[Congressional Record Volume 161, Number 63 (Wednesday, April 29, 2015)]
[Senate]
[Page S2532]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. REED (for himself and Mr. Blumenthal):
  S. 1127. A bill to amend the Internal Revenue Code of 1986 to expand 
the denial of deduction for certain excessive employee remuneration, 
and for other purposes; to the Committee on Finance.
  Mr. REED. Mr. President, today I am reintroducing the Stop 
Subsidizing Multimillion Dollar Corporate Bonuses Act with my 
colleague, Senator Blumenthal. This bill closes a loophole that allows 
publicly traded corporations to deduct an executive's pay that exceeds 
$1 million from their tax bill.
  Under current tax law, when a public corporation calculates its 
taxable income, it is generally permitted to deduct the cost of 
compensation from its revenues, with limits up to $1 million for some 
of the firm's most senior executives. However, a loophole relating to 
performance-based compensation has allowed many public corporations to 
avoid such limits and freely deduct excessive executive compensation. 
To illustrate how this loophole works, if a CEO receives $15 million in 
performance-based compensation in a given year, the public 
corporation's taxable income would decline by $15 million. With the 
current corporate tax rate at 35 percent, the corporation in this case 
would receive a tax cut of $5.25 million.
  The Stop Subsidizing Multimillion Dollar Corporate Bonuses Act would 
instead allow a public corporation to deduct all forms of compensation 
up to only $1 million per employee. Using the same example above, a 
profitable public corporation, after deducting only $1 million from the 
$15 million in CEO compensation, would then pay $4.9 million in taxes. 
In short, instead of costing the government $5.25 million, this public 
corporation will be paying $4.9 million in taxes, reducing the burden 
on middle-class families and our national debt.
  Indeed, over a 10-year window, the Joint Committee on Taxation, in 
their most recent assessment, estimated that closing this loophole 
would save U.S. taxpayers over $50 billion.
  First, our legislation extends section 162(m) of the Tax Code to 
apply to all employees of publicly traded corporations so that all 
compensation is subject to a deductibility cap of $1 million. Publicly 
traded corporations would still be permitted to pay their executives as 
much as they desire, but compensation above and beyond $1 million would 
no longer be subsidized through our Tax Code.
  Second, our bill removes the exemption for performance-based 
compensation, which currently permits compensation deductions above and 
beyond $1 million when executives have met performance benchmarks set 
by the corporation's board of directors. As a result, publicly traded 
corporations would still be able to incentivize their executives, but 
all such incentives would be subject to a corporate deductibility cap 
of $1 million.
  Finally, our legislation makes a technical correction to ensure that 
all publicly traded corporations that are required to provide quarterly 
and annual reports to their investors under Securities and Exchange 
Commission rules and regulations are subject to section 162(m). 
Currently, this section of the Tax Code only covers some publicly 
traded corporations that are required to provide these periodic reports 
to their shareholders. Discouraging unrestrained compensation packages 
shouldn't hinge on whether a publicly traded corporation falls into one 
SEC reporting requirement or another, and our bill closes this 
technical loophole.
  With this legislation, we aim to put an end to some of the 
extravagant tax breaks that exclusively benefit public corporations. 
This is simply a matter of fairness, ensuring that corporations--and 
not taxpayers who face their own challenges in this economy--are paying 
for the multimillion dollar bonuses they have decided to dole out.
  I want to thank Senator Blumenthal for working with me on this issue, 
and I urge our colleagues to join us in cosponsoring this legislation.
                                 ______