[Congressional Bills 111th Congress]
[From the U.S. Government Publishing Office]
[S. 651 Placed on Calendar Senate (PCS)]

                                                        Calendar No. 37
111th CONGRESS
  1st Session
                                 S. 651

 To amend the Internal Revenue Code of 1986 to impose an excise tax on 
   excessive bonuses paid by, and received from, companies receiving 
     Federal emergency economic assistance, to limit the amount of 
nonqualified deferred compensation that employees of such companies may 
              defer from taxation, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             March 19, 2009

   Mr. Baucus (for himself, Mr. Grassley, Mr. Wyden, Ms. Snowe, Mrs. 
Lincoln, Mr. Kerry, Ms. Stabenow, Mr. Schumer, Mr. Menendez, Mr. Nelson 
 of Florida, Mr. Bingaman, and Ms. Cantwell) introduced the following 
                  bill; which was read the first time

                             March 23, 2009

            Read the second time and placed on the calendar

_______________________________________________________________________

                                 A BILL


 
 To amend the Internal Revenue Code of 1986 to impose an excise tax on 
   excessive bonuses paid by, and received from, companies receiving 
     Federal emergency economic assistance, to limit the amount of 
nonqualified deferred compensation that employees of such companies may 
              defer from taxation, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Compensation Fairness Act of 2009''.

SEC. 2. EXCISE TAXES ON EXCESSIVE BONUSES PAID BY RECIPIENTS OF FEDERAL 
              EMERGENCY ECONOMIC ASSISTANCE.

    (a) Imposition of Tax.--Chapter 46 of the Internal Revenue Code of 
1986 (relating to excise tax on golden parachute payments) is amended 
by adding at the end the following new section:

``SEC. 4999A. EXCESSIVE BONUSES PAID BY RECIPIENTS OF FEDERAL EMERGENCY 
              ECONOMIC ASSISTANCE.

