2021 ESOP Fairness Act

II 117TH CONGRESS 1ST SESSION S. 1559 To amend the Internal Revenue Code of 1986 to allow certain qualified over-the-counter securities to be treated as readily traded on an estab- lished securities market for the purpose of diversification requirements for employee stock ownership plans. IN THE SENATE OF THE UNITED STATES MAY 11, 2021 Mr. TILLIS (for himself and Mr. PETERS) 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 allow cer- tain qualified over-the-counter securities to be treated as readily traded on an established securities market for the purpose of diversification requirements for em- ployee stock ownership plans. 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 ‘‘2021 ESOP Fairness 4 Act’’. 5 VerDate Sep 11 2014 00:35 May 27, 2021 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S1559.IS S1559 kjohnson on DSK79L0C42PROD with BILLS 2 •S 1559 IS SEC. 2. CERTAIN SECURITIES TREATED AS PUBLICLY 1 TRADED. 2 (a) IN GENERAL.—Paragraph (35) of section 401(a) 3 of the Internal Revenue Code of 1986 is amended by add- 4 ing at the end the following new subparagraph: 5 ‘‘(I) RULES RELATING TO PUBLICLY TRAD- 6 ED SECURITIES.—For purposes of this para- 7 graph— 8 ‘‘(i) IN GENERAL.—The term ‘publicly 9 traded employer securities’ means em- 10 ployer securities which are readily tradable 11 on an established securities market. 12 ‘‘(ii) SPECIAL RULE.—A security shall 13 be treated as described in clause (i) if the 14 security— 15 ‘‘(I) is the subject of priced 16 quotations by at least 2 dealers, pub- 17 lished and made continuously avail- 18 able on an interdealer quotation sys- 19 tem (as such term is used in section 20 13 of the Securities Exchange Act of 21 1934) which has made the request de- 22 scribed in section 6(j) of such Act to 23 be treated as an alternative trading 24 system, 25 VerDate Sep 11 2014 00:35 May 27, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S1559.IS S1559 kjohnson on DSK79L0C42PROD with BILLS 3 •S 1559 IS ‘‘(II) is not a penny stock (as de- 1 fined by section 3(a)(51) of such Act), 2 ‘‘(III) is issued by a company 3 which is not a shell company (as such 4 term is used in section 4(d)(6) of the 5 Securities Act of 1933) or a blank 6 check company (as defined in section 7 7(b)(3) of such Act), and is not sub- 8 ject to bankruptcy proceedings, 9 ‘‘(IV) in the case of a security 10 issued by a company incorporated in 11 the United States, the issuer pub- 12 lishes, not less frequently than annu- 13 ally, financial statements audited by 14 an independent auditor registered 15 with the Public Company Accounting 16 Oversight Board established under the 17 Sarbanes-Oxley Act of 2002, and 18 ‘‘(V) in the case of a security 19 issued by a company incorporated out- 20 side of the United States, the issuer— 21 ‘‘(aa) is subject to the re- 22 porting requirements of sections 23 13 or 15(d) of the Securities Ex- 24 change Act of 1934, 25 VerDate Sep 11 2014 00:35 May 27, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S1559.IS S1559 kjohnson on DSK79L0C42PROD with BILLS 4 •S 1559 IS ‘‘(bb) is subject to the re- 1 porting requirements of section 2 230.257 of title 17, Code of Fed- 3 eral Regulations, or 4 ‘‘(cc) is exempt from such 5 requirements under section 6 240.12g3–2(b) of title 17, Code 7 of Federal Regulations, and 8 has published all information which is 9 required by such Act or Rule, as ap- 10 plicable, to be publicly available.’’. 11 (b) CONFORMING AMENDMENT.—Subparagraph (G) 12 of section 401(a)(35) of the Internal Revenue Code of 13 1986 is amended by striking clause (v) and by redesig- 14 nating clause (vi) as clause (v). 15 (c) EFFECTIVE DATE.—The amendments made by 16 this section shall apply to plan years beginning after the 17 date of the enactment of this Act. 18 Æ VerDate Sep 11 2014 00:35 May 27, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6301 E:\BILLS\S1559.IS S1559 kjohnson on DSK79L0C42PROD with BILLS