CEO Accountability and Responsibility Act

I 117TH CONGRESS 1ST SESSION H. R. 3301 To amend the Internal Revenue Code of 1986 to adjust the rate of income tax of a publicly traded corporation based on the ratio of compensation of the corporation’s highest paid employee to the median compensation of all the corporation’s employees, and for other purposes. IN THE HOUSE OF REPRESENTATIVES MAY 18, 2021 Mr. DESAULNIER introduced the following bill; which was referred to the Committee on Ways and Means, and in addition to the Committee on Oversight and Reform, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned A BILL To amend the Internal Revenue Code of 1986 to adjust the rate of income tax of a publicly traded corporation based on the ratio of compensation of the corporation’s highest paid employee to the median compensation of all the corporation’s employees, and for other purposes. 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 ‘‘CEO Accountability 4 and Responsibility Act’’. 5 VerDate Sep 11 2014 04:21 Jun 16, 2021 Jkt 019200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H3301.IH H3301 kjohnson on DSK79L0C42PROD with BILLS 2 •HR 3301 IH SEC. 2. INCOME TAX RATE OF PUBLICLY TRADED COR- 1 PORATIONS BASED ON COMPENSATION 2 RATIO. 3 (a) IN GENERAL.—Section 11 of the Internal Rev- 4 enue Code of 1986 is amended by adding at the end the 5 following: 6 ‘‘(e) TAX RATE OF PUBLICLY TRADED CORPORA- 7 TIONS BASED ON COMPENSATION RATIO.— 8 ‘‘(1) IN GENERAL.—In the case of a publicly 9 traded corporation (as defined in section 10 162(m)(2)), in the amount of tax under subsection 11 (b) shall be determined— 12 ‘‘(A) by adjusting the highest rate of tax 13 applicable to the taxpayer by the percentage 14 point adjustment specified in paragraph (2), 15 and 16 ‘‘(B) by making proper adjustments to— 17 ‘‘(i) the dollar amount in clause (ii) of 18 the second sentence of paragraph (1), and 19 ‘‘(ii) the dollar amount in clause (ii) 20 of the third sentence of paragraph (1). 21 ‘‘(2) ADJUSTMENT OF TAX RATE.—For pur- 22 poses of paragraph (1), the percentage points speci- 23 fied in this paragraph shall be determined as follows: 24 VerDate Sep 11 2014 04:21 Jun 16, 2021 Jkt 019200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H3301.IH H3301 kjohnson on DSK79L0C42PROD with BILLS 3 •HR 3301 IH ‘‘If the compensation ratio is: The percentage point adjustment is: More than 100 but not more than 150 ........ +0.5 percentage points More than 150 but not more than 200 ........ +1 percentage points More than 200 but not more than 250 ........ +1.5 percentage points More than 250 but not more than 300 ........ +2 percentage points More than 300 but not more than 400 ........ +2.5 percentage points More than 400 .............................................. +3 percentage points. ‘‘(3) DEFINITIONS.—For purposes of this sub- 1 section— 2 ‘‘(A) COMPENSATION RATIO.—The term 3 ‘compensation ratio’ means, with respect to any 4 taxable year, a ratio— 5 ‘‘(i) the numerator of which is the 6 amount equal to the greater of the com- 7 pensation of the chief executive officer or 8 the highest paid employee of the taxpayer 9 for the calendar year preceding the begin- 10 ning of the taxable year, and 11 ‘‘(ii) the denominator of which is the 12 amount equal to the median compensation 13 of all employees employed by the taxpayer 14 in the United States for the calendar year 15 preceding the beginning of the taxable 16 year. 17 ‘‘(B) COMPENSATION.— 18 ‘‘(i) EMPLOYEES.—In the case of em- 19 ployees of the taxpayer other than the 20 VerDate Sep 11 2014 04:21 Jun 16, 2021 Jkt 019200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H3301.IH H3301 kjohnson on DSK79L0C42PROD with BILLS 4 •HR 3301 IH chief executive officer or the highest paid 1 employee, the term ‘compensation’ means 2 wages (as defined in section 3121(a)) paid 3 by the taxpayer during a calendar year. 4 ‘‘(ii) CEO AND HIGHEST PAID EM- 5 PLOYEE.—In the case of the chief execu- 6 tive officer and the highest paid employee 7 of the taxpayer, the term ‘compensation’ 8 means total compensation for the calendar 9 year, as reported in the Summary Com- 10 pensation Table reported to the Securities 11 and Exchange Commission pursuant to 12 Item 402 of Regulation S–K of the Securi- 13 ties and Exchange Commission. 14 ‘‘(4) SPECIAL RULE IF CONTRACTED OR FOR- 15 EIGN EMPLOYEE RATIO INCREASES.— 16 ‘‘(A) IN GENERAL.—If— 17 ‘‘(i) the total number of full-time em- 18 ployees, determined on an annual full-time 19 equivalent basis, employed by the taxpayer 20 in the United States for a taxable year is 21 reduced by more than 10 percent, as com- 22 pared to the total number of full-time em- 23 ployees, determined on an annual full-time 24 equivalent basis, employed by the taxpayer 25 VerDate Sep 11 2014 04:21 Jun 16, 2021 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H3301.IH H3301 kjohnson on DSK79L0C42PROD with BILLS 5 •HR 3301 IH in the United States for the preceding tax- 1 able year, and 2 ‘‘(ii) the total number of contracted 3 employees or foreign full-time employees, 4 determined on an annual full-time equiva- 5 lent basis, of the taxpayer for that taxable 6 year has increased, as compared with the 7 total number of contracted employees or 8 foreign full-time employees, determined on 9 an annual full-time equivalent basis, of the 10 taxpayer for the preceding taxable year, 11 then the applicable tax rate determined under 12 paragraph (2) shall be increased by 50 percent. 