Wall Street Tax Act of 2021

II 117TH CONGRESS 1ST SESSION S. 817 To amend the Internal Revenue Code of 1986 to impose a tax on certain trading transactions. IN THE SENATE OF THE UNITED STATES MARCH 18, 2021 Mr. SCHATZ (for himself, Mr. VAN HOLLEN, Ms. WARREN, Mrs. GILLIBRAND, Mr. MERKLEY, and Mr. WHITEHOUSE) introduced the following bill; which was read twice and referred to the Committee on Finance A BILL To amend the Internal Revenue Code of 1986 to impose a tax on certain trading transactions. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE. 3 This Act may be cited as the ‘‘Wall Street Tax Act 4 of 2021’’. 5 SEC. 2. TRANSACTION TAX. 6 (a) IN GENERAL.—Chapter 36 of the Internal Rev- 7 enue Code of 1986 is amended by inserting after sub- 8 chapter B the following new subchapter: 9 VerDate Sep 11 2014 15:43 Apr 10, 2021 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S817.IS S817 pamtmann on DSKBC07HB2PROD with BILLS 2 •S 817 IS ‘‘Subchapter C—Tax on Trading Transactions 1 ‘‘Sec. 4475. Tax on trading transactions. ‘‘Sec. 4476. Derivative defined. ‘‘SEC. 4475. TAX ON TRADING TRANSACTIONS. 2 ‘‘(a) IMPOSITION OF TAX.—There is hereby imposed 3 a tax on each covered transaction with respect to any secu- 4 rity. 5 ‘‘(b) RATE OF TAX.—The tax imposed under sub- 6 section (a) with respect to any covered transaction shall 7 be 0.1 percent of the specified base amount with respect 8 to such covered transaction. 9 ‘‘(c) SPECIFIED BASE AMOUNT.—For purposes of 10 this section, the term ‘specified base amount’ means— 11 ‘‘(1) except as provided in paragraph (2), the 12 fair market value of a security (determined as of the 13 time of the covered transaction), and 14 ‘‘(2) in the case of any payment with respect to 15 a derivative, the amount of such payment. 16 ‘‘(d) COVERED TRANSACTION.—For purposes of this 17 section— 18 ‘‘(1) IN GENERAL.—The term ‘covered trans- 19 action’ means— 20 ‘‘(A) except as provided in subparagraph 21 (B), any purchase if— 22 VerDate Sep 11 2014 15:43 Apr 10, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S817.IS S817 pamtmann on DSKBC07HB2PROD with BILLS 3 •S 817 IS ‘‘(i) such purchase occurs on, or is 1 subject to the rules of, a qualified board or 2 exchange located in the United States, or 3 ‘‘(ii) the purchaser or seller is a 4 United States person, and 5 ‘‘(B) any transaction with respect to a de- 6 rivative if— 7 ‘‘(i) such derivative is traded on, or is 8 subject to the rules of, a qualified board or 9 exchange located in the United States, or 10 ‘‘(ii) any party with rights under such 11 derivative is a United States person. 12 ‘‘(2) EXCEPTION FOR INITIAL ISSUES.—No tax 13 shall be imposed under subsection (a) on any cov- 14 ered transaction with respect to the initial issuance 15 of any security described in subparagraph (A), (B), 16 or (C) of subsection (e)(1). 17 ‘‘(e) DEFINITIONS AND SPECIAL RULES.—For pur- 18 poses of this section— 19 ‘‘(1) SECURITY.—For purposes of this section, 20 the term ‘security’ means— 21 ‘‘(A) any share of stock in a corporation, 22 ‘‘(B) any partnership or beneficial owner- 23 ship interest in a partnership or trust, 24 VerDate Sep 11 2014 15:43 Apr 10, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S817.IS S817 pamtmann on DSKBC07HB2PROD with BILLS 4 •S 817 IS ‘‘(C) except as provided in paragraph (2), 1 any note, bond, debenture, or other evidence of 2 indebtedness, and 3 ‘‘(D) any derivative (as defined in section 4 4476). 5 ‘‘(2) EXCEPTION FOR CERTAIN TRADED SHORT- 6 TERM INDEBTEDNESS.