Combating BDS Act of 2023

II 118TH CONGRESS 1ST SESSION S. 1637 To provide for nonpreemption of measures by State and local governments to divest from entities that engage in certain boycott, divestment, or sanctions activities targeting Israel or persons doing business in Israel or Israeli-controlled territories, and for other purposes. IN THE SENATE OF THE UNITED STATES MAY 17, 2023 Mr. RUBIO (for himself, Mr. CASSIDY, Mr. BRAUN, Mr. SCOTT of Florida, Mr. DAINES, and Mr. HAGERTY) introduced the following bill; which was read twice and referred to the Committee on Banking, Housing, and Urban Affairs A BILL To provide for nonpreemption of measures by State and local governments to divest from entities that engage in certain boycott, divestment, or sanctions activities tar- geting Israel or persons doing business in Israel or Israeli-controlled territories, 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 ‘‘Combating BDS Act 4 of 2023’’. 5 VerDate Sep 11 2014 00:47 May 31, 2023 Jkt 039200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S1637.IS S1637 kjohnson on DSK79L0C42PROD with BILLS 2 •S 1637 IS SEC. 2. NONPREEMPTION OF MEASURES BY STATE AND 1 LOCAL GOVERNMENTS TO DIVEST FROM EN- 2 TITIES THAT ENGAGE IN CERTAIN BOYCOTT, 3 DIVESTMENT, OR SANCTIONS ACTIVITIES 4 TARGETING ISRAEL OR PERSONS DOING 5 BUSINESS IN ISRAEL OR ISRAELI-CON- 6 TROLLED TERRITORIES. 7 (a) STATE AND LOCAL MEASURES.—Notwith- 8 standing any other provision of law, a State or local gov- 9 ernment may adopt and enforce measures that meet the 10 requirements of subsection (c) to divest the assets of the 11 State or local government from, prohibit investment of the 12 assets of the State or local government in, or restrict con- 13 tracting by the State or local government for goods and 14 services with— 15 (1) an entity that the State or local government 16 determines, using credible information available to 17 the public, knowingly engages in an activity de- 18 scribed in subsection (b); 19 (2) a successor entity or subunit of an entity 20 described in paragraph (1); or 21 (3) an entity that owns or controls or is owned 22 or controlled by an entity described in paragraph 23 (1). 24 (b) ACTIVITIES DESCRIBED.—An activity described 25 in this subsection is a commerce-related or investment-re- 26 VerDate Sep 11 2014 00:47 May 31, 2023 Jkt 039200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S1637.IS S1637 kjohnson on DSK79L0C42PROD with BILLS 3 •S 1637 IS lated boycott, divestment, or sanctions activity in the 1 course of interstate or international commerce that is in- 2 tended to penalize, inflict economic harm on, or otherwise 3 limit commercial relations with Israel or persons doing 4 business in Israel or Israeli-controlled territories for pur- 5 poses of coercing political action by, or imposing policy 6 positions on, the Government of Israel. 7 (c) REQUIREMENTS.—A State or local government 8 that seeks to adopt or enforce a measure under subsection 9 (a) shall meet the following requirements: 10 (1) NOTICE.—The State or local government 11 shall provide written notice— 12 (A) in the case of a measure relating to di- 13 vestment or investment, to each entity to which 14 the measure is to be applied; and 15 (B) in the case of a measure relating to 16 contracting, of the restrictions imposed by the 17 measure to each prospective contractor before 18 entering into a contract. 19 (2) TIMING.—A measure relating to divestment 20 or investment shall apply to an entity not earlier 21 than the date that is 90 days after the date on 22 which written notice is provided to the entity under 23 paragraph (1). 24 VerDate Sep 11 2014 00:47 May 31, 2023 Jkt 039200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S1637.IS S1637 kjohnson on DSK79L0C42PROD with BILLS 4 •S 1637 IS (3) OPPORTUNITY FOR COMMENT.—In the case 1 of a measure relating to divestment or investment, 2 the State or local government shall provide an op- 3 portunity to comment in writing to each entity to 4 which the measure is to be applied. If the entity 5 demonstrates to the State or local government that 6 neither the entity nor any entity related to the entity 7 as described in paragraph (2) or (3) of subsection 8 (a) has knowingly engaged in an activity described 9 in subsection (b), the measure shall not apply to the 10 entity. 