CEO-Employee Pay Fairness Act of 2014

Summary: CEO-Employee Pay Fairness Act of 2014 - Amends the Internal Revenue Code to deny a publicly held corporation a tax deduction for the payment of performance-based remuneration in excess of $1 million to any of its current or former&nbsp;officers or directors if such corporation does not meet the pay fairness requirement established by this Act. Deems the pay fairness requirement to be satisfied if: (1) the average compensation paid by the&nbsp;employer for all applicable U.S. employees for the taxable year&nbsp;exceeds the inflation and productivity growth adjusted average (i.e., $115,000 in 2014)&nbsp;of such compensation&nbsp;for the preceding taxable year; and (2) the aggregate compensation paid by the employer to or for all applicable employees for the taxable year&nbsp;is not less than the aggregate of such compensation for the preceding taxable year.&nbsp;

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``CEO-Employee Pay Fairness Act of 
2014''.

SEC. 2. EXPANSION OF DENIAL OF DEDUCTION FOR CERTAIN EXCESSIVE EMPLOYEE 
              REMUNERATION.

    (a) Expanded Application of Deduction Denial if Pay Fairness 
Requirement Not Met.--Section 162(m) of the Internal Revenue Code of 
1986 is amended by adding at the end the following new paragraph:
            ``(7) Special rule in case of companies not meeting pay 
        fairness requirement.--
                    ``(A) In general.--In the case of a publicly held 
                corporation which does not meet the pay fairness 
                requirement of subparagraph (B) for the taxable year--
                            ``(i) no deduction shall be allowed under 
                        this chapter for applicable employee 
                        remuneration with respect to any employee to 
                        the extent that the amount of such remuneration 
                        for the taxable year with respect to such 
                        employee exceeds $1,000,000, and
                            ``(ii) paragraph (4) shall be applied 
                        without regard to subparagraphs (B), (C), and 
                        (D) thereof.
                For purposes of the preceding sentence, the term 
                `employee' includes any officer or director of the 
                taxpayer and any former officer, director, or employee 
                of the taxpayer.
                    ``(B) Pay fairness requirement.--The pay fairness 
                requirement of this subparagraph is satisfied if--
                            ``(i)(I) the average compensation paid by 
                        the taxpayer to or for all applicable United 
                        States employees for the taxable year, exceeds
                            ``(II) the inflation and productivity 
                        growth adjusted average of such compensation 
                        for the preceding taxable year, and
                            ``(ii) the aggregate compensation paid by 
                        the employer to or for all applicable United 
                        States employees for the taxable year is not 
                        less than the aggregate of such compensation 
                        for the preceding taxable year.
                    ``(C) Applicable united states employee.--For 
                purposes of this paragraph, the term `applicable United 
                States employee' means, with respect to any taxable 
                year, any employee--
                            ``(i) whose services with respect to the 
                        employer are substantially all performed within 
                        the United States, and
                            ``(ii) whose compensation from the employer 
                        for the taxable year does not exceed the dollar 
                        amount in effect under section 414(q)(1)(B)(i) 
                        with respect to the calendar year in which such 
                        taxable year begins.
                    ``(D) Inflation and productivity growth adjusted 
                average.--The inflation and productivity growth 
                adjusted average of compensation under subparagraph 
                (B)(i)(II) for any taxable year shall be determined by 
                multiplying--
                            ``(i) the average of the compensation paid 
                        by the taxpayer to or for all applicable United 
                        States employees for the taxable year, by
                            ``(ii) the sum of the cost-of-living 
                        adjustment and the productivity adjustment for 
                        the taxable year.
                    ``(E) Cost-of-living adjustment.--For purposes of 
                subparagraph (D)(ii), the cost-of-living adjustment for 
                any taxable year shall be the cost-of-living adjustment 
                determined under section 1(f)(3) for the calendar year 
                in which the taxable year begins, determined by 
                substituting `the second preceding calendar year' for 
