[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[S. 2491 Introduced in Senate (IS)]

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118th CONGRESS
  1st Session
                                S. 2491

 To amend the Internal Revenue Code of 1986 to impose a tax on certain 
                         trading transactions.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             July 25, 2023

 Mr. Schatz (for himself, Mr. Van Hollen, Ms. Warren, Mr. Merkley, Mr. 
Whitehouse, and Mr. Fetterman) introduced the following bill; which was 
          read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
 To amend the Internal Revenue Code of 1986 to impose a tax on certain 
                         trading transactions.

    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 ``Wall Street Tax Act of 2023''.

SEC. 2. 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:

              ``Subchapter C--Tax on Trading Transactions

``Sec. 4475. Tax on trading transactions.
``Sec. 4476. Derivative defined.

``SEC. 4475. TAX ON TRADING TRANSACTIONS.

    ``(a) Imposition of Tax.--There is hereby imposed a tax on each 
covered transaction with respect to any security.
    ``(b) Rate of Tax.--The tax imposed under subsection (a) with 
respect to any covered transaction shall be 0.1 percent of the 
specified base amount with respect to such covered transaction.
    ``(c) Specified Base Amount.--For purposes of this section, the 
term `specified base amount' means--
            ``(1) except as provided in paragraph (2), the fair market 
        value of a security (determined as of the time of the covered 
        transaction), and
            ``(2) in the case of any payment with respect to a 
        derivative, the amount of such payment.
    ``(d) Covered Transaction.--For purposes of this section--
            ``(1) In general.--The term `covered transaction' means--
                    ``(A) except as provided in subparagraph (B), any 
                purchase if--
                            ``(i) such purchase occurs on, or is 
                        subject to the rules of, a qualified board or 
                        exchange located in the United States, or
                            ``(ii) the purchaser or seller is a United 
                        States person, and
                    ``(B) any transaction with respect to a derivative 
                if--
                            ``(i) such derivative is traded on, or is 
                        subject to the rules of, a qualified board or 
                        exchange located in the United States, or
                            ``(ii) any party with rights under such 
                        derivative is a United States person.
            ``(2) 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 (e)(1).
    ``(e) Definitions and Special Rules.--For purposes of this 
section--
            ``(1) Security.--For purposes of this section, the term 
        `security' means--
                    ``(A) any share of stock in a corporation,
                    ``(B) any partnership or beneficial ownership 
                interest in a partnership or trust,
                    ``(C) except as provided in paragraph (2), any 
                note, bond, debenture, or other evidence of 
                indebtedness, and
                    ``(D) any derivative (as defined in section 4476).
            ``(2) Exception for certain traded short-term 
        indebtedness.--A note, bond, debenture, or other evidence of 
        indebtedness which--
                    ``(A) is traded on, or is subject to the rules of, 
                a qualified board or exchange located in the United 
                States, and
                    ``(B) has a fixed maturity of not more than 100 
                days,
        shall not be treated as described in paragraph (1)(C).
            ``(3) Qualified board or exchange.--The term `qualified 
        board or exchange' has the meaning given such term by section 
        1256(g)(7).
    ``(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, 
                or is subject to the rules of, a qualified board or 
