[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[H.R. 5432 Introduced in House (IH)]
107th CONGRESS
2d Session
H. R. 5432
To amend the Internal Revenue Code of 1986 to require the same holding
period for company stock acquired upon exercise of options as is
applicable to company stock in its 401(k) plan, to require disclosure
to shareholders of the amount of corporate perks provided to retired
executives, and to provide parity for secured retirement benefits
between the rank and file and executives.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
September 24, 2002
Mr. Matsui (for himself, Mr. Gephardt, Mr. Rangel, Mr. George Miller of
California, Mr. Stark, Mr. Coyne, Mr. McDermott, Mr. Neal of
Massachusetts, Mr. Doggett, Ms. Lofgren, and Mr. Jefferson) 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 require the same holding
period for company stock acquired upon exercise of options as is
applicable to company stock in its 401(k) plan, to require disclosure
to shareholders of the amount of corporate perks provided to retired
executives, and to provide parity for secured retirement benefits
between the rank and file and executives.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SPECIAL RULES FOR EXECUTIVE PERKS AND RETIREMENT BENEFITS.
(a) In General.--Part I of subchapter D of chapter 1 of the
Internal Revenue Code of 1986 (relating to pension, profit-sharing,
stock bonus plans, etc.) is amended by adding at the end the following
new subpart:
``subpart f--special rules for executive perks and retirement benefits
``Sec. 420A. Holding period requirement
for stock acquired through
exercise of option.
``Sec. 420B. Additional tax on
nondisclosed retirement perks.
``Sec. 420C. Inclusion in gross income of
funded deferred compensation of
corporate insiders.
``Sec. 420D. Definitions and special
rule.
``SEC. 420A. HOLDING PERIOD REQUIREMENT FOR STOCK ACQUIRED THROUGH
EXERCISE OF OPTION.
``(a) In General.--In the case of a corporate insider with respect
to a corporation, the tax imposed by this chapter on a corporate
insider for any taxable year shall be increased by 50 percent of the
amount realized by such insider from the disqualified disposition
during such year of stock acquired by the corporate insider upon the
exercise of a stock option granted by the corporation with respect to
which such individual is a corporate insider.
``(b) Disqualified Disposition of Stock.--
``(1) In general.--For purposes of subsection (a), the term
`disqualified disposition of stock' means any sale, exchange,
or other disposition of stock which, if such stock were
employer securities held in a qualified cash or deferred
arrangement (as defined in section 401(k)(2)), would violate
any restriction imposed on the sale or other disposition of
such securities by the plan of which such arrangement is a
part.
``(2) Special rule for 2 or more cash or deferred
arrangements.--If a corporation has more than 1 qualified cash
or deferred arrangement (as so defined), the restrictions which
apply for purposes of paragraph (1) shall be the most
restrictive provisions relating to the disposition of employer
securities held pursuant to any such arrangements.
``SEC. 420B. ADDITIONAL TAX ON NONDISCLOSED RETIREMENT PERKS.
``(a) In General.--In the case of a publicly traded corporation,
the tax imposed by this chapter for the taxable year shall be increased
by 50 percent of the net cost to the corporation for the taxable year
of personal perks provided to a retired executive of the corporation.
``(b) Waiver If Perks Provided Pursuant to Shareholder Approval.--
Subsection (a) shall not apply with respect to any personal perks
provided pursuant to a contract if--
``(1) all of the material terms of such contract (including
a description of the benefits to be provided to the executive
and the extent of such benefits) are disclosed to shareholders,
and
``(2) such contract is approved by a majority of the vote
in a separate shareholder vote before any benefits are provided
under the contract.
``(c) Net Cost of Personal Perks.--
``(1) In general.--For purposes of subsection (a), the net
cost of personal perks provided to a retired executive is the
excess of--
``(A) the cost to the corporation of such perks,
over
``(B) the amount paid in cash during the taxable
year by the executive to reimburse the corporation for
the cost of such perks.
``(2) Personal perks.--For purposes of paragraph (1), the
term `personal perks' means--
``(A) the use of corporate-owned property,
``(B) travel expenses, including meals and lodging,
unless such expenses are directly related to the
performance of services by the executive for the
corporation and the business relationship of such
expenses is substantiated under the requirements of
section 274,
``(C) tickets to sporting or other entertainment
events,
``(D) amounts paid or incurred for membership in
any club organized for business, pleasure, recreation,
or other social purpose, and
``(E) other personal services, including services
related to maintenance or protection of any personal
residence of the executive.
``(3) Cost relating to use of corporate-owned property.--
For purposes of this subsection--
``(A) In general.--The cost taken into account with
respect to the use of corporate-owned property shall be
the allocable portion of the total cost of operating
such property.
``(B) Allocable portion.--For purposes of
subparagraph (A), the allocable portion of total cost
is--
``(i) the portion of the total cost
(including depreciation) incurred by the
corporation for operating and maintaining such
property during the corporation's taxable year
in which such use occurred,
``(ii) which is allocable to the use
(determined on the basis of the relationship of
such use to the total use of the property
during the taxable year).
``SEC. 420C. INCLUSION IN GROSS INCOME OF FUNDED DEFERRED COMPENSATION
OF CORPORATE INSIDERS.
``(a) In General.--If an employer maintains a funded deferred
compensation plan--
``(1) compensation of any corporate insider which is
deferred under such funded deferred compensation plan shall be
included in the gross income of the corporate insider or
beneficiary for the 1st taxable year in which there is no
substantial risk of forfeiture of the rights to such
compensation, and
``(2) the tax treatment of any amount made available under
the plan to a corporate insider or beneficiary shall be
determined under section 72 (relating to annuities, etc.).
