulations to--CommentsClose CommentsPermalink





`(1) prevent the avoidance of the purposes of this section, andCommentsClose CommentsPermalink





`(2) coordinate this section with the other provisions of this subchapter.CommentsClose CommentsPermalink





`(f) Cross Reference- For 40 percent no fault penalty on certain underpayments due to the avoidance of this section, see section 6662.'.CommentsClose CommentsPermalink





(b) Application to Real Estate Investment Trusts- Subsection (c) of section 856 of such Code is amended by adding at the end the following new paragraph:CommentsClose CommentsPermalink





`(8) EXCEPTION FROM RECHARACTERIZATION OF INCOME FROM INVESTMENT SERVICES PARTNERSHIP INTERESTS-CommentsClose CommentsPermalink





`(A) IN GENERAL- Paragraphs (2), (3), and (4) shall be applied without regard to section 710 (relating to special rules for partners providing investment management services to partnership).CommentsClose CommentsPermalink





`(B) SPECIAL RULE FOR PARTNERSHIPS OWNED BY REITS- Section 7704 shall be applied without regard to section 710 in the case of a partnership which meets each of the following requirements:CommentsClose CommentsPermalink





`(i) Such partnership is treated as publicly traded under section 7704 solely by reason of interests in such partnership being convertible into interests in a real estate investment trust which is publicly traded.CommentsClose CommentsPermalink





`(ii) 50 percent or more of the capital and profits interests of such partnership are owned, directly or indirectly, at all times during the taxable year by such real estate investment trust (determined with the application of section 267(c)).CommentsClose CommentsPermalink





`(iii) Such partnership meets the requirements of paragraphs (2), (3), and (4) (applied without regard to section 710).'.CommentsClose CommentsPermalink





(c) Imposition of Penalty on Underpayments-CommentsClose CommentsPermalink





(1) IN GENERAL- Subsection (b) of section 6662 of such Code is amended by inserting after paragraph (5) the following new paragraph:CommentsClose CommentsPermalink





`(6) The application of subsection (d) of section 710 or the regulations prescribed under section 710(e) to prevent the avoidance of the purposes of section 710.'.CommentsClose CommentsPermalink





(2) AMOUNT OF PENALTY-CommentsClose CommentsPermalink





(A) IN GENERAL- Section 6662 of such Code is amended by adding at the end the following new subsection:CommentsClose CommentsPermalink





`(i) 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)(6), subsection (a) shall be applied with respect to such portion by substituting `40 percent' for `20 percent'.'.CommentsClose CommentsPermalink





(B) CONFORMING AMENDMENTS- Subparagraph (B) of section 6662A(e)(2) of such Code is amended--CommentsClose CommentsPermalink





(i) by striking `section 6662(h)' and inserting `subsection (h) or (i) of section 6662', andCommentsClose CommentsPermalink





(ii) by striking `GROSS VALUATION MISSTATEMENT PENALTY' in the heading and inserting `CERTAIN INCREASED UNDERPAYMENT PENALTIES'.CommentsClose CommentsPermalink





(3) REASONABLE CAUSE EXCEPTION NOT APPLICABLE- Subsection (c) of section 6664 of such Code is amended--CommentsClose CommentsPermalink





(A) by redesignating paragraphs (2) and (3) as paragraphs (3) and (4), respectively,CommentsClose CommentsPermalink





(B) by striking `paragraph (2)' in paragraph (4), as so redesignated, and inserting `paragraph (3)', andCommentsClose CommentsPermalink





(C) by inserting after paragraph (1) the following new paragraph:CommentsClose CommentsPermalink





`(2) EXCEPTION- Paragraph (1) shall not apply to any portion of an underpayment to which this section applies by reason of subsection (b)(6).'.CommentsClose CommentsPermalink





(d) Conforming Amendments-CommentsClose CommentsPermalink





(1) Subsection (d) of section 731 of such Code is amended by inserting `section 710(b)(4) (relating to distributions of partnership property),' before `section 736'.CommentsClose CommentsPermalink





(2) Section 741 of such Code is amended by inserting `or section 710 (relating to special rules for partners providing investment management services to partnership)' before the period at the end.CommentsClose CommentsPermalink





(3) Paragraph (13) of section 1402(a) of such Code is amended--CommentsClose CommentsPermalink





(A) by striking `other than guaranteed' and inserting `other than--CommentsClose CommentsPermalink





`(A) guaranteed',CommentsClose CommentsPermalink





(B) by striking the semi-colon at the end and inserting `, and', andCommentsClose CommentsPermalink





(C) by adding at the end the following new subparagraph:CommentsClose CommentsPermalink





`(B) any income treated as ordinary income under section 710 received by an individual who provides investment management services (as defined in section 710(d)(2));'.CommentsClose CommentsPermalink





(4) Paragraph (12) of section 211(a) of the Social Security Act is amended--CommentsClose CommentsPermalink





(A) by striking `other than guaranteed' and inserting `other than--CommentsClose CommentsPermalink





`(A) guaranteed',CommentsClose CommentsPermalink





(B) by striking the semi-colon at the end and inserting `, and', andCommentsClose CommentsPermalink





(C) by adding at the end the following new subparagraph:CommentsClose CommentsPermalink





`(B) any income treated as ordinary income under section 710 of the Internal Revenue Code of 1986 received by an individual who provides investment management services (as defined in section 710(d)(2) of such Code);'.CommentsClose CommentsPermalink





(5) The table of sections for part I of subchapter K of chapter 1 of such Code is amended by adding at the end the following new item:CommentsClose CommentsPermalink





`Sec. 710. Special rules for partners providing investment management services to partnership.'.CommentsClose CommentsPermalink





(e) Effective Date-CommentsClose CommentsPermalink





(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.CommentsClose CommentsPermalink





(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 income referred to in such section shall be treated as being the lesser of the net income for the entire partnership taxable year or the net income determined by only taking into account items attributable to the portion of the partnership taxable year which is after such date.CommentsClose CommentsPermalink





(3) DISPOSITIONS OF PARTNERSHIP INTERESTS- Section 710(b) of the Internal Revenue Code of 1986 (as added by this section) shall apply to dispositions and distributions after the date of enactment of this Act.CommentsClose CommentsPermalink





(4) OTHER INCOME AND GAIN IN CONNECTION WITH INVESTMENT MANAGEMENT SERVICES- Section 710(d) of such Code (as added by this section) shall take effect on the date of enactment of this Act.CommentsClose CommentsPermalink





(5) PUBLICLY TRADED PARTNERSHIPS- For purposes of applying section 7704, the amendments made by this section shall apply to taxable years beginning after December 31, 2009.CommentsClose CommentsPermalink