Tax Excessive CEO Pay Act of 2019

I 116TH CONGRESS 1ST SESSION H. R. 5066 To amend the Internal Revenue Code of 1986 to impose a corporate tax rate increase on companies whose ratio of compensation of the CEO or other highest paid employee to median worker compensation is more than 50 to 1, and for other purposes. IN THE HOUSE OF REPRESENTATIVES NOVEMBER 13, 2019 Ms. LEE of California (for herself, Ms. TLAIB, Mr. GRIJALVA, Ms. NORTON, Mr. HUFFMAN, Ms. JAYAPAL, Mr. KHANNA, Mr. THOMPSON of Mis- sissippi, Ms. SCHAKOWSKY, Ms. DELAURO, Ms. HAALAND, Mr. ESPAILLAT, Ms. PRESSLEY, Mr. GARCI´A of Illinois, Ms. OMAR, Mrs. WATSON COLEMAN, and Mr. MCGOVERN) introduced the following bill; which was referred to the Committee on Ways and Means A BILL To amend the Internal Revenue Code of 1986 to impose a corporate tax rate increase on companies whose ratio of compensation of the CEO or other highest paid em- ployee to median worker compensation is more than 50 to 1, 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 ‘‘Tax Excessive CEO 4 Pay Act of 2019’’. 5 VerDate Sep 11 2014 21:14 Nov 21, 2019 Jkt 099200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H5066.IH H5066 lotter on DSKBCFDHB2PROD with BILLS 2 •HR 5066 IH SEC. 2. CORPORATE TAX INCREASE BASED ON COMPENSA- 1 TION RATIO. 2 (a) IN GENERAL.—Section 11 of the Internal Rev- 3 enue Code of 1986 is amended by adding at the end the 4 following new subsection: 5 ‘‘(e) TAX INCREASE BASED ON PAY RATIO.— 6 ‘‘(1) IN GENERAL.— 7 ‘‘(A) INCREASE IMPOSED.—In the case of 8 any corporation (except as provided in subpara- 9 graph (B)(ii)(II)) the pay ratio of which is 10 greater than 50 to 1 for a taxable year, the 21- 11 percent rate under subsection (b) for such tax- 12 able year shall be increased by the penalty de- 13 termined under paragraph (2). 14 ‘‘(B) PAY RATIO.—For purposes of this 15 subsection— 16 ‘‘(i) IN GENERAL.—The term ‘pay 17 ratio’ means the ratio described in section 18 229.402(u)(1)(iii) of title 17, Code of Fed- 19 eral Regulations (or any successor there- 20 to), except that if the highest compensated 21 employee of the corporation is not the 22 principal executive officer, the ratio shall 23 be determined based on the compensation 24 of such highest compensated employee. 25 VerDate Sep 11 2014 21:14 Nov 21, 2019 Jkt 099200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H5066.IH H5066 lotter on DSKBCFDHB2PROD with BILLS 3 •HR 5066 IH ‘‘(ii) CORPORATIONS NOT SUBJECT TO 1 SEC FILING.—In the case of a corporation 2 which (without regard to this clause) is not 3 subject to the authorities described in sec- 4 tion 229.10(a) of title 17, Code of Federal 5 Regulations (or any successor thereto)— 6 ‘‘(I) LARGE CORPORATIONS.—If 7 the average annual gross receipts of 8 such corporation for the 3-taxable- 9 year period ending with the taxable 10 year which precedes such taxable year 11 are at least $100,000,000, such cor- 12 poration shall calculate and report its 13 pay ratio according to the method 14 which the Secretary shall prescribe by 15 regulations consistent with the regula- 16 tion described in clause (i). 17 ‘‘(II) OTHER PRIVATE CORPORA- 18 TIONS EXEMPT.—Subparagraph (A) 19 shall not apply to any such corpora- 20 tion if the average annual gross re- 21 ceipts of such corporation for the 3- 22 taxable-year period ending with the 23 taxable year which precedes such tax- 24 able year are less than $100,000,000. 25 VerDate Sep 11 2014 21:14 Nov 21, 2019 Jkt 099200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H5066.IH H5066 lotter on DSKBCFDHB2PROD with BILLS 4 •HR 5066 IH ‘‘(2) AMOUNT OF PENALTY.—The penalty de- 1 termined under this paragraph is an increase, ex- 2 pressed in percentage points, determined in accord- 3 ance with the following table: 4 ‘‘If the pay ratio is: The increase is: Greater than 50 to 1, but not greater than 100 to 1 ........................ 0.5 Greater than 100 to 1, but not greater than 200 to 1 ...................... 1 Greater than 200 to 1, but not greater than 300 to 1 ...................... 2 Greater than 300 to 1, but not greater than 400 to 1 ...................... 3 Greater than 400 to 1, but not greater than 500 to 1 ...................... 4 Greater than 500 to 1 ........................................................................ 5.’’. (b) CONFORMING AMENDMENTS.— 5 (1) The following sections of the Internal Rev- 6 enue Code of 1986 are each amended by inserting 7 ‘‘applicable to the corporation (after the application 8 of section 11(e))’’ after ‘‘section 11(b)’’: 9 (A) Section 280C(c)(3)(B)(ii)(II). 10 (B) Paragraphs (2)(B) and (6)(A)(ii) of 11 section 860E(e). 12 (C) Section 7874(e)(1)(B). 13 (2) Section 852(b)(3)(A) of such Code is 14 amended by inserting ‘‘(after the application of sec- 15 tion 11(e))’’ after ‘‘section 11(b)’’. 16 (3) Paragraphs (1) and (2) of section 17 1445(e)(1) of such Code are each amended by strik- 18 ing ‘‘in effect for the taxable year under section 19 11(b)’’ and inserting ‘‘applicable to such corporation 20 under section 11 for the taxable year’’. 21 VerDate Sep 11 2014 21:14 Nov 21, 2019 Jkt 099200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H5066.IH H5066 lotter on DSKBCFDHB2PROD with BILLS 5 •HR 5066 IH (4) Section 1446(b)(2)(B) of such Code is 1 amended by striking ‘‘specified in section 11(b)’’ and 2 inserting ‘‘applicable to such corporation under sec- 3 tion 11 for the taxable year’’. 4 (c) EFFECTIVE DATE.—The amendments made by 5 this section shall apply to taxable years beginning after 6 December 31, 2019. 7 (d) REGULATIONS.—The Secretary of the Treasury 8 (or the Secretary’s delegate) shall issue regulations as nec- 9 essary to prevent avoidance of the purposes of the amend- 10 ments made by subsection (a), including regulations to 11 prevent the manipulation of the compensation ratio under 12 section 11(e) of the Internal Revenue Code of 1986 by 13 changes to the composition of the workforce (including by 14 using the services of contractors rather than employees). 15 Æ VerDate Sep 11 2014 21:14 Nov 21, 2019 Jkt 099200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6301 E:\BILLS\H5066.IH H5066 lotter on DSKBCFDHB2PROD with BILLS