[Congressional Bills 116th Congress]
[From the U.S. Government Publishing Office]
[S. 3526 Introduced in Senate (IS)]
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116th CONGRESS
2d Session
S. 3526
To restrict the authority of the Secretary of the Treasury to purchase
or guarantee assets in response to the coronavirus disease (COVID-19)
outbreak.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
March 18, 2020
Mr. Reed introduced the following bill; which was read twice and
referred to the Committee on Finance
_______________________________________________________________________
A BILL
To restrict the authority of the Secretary of the Treasury to purchase
or guarantee assets in response to the coronavirus disease (COVID-19)
outbreak.
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 ``Protecting Taxpayer's Return on
Investment Act of 2020''.
SEC. 2. AUTHORITY FOR WARRANTS AND DEBT INSTRUMENTS.
(a) Definitions.--In this section:
(1) Asset.--The term ``asset'' means any financial
instrument that the Secretary, after consultation with the
Chairman of the Board of Governors of the Federal Reserve
System, determines the purchase of which or the guarantee of
which is necessary to promote economic stability.
(2) Company.--The term ``company'' means any entity that is
not subject to the prohibitions in subsection (e).
(3) Secretary.--The term ``Secretary'' means the Secretary
of the Treasury.
(b) Warrant or Senior Debt Instrument.--The Secretary may not
purchase, or make any commitment to purchase, or guarantee, or make any
commitment to guarantee, any asset in response to the coronavirus
disease (COVID-19) outbreak, unless the Secretary receives from the
company from which such assets are to be purchased or are to be
guaranteed--
(1) in the case of a company, the securities of which are
traded on a national securities exchange, a warrant giving the
right to the Secretary to receive nonvoting common stock or
preferred stock in such company, or voting stock with respect
to which, the Secretary agrees not to exercise voting power, as
the Secretary determines appropriate; or
(2) in the case of any company other than one described in
paragraph (1), a warrant for common or preferred stock, or a
senior debt instrument from such company, as described in
subsection (c)(3).
(c) Terms and Conditions.--The terms and conditions of any warrant
or senior debt instrument required under subsection (b) shall meet the
following requirements:
(1) Purposes.--Such terms and conditions shall, at a
minimum, be designed--
(A) to provide for reasonable participation by the
Secretary, for the benefit of taxpayers, in equity
appreciation in the case of a warrant or other equity
security, or a reasonable interest rate premium, in the
case of a debt instrument; and
(B) to provide additional protection for the
taxpayer against losses from sale of assets by the
Secretary and any associated administrative expenses.
(2) Authority to sell, exercise, or surrender.--
(A) In general.--For the primary benefit of
taxpayers, the Secretary may sell, exercise, or
surrender a warrant or any senior debt instrument
received under this section, based on the conditions
established under paragraph (1).
(B) Proceeds.--Of any proceeds received through the
sale, exercise, or surrender of any warrant or any
senior debt instrument--
(i) 65 percent shall be transferred or
credited to the Housing Trust Fund established
under section 1338 of the Federal Housing
Enterprises Financial Safety and Soundness Act
of 1992 (12 U.S.C. 4568); and
(ii) 35 percent shall be transferred or
credited to the Capital Magnet Fund under
section 1339 of the Federal Housing Enterprises
Financial Safety and Soundness Act of 1992 (12
U.S.C. 4569).
(3) Conversion.--The warrant shall provide that if, after
the warrant is received by the Secretary under this section,
the company that issued the warrant is no longer listed or
traded on a national securities exchange or securities
association, as described in subsection (b)(1), such warrants
shall convert to senior debt, or contain appropriate
protections for the Secretary to ensure that the Treasury is
appropriately compensated for the value of the warrant, in an
amount determined by the Secretary for the primary benefit of
taxpayers.
(4) Protections.--Any warrant representing securities to be
received by the Secretary under this section shall contain
anti-dilution provisions of the type employed in capital market
transactions, as determined by the Secretary for the primary
benefit of taxpayers. Such provisions shall protect the value
of the securities from market transactions such as stock
splits, stock distributions, dividends, and other
distributions, mergers, and other forms of reorganization or
recapitalization.
(5) Exercise price.--The exercise price for any warrant
issued pursuant to this section shall be set by the Secretary,
for the primary benefit of taxpayers.
(6) Sufficiency.--The company shall guarantee to the
Secretary that it has authorized shares of nonvoting stock
available to fulfill its obligations under this section. Should
the company not have sufficient authorized shares, including
preferred shares that may carry dividend rights equal to a
multiple number of common shares, the Secretary may, to the
extent necessary for the primary benefit of taxpayers, accept a
senior debt note in an amount, and on such terms as will
compensate the Secretary with equivalent value, in the event
that a sufficient shareholder vote to authorize the necessary
additional shares cannot be obtained.
