[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[S. 2127 Introduced in Senate (IS)]
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119th CONGRESS
1st Session
S. 2127
To amend the Internal Revenue Code of 1986 to impose a tax on certain
trading transactions.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
June 18, 2025
Mr. Schatz (for himself, Ms. Warren, Mr. Van Hollen, Mr. Whitehouse,
Mr. Fetterman, and Mr. Merkley) 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 2025''.
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.--
``(1) In general.--The tax imposed under subsection (a)
with respect to any covered transaction shall be the applicable
percentage of the specified base amount with respect to such
covered transaction.
``(2) Applicable percentage.--For purposes of this
subsection, the applicable percentage shall be--
``(A) in the case of a covered transaction after
December 31, 2025, and before January 1, 2027, 0.02
percent,
``(B) in the case of a covered transaction after
December 31, 2026, and before January 1, 2028, 0.04
percent,
``(C) in the case of a covered transaction after
December 31, 2027, and before January 1, 2029, 0.06
percent,
``(D) in the case of a covered transaction after
December 31, 2028, and before January 1, 2030, 0.08
percent, and
``(E) in the case of a covered transaction after
December 31, 2029, 0.1 percent.
``(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.--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 (as defined in section 864(f)) in which the taxpayer is a
member.
``(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, 2025.
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