Combating BDS Act of 2016

Summary: Combating BDS Act of 2016 This bill authorizes a state or local government to adopt and enforce measures to divest its assets from, or prohibit investment of its assets in: (1) an entity that such government determines, using credible information available to the public, engages in a commerce or investment-related boycott, divestment, or sanctions activity targeting Israel; or (2) an entity that owns or controls, is owned or controlled by, or is under common ownership or control with, such an entity. Such government shall provide written notice to such an entity before applying such a measure. Such a measure by a state or local government is not preempted by any federal law. The bill applies to any measure adopted by a state or local government before, on, or after the date of this Act's enactment. The bill amends the Investment Company Act of 1940 to prohibit any person from bringing any civil, criminal, or administrative action against any registered investment company, or any officer or employee thereof, based solely upon such company divesting from, or avoiding investing in, securities issued by persons that such company determines, using credible information available to the public, engage in any commerce or investment-related boycotts, divestments, or sanctions activities targeting Israel.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Combating BDS Act of 2016''.

SEC. 2. AUTHORITY OF STATE AND LOCAL GOVERNMENTS TO DIVEST FROM 
              ENTITIES THAT ENGAGE IN CERTAIN BOYCOTT, DIVESTMENT, OR 
              SANCTIONS ACTIVITIES TARGETING ISRAEL.

    (a) Authority To Divest.--Notwithstanding any other provision of 
law, a State or local government may adopt and enforce measures that 
meet the notice requirement of subsection (b) to divest the assets of 
the State or local government from, or prohibit investment of the 
assets of the State or local government in--
            (1) an entity that the State or local government 
        determines, using credible information available to the public, 
        engages in a commerce-related or investment-related boycott, 
        divestment, or sanctions activity targeting Israel;
            (2) a successor entity or subunit of an entity described in 
        paragraph (1); or
            (3) an entity that owns or controls, is owned or controlled 
        by, or is under common ownership or control with, an entity 
        described in paragraph (1).
    (b) Notice Requirement.--
            (1) In general.--A State or local government shall provide 
        written notice to each entity to which a measure taken by the 
        State or local government under subsection (a) is to be applied 
        before applying the measure with respect to the entity.
            (2) Rule of construction.--Paragraph (1) shall not be 
        construed to prohibit a State or local government from taking 
        additional steps to provide due process with respect to an 
        entity to which a measure is to be applied under subsection 
        (a).
    (c) Nonpreemption.--A measure of a State or local government 
authorized under subsection (a) is not preempted by any Federal law.
    (d) Effective Date.--This section applies to any measure adopted by 
a State or local government before, on, or after the date of the 
enactment of this Act.
    (e) Rule of Construction.--Nothing in this section shall be 
construed to abridge the authority of a State to issue and enforce 
rules governing the safety, soundness, and solvency of a financial 
institution subject to its jurisdiction or the business of insurance 
pursuant to the Act of March 9, 1945 (59 Stat. 33, chapter 20; 15 
U.S.C. 1011 et seq.) (commonly known as the ``McCarran-Ferguson Act'').
    (f) Definitions.--In this section:
            (1) Assets.--
                    (A) In general.--Except as provided in subparagraph 
                (B), the term ``assets'' means any pension, retirement, 
                annuity, or endowment fund, or similar instrument, that 
                is controlled by a State or local government.
                    (B) Exception.--The term ``assets'' does not 
                include employee benefit plans covered by title I of 
                the Employee Retirement Income Security Act of 1974 (29 
                U.S.C. 1001 et seq.).
            (2) Boycott, divestment, or sanctions activity targeting 
        israel.--The term ``boycott, divestment, or sanctions activity 
        targeting Israel'' means any activity that is intended to 
        penalize, inflict economic harm on, or otherwise limit 
        commercial relations with Israel or persons doing business in 
        Israel or in Israeli-controlled territories for purposes of 
        coercing political action by, or imposing policy positions on, 
        the Government of Israel.
            (3) Entity.--The term ``entity'' includes--
                    (A) any corporation, company, business association, 
                partnership, or trust; and
                    (B) any governmental entity or instrumentality of a 
                government, including a multilateral development 
                institution (as defined in section 1701(c)(3) of the 
                International Financial Institutions Act (22 U.S.C. 
                262r(c)(3))).
            (4) Investment.--The term ``investment'' includes--
                    (A) a commitment or contribution of funds or 
                property;
                    (B) a loan or other extension of credit; and
                    (C) the entry into or renewal of a contract for 
                goods or services.
            (5) State.--The term ``State'' means each of the several 
        States, the District of Columbia, the Commonwealth of Puerto 
        Rico, the Commonwealth of the Northern Mariana Islands, 
        American Samoa, Guam, the United States Virgin Islands, and any 
        other territory or possession of the United States.
            (6) State or local government.--The term ``State or local 
        government'' includes--
                    (A) any State and any agency or instrumentality 
                thereof;
                    (B) any local government within a State and any 
                agency or instrumentality thereof; and
                    (C) any other governmental instrumentality of a 
                State or locality.

SEC. 3. SAFE HARBOR FOR CHANGES OF INVESTMENT POLICIES BY ASSET 
              MANAGERS.

    Section 13(c)(1) of the Investment Company Act of 1940 (15 U.S.C. 
80a-13(c)(1)) is amended--
            (1) in subparagraph (A), by striking ``; or'' and inserting 
        a semicolon;
            (2) in subparagraph (B), by striking the period at the end 
        and inserting ``; or''; and
            (3) by adding at the end the following:
                    ``(C) engage in any boycott, divestment, or 
                sanctions activity targeting Israel described in 
                section 2 of the Combating BDS Act of 2016.''.