(d) Exceptions.--The Secretary may establish an exception to the
requirements of this section and appropriate alternative requirements
for any participating company that is legally prohibited from issuing
securities and debt instruments, so as not to allow circumvention of
the requirements of this section.
(e) Prohibitions of Foreign Companies.--
(1) In general.--The Secretary may not purchase, or make
any commitment to purchase, or guarantee, or make any
commitment to guarantee, any asset in response to the
coronavirus disease (COVID-19) outbreak from--
(A) any foreign incorporated entity that the
Secretary has determined is an inverted domestic
corporation or any subsidiary of such entity; or
(B) any joint venture if more than 10 percent of
the joint venture (by vote or value) is held by a
foreign incorporated entity that the Secretary has
determined is an inverted domestic corporation or any
subsidiary of such entity.
(2) Inverted domestic corporation.--
(A) In general.--For purposes of this subsection, a
foreign incorporated entity shall be treated as an
inverted domestic corporation if, pursuant to a plan
(or a series of related transactions)--
(i) the entity completes on or after May 8,
2014, the direct or indirect acquisition of--
(I) substantially all of the
properties held directly or indirectly
by a domestic corporation; or
(II) substantially all of the
assets of, or substantially all of the
properties constituting a trade or
business of, a domestic partnership;
and
(ii) after the acquisition, either--
(I) more than 50 percent of the
stock (by vote or value) of the entity
is held--
(aa) in the case of an
acquisition with respect to a
domestic corporation, by former
shareholders of the domestic
corporation by reason of
holding stock in the domestic
corporation; or
(bb) in the case of an
acquisition with respect to a
domestic partnership, by former
partners of the domestic
partnership by reason of
holding a capital or profits
interest in the domestic
partnership; or
(II) the management and control of
the expanded affiliated group which
includes the entity occurs, directly or
indirectly, primarily within the United
States, as determined pursuant to
regulations prescribed by the
Secretary, and such expanded affiliated
group has significant domestic business
activities.
(B) Exception for corporations with substantial
business activities in foreign country of
organization.--
(i) In general.--A foreign incorporated
entity described in subparagraph (A) shall not
be treated as an inverted domestic corporation
if after the acquisition the expanded
affiliated group which includes the entity has
substantial business activities in the foreign
country in which or under the law of which the
entity is created or organized when compared to
the total business activities of such expanded
affiliated group.
(ii) Substantial business activities.--The
Secretary shall establish regulations for
determining whether an affiliated group has
substantial business activities for purposes of
clause (i), except that such regulations may
not treat any group as having substantial
business activities if such group would not be
considered to have substantial business
activities under the regulations prescribed
under section 7874 of the Internal Revenue Code
of 1986, as in effect on January 18, 2017.
(C) Significant domestic business activities.--
(i) In general.--For purposes of
subparagraph (A)(ii)(II), an expanded
affiliated group has significant domestic
business activities if at least 25 percent of--
(I) the employees of the group are
based in the United States;
(II) the employee compensation
incurred by the group is incurred with
respect to employees based in the
United States;
(III) the assets of the group are
located in the United States; or
(IV) the income of the group is
derived in the United States.
(ii) Determination.--Determinations
pursuant to clause (i) shall be made in the
same manner as such determinations are made for
purposes of determining substantial business
activities under regulations referred to in
subparagraph (B) as in effect on January 18,
2017, but applied by treating all references in
such regulations to ``foreign country'' and
``relevant foreign country'' as references to
``the United States''. The Secretary may issue
regulations decreasing the threshold percent in
any of the tests under such regulations for
determining if business activities constitute
significant domestic business activities for
purposes of this subparagraph.
(3) Waiver.--
(A) In general.--The Secretary may waive paragraph
(1) if the Secretary determines that the waiver is--
(i) required in the interest of national
security; or
(ii) necessary for the efficient or
effective administration of Federal or
federally funded--
(I) programs that provide health
benefits to individuals; or
(II) public health programs.
(B) Report to congress.--The Secretary shall, not
later than 14 days after issuing such waiver, submit a
written notification of the waiver to the relevant
authorizing committees of Congress and the Committees
on Appropriations of the Senate and the House of
Representatives.
(4) Definitions and special rules.--
(A) Definitions.--In this subsection, the terms
``expanded affiliated group'', ``foreign incorporated
entity'', ``domestic'', and ``foreign'' have the
meaning given those terms in section 835(c) of the
Homeland Security Act of 2002 (6 U.S.C. 395(c)).
