Federal

DEPOSIT Act

Source: Congress.gov · 1,140 words in original text

What This Bill Does

This bill adds a new tax rule to the tax code that applies higher tax rates to bonuses and stock sale profits received by executives at banks that have failed. The bill targets executives who worked at banks that the Federal Deposit Insurance Corporation (FDIC, a government agency that protects bank deposits) has taken over as conservator or receiver (legal terms meaning the FDIC has taken control of the failed bank). ##

Who It Affects

- Executives of banks that have been taken over by the FDIC - Bank executives who earned over $250,000 in adjusted gross income (income after certain deductions) during the year they received bonuses or stock profits - The Deposit Insurance Fund (the account that pays out when banks fail) ##

Key Provisions

- Executives at failed banks who received bonuses after March 1, 2023 and within 60 days before the FDIC took over the bank must pay a 90 percent tax rate on those bonuses (Sec. 3) - Executives who sold bank stock within 60 days before the FDIC took over the bank must pay a 100 percent tax rate on their profits from those sales (Sec. 3) - Money raised from this new tax will go back to the Deposit Insurance Fund (Sec. 2) - The tax only applies to executives earning over $250,000 in adjusted gross income for that tax year (Sec. 3) ##

What Changes

If this bill becomes law, bank executives will face significantly higher taxes on bonuses and stock sale profits they received right before their bank failed, specifically bonuses received after March 1, 2023 and any stock sales within 60 days of the FDIC takeover. ##

Important Definitions

- **Executive officer**: The bank's president, any vice president in charge of a major business unit (like sales, administration or finance), any other officer making policy decisions, or similar policy-making positions at bank subsidiaries - **Insured depository institution**: A bank that meets the definition in the Federal Deposit Insurance Act - **Excluded profits**: Bonuses paid after March 1, 2023 within 60 days before FDIC takeover, or profits from stock sales within 60 days before FDIC takeover ##

Effective Date

This law applies to tax years ending after the date it becomes law (Sec. 3).