—A note, bond, debenture, or 7 other evidence of indebtedness which— 8 ‘‘(A) is traded on, or is subject to the rules 9 of, a qualified board or exchange located in the 10 United States, and 11 ‘‘(B) has a fixed maturity of not more 12 than 100 days, 13 shall not be treated as described in paragraph 14 (1)(C). 15 ‘‘(3) QUALIFIED BOARD OR EXCHANGE.—The 16 term ‘qualified board or exchange’ has the meaning 17 given such term by section 1256(g)(7). 18 ‘‘(f) BY WHOM PAID.— 19 ‘‘(1) IN GENERAL.—The tax imposed by this 20 section shall be paid by— 21 ‘‘(A) in the case of a transaction which oc- 22 curs on, or is subject to the rules of, a qualified 23 board or exchange located in the United States, 24 such qualified board or exchange, and 25 VerDate Sep 11 2014 15:43 Apr 10, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S817.IS S817 pamtmann on DSKBC07HB2PROD with BILLS 5 •S 817 IS ‘‘(B) in the case of a purchase not de- 1 scribed in subparagraph (A) which is executed 2 by a broker (as defined in section 6045(c)(1)) 3 which is a United States person, such broker. 4 ‘‘(2) SPECIAL RULES FOR DIRECT, ETC., 5 TRANSACTIONS.—In the case of any transaction to 6 which paragraph (1) does not apply, the tax imposed 7 by this section shall be paid by— 8 ‘‘(A) in the case of a transaction described 9 in subsection (d)(1)(A)— 10 ‘‘(i) the purchaser if the purchaser is 11 a United States person, and 12 ‘‘(ii) the seller if the purchaser is not 13 a United States person, and 14 ‘‘(B) in the case of a transaction described 15 in subsection (d)(1)(B)— 16 ‘‘(i) the payor if the payor is a United 17 States person, and 18 ‘‘(ii) the payee if the payor is not a 19 United States person. 20 ‘‘(g) TREATMENT OF EXCHANGES AND PAYMENTS 21 WITH RESPECT TO DERIVATIVES.—For purposes of this 22 section— 23 ‘‘(1) TREATMENT OF EXCHANGES.— 24 VerDate Sep 11 2014 15:43 Apr 10, 2021 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S817.IS S817 pamtmann on DSKBC07HB2PROD with BILLS 6 •S 817 IS ‘‘(A) IN GENERAL.—An exchange shall be 1 treated as the sale of the property transferred 2 and a purchase of the property received by each 3 party to the exchange. 4 ‘‘(B) CERTAIN DEEMED EXCHANGES.—In 5 the case of a distribution treated as an ex- 6 change for stock under section 302 or 331, the 7 corporation making such distribution shall be 8 treated as having purchased such stock for pur- 9 poses of this section. 10 ‘‘(2) PAYMENTS WITH RESPECT TO DERIVA- 11 TIVES TREATED AS SEPARATE TRANSACTIONS.—Ex- 12 cept as otherwise provided by the Secretary, any 13 payment with respect to any derivative shall be 14 treated as a separate transaction for purposes of 15 this section. 16 ‘‘(h) APPLICATION TO TRANSACTIONS BY CON- 17 TROLLED FOREIGN CORPORATIONS.— 18 ‘‘(1) IN GENERAL.—For purposes of this sec- 19 tion, a controlled foreign corporation shall be treated 20 as a United States person. 21 ‘‘(2) SPECIAL RULES FOR PAYMENT OF TAX ON 22 DIRECT, ETC., TRANSACTIONS.—In the case of any 23 transaction which is a covered transaction solely by 24 VerDate Sep 11 2014 15:43 Apr 10, 2021 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S817.IS S817 pamtmann on DSKBC07HB2PROD with BILLS 7 •S 817 IS reason of paragraph (1) and which is not described 1 in subsection (f)(1)— 2 ‘‘(A) PAYMENT BY UNITED STATES SHARE- 3 HOLDERS.—Any tax which would (but for this 4 paragraph) be payable under subsection (f)(2) 5 by the controlled foreign corporation shall, in 6 lieu thereof, be paid by the United States 7 shareholders of such controlled foreign corpora- 8 tion as provided in subparagraph (B). 9 ‘‘(B) PRO RATA SHARES.—Each such 10 United States shareholder shall pay the same 11 proportion of such tax as— 12 ‘‘(i) the stock which such United 13 States shareholder owns (within the mean- 14 ing of section 958(a)) in such controlled 15 foreign corporation, bears to 16 ‘‘(ii) the stock so owned by all United 17 States shareholders in such controlled for- 18 eign corporation. 