Bill would make controlling funds share company liabilities

A controlling private fund and people with an active roles in it would share responsibility for certain company liabilities. A controlling private fund is a private fund that becomes able to direct a company through an acquisition. The rule covers a company acquired by a controlling private fund and its affiliates, including specified debts, government penalties, worker-notice violations, and pension obligations. For four years after the acquisition closes, the company could not make capital distributions or similarly reduce its equity; other limits would apply to large distributions and certain relocations tied to plant closings or mass layoffs. The payout limits would apply after an acquisition closes, including a four-year limit on capital distributions.

Bankruptcy courts would weigh job preservation and employment terms when approving company asset sales. The rules cover sales or leases of a bankrupt company’s property, including sales under a bankruptcy plan. A buyer or lessee would have to tell the court how the sale would affect jobs and employment terms. If two or more qualifying offers are before the court, it would have to approve the offer that best preserves jobs and employment terms; the court could impose remedies for material noncompliance.

Employers would face new limits on actions involving strikes and collective bargaining. The rules apply to employers and employees covered by the National Labor Relations Act. The text would prohibit promising, threatening, or taking action to permanently replace striking workers, discriminating against workers for strike activity, or withholding work to influence bargaining before a strike. It would also prohibit requiring or coercing employees to take part in employer campaign activities unrelated to their jobs.

The bill would change tax treatment for some investment fund income, company interest deductions, and real estate investment trusts. The provisions address certain investment firms, investment managers, businesses controlled by investment firms, and taxpayers receiving qualified real estate investment trust dividends. Some payments from controlled companies to investment firms would face an added tax, with exceptions including interest and certain stock distributions. Some investment managers’ partnership income would be treated as ordinary income rather than capital gain, subject to exceptions; certain heavily indebted businesses owned by private funds would face limits on interest deductions. The text would also remove certain real estate investment trust dividends from a tax deduction for qualified business income. The added tax on applicable payments would apply to payments made or accrued on or after enactment; other provisions set their own start dates.

The Securities and Exchange Commission would require public reports from controlling private funds and more reports from certain investment advisers. The annual public reports would apply to controlling private funds. Quarterly reports would apply to investment advisers required to file Form PF or a successor form. Annual fund reports would cover matters such as returns, fees, debt, company outcomes, workforce practices, and political spending; the Commission would make the information public. Advisers required to file Form PF or a successor form would report their funds’ investments and loans they made to the Commission every quarter. The Commission would issue final rules for annual reports within one year after enactment and amend quarterly reporting rules within 180 days after enactment.