                exchange located in the United States, such qualified 
                board or exchange, and
                    ``(B) in the case of a purchase not described in 
                subparagraph (A) which is executed by a broker (as 
                defined in section 6045(c)(1)) which is a United States 
                person, such broker.
            ``(2) Special rules for direct, etc., transactions.--In the 
        case of any transaction to which paragraph (1) does not apply, 
        the tax imposed by this section shall be paid by--
                    ``(A) in the case of a transaction described in 
                subsection (d)(1)(A)--
                            ``(i) the purchaser if the purchaser is a 
                        United States person, and
                            ``(ii) the seller if the purchaser is not a 
                        United States person, and
                    ``(B) in the case of a transaction described in 
                subsection (d)(1)(B)--
                            ``(i) the payor if the payor is a United 
                        States person, and
                            ``(ii) the payee if the payor is not a 
                        United States person.
    ``(g) Treatment of Exchanges and Payments With Respect to 
Derivatives.--For purposes of this section--
            ``(1) Treatment of exchanges.--
                    ``(A) In general.--An exchange shall be treated as 
                the sale of the property transferred and a purchase of 
                the property received by each party to the exchange.
                    ``(B) Certain deemed exchanges.--In the case of a 
                distribution treated as an exchange for stock under 
                section 302 or 331, the corporation making such 
                distribution shall be treated as having purchased such 
                stock for purposes of this section.
            ``(2) Payments with respect to derivatives treated as 
        separate transactions.--Except as otherwise provided by the 
        Secretary, any payment with respect to any derivative shall be 
        treated as a separate transaction for purposes of this section.
    ``(h) Application to Transactions by Controlled Foreign 
Corporations.--
            ``(1) In general.--For purposes of this section, a 
        controlled foreign corporation shall be treated as a United 
        States person.
            ``(2) Special rules for payment of tax on direct, etc., 
        transactions.--In the case of any transaction which is a 
        covered transaction solely by reason of paragraph (1) and which 
        is not described in subsection (f)(1)--
                    ``(A) Payment by united states shareholders.--Any 
                tax which would (but for this paragraph) be payable 
                under subsection (f)(2) by the controlled foreign 
                corporation shall, in lieu thereof, be paid by the 
                United States shareholders of such controlled foreign 
                corporation as provided in subparagraph (B).
                    ``(B) Pro rata shares.--Each such United States 
                shareholder shall pay the same proportion of such tax 
                as--
                            ``(i) the stock which such United States 
                        shareholder owns (within the meaning of section 
                        958(a)) in such controlled foreign corporation, 
                        bears to
                            ``(ii) the stock so owned by all United 
                        States shareholders in such controlled foreign 
                        corporation.
                    ``(C) Definitions.--For purposes of this 
                subsection, the terms `United States shareholder' and 
                `controlled foreign corporation' have the meanings 
                given such terms in sections 951(b) and 957(a), 
                respectively.
    ``(i) Administration.--The Secretary shall carry out this section 
in consultation with the Securities and Exchange Commission and the 
Commodity Futures Trading Commission.
    ``(j) 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.