19 ‘‘(C) DEFINITIONS.—For purposes of this 20 subsection, the terms ‘United States share- 21 holder’ and ‘controlled foreign corporation’ have 22 the meanings given such terms in sections 23 951(b) and 957(a), respectively. 24 VerDate Sep 11 2014 15:43 Apr 10, 2021 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S817.IS S817 pamtmann on DSKBC07HB2PROD with BILLS 8 •S 817 IS ‘‘(i) ADMINISTRATION.—The Secretary shall carry 1 out this section in consultation with the Securities and Ex- 2 change Commission and the Commodity Futures Trading 3 Commission. 4 ‘‘(j) GUIDANCE; REGULATIONS.—The Secretary 5 shall— 6 ‘‘(1) provide guidance regarding such informa- 7 tion reporting concerning covered transactions as the 8 Secretary deems appropriate, and 9 ‘‘(2) prescribe such regulations as are necessary 10 or appropriate to prevent avoidance of the purposes 11 of this section, including the use of non-United 12 States persons in such transactions. 13 ‘‘SEC. 4476. DERIVATIVE DEFINED. 14 ‘‘(a) IN GENERAL.—For purposes of this subchapter, 15 except as otherwise provided in this section, the term ‘de- 16 rivative’ means any contract (including any option, for- 17 ward contract, futures contract, short position, swap, or 18 similar contract) the value of which, or any payment or 19 other transfer with respect to which, is (directly or indi- 20 rectly) determined by reference to one or more of the fol- 21 lowing: 22 ‘‘(1) Any share of stock in a corporation. 23 ‘‘(2) Any partnership or beneficial ownership 24 interest in a partnership or trust. 25 VerDate Sep 11 2014 15:43 Apr 10, 2021 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S817.IS S817 pamtmann on DSKBC07HB2PROD with BILLS 9 •S 817 IS ‘‘(3) Any evidence of indebtedness. 1 ‘‘(4) Except as provided in subsection (b)(1), 2 any real property. 3 ‘‘(5) Any commodity which is actively traded 4 (within the meaning of section 1092(d)(1)). 5 ‘‘(6) Any currency. 6 ‘‘(7) Any rate, price, amount, index, formula, or 7 algorithm. 8 ‘‘(8) Any other item as the Secretary may pre- 9 scribe. 10 Except as provided in regulations prescribed by the Sec- 11 retary to prevent the avoidance of the purposes of this 12 subchapter, such term shall not include any item described 13 in paragraphs (1) through (8). 14 ‘‘(b) EXCEPTIONS.— 15 ‘‘(1) CERTAIN REAL PROPERTY.— 16 ‘‘(A) IN GENERAL.—For purposes of this 17 subchapter, the term ‘derivative’ shall not in- 18 clude any contract with respect to interests in 19 real property (as defined in section 20 856(c)(5)(C)) if such contract requires physical 21 delivery of such real property. 22 ‘‘(B) OPTIONS TO SETTLE IN CASH.— 23 ‘‘(i) IN GENERAL.—For purposes of 24 subparagraph (A), a contract which pro- 25 VerDate Sep 11 2014 15:43 Apr 10, 2021 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S817.IS S817 pamtmann on DSKBC07HB2PROD with BILLS 10 •S 817 IS vides for an option of cash settlement shall 1 not be treated as requiring physical deliv- 2 ery of real property unless the option is— 3 ‘‘(I) not exercisable uncondition- 4 ally, and 5 ‘‘(II) exercisable only in unusual 6 and exceptional circumstances. 7 ‘‘(ii) OPTION OF CASH SETTLE- 8 MENT.—For purposes of clause (i), a con- 9 tract provides an option of cash settlement 10 if the contract settles in (or could be set- 11 tled in) cash or property other than the 12 underlying real property. 13 ‘‘(2) SECURITIES LENDING, SALE-REPURCHASE, 14 AND SIMILAR FINANCING TRANSACTIONS.