Internal Revenue Code · 26 U.S.C.
§ 7704. Certain publicly traded partnerships treated as corporations
Official text, no changes From the Office of the Law Revision Counsel, release point 119-121 (current through Public Law 119-121 (October 9, 2026)). Compare it with the official text at uscode.house.gov (external site).
Cite as 26 U.S.C. § 7704
At a glance
Read from the text, the source credit and the official notes. Not part of the law.
- Status
- In force
- Added
- December 22, 1987 by Pub. L. 100–203
- Last amended
- July 4, 2025 by Pub. L. 119–21
- Amendments
- 7 dated changes in the source credit
- Length
- 7 subsections · 1,640 words · about 7 min to read
- Defines
- 5 terms
- Cross-references
- cites 16; cited by 7 Code sections and 17 other regulations
- Regulations
- 5 issued under this section
Subsection (a) shall not apply to any publicly traded partnership for any taxable year if such partnership met the gross income requirements of paragraph (2) for such taxable year and each preceding taxable year beginning after December 31, 1987, during which the partnership (or any predecessor) was in existence. For purposes of the preceding sentence, a partnership shall not be treated as being in existence during any period before the 1st taxable year in which such partnership (or a predecessor) was a publicly traded partnership.
A partnership meets the gross income requirements of this paragraph for any taxable year if 90 percent or more of the gross income of such partnership for such taxable year consists of qualifying income.
This subsection shall not apply to any partnership which would be described in section 851(a) if such partnership were a domestic corporation. To the extent provided in regulations, the preceding sentence shall not apply to any partnership a principal activity of which is the buying and selling of commodities (not described in section 1221(a)(1)), or options, futures, or forwards with respect to commodities.
The term “qualifying income” also includes any income which would qualify under section 851(b)(2)(A) or 856(c)(2).
In the case of the sale or other disposition of real property described in section 1221(a)(1), gross income shall not be reduced by inventory costs.
There is hereby imposed for each taxable year on the income of each electing 1987 partnership a tax equal to 3.5 percent of such partnership’s gross income for the taxable year from the active conduct of trades and businesses by the partnership.
For purposes of this paragraph, in the case of a partnership which is a partner in another partnership, the gross income referred to in subparagraph (A) shall include the partnership’s distributive share of the gross income of such other partnership from the active conduct of trades and businesses of such other partnership. A similar rule shall apply in the case of lower-tiered partnerships.
For purposes of this title, the tax imposed by this paragraph shall be treated as imposed by chapter 1 other than for purposes of determining the amount of any credit allowable under chapter 1 and shall be paid by the partnership. Section 6655 shall be applied to such partnership with respect to such tax in the same manner as if the partnership were a corporation, such tax were imposed by section 11, and references in such section to taxable income were references to the gross income referred to in subparagraph (A).
An election and consent under this subsection shall apply to the taxable year for which made and all subsequent taxable years unless revoked by the partnership. Such revocation may be made without the consent of the Secretary, but, once so revoked, may not be reinstated.
(Added Pub. L. 100–203, title X, § 10211(a), Dec. 22, 1987, 101 Stat. 1330–403; amended Pub. L. 100–647, title II, § 2004(f)(1), (3)–(5), Nov. 10, 1988, 102 Stat. 3602, 3603; Pub. L. 105–34, title IX, § 964(a), Aug. 5, 1997, 111 Stat. 892; Pub. L. 105–206, title VI, § 6009(b)(1), July 22, 1998, 112 Stat. 812; Pub. L. 106–170, title V, § 532(c)(2)(V)–(Y), Dec. 17, 1999, 113 Stat. 1931; Pub. L. 108–357, title III, § 331(e), Oct. 22, 2004, 118 Stat. 1476; Pub. L. 110–343, div. B, title I, § 116(a), title II, § 208(a), Oct. 3, 2008, 122 Stat. 3831, 3840; Pub. L. 119–21, title VII, § 70524(a), July 4, 2025, 139 Stat. 281.)
Terms defined here
Where the text says “the term … means”. Select a term to jump to its definition.
Regulations under this section
Treasury regulations (26 CFR) issued under § 7704
Cross-references
Computed from the citations in the text of Title 26 and 26 CFR.
This section cites 16 other sections
- § 851(a) Definition of regulated investment company
- § 1221(a)(1) Capital asset defined
- § 6426 Credit for alcohol fuel, biodiesel, and alternative fuel mixtures
- § 40A(d)(1) Biodiesel and renewable diesel used as fuel
- § 40B(d)(1) Sustainable aviation fuel credit
- § 45Q(d) Credit for carbon oxide sequestration
- § 45J(d)(2) Credit for production from advanced nuclear power facilities
- § 45(c)(1) Electricity produced from certain renewable resources, etc.