``(b) Funded Deferred Compensation Plan.--For purposes of this
section--
``(1) In general.--The term `funded deferred compensation
plan' means any plan providing for the deferral of compensation
unless--
``(A) the employee's rights to the compensation
deferred under the plan are no greater than the rights
of a general creditor of the employer, and
``(B) all amounts set aside (directly or
indirectly) for purposes of paying the deferred
compensation, and all income attributable to such
amounts, remain (until made available to the
participant or other beneficiary) solely the property
of the employer (without being restricted to the
provision of benefits under the plan), and
``(C) the amounts referred to in subparagraph (B)
are available to satisfy the claims of the employer's
general creditors at all times (not merely after
bankruptcy or insolvency).
Such term shall not include a qualified employer plan.
``(2) Special rules.--
``(A) Employee's rights.--A plan shall be treated
as failing to meet the requirements of paragraph (1)(A)
unless--
``(i) the compensation deferred under the
plan is payable only upon separation from
service, death, disability, or at a specified
time (or pursuant to a fixed schedule), and
``(ii) the plan does not permit the
acceleration of the time such deferred
compensation is payable by reason of any event.
If the employer and employee agree to a modification of
the plan that accelerates the time for payment of any
deferred compensation, then all compensation previously
deferred under the plan shall be includible in gross
income for the taxable year during which such
modification takes effect and the taxpayer shall pay
interest at the underpayment rate on the underpayments
that would have occurred had the deferred compensation
been includible in gross income on the earliest date
that there is no substantial risk of forfeiture of the
rights to such compensation.
``(B) Creditor's rights.--A plan shall be treated
as failing to meet the requirements of paragraph (1)(B)
with respect to amounts set aside in a trust unless--
``(i) the employee has no beneficial
interest in the trust,
``(ii) assets in the trust are available to
satisfy claims of general creditors at all
times (not merely after bankruptcy or
insolvency), and
``(iii) there is no factor that would make
it more difficult for general creditors to
reach the assets in the trust than it would be
if the trust assets were held directly by the
employer in the United States.
Except as provided in regulations prescribed by the
Secretary, such a factor shall include the location of
the trust outside the United States.
``(c) Other Definitions and Special Rules.--For purposes of this
section--
``(1) Qualified employer plan.--The term `qualified
employer plan' means--
``(A) any plan, contract, pension, account, or
trust described in subparagraph (A) or (B) of section
219(g)(5), and
``(B) any other plan of an organization exempt from
tax under subtitle A.
``(2) Plan includes arrangements, etc.--The term `plan'
includes any agreement or arrangement.
``(3) Substantial risk of forfeiture.--The rights of a
person to compensation are subject to a substantial risk of
forfeiture if such person's rights to such compensation are
conditioned upon the future performance of substantial services
by any individual.
``(4) Treatment of earnings.--Except for purposes of
subsection (a)(1) and the last sentence of (b)(2)(A),
references to deferred compensation shall be treated as
including references to income attributable to such
compensation or such income.
``SEC. 420D. DEFINITIONS AND SPECIAL RULE.
``(a) Definitions.--For purposes of this subpart--
``(1) Corporate insider.--The term `corporate insider'
means, with respect to a corporation, any individual--
``(A) who is subject to the requirements of section
16(a) of the Securities Exchange Act of 1934 with
respect to such corporation, or
``(B) who would be subject to such requirements if
such corporation were an issuer of equity securities
referred to in such section.
``(2) Retired executive.--The term `retired executive'
means any corporate insider who is no longer performing
services on a substantially full time basis in the capacity
that resulted in being subject to the requirements of section
16(a) of the Securities Exchange Act of 1934.
``(3) Publicly traded corporation.--The term `publicly
traded corporation' means any corporation issuing any class of
securities required to be registered under section 12 of the
Securities Exchange Act of 1934.
``(4) Corporate-owned property.--
``(A) In general.--Except as provided in
subparagraph (B), the term `corporate-owned property'
means any of the following property owned by a
corporation--
``(i) planes,
``(ii) apartments or other residences,
``(iii) vacation, sports, and entertainment
facilities, and
``(iv) cars.
Such term includes any such property which is leased or
chartered by the corporation.
``(B) Exceptions.--Such term does not include any
property used directly by the corporation in providing
transportation, lodging, or entertainment services to
the general public.
``(b) Additions to Tax Not Treated As Tax for Certain Purposes.--
The tax imposed by sections 420A and 420B shall not be treated as a tax
imposed by this chapter for purposes of determining--
``(1) the amount of any credit allowable under this
chapter, or
``(2) the amount of the minimum tax imposed by section
55.''.
(b) Clerical Amendment.--The table of subparts for part I of
subchapter D of chapter 1 of such Code is amended by adding at the end
the following new item:
``Subpart F. Special Rules for Executive
Perks and Retirement
Benefits.''.
(c) Effective Date.--The amendments made by this section shall take
effect as follows:
(1) Section 420A of the Internal Revenue Code of 1986 (as
added by this section) shall apply to stock acquired pursuant
to the exercise of an option after the date of the enactment of
this Act.
(2)(A) Except as provided by subparagraph (B), section 420B
of such Code (as so added) shall apply to perks provided after
the date of the enactment of this Act.
(B) In the case of perks provided pursuant to a contract in
existence on the date of the enactment of this Act, such
section 420B shall apply to such perks after the date of the
first annual shareholders meeting after the date of the
enactment of this Act.
(3) Section 420C of such Code (as so added) shall apply to
amounts deferred after the date of the enactment of this Act.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Ways and Means.
Llama 3.2 · runs locally in your browser
Ask anything about this bill. The AI reads the full text to answer.
Enter to send · Shift+Enter for new line