US SB2094

Requires partners in "applicable partnerships" (those with two or more related parties) to recognize gain when receiving property distributions that result in basis increases to remaining partnership property under Section 734(b)(1)(B)

Limits basis step-ups on partnership interest transfers between related parties to the amount of gain actually recognized on the transfer, preventing artificial inflation of asset basis without corresponding tax

Provides a small business exception for partnerships meeting the gross receipts test under Section 448(c), though partnerships that fail the test in any year after enactment are permanently disqualified

Imposes a 40% accuracy-related penalty (double the standard 20% rate) for underpayments attributable to related-party partnership distribution understatements

Applies to distributions and transfers occurring after June 11, 2025, and directs the Treasury Secretary to issue regulations addressing substantially similar transactions, including those involving tax-indifferent parties