    ``(a) Imposition of Tax.--There is hereby imposed--
            ``(1) on each Federal emergency economic assistance 
        recipient which pays an excessive bonus, a tax equal to 35 
        percent of the amount of such bonus, and
            ``(2) on each covered individual who receives an excessive 
        bonus from such a recipient, a tax equal to 35 percent of the 
        amount of such bonus.
    ``(b) Excessive Bonus.--For purposes of this section--
            ``(1) In general.--The term `excessive bonus' means, with 
        respect to any calendar year--
                    ``(A) any applicable bonus payment paid to a 
                covered individual during such calendar year which is a 
                retention bonus, or
                    ``(B) in the case of applicable bonus payments not 
                described in subparagraph (A), an amount equal to the 
                sum of--
                            ``(i) the portion of such applicable bonus 
                        payments paid to a covered individual during 
                        such calendar year which is attributable to 
                        services performed by such individual during 
                        such calendar year, but only to the extent such 
                        payments exceed $50,000, plus
                            ``(ii) the portion of applicable bonus 
                        payments paid to a covered individual during 
                        such calendar year which is attributable to 
                        services performed by such individual during 
                        any preceding calendar year, but only to the 
                        extent such payments (when added to such 
                        payments paid during all prior calendar years 
                        with respect to services performed during such 
                        preceding calendar year) exceed $50,000.
            ``(2) Applicable bonus payments.--
                    ``(A) In general.--Except as provided in 
                subparagraph (B), the term `applicable bonus payment' 
                means any bonus payment by a Federal emergency economic 
                assistance recipient--
                            ``(i) which is paid after December 31, 
                        2008, and
                            ``(ii) which is payable by reason of 
                        services performed by such individual in an 
                        applicable calendar year of the Federal 
                        emergency economic assistance recipient.
                    ``(B) Payments after assistance period.--A bonus 
                payment shall not be treated as an applicable bonus 
                payment if it is made after the end date applicable 
                under clause (i)(II) or (ii)(II) of subparagraph (C) 
                (without regard to whether the payment is attributable 
                to services performed before such end date).
                    ``(C) Applicable calendar year.--The term 
                `applicable calendar year' means, with respect to any 
                Federal emergency economic assistance recipient, any 
                calendar year which includes any portion of the period 
                which--
                            ``(i) in the case of a recipient described 
                        in subsection (c)(1)--
                                    ``(I) begins on the first date on 
                                which the outstanding aggregate 
                                assistance received under all programs 
                                described in subsection (c)(1)(A) 
                                exceeds $100,000,000, and
                                    ``(II) ends on the first date on 
                                which such outstanding aggregate amount 
                                does not exceed $100,000,000, and
                            ``(ii) in the case of a recipient described 
                        in subsection (c)(2)--
                                    ``(I) begins on the first date on 
                                which assistance was received under a 
                                program described in subsection 
                                (c)(1)(A), and
                                    ``(II) ends on the first date on 
                                which there is no outstanding 
                                assistance provided to such recipient 
                                under any such program.
                In the case of a person described in subsection (c)(3) 
                with respect to a recipient described in subsection 
                (c)(1) or (2), this subparagraph shall be applied by 
                reference to the same period as is used for such 
                recipient.
                    ``(D) Waiver of restriction on repayment or 
                redemption.--Any restriction or prohibition under any 
                program described in subsection (c)(1)(A) (or any 
                agreement entered into under such program) on a Federal 
                emergency economic assistance recipient with respect to 
                the repayment of any assistance provided under such 
                program or the redemption of any equity interest shall 
                not apply if such restriction or prohibition would 
                prevent the recipient from reducing its outstanding 
                assistance for purposes of subparagraph (C).
            ``(3) Bonus payment.--
                    ``(A) In general.--The term `bonus payment' means 
                any payment which--
                            ``(i) is a payment to a covered individual 
