2019 ESOP Fairness Act

I 116TH CONGRESS 2D SESSION H. R. 5851 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 HOUSE OF REPRESENTATIVES FEBRUARY 11, 2020 Mr. HIGGINS of New York (for himself and Mr. KELLY of Pennsylvania) in- troduced the following bill; which was referred to the Committee on Ways and Means 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 ‘‘2019 ESOP Fairness 4 Act’’. 5 VerDate Sep 11 2014 18:44 Feb 18, 2020 Jkt 099200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H5851.IH H5851 pamtmann on DSKBC07HB2PROD with BILLS 2 •HR 5851 IH 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 18:44 Feb 18, 2020 Jkt 099200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H5851.IH H5851 pamtmann on DSKBC07HB2PROD with BILLS 3 •HR 5851 IH ‘‘(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 VerDate Sep 11 2014 18:44 Feb 18, 2020 Jkt 099200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H5851.IH H5851 pamtmann on DSKBC07HB2PROD with BILLS 4 •HR 5851 IH change Act of 1934 (15 U.S.C. 1 78m or 78o(d)), 2 ‘‘(bb) is subject to the re- 3 porting requirements of section 4 230.257 of title 17, Code of Fed- 5 eral Regulations, or 6 ‘‘(cc) is exempt from such 7 requirements under section 8 240.12g3–2(b) of title 17, Code 9 of Federal Regulations, and 10 has published all information which is 11 required by such Act or Rule, as ap- 12 plicable, to be publicly available.’’. 13 (b) CONFORMING AMENDMENT.—Subparagraph (G) 14 of section 401(a)(35) of the Internal Revenue Code of 15 1986 is amended by striking clause (v) and by redesig- 16 nating clause (vi) as clause (v). 17 (c) EFFECTIVE DATE.—The amendments made by 18 this section shall apply to plan years beginning after the 19 date of the enactment of this Act. 20 Æ VerDate Sep 11 2014 18:44 Feb 18, 2020 Jkt 099200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6301 E:\BILLS\H5851.IH H5851 pamtmann on DSKBC07HB2PROD with BILLS