13 For taxpayers who first commence doing busi- 14 ness during the taxable year, the number of 15 full-time employees, contracted employees, and 16 foreign full-time employees for the immediately 17 preceding prior taxable year shall be zero. 18 ‘‘(B) DEFINITIONS.—For purposes of this 19 paragraph— 20 ‘‘(i) ANNUAL FULL-TIME EQUIVA- 21 LENT.—The term ‘annual full-time equiva- 22 lent’ means— 23 ‘‘(I) in the case of a full-time em- 24 ployee paid hourly qualified wages, the 25 VerDate Sep 11 2014 04:21 Jun 16, 2021 Jkt 019200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H3301.IH H3301 kjohnson on DSK79L0C42PROD with BILLS 6 •HR 3301 IH total number of hours worked for the 1 taxpayer by the employee, not to ex- 2 ceed 2,000 hours per employee, di- 3 vided by 2,000, and 4 ‘‘(II) in the case of a salaried 5 full-time employee, the total number 6 of weeks worked for the taxpayer by 7 the employee divided by 52. 8 ‘‘(ii) CONTRACTED FULL-TIME EM- 9 PLOYEE.—The term ‘contracted full-time 10 employee’ means an individual engaged by 11 the taxpayer to provide a specific set of 12 services established pursuant to the terms 13 and conditions of a written employment 14 contract that delineates the length of em- 15 ployment, the salary and bonuses (if any) 16 to be paid, and the benefits that accrue to 17 that individual. 18 ‘‘(iii) FOREIGN FULL-TIME EM- 19 PLOYEE.—The term ‘foreign full-time em- 20 ployee’ means a full-time employee of the 21 taxpayer that is employed at a location 22 other than the United States. 23 VerDate Sep 11 2014 04:21 Jun 16, 2021 Jkt 019200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H3301.IH H3301 kjohnson on DSK79L0C42PROD with BILLS 7 •HR 3301 IH ‘‘(iv) FULL-TIME EMPLOYEE.—The 1 term ‘full-time employee’ means an em- 2 ployee of the taxpayer that either— 3 ‘‘(I) is paid compensation by the 4 taxpayer for services of not less than 5 an average of 35 hours per week, or 6 ‘‘(II) is a salaried employee of 7 the taxpayer and is paid compensation 8 during the taxable year for full-time 9 employment. 10 ‘‘(5) CONTROLLED GROUPS.—For purposes of 11 this subsection, all persons treated as a single em- 12 ployer under subsection (b), (c), (m) or (o) of sec- 13 tion 414 shall be treated as one person. 14 ‘‘(6) REPORTS.—The taxpayer shall furnish 15 such reports to the Secretary with respect to com- 16 pensation and such other matters as the Secretary 17 may require. The reports required by this subsection 18 shall be filed at such time and in such manner as 19 may be required by the Secretary. 20 ‘‘(7) REGULATIONS.—The Secretary shall pre- 21 scribe such regulations and other guidance as may 22 be necessary or appropriate to carry out this sub- 23 section, including any guidelines regarding the deter- 24 VerDate Sep 11 2014 04:21 Jun 16, 2021 Jkt 019200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H3301.IH H3301 kjohnson on DSK79L0C42PROD with BILLS 8 •HR 3301 IH mination of wages, average compensation, and com- 1 pensation ratio.’’. 2 (b) EFFECTIVE DATE.—The amendment made by 3 subsection (a) shall apply to taxable years beginning after 4 the date of the enactment of this Act. 5 SEC. 3. CONTRACTING PREFERENCE FOR ENTITIES WITH 6 CERTAIN PAY RATIOS. 7 (a) AMENDMENT.—Chapter 47 of title 41, United 8 States Code, is amended by inserting after section 4714 9 the following new section: 10 ‘‘§ 4715. Preference for entities with certain pay ra- 11 tios 12 ‘‘(a) PREFERENCE.—In the evaluation of bids or pro- 13 posals for a contract for the procurement of goods or serv- 14 ices, the head of an executive agency shall provide a pref- 15 erence to an entity that for the previous calendar year has 16 a compensation ratio of less than 50-to-1. 17 ‘‘(b) COMPENSATION RATIO DEFINED.—In this sec- 18 tion, the term ‘compensation ratio’ has the meaning given 19 that term in section 11(e)(3)(A) of the Internal Revenue 20 Code of 1986, except the ratio determined for the calendar 21 year preceding the calendar year of the contract to which 22 this section applies.’’. 23 (b) CLERICAL AMENDMENT.—The table of sections 24 at the beginning of such chapter is amended by inserting 25 VerDate Sep 11 2014 04:21 Jun 16, 2021 Jkt 019200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H3301.IH H3301 kjohnson on DSK79L0C42PROD with BILLS 9 •HR 3301 IH after the item relating to section 4714 the following new 1 item: 2 ‘‘4715. Preference for entities with certain pay ratios.’’. Æ VerDate Sep 11 2014 04:21 Jun 16, 2021 Jkt 019200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6301 E:\BILLS\H3301.IH H3301 kjohnson on DSK79L0C42PROD with BILLS