SECTION 5. DEFINITIONS

.01 Eligible § 861 partnership . An eligible § 861 partnership is a partnership that, for the current taxable year—

(a) has at least 100 partners on any day during the partnership’s taxable year,

(b) is composed at all times during the taxable year of interests, at least 70 percent of which are held by qualifying partners (as defined in section 5.04 of this revenue procedure), and

(c) has DPGR.

.02 Eligible widely-held pass-thru en- tity . An eligible widely-held pass-thru entity is a partnership or S corporation that, for the current taxable year—

(a) satisfies the requirements of § 1.199–4(e)(2) (definition of eligible taxpayer), determined as though the partnership or S corporation were the taxpayer,

(b) has total CGS and deductions, the sum of which is $100 million or less,

(c) has DPGR, (d) for every day of the current taxable year, is composed entirely of partners, or S corporation shareholders, that are individuals, estates, or trusts described (or treated as described) in § 1361(c)(2), and

(e) for every day of the taxable year, is—

(i) a partnership in which no partner has a profits or capital interest exceeding 10 percent (determined after aggregating the interests of any related persons as defined in section 5.06 of this revenue procedure) of the total profits or capital interests of the partnership, or

(ii) an S corporation with a shareholder described in § 1361(c)(6) in which no shareholder owns shares exceeding 10 percent (determined after aggregating the interests of any related persons as defined in section 5.06 of this revenue procedure) of the total shares of the S corporation.

.03 Eligible small pass-thru entity . An eligible small pass-thru entity is a partnership or S corporation that, for the current taxable year—

(a) satisfies the requirements of § 1.199–4(f)(2) (definition of qualifying small taxpayer), determined as though the partnership or S corporation were the taxpayer,

(b) has total costs (as defined in § 1.199–4(f)(3)) of $5 million or less,

(c) has DPGR, and (d) in the case of a partnership, does not have an ineligible entity (as described in section 3.02 of this revenue procedure) as a partner.

.04 Qualifying partner . A qualifying partner is a partner in an eligible § 861 partnership that, on each day during the partnership’s taxable year that such person is a partner of the partnership, such person—

(a) is not a general partner or a managing member of a partnership organized as a limited liability company under state law,

June 4, 2007 1348 2007–23 I.R.B.