To amend the Internal Revenue Code of 1986 to encourage more responsible corporate governance.

Summary: Executive Accountability Act of 2002 - Amends the Internal Revenue Code to negate, in specified cases, the performance-based compensation exception to the $1,000,000 limitation on deductible compensation paid by publicly held corporations.Includes in gross income funded deferred compensation of a corporate insider if the insider's corporation funds its defined contribution plan with employer stock, with specified exceptions.Includes in gross income the net unrealized built-in gain on options held by a corporate insider to acquire stock in an expatriate corporation or in any member of an expanded affiliated group which includes such corporation.Applies the golden parachute excise tax to certain cases of deferred compensation paid by a corporation to a corporate insider after such individual has left the firm if the stock value of the corporation has recently suffered a major decline or the corporation has recently declared bankruptcy.

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Executive Accountability Act of 
2002''.

SEC. 2. PERFORMANCE-BASED COMPENSATION EXCEPTION TO $1,000,000 
              LIMITATION ON DEDUCTIBLE COMPENSATION NOT TO APPLY IN 
              CERTAIN CASES.

    (a) In General.--Paragraph (4) of section 162(m) of the Internal 
Revenue Code of 1986 is amended by adding at the end the following new 
subparagraph:
                    ``(G) Certain factors not permitted to be taken 
                into account in determining whether performance goals 
                are met.--Subparagraph (C) shall not apply if, in 
                determining whether the performance goals are met, any 
                of the following are taken into account:
                            ``(i) Cost savings as a result of changes 
                        to any qualified employer plan (as defined in 
                        section 4972(d)).
                            ``(ii) Excess assets of such a plan or 
                        earnings thereon.
                            ``(iii) Any excess of the amount assumed to 
                        be the return on the assets of such a plan over 
                        the actual return on such assets.''
    (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. 3. INCLUSION IN GROSS INCOME OF FUNDED DEFERRED COMPENSATION OF 
              CORPORATE INSIDERS IF CORPORATION FUNDS DEFINED 
              CONTRIBUTION PLAN WITH EMPLOYER STOCK.

    (a) In General.--Subpart A of part I of subchapter D of chapter 1 
of the Internal Revenue Code of 1986 is amended by adding at the end 
the following new section:

``SEC. 409A. DENIAL OF DEFERRAL FOR FUNDED DEFERRED COMPENSATION OF 
              CORPORATE INSIDERS IF CORPORATION FUNDS DEFINED 
              CONTRIBUTION PLAN WITH EMPLOYER STOCK.

    ``(a) In General.--If an employer maintains a defined contribution 
plan to which employer contributions are made in the form of employer 
stock and such employer maintains a funded deferred compensation plan--
            ``(1) compensation of any corporate insider which is 
        deferred under such funded deferred compensation plan shall be 
        included in the gross income of the insider or beneficiary for 
        the 1st taxable year in which there is no substantial risk of 
        forfeiture of the rights to such compensation, and
            ``(2) the tax treatment of any amount made available under 
        the plan to a corporate insider or beneficiary shall be 
        determined under section 72 (relating to annuities, etc.).
    ``(b) Funded Deferred Compensation Plan.--For purposes of this 
section--
            ``(1) In general.--The term `funded deferred compensation 
        plan' means any plan providing for the deferral of compensation 
        unless--
                    ``(A) the employee's rights to the compensation 
                deferred under the plan are no greater than the rights 
                of a general creditor of the employer, and
                    ``(B) all amounts set aside (directly or 
                indirectly) for purposes of paying the deferred 
                compensation, and all income attributable to such 
                amounts, remain (until made available to the 
                participant or other beneficiary) solely the property 
                of the employer (without being restricted to the 
                provision of benefits under the plan), and
                    ``(C) the amounts referred to in subparagraph (B) 
                are available to satisfy the claims of the employer's 
                general creditors at all times (not merely after 
                bankruptcy or insolvency).
        Such term shall not include a qualified employer plan.
            ``(2) Special rules.--
                    ``(A) Employee's rights.--A plan shall be treated 
                as failing to meet the requirements of paragraph (1)(A) 
                unless--
                            ``(i) the compensation deferred under the 
                        plan is paid only upon separation from service, 
                        death, or at a specified time (or pursuant to a 
                        fixed schedule), and
                            ``(ii) the plan does not permit the 
                        acceleration of the time such deferred 
                        compensation is paid by reason of any event.
                If the employer and employee agree to a modification of 
                the plan that accelerates the time for payment of any 
                deferred compensation, then all compensation previously 
                deferred under the plan shall be includible in gross 
                income for the taxable year during which such 
                modification takes effect and the taxpayer shall pay 
                interest at the underpayment rate on the underpayments 
                that would have occurred had the deferred compensation 
                been includible in gross income when deferred.
                    ``(B) Creditor's rights.--A plan shall be treated 
                as failing to meet the requirements of paragraph (1)(B) 
                with respect to amounts set aside in a trust unless--
                            ``(i) the employee has no beneficial 
                        interest in the trust,
                            ``(ii) assets in the trust are available to 
                        satisfy claims of general creditors at all 
                        times (not merely after bankruptcy or 
                        insolvency), and
                            ``(iii) there is no factor (such as the 
                        location of the trust outside the United 
                        States) that would make it more difficult for 
                        general creditors to reach the assets in the 
                        trust than it would be if the trust assets were 
                        held directly by the employer in the United 
                        States.
    ``(c) Corporate Insider.--For purposes of this section, the term 
`corporate insider' means, with respect to a corporation, any 
individual who is subject to the requirements of section 16(a) of the 
Securities Exchange Act of 1934 with respect to such corporation.
    ``(d) Other definitions.--For purposes of this section--
            ``(1) Plan includes arrangements, etc.--The term `plan' 
        includes any agreement or arrangement.
            ``(2) Substantial risk of forfeiture.--The rights of a 
        person to compensation are subject to a substantial risk of 
        forfeiture if such person's rights to such compensation are 
        conditioned upon the future performance of substantial services 
        by any individual.''
    (b) Clerical Amendment.--The table of sections for such subpart A 
is amended by adding at the end the following new item:

                              ``Sec. 409A. Denial of deferral for 
                                        funded deferred compensation of 
                                        corporate insiders if 
                                        corporation funds defined 
                                        contribution plan with employer 
                                        stock.''
    (c) Effective Date.--The amendments made by this section shall 
apply to amounts deferred after the date of the enactment of this Act.

SEC. 4. INCLUSION IN INCOME OF CERTAIN DEFERRED AMOUNTS OF INSIDERS OF 
              CORPORATIONS WHICH EXPATRIATE TO AVOID UNITED STATES 
              INCOME TAX.

    (a) In General.--Part II of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 (relating to items specifically included 
in gross income) is amended by adding at the end the following new 
section:

``SEC. 91. UNREALIZED GAIN ON STOCK OPTIONS OF INSIDERS OF CORPORATIONS 
              WHICH EXPATRIATE TO AVOID UNITED STATES INCOME TAX.

    ``(a) In General.--In the case of a corporate insider of any 
expatriate corporation, the gross income of such insider (for the 
taxable year during which such corporation becomes an expatriate 
corporation) shall include as ordinary income the net unrealized built-
in gain on options held by such insider to acquire stock in such 
corporation or in any member of the expanded affiliated group which 
includes such corporation. Proper adjustments shall be made in the 
amount of any gain or loss subsequently realized with respect to such 
options for any amount included in gross income under the preceding 
sentence.
    ``(b) Definitions.--For purposes of this section--
            ``(1) Corporate insider.--The term `corporate insider' 
        means, with respect to a corporation, any individual who is 
        subject to the requirements of section 16(a) of the Securities 
        Exchange Act of 1934 with respect to such corporation.
            ``(2) Expatriate corporation.--
                    ``(A) In general.--The term `expatriate 
                corporation' means the acquiring corporation in a 
                corporate expatriation transaction.
                    ``(B) Corporate expatriation transaction.--For 
                purposes of this paragraph--
                            ``(i) In general.--The term `corporate 
                        expatriation transaction' means any transaction 
                        if--
                                    ``(I) a nominally foreign 
                                corporation (referred to in this 
                                subparagraph as the `acquiring 
                                corporation') acquires, as a result of 
                                such transaction, directly or 
                                indirectly substantially all of the 
                                properties held directly or indirectly 
                                by a domestic corporation, and
                                    ``(II) immediately after the 
                                transaction, more than 80 percent of 
                                the stock (by vote or value) of the 
                                acquiring corporation is held by former 
                                shareholders of the domestic 
                                corporation by reason of holding stock 
                                in the domestic corporation.
                            ``(ii) Lower stock ownership requirement in 
                        certain cases.--Subclause (II) of clause (i) 
                        shall be applied by substituting `50 percent' 
                        for `80 percent' with respect to any nominally 
                        foreign corporation if--
                                    ``(I) such corporation does not 
                                have substantial business activities 
                                (when compared to the total business 
                                activities of the expanded affiliated 
                                group) in the foreign country in which 
                                or under the law of which the 
                                corporation is created or organized, 
                                and
                                    ``(II) the stock of the corporation 
                                is publicly traded and the principal 
                                market for the public trading of such 
                                stock is in the United States.
                            ``(iii) Partnership transactions.--The term 
                        `corporate expatriation transaction' includes 
                        any transaction if--
                                    ``(I) a nominally foreign 
                                corporation (referred to in this 
                                paragraph as the `acquiring 