- § 48(a)(3)(A) Energy credit
- § 1231(b) Property used in the trade or business and involuntary conversions
- § 611 Allowance of deduction for depletion
- § 613(b)(7) Percentage depletion
- § 856(f) Definition of real estate investment trust
- § 318(a)(3)(A) Constructive ownership of stock
- § 6655 Failure by corporation to pay estimated income tax
- § 11 Tax imposed
Cited by 7 Code sections
- § 199A(e)(4)(A) Qualified business income
- § 351(e)(1)(B)(iv) Transfer to corporation controlled by transferor
- § 475(f)(1)(D) Mark to market accounting method for dealers in securities
- § 851(h) Definition of regulated investment company
- § 897(k)(3)(B)(ii)(I) Disposition of investment in United States real property
- § 988(c)(1)(E)(iii)(III) Treatment of certain foreign currency transactions
- § 4501(b) Repurchase of corporate stock
Cited in 17 regulations not issued under it
- § 1.162-33 Certain employee remuneration in excess of $1,000,000 not deductible for taxable years beginning after December 31, 2017.
- § 1.199A-3 Qualified business income, qualified REIT dividends, and qualified PTP income.
- § 1.280G-1 Golden parachute payments.
- § 1.367(e)-2 Distributions described in section 367(e)(2).
- § 1.706-4 Determination of distributive share when a partner's interest varies.
- § 1.743-1 Optional adjustment to basis of partnership property.
- § 1.892-3T Income of foreign governments (temporary regulations).
- § 1.988-1 Certain definitions and special rules.
- § 1.1223-3 Rules relating to the holding periods of partnership interests.
- § 1.1445-8 Special rules regarding publicly traded partnerships, publicly traded trusts and real estate investment trusts (REITs).
- § 1.1446-4 Publicly traded partnerships.
- § 1.1446(f)-1 General rules.
- § 1.6011-18 Certain partnership related-party basis adjustment transactions as transactions of interest.
- § 1.6045-4 Information reporting on real estate transactions.
- § 1.7874-2 Surrogate foreign corporation.
- § 58.4501-5 Examples.
- § 301.6226-2 Statements furnished to partners and filed with the IRS.
Amendment history
From the source credit and the official notes, newest first.
- Amended by Pub. L. 119–21Parts changed in 2025: (d)(1)(E)
- Amended by Pub. L. 110–343Parts changed in 2008: (d)(1)(E)
- Amended by Pub. L. 108–357Parts changed in 2004: (d)(4)
- Amended by Pub. L. 106–170Parts changed in 1999: (c)(3)
- Amended by Pub. L. 105–206Parts changed in 1998: (g)(3)(C)
- Amended by Pub. L. 105–34Parts changed in 1997: (g)
- Amended by Pub. L. 100–647Parts changed in 1988: (c)(1) (d)(1) (d)(3) (e)(4)
- Added by Pub. L. 100–203
Where it sits in the Code
Nearby sections
- § 7702 Life insurance contract defined
- § 7702A Modified endowment contract defined
- § 7702B Treatment of qualified long-term care insurance
- § 7703 Determination of marital status
- § 7704 Certain publicly traded partnerships treated as corporations
- § 7705 Certified professional employer organizations
Official notes
Show the Law Revision Counsel's notes (amendments, effective dates)
Editorial Notes
References in Text
Section 10211(c)(2) of the Revenue Reconciliation Act of 1987, referred to in subsec. (g)(2)(A), probably means section 10211(c)(2) of the Revenue Act of 1987, title X of Pub. L. 100–203, which is set out as a note below.
Amendments
2025—Subsec. (d)(1)(E). Pub. L. 119–21 substituted “gains derived from—” for “gains derived from”, inserted cl. (i) designation before “the exploration”, inserted “or” before “industrial source”, and substituted cls. (ii) to (vi) for “or the transportation or storage of any fuel described in subsection (b), (c), (d), or (e) of section 6426, or any alcohol fuel defined in section 6426(b)(4)(A) or any biodiesel fuel as defined in section 40A(d)(1),”.
2008—Subsec. (d)(1)(E). Pub. L. 110–343, § 208(a), substituted “, industrial source carbon dioxide, or the transportation or storage of any fuel described in subsection (b), (c), (d), or (e) of section 6426, or any alcohol fuel defined in section 6426(b)(4)(A) or any biodiesel fuel as defined in section 40A(d)(1)” for “or industrial source carbon dioxide”.
Pub. L. 110–343, § 116(a), inserted “or industrial source carbon dioxide” before comma at end.
2004—Subsec. (d)(4). Pub. L. 108–357 substituted “section 851(b)(2)(A)” for “section 851(b)(2)”.
1999—Subsecs. (c)(3), (d)(1)(D), (G), (5). Pub. L. 106–170 substituted “section 1221(a)(1)” for “section 1221(1)”.
1998—Subsec. (g)(3)(C). Pub. L. 105–206 inserted at end “and shall be paid by the partnership. Section 6655 shall be applied to such partnership with respect to such tax in the same manner as if the partnership were a corporation, such tax were imposed by section 11, and references in such section to taxable income were references to the gross income referred to in subparagraph (A)”.
1997—Subsec. (g). Pub. L. 105–34 added subsec. (g).