(B) Special rules.--In applying paragraph (2) of
this subsection for purposes of paragraph (1) of this
subsection, the rules described under 835(c)(1) of the
Homeland Security Act of 2002 (6 U.S.C. 395(c)(1))
shall apply.
(5) Regulations regarding management and control.--
(A) In general.--The Secretary shall, for purposes
of this subsection, prescribe regulations for purposes
of determining cases in which the management and
control of an expanded affiliated group is to be
treated as occurring, directly or indirectly, primarily
within the United States. The regulations prescribed
under the preceding sentence shall apply to periods
after May 8, 2014.
(B) Executive officers and senior management.--The
regulations prescribed under subparagraph (A) shall
provide that the management and control of an expanded
affiliated group shall be treated as occurring,
directly or indirectly, primarily within the United
States if substantially all of the executive officers
and senior management of the expanded affiliated group
who exercise day-to-day responsibility for making
decisions involving strategic, financial, and
operational policies of the expanded affiliated group
are based or primarily located within the United
States. Individuals who in fact exercise such day-to-
day responsibilities shall be treated as executive
officers and senior management regardless of their
title.
SEC. 3. SPECIAL RULES FOR TAX TREATMENT OF EXECUTIVE COMPENSATION FOR
EMPLOYERS PARTICIPATING IN CERTAIN CORONAVIRUS RELIEF
PROGRAMS.
(a) In General.--Section 162(m) of the Internal Revenue Code of
1986 is amended by adding at the end the following new paragraph:
``(7) Special rule for application to employers
participating in certain coronavirus relief programs.--
``(A) In general.--In the case of an applicable
employer, no deduction shall be allowed under this
chapter--
``(i) in the case of applicable
remuneration for any applicable taxable year
which is attributable to services performed by
a covered individual during such applicable
taxable year, to the extent that the amount of
such remuneration exceeds $500,000, or
``(ii) in the case of deferred deduction
remuneration for any taxable year for services
performed during any applicable taxable year by
a covered individual, to the extent that the
amount of such remuneration exceeds $500,000
reduced (but not below zero) by the sum of--
``(I) the applicable remuneration
for such applicable taxable year, plus
``(II) the portion of the deferred
deduction remuneration for such
services which was taken into account
under this clause in a preceding
taxable year.
``(B) Applicable employer.--For purposes of this
paragraph--
``(i) In general.--The term `applicable
employer' means any employer from whom one or
more assets are purchased or guaranteed in
accordance with section 2 of the Protecting
Taxpayer's Return on Investment Act of 2020.
``(ii) Aggregation rules.--Two or more
persons who are treated as a single employer
under subsection (b) or (c) of section 414
shall be treated as a single employer, except
that in applying section 1563(a) for purposes
of either such subsection, paragraphs (2) and
(3) thereof shall be disregarded.
``(C) Applicable taxable year.--For purposes of
this paragraph, the term `applicable taxable year'
means, with respect to any employer--
``(i) the first taxable year of the
employer in which the Secretary has purchased
or guaranteed an asset of the employer in
accordance with section 2 of the Protecting
Taxpayer's Return on Investment Act of 2020,
and
``(ii) any subsequent taxable year ending
before the date on which the Secretary sells
the assets associated with the employer or no
longer guarantees the assets associated with
the employer, as the case may be.
``(D) Covered individual.--For purposes of this
paragraph, the term `covered individual' means any
individual who has performed services (directly or
indirectly) for the applicable employer (or any
predecessor).
``(E) Applicable remuneration.--For purposes of
this paragraph, the term `applicable remuneration'
means the applicable employee remuneration of the
covered individual, as determined under paragraph (4)
without regard to subparagraph (B) thereof. Such term
shall not include any deferred deduction remuneration
with respect to services performed in a prior
applicable taxable year.
``(F) Deferred deduction remuneration.--For
purposes of this paragraph, the term `deferred
deduction remuneration' means remuneration which would
be applicable remuneration for services performed in an
applicable taxable year but for the fact that the
deduction under this chapter (determined without regard
to this paragraph) for such remuneration is allowable
in a subsequent taxable year.
``(G) Coordination.--Rules similar to the rules of
subparagraphs (D), (E), and (F) of paragraph (4) shall
apply for purposes of this paragraph.
``(H) Regulatory authority.--The Secretary may
prescribe such guidance, rules, or regulations as are
necessary to carry out the purposes of this paragraph,
including the extent to which this paragraph applies in
the case of any acquisition, merger, or reorganization
of an applicable employer.''.
(b) Effective Date.--The amendment made by this section shall apply
to taxable years beginning after December 31, 2019.
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