Employee Partnership Reward Act of 1994

Summary: TABLE OF CONTENTS: 
     Title I:  Refundable Income Tax Credit for Nondeferred 
          Distributions from Performance-Based Reward Plans 
     Title II:  Establishment of Program to Promote 
          Performance-Based Reward Plans and Employee 
          Decisionmaking Participation Programs 
Employee Partnership Reward Act of 1994 - 
Title I:  Refundable Income Tax Credit for Nondeferred Distributions from Performance-Based Reward Plans
 - Amends the Internal Revenue Code to allow eligible employees a refundable income tax credit for nondeferred distributions from performance-based reward plans. 
Allows employers an additional deduction for performance-based rewards. 
Directs the Secretary of the Treasury to study and report to the Congress on the effect of such credit in stimulating productivity and full employment. 
Directs the Secretary of Labor and the Director of the Federal Mediation and Conciliation Service each to:  (1) collect statistics on the extent of performance-based reward plans in the United States; and (2) prepare studies describing the nature and terms of these plans. 
Requires the Director of the Office of Management and Budget to publish annual estimates of annual tax expenditures for deferred profit-sharing plans and employee stock ownership plans. 
Title II:  Establishment of Program to Promote Performance-Based Reward Plans and Employee Decisionmaking Participation Programs
 - Directs the Administrator of the Small Business Administration to establish and carry out an Employee Partnership Pilot Program. 
Directs the Administrator to make five-year program grants to up to five eligible entities to promote implementation of performance-based reward plans and employee decisionmaking participation programs. Requires a matching non-Federal share.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Employee Partnership Reward Act of 
1994''.

  TITLE I--REFUNDABLE INCOME TAX CREDIT FOR NONDEFERRED DISTRIBUTIONS 
                  FROM PERFORMANCE-BASED REWARD PLANS.

SEC. 101. REFUNDABLE INCOME TAX CREDIT FOR NONDEFERRED DISTRIBUTIONS 
              FROM PERFORMANCE-BASED REWARD PLANS.

    (a) In General.--Subpart C of part IV of subchapter A of chapter 1 
of the Internal Revenue Code of 1986 (relating to refundable credits) 
is amended by redesignating section 35 as section 36 and by inserting 
after section 34 the following new section:

``SEC. 35. NONDEFERRED DISTRIBUTIONS FROM PERFORMANCE-BASED REWARD 
              PLANS.