1988—Subsec. (c)(1). Pub. L. 100–647, § 2004(f)(3), inserted at end “For purposes of the preceding sentence, a partnership shall not be treated as being in existence during any period before the 1st taxable year in which such partnership (or a predecessor) was a publicly traded partnership.”
Subsec. (d)(1). Pub. L. 100–647, § 2004(f)(4), inserted at end “For purposes of subparagraph (E), the term ‘mineral or natural resource’ means any product of a character with respect to which a deduction for depletion is allowable under section 611; except that such term shall not include any product described in subparagraph (A) or (B) of section 613(b)(7).”
Subsec. (d)(3). Pub. L. 100–647, § 2004(f)(5), amended par. (3) generally. Prior to amendment, par. (3) read as follows: “The term ‘real property rent’ means amounts which would qualify as rent from real property under section 856(d) if such section were applied without regard to paragraph (2)(C) thereof (relating to independent contractor requirements).”
Subsec. (e)(4). Pub. L. 100–647, § 2004(f)(1), inserted “or to pay such amounts” before “as may be required”.
Statutory Notes and Related Subsidiaries
Effective Date of 2025 Amendment
Pub. L. 119–21, title VII, § 70524(b), July 4, 2025, 139 Stat. 282, provided that: “The amendments made by this section [amending this section] shall apply to taxable years beginning after December 31, 2025.”
Effective Date of 2008 Amendment
Pub. L. 110–343, div. B, title I, § 116(b), Oct. 3, 2008, 122 Stat. 3831, provided that: “The amendment made by this section [amending this section] shall take effect on the date of the enactment of this Act [Oct. 3, 2008], in taxable years ending after such date.”
Pub. L. 110–343, div. B, title II, § 208(b), Oct. 3, 2008, 122 Stat. 3840, provided that: “The amendment made by this section [amending this section] shall take effect on the date of the enactment of this Act [Oct. 3, 2008], in taxable years ending after such date.”
Effective Date of 2004 Amendment
Amendment by Pub. L. 108–357 applicable to taxable years beginning after Oct. 22, 2004, see section 331(h) of Pub. L. 108–357, set out as a note under section 469 of this title.
Effective Date of 1999 Amendment
Amendment by Pub. L. 106–170 applicable to any instrument held, acquired, or entered into, any transaction entered into, and supplies held or acquired on or after Dec. 17, 1999, see section 532(d) of Pub. L. 106–170, set out as a note under section 170 of this title.
Effective Date of 1998 Amendment
Pub. L. 105–206, title VI, § 6009(b)(2), July 22, 1998, 112 Stat. 812, provided that: “The second sentence of section 7704(g)(3)(C) of the 1986 Code (as added by paragraph (1)) shall apply to taxable years beginning after the date of the enactment of this Act [July 22, 1998].”
Effective Date of 1997 Amendment
Pub. L. 105–34, title IX, § 964(b), Aug. 5, 1997, 111 Stat. 893, provided that: “The amendment made by this section [amending this section] shall apply to taxable years beginning after December 31, 1997.”
Effective Date of 1988 Amendment
Amendment by Pub. L. 100–647 effective, except as otherwise provided, as if included in the provisions of the Revenue Act of 1987, Pub. L. 100–203, title X, to which such amendment relates, see section 2004(u) of Pub. L. 100–647, set out as a note under section 56 of this title.
Effective Date
Pub. L. 100–203, title X, § 10211(c), Dec. 22, 1987, 101 Stat. 1330–405, as amended by Pub. L. 100–647, title II, § 2004(f)(2), Nov. 10, 1988, 102 Stat. 3602, provided that:
“(1) In general.— The amendments made by this section [enacting this section] shall apply—“(A) except as provided in subparagraph (B), to taxable years beginning after December 31, 1987, or“(B) in the case of an existing partnership, to taxable years beginning after December 31, 1997.“(2) Existing partnership.— For purposes of this subsection—“(A) In general.— The term ‘existing partnership’ means any partnership if—“(i) such partnership was a publicly traded partnership on December 17, 1987,“(ii) a registration statement indicating that such partnership was to be a publicly traded partnership was filed with the Securities and Exchange Commission with respect to such partnership on or before such date, or“(iii) with respect to such partnership, an application was filed with a State regulatory commission on or before such date seeking permission to restructure a portion of a corporation as a publicly traded partnership.“(B) Special rule where substantial new line of business added after december 17, 1987.— A partnership which, but for this subparagraph, would be treated as an existing partnership shall cease to be treated as an existing partnership as of the 1st day after December 17, 1987, on which there has been an addition of a substantial new line of business with respect to such partnership.“(C) Coordination with passive-type income requirements.— In the case of an existing partnership, paragraph (1) of section 7704(c) of the Internal Revenue Code of 1986 (as added by this section) shall be applied by substituting for ‘December 31, 1987’ the earlier of—“(i) December 31, 1997, or“(ii) the day (if any) as of which such partnership ceases to be treated as an existing partnership by reason of subparagraph (B).”