                                corporation') acquires, as a result of 
                                such transaction, directly or 
                                indirectly properties constituting a 
                                trade or business of a domestic 
                                partnership,
                                    ``(II) immediately after the 
                                transaction, more than 80 percent of 
                                the stock (by vote or value) of the 
                                acquiring corporation is held by former 
                                partners of the domestic partnership or 
                                related foreign partnerships 
                                (determined without regard to stock of 
                                the acquiring corporation which is sold 
                                in a public offering related to the 
                                transaction), and
                                    ``(III) the acquiring corporation 
                                meets the requirements of subclauses 
                                (I) and (II) of clause (ii).
                            ``(iv) Special rules.--For purposes of this 
                        subparagraph--
                                    ``(I) a series of related 
                                transactions shall be treated as 1 
                                transaction, and
                                    ``(II) stock held by members of the 
                                expanded affiliated group which 
                                includes the acquiring corporation 
                                shall not be taken into account in 
                                determining ownership.
                            ``(v) Nominally foreign corporation.--The 
                        term `nominally foreign corporation' means any 
                        corporation which would (but for this 
                        subparagraph) be treated as a foreign 
                        corporation.
            ``(3) Net realized built-in gain.--The term `net unrealized 
        built-in gain' means, with respect to options to acquire stock 
        in any corporation, the amount which would be required to be 
        included in gross income were such options exercised.
            ``(4) Expanded affiliated group.--The term `expanded 
        affiliated group' means an affiliated group (as defined in 
        section 1504(a) without regard to section 1504(b)).''
    (b) Clerical Amendment.--The table of sections for such part II is 
amended by adding at the end the following new item:

                              ``Sec. 91. Certain deferred amounts of 
                                        insiders of corporations which 
                                        expatriate to avoid United 
                                        States income tax.''
    (c) Effective Date.--The amendments made by this section shall 
apply with respect to corporate expatriation transactions completed 
after September 11, 2001, and to taxable years ending after such date.

SEC. 5. GOLDEN PARACHUTE EXCISE TAX TO APPLY TO DEFERRED COMPENSATION 
              PAID BY CORPORATION AFTER MAJOR DECLINE IN STOCK VALUE OR 
              CORPORATION DECLARES BANKRUPTCY.

    (a) In General.--Section 4999 of the Internal Revenue Code of 1986 
(relating to golden parachute payments) is amended by redesignating 
subsection (c) as subsection (d) and by inserting after subsection (b) 
the following new subsection:
    ``(c) Tax To Apply to Deferred Compensation Paid After Major Stock 
Value Decline or Bankruptcy.--
            ``(1) In general.--For purposes of this section, the term 
        `excess parachute payment' includes severance pay, and any 
        other payment of deferred compensation, which is received by a 
        corporate insider after the date that the insider ceases to be 
        employed by the corporation if--
                    ``(A) there is at least a 75-percent decline in the 
                value of the stock in such corporation during the 1-
                year period ending on such date, or
                    ``(B) such corporation becomes a debtor in a title 
                11 or similar case (as defined in section 368(a)(3)(A)) 
                during the 180-day period beginning 90 days before such 
                date.
        Such term shall not include any payment from a qualified 
        employer plan.
            ``(2) Corporate insider.--For purposes of paragraph (1), 
        the term `corporate insider' means, with respect to a 
        corporation, any individual who is subject to the requirements 
        of section 16(a) of the Securities Exchange Act of 1934 with 
        respect to such corporation.''
    (b) Effective Date.--The amendment made by this section shall apply 
with respect to cessations of employment after the date of the 
enactment of this Act.