11 (4) DISCLOSURE IN CONTRACTING MEAS- 12 URES.—The State or local government may require, 13 in a measure relating to contracting, that a prospec- 14 tive contractor disclose whether the prospective con- 15 tractor or any entity related to the prospective con- 16 tractor as described in paragraph (2) or (3) of sub- 17 section (a) knowingly engages in any activity de- 18 scribed in subsection (b) before entering into a con- 19 tract. 20 (5) SENSE OF CONGRESS ON AVOIDING ERRO- 21 NEOUS TARGETING.—It is the sense of Congress 22 that a State or local government should not adopt 23 a measure under subsection (a) with respect to an 24 entity unless the State or local government has 25 VerDate Sep 11 2014 00:47 May 31, 2023 Jkt 039200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S1637.IS S1637 kjohnson on DSK79L0C42PROD with BILLS 5 •S 1637 IS made every effort to avoid erroneously targeting the 1 entity and has verified that the entity engages in an 2 activity described in subsection (b). 3 (d) NOTICE TO DEPARTMENT OF JUSTICE.— 4 (1) IN GENERAL.—Except as provided in para- 5 graph (2), not later than 30 days after adopting a 6 measure described in subsection (a), the State or 7 local government that adopted the measure shall 8 submit written notice to the Attorney General de- 9 scribing the measure. 10 (2) EXISTING MEASURES.—With respect to 11 measures described in subsection (a) adopted before 12 the date of the enactment of this Act, the State or 13 local government that adopted the measure shall 14 submit written notice to the Attorney General de- 15 scribing the measure not later than 30 days after 16 the date of the enactment of this Act. 17 (e) NONPREEMPTION.—A measure of a State or local 18 government that is consistent with subsection (a) is not 19 preempted by any Federal law. 20 (f) PRIOR ENACTED MEASURES.— 21 (1) IN GENERAL.—Notwithstanding any other 22 provision of this section or any other provision of 23 law, and except as provided in paragraph (2), a 24 State or local government may enforce a measure 25 VerDate Sep 11 2014 00:47 May 31, 2023 Jkt 039200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S1637.IS S1637 kjohnson on DSK79L0C42PROD with BILLS 6 •S 1637 IS described in subsection (a) adopted by the State or 1 local government before the date of the enactment of 2 this Act without regard to the requirements of sub- 3 section (c). 4 (2) APPLICATION OF NOTICE AND OPPOR- 5 TUNITY FOR COMMENT.—Enforcement of a measure 6 described in paragraph (1) shall be subject to the re- 7 quirements of subsection (c) on and after the date 8 that is 2 years after the date of the enactment of 9 this Act. 10 (g) RULES OF CONSTRUCTION.— 11 (1) AUTHORITY OF STATES.—Nothing in this 12 section shall be construed to abridge the authority of 13 a State to issue and enforce rules governing the 14 safety, soundness, and solvency of a financial insti- 15 tution subject to its jurisdiction or the business of 16 insurance pursuant to the Act of March 9, 1945 (59 17 Stat. 33, chapter 20; 15 U.S.C. 1011 et seq.) (com- 18 monly known as the ‘‘McCarran-Ferguson Act’’). 19 (2) POLICY OF THE UNITED STATES.—Nothing 20 in this section shall be construed to alter the estab- 21 lished policy of the United States concerning final 22 status issues associated with the Palestinian-Israeli 23 conflict, including border delineation, that can only 24 VerDate Sep 11 2014 00:47 May 31, 2023 Jkt 039200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S1637.IS S1637 kjohnson on DSK79L0C42PROD with BILLS 7 •S 1637 IS be resolved through direct negotiations between the 1 parties. 2 (h) DEFINITIONS.—In this section: 3 (1) ASSETS.— 4 (A) IN GENERAL.—Except as provided in 5 subparagraph (B), the term ‘‘assets’’ means 6 any pension, retirement, annuity, or endowment 7 fund, or similar instrument, that is controlled 8 by a State or local government. 9 (B) EXCEPTION.—The term ‘‘assets’’ does 10 not include employee benefit plans covered by 11 title I of the Employee Retirement Income Se- 12 curity Act of 1974 (29 U.S.C. 1001 et seq.). 