II 118TH CONGRESS 1ST SESSION S. 800 To amend the Internal Revenue Code of 1986 to impose a higher rate of tax on bonuses and profits from sales of stock received by executives employed by failing banks that were closed and for which the Federal Deposit Insurance Corporation has been appointed as conservator or receiver. IN THE SENATE OF THE UNITED STATES MARCH 14, 2023 Mr. BLUMENTHAL 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 higher rate of tax on bonuses and profits from sales of stock received by executives employed by failing banks that were closed and for which the Federal Deposit In- surance Corporation has been appointed as conservator or receiver. 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 ‘‘Deliver Executive Prof- 4 its On Seized Institutions to Taxpayers Act’’ or the ‘‘DE- 5 POSIT Act’’. 6 VerDate Sep 11 2014 03:57 Mar 23, 2023 Jkt 039200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S800.IS S800 kjohnson on DSK79L0C42PROD with BILLS 2 •S 800 IS SEC. 2. SENSE OF THE SENATE. 1 It is the sense of the Senate that the revenue raised 2 from the tax imposed under subsection (k) of section 1 3 of the Internal Revenue Code of 1986 (as added by section 4 3) will be returned to the Deposit Insurance Fund (as de- 5 fined in section 3 of the Federal Deposit Insurance Act 6 (12 U.S.C. 1813)). 7 SEC. 3. HIGHER RATE OF TAX ON BONUSES AND STOCK 8 PROFITS RECEIVED BY CERTAIN BANK EX- 9 ECUTIVES. 10 (a) IN GENERAL.—Section 1 of the Internal Revenue 11 Code of 1986 is amended by adding at the end the fol- 12 lowing new subsection: 13 ‘‘(k) RATE OF TAX ON PROFITS RECEIVED BY CER- 14 TAIN BANK EXECUTIVES.— 15 ‘‘(1) IN GENERAL.—In the case of any applica- 16 ble individual who receives any excluded profits dur- 17 ing the taxable year, the tax imposed by this section 18 shall be equal to— 19 ‘‘(A) the tax which would be imposed by 20 this section if the taxable income of such indi- 21 vidual for the taxable year were reduced (but 22 not below zero) by the amount of the excluded 23 profits received by such individual during such 24 taxable year, plus 25 VerDate Sep 11 2014 03:57 Mar 23, 2023 Jkt 039200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S800.IS S800 kjohnson on DSK79L0C42PROD with BILLS 3 •S 800 IS ‘‘(B) 90 percent of the excluded profits de- 1 scribed in subclause (I) of paragraph (2)(B)(i) 2 which were received by such individual during 3 such taxable year, plus 4 ‘‘(C) 100 percent of the excluded profits 5 described in subclause (II) of such paragraph 6 which were received by such individual during 7 such taxable year. 8 ‘‘(2) DEFINITIONS.—For purposes of this sub- 9 section— 10 ‘‘(A) APPLICABLE INDIVIDUAL.—The term 11 ‘applicable individual’ means any individual— 12 ‘‘(i) who— 13 ‘‘(I) was employed by an insured 14 depository institution for which the 15 Federal Deposit Insurance Corpora- 16 tion has been appointed conservator 17 or receiver, and 18 ‘‘(II) served as an executive offi- 19 cer for such institution prior to such 20 conservatorship or receivership, and 21 ‘‘(ii) with respect to the taxable year 22 in which the excluded profits were received, 23 whose adjusted gross income (reduced by 24 the amount of such excluded profits) for 25 VerDate Sep 11 2014 03:57 Mar 23, 2023 Jkt 039200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S800.IS S800 kjohnson on DSK79L0C42PROD with BILLS 4 •S 800 IS such taxable year was greater than 1 $250,000. 2 ‘‘(B) EXCLUDED PROFITS.— 3 ‘‘(i) IN GENERAL.—The term ‘ex- 4 cluded profits’ means, with respect to any 5 applicable individual for any taxable 6 year— 7 ‘‘(I) any payment in the nature 8 of a bonus which is paid— 9 ‘‘(aa) after March 1, 2023, 10 and 11 ‘‘(bb) by any insured deposi- 12 tory institution within the 60-day 13 period prior to the date on which 14 the Federal Deposit Insurance 15 Corporation was appointed con- 16 servator or receiver for such in- 17 stitution, or 18 ‘‘(II) any profit made by such ap- 19 plicable individual from the sale of 20 any security of the insured depository 21 institution that employs such applica- 22 ble individual, if that sale occurs not 23 more than 60 days before the date on 24 which the Federal Deposit Insurance 25 VerDate Sep 11 2014 03:57 Mar 23, 2023 Jkt 039200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S800.IS S800 kjohnson on DSK79L0C42PROD with BILLS 5 •S 800 IS Corporation is appointed conservator 1 or receiver with respect to the insured 2 depository institution. 3 ‘‘(ii) CONTROLLED GROUPS.— 4 ‘‘(I) IN GENERAL.—For purposes 5 of clause (i), all persons treated as a 6 single employer under subsection (a) 7 or (b) of section 52 or under sub- 8 section (m) or (o) of section 414 shall 9 be treated as one person. 10 ‘‘(II) INCLUSION OF FOREIGN 11 CORPORATIONS.—For purposes of 12 subclause (I), in applying subsections 13 (a) and (b) of section 52 to this sec- 14 tion, section 1563 shall be applied 15 without regard to subsection (b)(2)(C) 16 thereof. 17 ‘‘(C) EXECUTIVE OFFICER.—The term ‘ex- 18 ecutive officer’ means, with respect to any in- 19 sured depository institution, its president, any 20 vice president of such institution in charge of a 21 principal business unit, division or function 22 (such as sales, administration or finance), any 23 other officer who performs a policy making 24 function or any other person who performs 25 VerDate Sep 11 2014 03:57 Mar 23, 2023 Jkt 039200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S800.IS S800 kjohnson on DSK79L0C42PROD with BILLS 6 •S 800 IS similar policy making functions for such institu- 1 tion. Executive officers of subsidiaries may be 2 deemed executive officers of such institution if 3 they perform such policy making functions for 4 such institution. 5 ‘‘(D) INSURED DEPOSITORY INSTITU- 6 TION.—The term ‘insured depository institu- 7 tion’ has the same meaning given such term 8 under section 3 of the Federal Deposit Insur- 9 ance Act (12 U.S.C. 1813).’’. 10 (b) EFFECTIVE DATE.—The amendment made by 11 this section shall apply to taxable years ending after the 12 date of the enactment of this Act. 13 Æ VerDate Sep 11 2014 03:57 Mar 23, 2023 Jkt 039200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6301 E:\BILLS\S800.IS S800 kjohnson on DSK79L0C42PROD with BILLS

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