II 

116TH CONGRESS 

1ST SESSION S. 647 

To amend the Internal Revenue Code of 1986 to impose a tax on certain 

trading transactions. 

IN THE SENATE OF THE UNITED STATES 

MARCH 5, 2019 

Mr. SCHATZ (for himself, Mr. VAN HOLLEN, Mr. MERKLEY, and Mrs. GILLIBRAND) 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. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Wall Street Tax Act 

5 of 2019’’. 

6 SEC. 2. TRANSACTION TAX. 

7 (a) IN GENERAL.—Chapter 36 of the Internal Rev8 enue Code of 1986 is amended by inserting after sub9 chapter B the following new subchapter: 


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1 ‘‘Subchapter C—Tax on Trading Transactions 

‘‘Sec. 4475. Tax on trading transactions. 

‘‘Sec. 4476. Derivative defined. 

2 ‘‘SEC. 4475. TAX ON TRADING TRANSACTIONS. 

3 ‘‘(a) IMPOSITION OF TAX.—There is hereby imposed 

4 a tax on each covered transaction with respect to any secu5 rity. 

6 ‘‘(b) RATE OF TAX.—The tax imposed under sub7 section (a) with respect to any covered transaction shall 

8 be 0.1 percent of the specified base amount with respect 

9 to such covered transaction. 

10 ‘‘(c) SPECIFIED BASE AMOUNT.—For purposes of 

11 this section, the term ‘specified base amount’ means— 

12 ‘‘(1) except as provided in paragraph (2), the 

13 fair market value of a security (determined as of the 

14 time of the covered transaction), and 

15 ‘‘(2) in the case of any payment with respect to 

16 a derivative, the amount of such payment. 

17 ‘‘(d) COVERED TRANSACTION.—For purposes of this 

18 section— 

19 ‘‘(1) IN GENERAL.—The term ‘covered trans20 action’ means— 

21 ‘‘(A) except as provided in subparagraph 

22 (B), any purchase if— 


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1 ‘‘(i) such purchase occurs on, or is 

2 subject to the rules of, a qualified board or 

3 exchange located in the United States, or 

4 ‘‘(ii) the purchaser or seller is a 

5 United States person, and 

6 ‘‘(B) any transaction with respect to a de7 rivative if— 

8 ‘‘(i) such derivative is traded on, or is 

9 subject to the rules of, a qualified board or 

10 exchange located in the United States, or 

11 ‘‘(ii) any party with rights under such 

12 derivative is a United States person. 

13 ‘‘(2) EXCEPTION FOR INITIAL ISSUES.—No tax 

14 shall be imposed under subsection (a) on any cov15 ered transaction with respect to the initial issuance 

16 of any security described in subparagraph (A), (B), 

17 or (C) of subsection (e)(1). 

18 ‘‘(e) DEFINITIONS AND SPECIAL RULES.—For pur19 poses of this section— 

20 ‘‘(1) SECURITY.—For purposes of this section, 

21 the term ‘security’ means— 

22 ‘‘(A) any share of stock in a corporation, 

23 ‘‘(B) any partnership or beneficial owner24 ship interest in a partnership or trust, 


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1 ‘‘(C) except as provided in paragraph (2), 

2 any note, bond, debenture, or other evidence of 

3 indebtedness, and 

4 ‘‘(D) any derivative (as defined in section 

5 4476). 

6 ‘‘(2) EXCEPTION FOR CERTAIN TRADED SHORT7 TERM INDEBTEDNESS.—A note, bond, debenture, or 

8 other evidence of indebtedness which— 

9 ‘‘(A) is traded on, or is subject to the rules 

10 of, a qualified board or exchange located in the 

11 United States, and 

12 ‘‘(B) has a fixed maturity of not more 

13 than 100 days, 

14 shall not be treated as described in paragraph 

15 (1)(C). 

16 ‘‘(3) QUALIFIED BOARD OR EXCHANGE.—The 

17 term ‘qualified board or exchange’ has the meaning 

18 given such term by section 1256(g)(7). 

19 ‘‘(f) BY WHOM PAID.— 

20 ‘‘(1) IN GENERAL.—The tax imposed by this 

21 section shall be paid by— 

22 ‘‘(A) in the case of a transaction which oc23 curs on, or is subject to the rules of, a qualified 

24 board or exchange located in the United States, 

25 such qualified board or exchange, and 


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1 ‘‘(B) in the case of a purchase not de2 scribed in subparagraph (A) which is executed 

3 by a broker (as defined in section 6045(c)(1)) 

4 which is a United States person, such broker. 