13 (2) ENTITY.—The term ‘‘entity’’ includes— 14 (A) any corporation, company, business as- 15 sociation, partnership, or trust; and 16 (B) any governmental entity or instrumen- 17 tality of a government, including a multilateral 18 development institution (as defined in section 19 1701(c)(3) of the International Financial Insti- 20 tutions Act (22 U.S.C. 262r(c)(3))). 21 (3) INVESTMENT.—The term ‘‘investment’’ in- 22 cludes— 23 (A) a commitment or contribution of funds 24 or property; 25 VerDate Sep 11 2014 00:47 May 31, 2023 Jkt 039200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S1637.IS S1637 kjohnson on DSK79L0C42PROD with BILLS 8 •S 1637 IS (B) a loan or other extension of credit; and 1 (C) the entry into or renewal of a contract 2 for goods or services. 3 (4) KNOWINGLY.—The term ‘‘knowingly’’, with 4 respect to conduct, a circumstance, or a result, 5 means that a person has actual knowledge, or should 6 have known, of the conduct, the circumstance, or the 7 result. 8 (5) STATE.—The term ‘‘State’’ means each of 9 the several States, the District of Columbia, the 10 Commonwealth of Puerto Rico, the Commonwealth 11 of the Northern Mariana Islands, American Samoa, 12 Guam, the United States Virgin Islands, and any 13 other territory or possession of the United States. 14 (6) STATE OR LOCAL GOVERNMENT.—The term 15 ‘‘State or local government’’ includes— 16 (A) any State and any agency or instru- 17 mentality thereof; 18 (B) any local government within a State 19 and any agency or instrumentality thereof; and 20 (C) any other governmental instrumen- 21 tality of a State or locality. 22 VerDate Sep 11 2014 00:47 May 31, 2023 Jkt 039200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S1637.IS S1637 kjohnson on DSK79L0C42PROD with BILLS 9 •S 1637 IS SEC. 3. SAFE HARBOR FOR CHANGES OF INVESTMENT 1 POLICIES BY ASSET MANAGERS. 2 Section 13(c)(1) of the Investment Company Act of 3 1940 (15 U.S.C. 80a–13(c)(1)) is amended— 4 (1) in subparagraph (A), by striking ‘‘; or’’ and 5 inserting a semicolon; 6 (2) in subparagraph (B), by striking the period 7 at the end and inserting ‘‘; or’’; and 8 (3) by adding at the end the following: 9 ‘‘(C) knowingly engage in any activity de- 10 scribed in section 2(b) of the Combating BDS 11 Act of 2023.’’. 12 SEC. 4. SENSE OF CONGRESS REGARDING CERTAIN ERISA 13 PLAN INVESTMENTS. 14 It is the sense of Congress that— 15 (1) a fiduciary of an employee benefit plan, as 16 defined in section 3(3) of the Employee Retirement 17 Income Security Act of 1974 (29 U.S.C. 1002(3)), 18 may divest plan assets from, or avoid investing plan 19 assets in, any person the fiduciary determines know- 20 ingly engages in any activity described in section 21 2(b), if— 22 (A) the fiduciary makes that determination 23 using credible information that is available to 24 the public; and 25 VerDate Sep 11 2014 00:47 May 31, 2023 Jkt 039200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S1637.IS S1637 kjohnson on DSK79L0C42PROD with BILLS 10 •S 1637 IS (B) the fiduciary prudently determines 1 that the result of that divestment or avoidance 2 of investment would not be expected to provide 3 the employee benefit plan with— 4 (i) a lower rate of return than alter- 5 native investments with commensurate de- 6 grees of risk; or 7 (ii) a higher degree of risk than alter- 8 native investments with commensurate 9 rates of return; and 10 (2) by divesting assets or avoiding the invest- 11 ment of assets as described in paragraph (1), the fi- 12 duciary is not breaching the responsibilities, obliga- 13 tions, or duties imposed upon the fiduciary by sub- 14 paragraph (A) or (B) of section 404(a)(1) of the 15 Employee Retirement Income Security Act of 1974 16 (29 U.S.C. 1104(a)(1)). 17 SEC. 5. RULE OF CONSTRUCTION. 18 Nothing in this Act shall be construed to infringe 19 upon any right protected under the First Amendment to 20 the Constitution of the United States. 21 Æ VerDate Sep 11 2014 00:47 May 31, 2023 Jkt 039200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6301 E:\BILLS\S1637.IS S1637 kjohnson on DSK79L0C42PROD with BILLS