On July 22, 2015, the Treasury Department released proposed regulations under Section 707 of the Internal Revenue Code of 1986, as amended (the “Code”), that are intended to provide guidance on when a compensation arrangement between a partnership and a partner will be treated as a disguised payment for services to a partner not acting in a partner capacity. Treatment as a disguised payment for services would, among other things, cause the partner to be subject to tax at ordinary income rates on such disguised payments, potentially subject such payments to compliance with the deferred compensation regimes of Sections 409A and 457A of the Code, and cause such payments to be subject to the applicable capitalization and deduction rules for the partnership. This differs from “profits interest” treatment, which permits a partnership interest to be valued at zero upon receipt if such interest is not “in the money” when granted.