Excise tax on excessive chief executive officer pay disparity

(a)

In general

Subtitle D of the Internal Revenue Code of 1986 is amended by adding at the end the following new chapter:

50B

Pay disparity

Sec. 5000E. Excessive pay disparity.

5000E.

Excessive pay disparity

(a)

In general

In the case of any employer which is an applicable employer for the calendar year, there is hereby imposed a tax equal to the lesser of—(1)1 percent of the product of—(A)the pay disparity factor of the applicable employer for the calendar year, and(B)the excess of—(i)amount determined under subsection (c)(2)(A) for such calendar year, over(ii)5,000 percent of the amount determined under subsection (c)(2)(B) for such calendar year, or(2)1 percent of the gross receipts (within the meaning of section 448(c)) of such applicable employer.(b)

Applicable employer

(1)

In general

For purposes of this section, the term applicable employer means, with respect to any calendar year, any employer which—(A)has not less than $100,000,000 in gross receipts (within the meaning of section 448(c)) for each of the 3 calendar years preceding such calendar year, and(B)has paid wages in excess of $10,000,000 for each calendar year in the 3-calendar-year period taken into account under subparagraph (A).(2)

Aggregation rule

For purposes of this section, the rules of subsection (a) and (b) of section 52 shall apply.(3)

Predecessors

For purposes of paragraph (1)(A), rules similar to the rules of section 448(c)(3)(D) shall apply. (4)

Inflation adjustment

(A)

In general

In the case of any calendar year after 2024, the $100,000,000 amount under paragraph (1)(A) and the $10,000,000 amount under paragraph (1)(B) shall each be increased by an amount equal to—(i)such dollar amount, multiplied by(ii)the cost-of-living adjustment determined under section 1(f)(3) for such calendar year, determined by substituting calendar year 2023 for calendar year 2016 in subparagraph (A)(ii) thereof.(B)

Rounding

The amount of any increase under clause (i) shall be rounded to the nearest multiple of $100,000. (c)

Pay disparity factor

For purposes of this section—(1)

In general

The term pay disparity factor means, with respect to any applicable employer for calendar year, the excess (if any) of—(A)the pay disparity ratio of such employer for such calendar year, over(B)50.(2)

Pay disparity ratio

The term pay disparity ratio means, with respect to any applicable employer for calendar year, the ratio of—(A)the average qualified wages for the 5-calendar year period ending with such calendar year of the individual who is the highest compensated employee of the applicable employer for such calendar year, to(B)the median wages paid to all applicable employees of the applicable employer for such calendar year.(3)

Wages; qualified wages

(A)

Wages

The term wages has the meaning given such term under section 3401(a), determined without regard to paragraph (8) thereof.(B)

Qualified wages

(i)

In general

The term qualified wages means wages increased by— (I)any elective deferrals (within the meaning of section 402(g)(3)) not included in wages, and(II)any amounts described in section 415(c)(3)(D)(ii) which are not included in wages.(ii)

Self-employed individuals and owner-employees

In the case of an employee (within the meaning of section 401(c)(1)), the term qualified wages includes the earned income (as defined in section 401(c)(2) of such employee, but determined without regard to any exclusion under section 911) of such employee. (4)

Applicable employee

For purposes of this subsection—(A)

In general

The term applicable employee means any individual whose wages in connection with services performed for the applicable employer for the calendar year are equal to or more than $5,000.(B)

Inflation adjustment

(i)

In general

In the case of any calendar year after 2024, the $5,000 amount under subparagraph (A)(ii) shall be increased by an amount equal to—(I)such dollar amount, multiplied by(II)the cost-of-living adjustment determined under section 1(f)(3) for such calendar year, determined by substituting calendar year 2023 for calendar year 2016 in subparagraph (A)(ii) thereof.(ii)

Rounding

The amount of any increase under clause (i) shall be rounded to the nearest multiple of $100.(d)

Joint and several liability

If more than one taxpayer is treated as a single employer under this section by reason of subsection (b)(2), then each such taxpayer shall be jointly and severally liable for the tax imposed by subsection (a).(e)

Regulations

The Secretary shall issue regulations as necessary to prevent avoidance of the purposes of this section, including regulations to prevent the manipulation of the pay disparity factor by changes to the composition of the workforce (including by using the services of contractors rather than employees).

(b)

No deduction from income taxes

Section 275(a)(6) of the Internal Revenue Code of is amended by inserting 50B, after 50A,.(c)

Clerical amendment

The table of chapters for subtitle D of the Internal Revenue Code of 1986 is amended by adding at the end the following new item:

Chapter 50B—Pay disparity

(d)

Effective date

The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.