                `calendar year 1992' in subparagraph (B) thereof.
                    ``(F) Productivity adjustment.--For purposes of 
                subparagraph (D)(ii)--
                            ``(i) In general.--The productivity 
                        adjustment for the taxable year shall be an 
                        amount (expressed as a percentage) equal to the 
                        average annual increase in the business 
                        productivity index for the period beginning 
                        with calendar year 2000 and ending with the 
                        calendar year preceding the calender year in 
                        which the taxable year begins.
                            ``(ii) Business productivity index.--The 
                        term `business productivity index' means the 
                        nonfarm business productivity index published 
                        by the Bureau of Labor Statistics as adjusted 
                        by the Secretary to account for depreciation.
                    ``(G) Compensation.--For purposes of this 
                subparagraph, the term `compensation' means, with 
                respect to any employee, the sum of--
                            ``(i) the employee's wages on which the tax 
                        under section 3101(b) is imposed, plus
                            ``(ii) any amount described in paragraph 
                        (9), (11), (12), or (14) of section 6051(a) 
                        with respect to the employee.
                    ``(H) Aggregation rules.--Rules similar to the 
                rules of paragraph (5)(B)(iii) shall apply for purposes 
                of this paragraph.
                    ``(I) Regulations.--The Secretary may prescribe 
                such regulations as are necessary to carry out the 
                purposes of this paragraph, including adjustments to 
                the pay fairness requirements of subparagraph (B)--
                            ``(i) to prevent avoidance of this 
                        paragraph through changes in the composition of 
                        the taxpayer's workforce, and
                            ``(ii) to account for significant, non-tax-
                        motivated changes in the size and composition 
                        of the taxpayer's workforce (including mergers, 
                        spinoffs, or changes in the occupational 
                        composition of a taxpayer's workforce).''.
    (b) Modification of Definition of Covered Employees.--
            (1) In general.--Paragraph (3) of section 162(m) of such 
        Code is amended--
                    (A) in subparagraph (A), by striking ``as of the 
                close of the taxable year, such employee is the chief 
                executive officer of the taxpayer or is'' and inserting 
                ``such employee is the chief executive officer or the 
                chief financial officer of the taxpayer at any time 
                during the taxable year, or was'',
                    (B) in subparagraph (B) by striking ``(other than 
                the chief executive officer)'' and inserting ``(other 
                than any individual described in subparagraph (A))'', 
                and
                    (C) by striking ``or'' at the end of subparagraph 
                (A), by striking the period at the end of subparagraph 
                (B) and inserting ``, or'', and by adding at the end 
                the following:
                    ``(C) was a covered employee of the taxpayer (or 
                any predecessor) for any preceding taxable year 
                beginning after December 31, 2014.''.
            (2) Technical amendment.--Section 162(m)(3)(B) of such Code 
        is amended by striking ``4 highest'' and inserting ``3 
        highest''.
    (c) Applicable Employee Remuneration Paid to Beneficiaries, etc.--
Paragraph (4) of section 162(m) of such Code is amended by adding at 
the end the following new subparagraph:
                    ``(H) Special rule for remuneration paid to 
                beneficiaries, etc.--Remuneration shall not fail to be 
                applicable employee remuneration merely because it is 
                includible in the income of, or paid to, a person other 
                than the covered employee, including after the death of 
                the covered employee.''.
    (d) Expansion of Applicable Employer To Include Non-Listed Public 
Companies.--Paragraph (2) of section 162(m) of such Code is amended to 
read as follows:
            ``(2) Publicly held corporation.--For purposes of this 
        subsection, the term `publicly held corporation' means any 
        corporation which is an issuer (as defined in section 3 of the 
        Securities Exchange Act of 1934)--
                    ``(A) that has a class of securities registered 
                under section 12 of such Act, or
                    ``(B) that is required to file reports under 
                section 15(d) of such Act.''.
    (e) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2014.