                        by a Federal emergency economic assistance 
                        recipient for services rendered, and
                            ``(ii) is in addition to any amount payable 
                        to such individual for services performed by 
                        such individual at a regular hourly, daily, 
                        weekly, monthly, or similar periodic rate.
                Such term does not include payments to an employee as 
                commissions, contributions to any qualified retirement 
                plan (as defined in section 4974(c)), welfare and 
                fringe benefits, overtime pay, or expense 
                reimbursements.
                    ``(B) Exception for certain equity payments.--
                            ``(i) In general.--In the case of a payment 
                        other than a retention bonus, such payment 
                        shall not be treated as a bonus payment if the 
                        payment consists of the granting on or after 
                        January 1, 2009, of an equity interest 
                        described in clause (ii) but only if no portion 
                        of such interest vests before the date which is 
                        3 years after the date on which such interest 
                        is granted.
                            ``(ii) Equity interests.--An equity 
                        interest is described in this clause if it is--
                                    ``(I) a stock option which is 
                                granted at its fair market value on the 
                                date of the grant,
                                    ``(II) a stock appreciation right 
                                which is granted at its fair market 
                                value on the date of the grant, or
                                    ``(III) restricted stock described 
                                in section 111(b)(3)(D)(i) of the 
                                Emergency Economic Stabilization Act of 
                                2008 (as in effect on the date of the 
                                enactment of this section).
                            ``(iii) Secretarial authority.--The 
                        Secretary may by regulation provide for the 
                        application of this subparagraph in the case of 
                        a person other than a corporation.
            ``(4) Retention bonus.--The term `retention bonus' means 
        any bonus payment to an individual which--
                    ``(A) is contingent on the completion of a period 
                of future service with the Federal emergency economic 
                assistance recipient, the completion of a specific 
                project or other activity for the Federal emergency 
                economic assistance recipient, or such other 
                circumstances as the Secretary may prescribe, and
                    ``(B) is not based on the performance of the 
                individual (other than a requirement that the employee 
                not be separated from employment for cause).
        A bonus payment shall not be treated as based on performance 
        for purposes of subparagraph (B) solely because the amount of 
        the payment is determined by reference to a previous bonus 
        payment which was based on performance.
    ``(c) Federal Emergency Economic Assistance Recipient.--For 
purposes of this subsection, the term `Federal emergency economic 
assistance recipient' means--
            ``(1) any person (other than a bank to which section 585 
        applies) if at any time after December 31, 2007--
                    ``(A) the Federal Government acquires--
                            ``(i) an equity interest in such person 
                        pursuant to a program authorized by the 
                        Emergency Economic Stabilization Act of 2008 or 
                        the third undesignated paragraph of section 13 
                        of the Federal Reserve Act (12 U.S.C. 343), or
                            ``(ii) any warrant (or other right) to 
                        acquire any equity interest with respect to 
                        such person pursuant to any such program, and
                    ``(B) the outstanding aggregate amount of the 
                assistance provided to such person under such programs 
                exceeds $100,000,000,
            ``(2) the Federal National Mortgage Association and the 
        Federal Home Loan Mortgage Corporation, and
            ``(3) any person which is a member of the same affiliated 
        group (as defined in section 1504, determined without regard to 
        subsection (b) thereof) as a person described in paragraph (1) 
        or (2).
    ``(d) Covered Individual.--For purposes of this section, the term 
`covered individual' means, with respect to any Federal emergency 
economic assistance recipient, any director or officer or other 
employee of such recipient.
    ``(e) Administrative Provisions; Special Rules.--For purposes of 
this section--
            ``(1) Administrative provisions.--
                    ``(A) In general.--For purposes of subtitle F, the 
                tax imposed by this section with respect to an 
                excessive bonus shall be treated as a tax imposed by 
                subtitle A for the taxable year of the Federal 
                emergency economic assistance recipient or covered 
                individual with or within which ends the calendar year 
                in which payment of the excessive bonus is made.
                    ``(B) Wage withholding.--If an excessive bonus is 
                treated as wages for purposes of section 3402, the 