    ``(a) General Rule.--In the case of an eligible employee, there 
shall be allowed as a credit against the tax imposed by this subtitle 
for the taxable year an amount equal to 10 percent of the value of the 
rewards received by such employee from a qualified performance-based 
reward plan for any plan year ending with or within such taxable year. 
The preceding sentence shall not apply to any reward with respect to a 
plan year which is made more than 2 months following the close of such 
plan year.
    ``(b) Limitations on Amount of Credit.--
            ``(1) Maximum credit.--The credit allowed by subsection (a) 
        for the taxable year shall not exceed $500 with respect to each 
        eligible employee.
            ``(2) Minimum credit.--The credit allowed by subsection (a) 
        for the taxable year shall not be less than $100.
            ``(3) Cost-of-living adjustment.--In the case of any 
        calendar year after 1994, each dollar amount in paragraph (1) 
        or (2) shall be increased by an amount equal to--
                    ``(A) such dollar amount, multiplied by
                    ``(B) the cost-of-living adjustment determined 
                under section 1(f)(3) for such calendar year by 
                substituting `1993' for `1992' in subparagraph (B) 
                thereof.
        If any increase under the preceding sentence is not a multiple 
        of $50, such increase shall be rounded to the nearest multiple 
        of $50.
    ``(c) Eligible Employee.--For purposes of this section, the term 
`eligible employee' means any employee of an employer who is a 
participant in a qualified performance-based reward plan of such 
employer. Such term shall not include any highly compensated employee 
(within the meaning of section 414(q)) and shall not include any 
employee engaged in sales.
    ``(d) Qualified Performance-Based Reward Plan.--For purposes of 
this section, the term `qualified performance-based reward plan' means 
a written plan maintained by an employer--
            ``(1) the principal purpose of which is to improve the 
        performance of the organization and reward employees as a 
        function of that improvement, and
            ``(2) which meets--
                    ``(A) the determination requirements of subsection 
                (e),
                    ``(B) the allocation requirements of subsection 
                (f),
                    ``(C) the distribution requirements of subsection 
                (g),
                    ``(D) the nondiscrimination requirements of 
                subsection (h), and
                    ``(E) the plan approval requirements of subsection 
                (i).
    ``(e) Determination Requirements.--A plan meets the requirements of 
this subsection if the amount to be distributed under the plan for any 
year is determined in accordance with a fixed formula set forth in the 
plan which is based on a measurable and auditable indicator of the 
employer's performance or, at the election of the employer, of the 
organizational unit in which the employees covered by the plan perform 
services.
    ``(f) Allocation Requirements.--
            ``(1) In general.--A plan meets the requirements of this 
        subsection if, under the plan, amounts are distributed to 
        employees of the employer maintaining the plan only in 
        accordance with a fixed formula set forth in the plan.
            ``(2) Change in formula.--For purposes of paragraph (1), a 
        formula shall be treated as a fixed formula only if under the 
        plan any change in the formula may not take effect until the 
        plan year following the plan year in which the change is 
        adopted by the plan.
    ``(g) Distribution Requirements.--
            ``(1) In general.--A plan meets the requirements of this 
        subsection if the plan requires that, for each year, the total 
        value of rewards made under the plan to nonhighly compensated 
        employees is not less than the lesser of--
                    ``(A) 2 percent of the total wages paid to such 
                employees during such year by the employer maintaining 
                such plan, or
                    ``(B) the amount which, when added to the total 
                rewards made under the plan to such employees during 
                the 2 preceding years, is equal to 2 percent of the sum 
                of the total wages paid to such employees by such 
                employer during such year and such 2 preceding years.
            ``(2) Wages.--For purposes of paragraph (1), the term 
        `wages' has the meaning given such term by section 3306(b), 
        except that--
                    ``(A) any dollar limitation in such section shall 
                be disregarded, and
                    ``(B) rewards from a qualified performance-based 
                reward plan shall not be taken into account.
    ``(h) Antidiscrimination Requirements.--
            ``(1) In general.--A plan meets the requirements of this 
        subsection if the plan benefits such employees as qualify under 
        a classification set up by the employer and found by the 
        Secretary not to be discriminatory in favor of highly 
        compensated employees (within the meaning of section 414(q)).
            ``(2) Excluded employees.--In determining whether the 
        requirements of paragraph (1) are met, there shall be excluded 
        from consideration employees described in section 414(q)(8).
            ``(3) Benefits may bear uniform relationship to 
        compensation.--A plan shall not be considered discriminatory 
        merely because the benefits under the plan bear a uniform 
        relationship to the compensation (within the meaning of section 
        414(s)) of the employees.
    ``(i) Plan Approval Requirements.--A plan meets the requirements of 
this subsection if the plan--
            ``(1) is submitted to the Secretary in such form and manner 
        as the Secretary may provide, and
            ``(2) is approved by the Secretary.
    ``(j) Special Rule and Definition.--For purposes of this 
subsection--
            ``(1) Plans which are part of deferred plan.--A plan shall 
        not be treated as failing to be a qualified performance-based 
        reward plan merely because such plan includes a qualified cash 
        or deferred arrangement (as defined in section 401(k)(2)).
            ``(2) Self-employed individuals.--The term `employee' does 
        not include an individual who is an employee (within the 
        meaning of section 401(c)(1)).
    ``(k) Employee Rights.--For purposes of section 502 of Employee 
Retirement Income Security Act of 1974, a qualified performance-based 
reward plan shall be treated as a welfare benefit plan.''
    (b) Conforming Amendment.--
            (1) Paragraph (2) of section 1324(b) of title 31, United 
        States Code, is amended by inserting before the period ``or 
        from section 35 of such Code''.
            (2) The table of sections for subpart C of part IV of 
        subchapter A of chapter 1 of such Code is amended by striking 
        the item relating to section 35 and inserting the following new 
        items:

                              ``Sec. 35. Nondeferred distributions from 
                                        performance-based reward plans.
                              ``Sec. 36. Overpayments of tax.''
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.

SEC. 102. ADDITIONAL DEDUCTION TO EMPLOYERS FOR PERFORMANCE-BASED 
              REWARDS.