``SEC. 4476. DERIVATIVE DEFINED.

    ``(a) In General.--For purposes of this subchapter, except as 
otherwise provided in this section, the term `derivative' means any 
contract (including any option, forward contract, futures contract, 
short position, swap, or similar contract) the value of which, or any 
payment or other transfer with respect to which, is (directly or 
indirectly) determined by reference to one or more of the following:
            ``(1) Any share of stock in a corporation.
            ``(2) Any partnership or beneficial ownership interest in a 
        partnership or trust.
            ``(3) Any evidence of indebtedness.
            ``(4) Except as provided in subsection (b)(1), any real 
        property.
            ``(5) Any commodity which is actively traded (within the 
        meaning of section 1092(d)(1)).
            ``(6) Any currency.
            ``(7) Any rate, price, amount, index, formula, or 
        algorithm.
            ``(8) Any other item as the Secretary may prescribe.
Except as provided in regulations prescribed by the Secretary to 
prevent the avoidance of the purposes of this subchapter, such term 
shall not include any item described in paragraphs (1) through (8).
    ``(b) Exceptions.--
            ``(1) Certain real property.--
                    ``(A) In general.--For purposes of this subchapter, 
                the term `derivative' shall not include any contract 
                with respect to interests in real property (as defined 
                in section 856(c)(5)(C)) if such contract requires 
                physical delivery of such real property.
                    ``(B) Options to settle in cash.--
                            ``(i) In general.--For purposes of 
                        subparagraph (A), a contract which provides for 
                        an option of cash settlement shall not be 
                        treated as requiring physical delivery of real 
                        property unless the option is--
                                    ``(I) not exercisable 
                                unconditionally, and
                                    ``(II) exercisable only in unusual 
                                and exceptional circumstances.
                            ``(ii) Option of cash settlement.--For 
                        purposes of clause (i), a contract provides an 
                        option of cash settlement if the contract 
                        settles in (or could be settled in) cash or 
                        property other than the underlying real 
                        property.
            ``(2) Securities lending, sale-repurchase, and similar 
        financing transactions.--To the extent provided by the 
        Secretary, for purposes of this subchapter, the term 
        `derivative' shall not include the right to the return of the 
        same or substantially identical securities transferred in a 
        securities lending transaction, sale-repurchase transaction, or 
        similar financing transaction.
            ``(3) Options received in connection with the performance 
        of services.--For purposes of this subchapter, the term 
        `derivative' shall not include any option described in section 
        83(e)(3) received in connection with the performance of 
        services.
            ``(4) Insurance contracts, annuities, and endowments.--For 
        purposes of this subchapter, the term `derivative' shall not 
        include any insurance, annuity, or endowment contract issued by 
        an insurance company to which subchapter L applies (or issued 
        by any foreign corporation to which such subchapter would apply 
        if such foreign corporation were a domestic corporation).
            ``(5) Derivatives with respect to stock of members of same 
        worldwide affiliated group.--
                    ``(A) In general.--For purposes of this subchapter, 
                the term `derivative' shall not include any derivative 
                (determined without regard to this paragraph) with 
                respect to stock issued by any member of the same 
                worldwide affiliated group in which the taxpayer is a 
                member.
                    ``(B) Worldwide affiliated group.--For purposes of 
                this paragraph, the term `worldwide affiliated group' 
                means group consisting of--
                            ``(i) the includible members of an 
                        affiliated group (as defined in section 
                        1504(a), determined without regard to paragraph 
                        (2) of section 1504(b)), and
                            ``(ii) all controlled foreign corporations 
                        in which such members in the aggregate meet the 
                        ownership requirements of section 1504(a)(2) 
                        either directly or indirectly through applying 
                        paragraph (2) of section 958(a) or through 
                        applying rules similar to the rules of such 
                        paragraph to stock owned directly or indirectly 
                        by domestic partnerships, trusts, or estates.
            ``(6) Commodities used in normal course of trade or 
        business.--For purposes of this subchapter, the term 
        `derivative' shall not include any contract with respect to any 
        commodity if--
                    ``(A) such contract requires physical delivery with 
                the option of cash settlement only in unusual and 
                exceptional circumstances, and
                    ``(B) such commodity is used (and is used in 
                quantities with respect to which such derivative 
                relates) in the normal course of the taxpayer's trade 
                or business (or, in the case of an individual, for 
                personal consumption).
    ``(c) Contracts With Embedded Derivative Components.--
            ``(1) In general.--If a contract has derivative and 
        nonderivative components, then each derivative component shall 
        be treated as a derivative for purposes of this subchapter. If 
        the derivative component cannot be separately valued, then the 
        entire contract shall be treated as a derivative for purposes 
        of this subchapter.
            ``(2) Exception for certain embedded derivative components 
        of debt instruments.--A debt instrument shall not be treated as 
        having a derivative component merely because--
                    ``(A) such debt instrument is denominated in a 
                nonfunctional currency (as defined in section 
                988(c)(1)(C)(ii)), or
                    ``(B) payments with respect to such debt instrument 
                are determined by reference to the value of a 
                nonfunctional currency (as so defined).
    ``(d) Treatment of American Depository Receipts and Similar 
Instruments.--Except as otherwise provided by the Secretary, for 
purposes of this subchapter, American depository receipts (and similar 
instruments) with respect to shares of stock in foreign corporations 
shall be treated as shares of stock in such foreign corporations.''.
    (b) Information Reporting With Respect to Controlled Foreign 
Corporations.--Section 6038(a)(1)(B) of such Code is amended by 
inserting ``and transactions which are covered transactions for 
purposes of section 4475 by reason of the application of section 
4475(h)(1) to such corporation'' before the semicolon at the end.
    (c) Conforming Amendment.--The table of subchapters for chapter 36 
of such Code is amended by inserting after the item relating to 
subchapter B the following new item:

``Subchapter C. Tax on trading transactions.''.
    (d) Effective Date.--The amendments made by this section shall 
apply to transactions after December 31, 2023.
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