Transaction tax

(a)

In general

Chapter 36 of the Internal Revenue Code of 1986 is amended by inserting after subchapter B the following new subchapter:

Tax on Securities Transactions

Sec. 4475. Tax on securities transactions.

4475.

Tax on securities transactions

(a)

Imposition of tax

There is hereby imposed a tax on each covered transaction with respect to any security. (b)

Rate of tax

(1)

Security

(A)

In general

Except as otherwise provided in this subsection, the rate of such tax shall be equal to 0.25 percent of the fair market value of the security. (B)

Derivatives

In the case of a security described in subsection (d)(1)(D), the rate of such tax shall be equal to 0.25 percent of the fair market value of the underlying property with respect to, or the notional principal amount of, the derivative financial instrument involved in such transaction. (C)

Short-term debt instruments

In the case of a covered transaction with respect to a security described in subsection (d)(1)(C) which has a fixed maturity date not more than 1 year from the date of issue, the rate of such tax shall be equal to 0.02 percent of the fair market value of such security. (2)

Hedging transaction

In the case of any covered transaction which is a hedging transaction (within the meaning of section 1221(a)(7)), subparagraphs (A) and (B) of paragraph (1) shall each be applied by substituting 0.02 percent for 0.25 percent. (c)

Covered transaction

For purposes of this section, the term covered transaction means— (1)except as provided in paragraph (2), any purchase if— (A)such purchase occurs on a trading facility located in the United States, or (B)the purchaser or seller is a United States person, or (2)any transaction with respect to a security described in subsection (d)(1)(D), if any party with rights under such security is a United States person or if such transaction is facilitated by a United States person, including a trading facility located in the United States or a broker. (d)

Security and other definitions

For purposes of this section— (1)

In general

The term security means— (A)any share of stock in a corporation, (B)any partnership or beneficial ownership interest in a widely held or publicly traded partnership or trust, (C)any note, bond, debenture, or other evidence of indebtedness issued by a nongovernmental entity the beneficial ownership of which is traded on an established market, or (D)any evidence of an interest in, or a derivative financial instrument in— (i)any security described in subparagraph (A), (B), or (C), (ii)any specified index, or (iii)any other note, bond, or debenture issued by a nongovernmental entity. (2)

Derivative financial instrument

The term derivative financial instrument means any option, forward contract, short position, notional principal contract, credit default swap, or any similar financial instrument. (3)

Specified index

The term specified index means any 1 or more of any combination of— (A)a fixed rate, price, or amount, or (B)a variable rate, price, or amount,

which is based on any current objectively determinable information which is not within the control of any of the parties to the contract or instrument and is not unique to any of the parties’ circumstances.

(e)

Exceptions to imposition of tax

(1)

Exception for initial issues

No tax shall be imposed under subsection (a) on any covered transaction with respect to the initial issuance of any security described in subparagraph (A), (B), or (C) of subsection (d)(1). (2)

Exception for retirement accounts, etc

No tax shall be imposed under subsection (a) on any covered transaction with respect to any security which is held in any plan, account, or arrangement described in section 220, 223, 401(a), 403(a), 403(b), 408, 408A, 529, or 530 (including assets held in a segregated asset account described in section 817 as part of any such plan, account, or arrangement). (3)

Exception for certain mutual fund transactions

No tax shall be imposed under subsection (a) on any covered transaction— (A)with respect to the purchase of any interest in a regulated investment company (as defined in section 851) which issues only stock which is redeemable on the demand of the stock holder, (B)by a regulated investment company (as so defined) which is 100 percent owned by 1 or more plans, accounts, or arrangements described in paragraph (2), and (C)to the extent such tax is properly allocable to any class of shares of a regulated investment company (as so defined) which is 100 percent owned by 1 or more plans, accounts, or arrangements described in paragraph (2). (f)

By whom paid

(1)

In general

The tax imposed by this section shall be paid by— (A)in the case of a transaction which occurs on a trading facility located in the United States, such trading facility, (B)in the case of a transaction not described in subparagraph (A) which is executed by a broker, such broker, (C)in the case of a transaction not described in subparagraph (A) or (B), with respect to a security described in section (d)(1)(D), the party identified by the Secretary, or (D)in any other case, the purchaser with respect to the transaction. (2)

Withholding if purchaser is not a United States person

See section 1447 for withholding by seller if purchaser is a foreign person. (g)

Administration

The Secretary shall carry out this section in consultation with the Securities and Exchange Commission and the Commodity Futures Trading Commission. (h)

Guidance; regulations

The Secretary shall— (1)provide guidance regarding such information reporting concerning covered transactions as the Secretary deems appropriate, and (2)prescribe such regulations as are necessary or appropriate to prevent avoidance of the purposes of this section, including the use of non-United States persons in such transactions or the improper allocation of taxes to classes of shares described in subsection (e)(3)(C).

(b)

Credit for first $100,000 of stock transactions per year

Subpart C of part IV of subchapter A of chapter 1 of such Code is amended by inserting after section 36A the following new section:

36B.

Credit for securities transaction taxes

(a)

Allowance of credit

In the case of any individual who is a purchaser with respect to a covered transaction, there shall be allowed as a credit against the tax imposed by this subtitle for the taxable year an amount equal to the lesser of— (1)the aggregate amount of tax imposed under section 4475 on covered transactions during the taxable year with respect to which the taxpayer is the purchaser, or (2)$250 ($125 in the case of a married individual filing a separate return). (b)

Definitions

For purposes of this section, any term used in this section which is also used in section 4475 shall have the same meaning as when used in section 4475.

(c)

Withholding

Subchapter A of chapter 3 of such Code is amended by adding at the end the following new section:

1447.

Withholding on securities transactions

(a)

In general

In the case of any outbound securities transaction, except as provided in subsection (b), the transferor shall deduct and withhold a tax equal to the tax imposed under section 4475 with respect to such transaction. (b)

Derivatives

In the case of any outbound securities transaction with respect to a security described in section 4475(d)(1)(D), the party identified by the Secretary shall so deduct and withhold. (c)

Outbound securities transaction

For purposes of this section, the term outbound securities transaction means any covered transaction to which section 4475(a) applies if— (1)such transaction does not occur on a trading facility located in the United States, and (2)the purchaser with respect to such transaction in not a United States person.

(d)

Conforming amendments

(1)Section 6211(b)(4)(A) of such Code is amended by inserting 36B, after 36A,. (2)Section 1324(b)(2) of title 31, United States Code, is amended by inserting 36B, after 36A,. (e)

Clerical amendments

(1)The table of subchapters for chapter 36 of the Internal Revenue Code of 1986 is amended by inserting after the item relating to subchapter B the following new item:

Subchapter C. Tax on securities transactions.

(2)The table of sections for subchapter A of chapter 3 of such Code is amended by adding at the end the following new item:

Sec. 1447. Withholding on securities transactions.

(3)The table of sections for subpart C of part IV of subchapter A of chapter 1 of such Code is amended by inserting after the item relating to section 36A the following new item:

Sec. 36B. Credit for securities transaction taxes.

(f)

Effective date

The amendments made by this section shall apply to transactions occurring after December 31, 2010.