In an amended prospectus filed with the U.S. Securities and Exchange Commission, Blackstone said the proposed law would apply to it beginning with the 2013 tax year.
Blackstone said the legislation, if enacted, would cause "a material increase in our tax liability when such legislation begins to apply to us." It also said changes that precluded it from qualifying under publicly traded partnership rules might "result in a reduction in the value of our common units."
Blackstone is expected to conduct an initial public offering in the last week of June, raising an estimated $3.87 billion to $4.13 billion.
"The nature of investment vehicles is changing right before our eyes, and the tax code must keep up with the times," Baucus said in a statement.
The bill he and Grassley proposed could double the tax burden for Blackstone and other private-equity firms that go public because corporations pay their own income taxes and their shareholders pay capital gains taxes on their investment. Investment partnerships and their partners, by contrast, pay only one level of tax, on their shares of the income generated.
"Creative new structures for investment vehicles may blur the lines for the tax treatment of income," Baucus said. "We must make the law clear and apply the law fairly, or risk the erosion of our corporate tax base.."
Baucus and Grassley sent letters to Treasury Secretary Henry Paulson and Christopher Cox, the chairman of the Securities and Exchange Commission, saying that the Blackstone IPO raises serious tax questions that must be resolved soon.
The SEC has been reviewing Blackstone's planned IPO.