                amount otherwise required to be deducted and withheld 
                under such section shall be increased by an amount 
                equal to 35 percent of such bonus.
                    ``(C) Special rules for payments to nonresident 
                alien individuals.--In the case of a payment of an 
                excessive bonus to a covered individual who is a 
                nonresident alien individual--
                            ``(i) Withholding.--If section 1441 applies 
                        with respect to such payment, the amount 
                        otherwise required to be deducted and withheld 
                        under such section shall be increased by an 
                        amount equal to 35 percent of such bonus.
                            ``(ii) Liability where no withholding.--If 
                        section 1441 does not apply to such payment, 
                        the person described in subsection (c)(1) or 
                        (2) with respect to the excessive bonus (and 
                        all persons described in subsection (c)(3) with 
                        respect to such person) shall be jointly and 
                        severally liable for payment of the tax imposed 
                        by subsection (a)(2) with respect to the 
                        excessive bonus.
            ``(2) Special rules for earnings.--
                    ``(A) Inclusion of future earnings on excessive 
                bonuses.--Any income (whether actual or notional) for 
                any calendar year which is properly allocable to the 
                portion of any applicable bonus payment which is 
                treated as an excessive bonus (determined after 
                application of subparagraph (B)) shall be treated as an 
                excessive bonus for the calendar year in which paid.
                    ``(B) Future earnings on payment not treated as 
                excessive bonus.--
                            ``(i) In general.--Any income (whether 
                        actual or notional) for any calendar year which 
                        is properly allocable to the portion of any 
                        applicable bonus payment which is not treated 
                        as an excessive bonus shall be taken into 
                        account as an excessive bonus in the calendar 
                        year in which paid to the extent that the sum 
                        of--
                                    ``(I) the amount of such income in 
                                excess of the amount which would have 
                                been earned if the return on such 
                                portion were a market rate of return, 
                                plus
                                    ``(II) an amount equal to such 
                                portion, plus
                                    ``(III) such excess income for any 
                                preceding calendar year,
                        exceeds $50,000.
                            ``(ii) Market rate of return.--The 
                        Secretary shall prescribe by regulation rules 
                        governing the calculation of a market rate of 
                        return. Such rules shall allow in appropriate 
                        cases the treatment of income as based on a 
                        market rate of return if the income of the plan 
                        is determined by reference to the rate of 
                        return on a predetermined investment, including 
                        stock or other ownership interests (whether or 
                        not publicly traded) in the employer 
                        maintaining the plan.
            ``(3) Individual not taxed if bonus repaid.--If a covered 
        individual repays all or any portion of an applicable bonus 
        payment to the Federal emergency economic assistance recipient 
        before the due date (without regard to extensions) for the 
        individual's return of tax imposed by chapter for the taxable 
        year for which tax under this section would (without regard to 
        this paragraph) have been imposed, then, solely for purposes of 
        applying this title to the covered individual, the portion 
        repaid shall be treated as if it had not been paid to the 
        covered individual.
            ``(4) Notice requirements.--The Secretary shall require 
        each Federal emergency economic assistance recipient to notify, 
        as soon as practicable after the date of the enactment of this 
        subsection and at such other times as the Secretary determines 
        appropriate, the Secretary and each covered individual of the 
        amount of excessive bonuses to which this section applied and 
        the amount of tax deducted and withheld on such bonuses.
            ``(5) Secretarial authority.--The Secretary may prescribe 
        such regulations, rules, and guidance as may be necessary to 
        carry out the provisions of this section, including 
        regulations, rules, and guidance necessary to prevent--
                    ``(A) the recharacterization of a bonus payment as 
                a payment which is not a bonus payment in order to 
                avoid the purposes of this section, or
                    ``(B) the avoidance of the purposes of this section 
                through the use of partnerships or other pass through 
                entities.''.
    (b) Conforming Amendments.--
            (1) The heading and table of sections for chapter 46 of 
        such Code are amended to read as follows:

          ``Chapter 46-Taxes on Certain Excessive Remuneration

``Sec. 4999. Golden parachute payments.
``Sec. 4999A. Excessive bonuses paid by recipients of Federal emergency 
                            economic assistance.''.
            (2) The item relating to chapter 46 in the table of 
        chapters for subtitle D of such Code is amended to read as 
        follows:

``Chapter 46. Taxes on excessive remuneration.''.
    (c) Effective Date.--The amendments made by this subsection shall 
apply to payments of excessive bonuses after December 31, 2008, in 
taxable years ending after such date.

SEC. 3. LIMITATION ON ANNUAL AMOUNTS WHICH MAY BE DEFERRED UNDER 
              NONQUALIFIED DEFERRED COMPENSATION ARRANGEMENTS OF 
              RECIPIENTS OF FEDERAL EMERGENCY ECONOMIC ASSISTANCE.

    (a) In General.--Section 409A(a) of the Internal Revenue Code of 
1986 (relating to inclusion of gross income under nonqualified deferred 
compensation plans) is amended--
            (1) by striking ``and (4)'' in subclause (I) of paragraph 
        (1)(A)(i) and inserting ``(4), and (5)'', and
            (2) by adding at the end the following new paragraph:
            ``(5) Annual limitation on aggregate deferred amounts.--
                    ``(A) Limitation.--In the case of any Federal 
                emergency economic assistance recipient maintaining a 
                nonqualified deferred compensation plan, the 
                requirements of this paragraph are met if the plan 
                provides that the aggregate amount of compensation 
                which is deferred for any applicable taxable year 
                beginning after December 31, 2008, with respect to a 
                participant under the plan may not exceed $1,000,000. 
                For purposes of this paragraph, only amounts deferred 
                after the date of the enactment of this paragraph shall 
                be taken into account.
                    ``(B) Special rules relating to earnings.--
                            ``(i) Inclusion of future earnings.--If an 
                        amount is includible under paragraph (1) in the 
                        gross income of a participant for any taxable 
                        year by reason of any failure to meet the 
                        requirements of this paragraph, any income 
                        (whether actual or notional) for any subsequent 
                        taxable year shall be included in gross income 
                        under paragraph (1)(A) in such subsequent 
                        taxable year to the extent such income--
                                    ``(I) is attributable to 
                                compensation (or income attributable to 
                                such compensation) required to be 
                                included in gross income by reason of 
                                such failure (including by reason of 
                                this subparagraph), and
                                    ``(II) is not subject to a 
                                substantial risk of forfeiture and has 
                                not been previously included in gross 
                                income.
                            ``(ii) Earnings counted against cap only if 
                        in excess of market rate.--Income (whether 
                        actual or notional) which is properly allocable 
                        to any participant for any taxable year shall 
                        be taken into account in determining whether 
                        the requirement of subparagraph (A) is met with 
                        respect to the taxable year only to the extent 
                        of the excess (if any) of--
                                    ``(I) the amount of such income, 
                                over
                                    ``(II) the amount of such income 
                                which would have been earned on the 
                                amount to which it is attributable if 
                                the return on such amount were a market 
                                rate of return.
                            ``(iii) Market rate of return.--The 
                        Secretary shall prescribe by regulation rules 
                        governing the calculation of a market rate of 
                        return. Such rules shall allow in appropriate 
                        cases the treatment of income as based on a 
                        market rate of return if the income of the plan 
                        is determined by reference to the rate of 
                        return on a predetermined investment, including 
                        stock or other ownership interests (whether or 
                        not publicly traded) in the employer 
                        maintaining the plan.
                    ``(C) Aggregation rule.--For purposes of this 
                paragraph, all nonqualified deferred compensation plans 
                maintained by all employers treated as a single 
                employer under subsection (d)(6) shall be treated as 1 
                plan.
                    ``(D) Definitions.--For purposes of this 
                paragraph--
                            ``(i) In general.--Any term which is used 
                        in this paragraph which is also used in section 
                        4999A shall have the same meaning as when used 
                        in such section.
                            ``(ii) Applicable taxable year.--The term 
                        `applicable taxable year' means any taxable 
                        year which includes the portion of any 
                        applicable calendar year (as defined in section 
                        4999A(b)(2)(C)).''.
    (b) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to taxable years beginning after December 31, 2008, 
        except that the amendments shall only apply to amounts deferred 
        after the date of the enactment of this Act (and to earnings on 
        such amounts).
            (2) Guidance relating to certain existing arrangements.--
        Not later than 60 days after the date of the enactment of this 
        Act, the Secretary of the Treasury shall issue guidance 
        providing a limited period during which a nonqualified deferred 
        compensation plan adopted before December 31, 2008, may, 
        without violating the requirements of section 409A(a) of such 
        Code, be amended--
                    (A) to provide that a participant may, no later 
                than December 31, 2009--
                            (i) terminate participation in the plan, or
                            (ii) cancel or modify an outstanding 
                        deferral election with regard to all or a 
                        portion of amounts deferred after the date of 
                        the enactment of this Act, to the extent 
                        necessary for the plan to meet the requirements 
                        of section 409A(a)(5) of such Code (as added by 
                        the amendments made by this section),
                but only if amounts subject to the termination, 
                cancellation, or modification are, to the extent not 
                previously included in gross income, includible in 
                income of the participant when no longer subject to 
                substantial risk of forfeiture, and
                    (B) to conform to the requirements of section 
                409A(a)(5) of such Code (as added by the amendments 
                made by this section) with regard to amounts deferred 
                after the date of the enactment of this Act.
                                                        Calendar No. 37

111th CONGRESS

  1st Session

                                 S. 651

_______________________________________________________________________

                                 A BILL

 To amend the Internal Revenue Code of 1986 to impose an excise tax on 
   excessive bonuses paid by, and received from, companies receiving 
     Federal emergency economic assistance, to limit the amount of 
nonqualified deferred compensation that employees of such companies may 
              defer from taxation, and for other purposes.

_______________________________________________________________________

                             March 23, 2009

            Read the second time and placed on the calendar