—To the 15 extent provided by the Secretary, for purposes of 16 this subchapter, the term ‘derivative’ shall not in- 17 clude the right to the return of the same or substan- 18 tially identical securities transferred in a securities 19 lending transaction, sale-repurchase transaction, or 20 similar financing transaction. 21 ‘‘(3) OPTIONS RECEIVED IN CONNECTION WITH 22 THE PERFORMANCE OF SERVICES.—For purposes of 23 this subchapter, the term ‘derivative’ shall not in- 24 clude any option described in section 83(e)(3) re- 25 VerDate Sep 11 2014 15:43 Apr 10, 2021 Jkt 019200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S817.IS S817 pamtmann on DSKBC07HB2PROD with BILLS 11 •S 817 IS ceived in connection with the performance of serv- 1 ices. 2 ‘‘(4) INSURANCE CONTRACTS, ANNUITIES, AND 3 ENDOWMENTS.—For purposes of this subchapter, 4 the term ‘derivative’ shall not include any insurance, 5 annuity, or endowment contract issued by an insur- 6 ance company to which subchapter L applies (or 7 issued by any foreign corporation to which such sub- 8 chapter would apply if such foreign corporation were 9 a domestic corporation). 10 ‘‘(5) DERIVATIVES WITH RESPECT TO STOCK 11 OF MEMBERS OF SAME WORLDWIDE AFFILIATED 12 GROUP.—For purposes of this subchapter, the term 13 ‘derivative’ shall not include any derivative (deter- 14 mined without regard to this paragraph) with re- 15 spect to stock issued by any member of the same 16 worldwide affiliated group (as defined in section 17 864(f)) in which the taxpayer is a member. 18 ‘‘(6) COMMODITIES USED IN NORMAL COURSE 19 OF TRADE OR BUSINESS.—For purposes of this sub- 20 chapter, the term ‘derivative’ shall not include any 21 contract with respect to any commodity if— 22 ‘‘(A) such contract requires physical deliv- 23 ery with the option of cash settlement only in 24 unusual and exceptional circumstances, and 25 VerDate Sep 11 2014 15:43 Apr 10, 2021 Jkt 019200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S817.IS S817 pamtmann on DSKBC07HB2PROD with BILLS 12 •S 817 IS ‘‘(B) such commodity is used (and is used 1 in quantities with respect to which such deriva- 2 tive relates) in the normal course of the tax- 3 payer’s trade or business (or, in the case of an 4 individual, for personal consumption). 5 ‘‘(c) CONTRACTS WITH EMBEDDED DERIVATIVE 6 COMPONENTS.— 7 ‘‘(1) IN GENERAL.—If a contract has derivative 8 and nonderivative components, then each derivative 9 component shall be treated as a derivative for pur- 10 poses of this subchapter. If the derivative component 11 cannot be separately valued, then the entire contract 12 shall be treated as a derivative for purposes of this 13 subchapter. 14 ‘‘(2) EXCEPTION FOR CERTAIN EMBEDDED DE- 15 RIVATIVE COMPONENTS OF DEBT INSTRUMENTS.—A 16 debt instrument shall not be treated as having a de- 17 rivative component merely because— 18 ‘‘(A) such debt instrument is denominated 19 in a nonfunctional currency (as defined in sec- 20 tion 988(c)(1)(C)(ii)), or 21 ‘‘(B) payments with respect to such debt 22 instrument are determined by reference to the 23 value of a nonfunctional currency (as so de- 24 fined). 25 VerDate Sep 11 2014 15:43 Apr 10, 2021 Jkt 019200 PO 00000 Frm 00012 Fmt 6652 Sfmt 6201 E:\BILLS\S817.IS S817 pamtmann on DSKBC07HB2PROD with BILLS 13 •S 817 IS ‘‘(d) TREATMENT OF AMERICAN DEPOSITORY RE- 1 CEIPTS AND SIMILAR INSTRUMENTS.—Except as other- 2 wise provided by the Secretary, for purposes of this sub- 3 chapter, American depository receipts (and similar instru- 4 ments) with respect to shares of stock in foreign corpora- 5 tions shall be treated as shares of stock in such foreign 6 corporations [Text truncated for display. 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