    (a) In General.--Section 162 of the Internal Revenue Code of 1986 
is amended by redesignating subsection (o) as subsection (p) and by 
inserting after subsection (n) the following new subsection:
    ``(o) Performance-Based Rewards.--In addition to the deduction 
otherwise allowed under this chapter for rewards under a performance-
based reward plan (as defined in section 35(c)), there shall be allowed 
an additional deduction equal to 10 percent of the amount allowed as a 
deduction under this chapter (other than this subsection) for the 
taxable year for such awards.''
    (b) Effective Date.--The amendment made by this section shall apply 
to taxable years beginning after the date of the enactment of this Act.

SEC. 103. STUDY OF EFFECT OF CREDIT.

    The Secretary of the Treasury, in consultation with the Secretary 
of Commerce and the Secretary of Labor, shall--
            (1) conduct a study of the effect of the credit under 
        section 35 of the Internal Revenue Code of 1986 (as added by 
        this Act) in stimulating productivity and full employment, and
            (2) report the results of such study to the Congress no 
        later than January 1, 2002.

SEC. 104. COLLECTION OF STATISTICS.

    (a) Performance-Based Reward Plans.--The Secretary of Labor and the 
Director of the Federal Mediation and Conciliation Service each shall--
            (1) collect statistics on the extent of performance-based 
        reward plans in the United States; and
            (2) prepare studies which describe the nature and terms of 
        these performance-based reward plans.
Such studies shall differentiate between various types of such plans 
and between plans which do and do not have fixed formulas for 
determining amounts payable to employees.
    (b) Profit-Sharing and Employee Stock Ownership Plans.--The 
Director of the Office of Management and Budget shall publish annually 
estimates of the annual tax expenditures for deferred profit-sharing 
plans and employee stock ownership plans.

TITLE II--ESTABLISHMENT OF PROGRAM TO PROMOTE PERFORMANCE-BASED REWARD 
        PLANS AND EMPLOYEE DECISIONMAKING PARTICIPATION PROGRAMS

SEC. 201. EMPLOYEE PARTNERSHIP PILOT PROGRAM.

    (a) Establishment.--The Administrator, in consultation with the 
Secretary of Labor, shall establish and carry out an Employee 
Partnership Pilot Program (in this section referred to as the 
``program'') in accordance with the requirements of this section.
    (b) Grant Awards.--Under the program, the Administrator shall make 
grants to not to exceed 5 eligible entities for the purpose of 
promoting implementation of performance-based reward plans and employee 
decisionmaking participation programs.
    (c) Selection of Grant Recipients.--The Administrator shall select 
eligible entities to receive grants under the program on the basis of 
competitive, merit-based criteria to be established by the 
Administrator, in consultation with the Secretary of Labor. Such 
criteria, at a minimum, shall provide for consideration of the 
following:
            (1) The ability of an applicant to carry out the purposes 
        of the program.
            (2) The ability of an applicant to integrate implementation 
        of the program with existing Federal and State business 
        assistance resources.
            (3) The ability of an applicant to continue to carry out 
        the purposes of the program after termination of the program.
    (d) Use of Grant Amounts.--Amounts from grants received under the 
program shall be used for activities which promote the purposes of the 
program, including the following:
            (1) The collection and dissemination of information 
        regarding successful implementation of performance-based reward 
        plans and employee decisionmaking participation programs.
            (2) The development of best practices guidelines concerning 
        performance-based reward plans and employee decisionmaking 
        participation programs.
            (3) The provision of technical assistance and training to 
        aid firms in designing and implementing performance-based 
        reward plans and employee decisionmaking participation 
        programs.
            (4) Proactive education and outreach to key groups such as 
        business owners, unions, managers, trade associations, and 
        community associations to inform such groups about the benefits 
        of performance-based reward plans and employee decisionmaking 
        participation programs.
    (e) Non-Federal Share.--In order to be eligible for a grant under 
the program, an eligible entity shall agree to provide from non-Federal 
sources for activities described in subsection (d) an amount at least 
equal to the amount of the grant.
    (f) Term of Program.--The program shall terminate on the last day 
of the 5th fiscal year beginning after the date of the enactment of 
this Act.
    (g) Report.--The Administrator shall transmit to Congress a report 
containing an evaluation of the program, together with recommendations 
for appropriate legislative and administrative actions.
    (h) Definitions.--For the purposes of this section, the following 
definitions apply:
            (1) Administrator.--The term ``Administrator'' means the 
        Administrator of the Small Business Administration.
            (2) Eligible entity.--The term ``eligible entity'' means an 
        educational institution, a non-profit organization, or a unit 
        of State or local government.