The PARTNERSHIPS Act amends federal tax rules for partnerships and partners to prevent aggressive tax avoidance strategies among related parties. The bill requires certain controlled partners to use consistent methods for allocating partnership income and losses, mandates the use of specific valuation techniques to prevent unfair gain-shifting, eliminates outdated time limits on taxing contributed property, and changes how partnership debt is allocated. The legislation also expands the Net Investment Income Tax to apply to high-income individuals' business income above $400,000 ($500,000 for joint filers), while providing exemptions and phase-in periods for smaller partnerships. Additionally, the bill closes tax loopholes involving transfers of appreciated securities into investment entities, clarifies when taxpayers can claim losses from worthless investments, and codifies Treasury Department authority to disregard partnership transactions lacking legitimate business purposes. Most provisions take effect after the bill's enactment or December 31, 2025, with a six-year installment payment option available for affected taxpayers.
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