[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>