5 ‘‘(2) SPECIAL RULES FOR DIRECT, ETC., 

6 TRANSACTIONS.—In the case of any transaction to 

7 which paragraph (1) does not apply, the tax imposed 

8 by this section shall be paid by— 

9 ‘‘(A) in the case of a transaction described 

10 in subsection (d)(1)(A)— 

11 ‘‘(i) the purchaser if the purchaser is 

12 a United States person, and 

13 ‘‘(ii) the seller if the purchaser is not 

14 a United States person, and 

15 ‘‘(B) in the case of a transaction described 

16 in subsection (d)(1)(B)— 

17 ‘‘(i) the payor if the payor is a United 

18 States person, and 

19 ‘‘(ii) the payee if the payor is not a 

20 United States person. 

21 ‘‘(g) TREATMENT OF EXCHANGES AND PAYMENTS

22 WITH RESPECT TO DERIVATIVES.—For purposes of this 

23 section— 

24 ‘‘(1) TREATMENT OF EXCHANGES.— 


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1 ‘‘(A) IN GENERAL.—An exchange shall be 

2 treated as the sale of the property transferred 

3 and a purchase of the property received by each 

4 party to the exchange. 

5 ‘‘(B) CERTAIN DEEMED EXCHANGES.—In 

6 the case of a distribution treated as an ex7 change for stock under section 302 or 331, the 

8 corporation making such distribution shall be 

9 treated as having purchased such stock for pur10 poses of this section. 

11 ‘‘(2) PAYMENTS WITH RESPECT TO DERIVA12 TIVES TREATED AS SEPARATE TRANSACTIONS.—Ex13 cept as otherwise provided by the Secretary, any 

14 payment with respect to any derivative shall be 

15 treated as a separate transaction for purposes of 

16 this section. 

17 ‘‘(h) APPLICATION TO TRANSACTIONS BY CON18 TROLLED FOREIGN CORPORATIONS.— 

19 ‘‘(1) IN GENERAL.—For purposes of this sec20 tion, a controlled foreign corporation shall be treated 

21 as a United States person. 

22 ‘‘(2) SPECIAL RULES FOR PAYMENT OF TAX ON

23 DIRECT, ETC., TRANSACTIONS.—In the case of any 

24 transaction which is a covered transaction solely by 


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1 reason of paragraph (1) and which is not described 

2 in subsection (f)(1)— 

3 ‘‘(A) PAYMENT BY UNITED STATES SHARE4 HOLDERS.—Any tax which would (but for this 

5 paragraph) be payable under subsection (f)(2) 

6 by the controlled foreign corporation shall, in 

7 lieu thereof, be paid by the United States 

8 shareholders of such controlled foreign corpora9 tion as provided in subparagraph (B). 

10 ‘‘(B) PRO RATA SHARES.—Each such 

11 United States shareholder shall pay the same 

12 proportion of such tax as— 

13 ‘‘(i) the stock which such United 

14 States shareholder owns (within the mean15 ing of section 958(a)) in such controlled 

16 foreign corporation, bears to 

17 ‘‘(ii) the stock so owned by all United 

18 States shareholders in such controlled for19 eign corporation. 

20 ‘‘(C) DEFINITIONS.—For purposes of this 

21 subsection, the terms ‘United States share22 holder’ and ‘controlled foreign corporation’ have 

23 the meanings given such terms in sections 

24 951(b) and 957(a), respectively. 


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1 ‘‘(i) ADMINISTRATION.—The Secretary shall carry 

2 out this section in consultation with the Securities and Ex3 change Commission and the Commodity Futures Trading 

4 Commission. 

5 ‘‘(j) GUIDANCE; REGULATIONS.—The Secretary 

6 shall— 

7 ‘‘(1) provide guidance regarding such informa8 tion reporting concerning covered transactions as the 

9 Secretary deems appropriate, and 

10 ‘‘(2) prescribe such regulations as are necessary 

11 or appropriate to prevent avoidance of the purposes 

12 of this section, including the use of non-United 

13 States persons in such transactions. 

14 ‘‘SEC. 4476. DERIVATIVE DEFINED. 

15 ‘‘(a) IN GENERAL.—For purposes of this subchapter, 

16 except as otherwise provided in this section, the term ‘de17 rivative’ means any contract (including any option, for18 ward contract, futures contract, short position, swap, or 

19 similar contract) the value of which, or any payment or 

20 other transfer with respect to which, is (directly or indi21 rectly) determined by reference to one or more of the fol22 lowing: 

23 ‘‘(1) Any share of stock in a corporation. 

24 ‘‘(2) Any partnership or beneficial ownership 

25 interest in a partnership or trust. 


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1 ‘‘(3) Any evidence of indebtedness. 

2 ‘‘(4) Except as provided in subsection (b)(1), 

3 any real property. 

4 ‘‘(5) Any commodity which is actively traded 

5 (within the meaning of section 1092(d)(1)). 

6 ‘‘(6) Any currency. 

7 ‘‘(7) Any rate, price, amount, index, formula, or 

8 algorithm. 

9 ‘‘(8) Any other item as the Secretary may pre10 scribe. 

11 Except as provided in regulations prescribed by the Sec12 retary to prevent the avoidance of the purposes of this 

13 subchapter, such term shall not include any item described 

14 in paragraphs (1) through (8). 

15 ‘‘(b) EXCEPTIONS.— 

16 ‘‘(1) CERTAIN REAL PROPERTY.— 

17 ‘‘(A) IN GENERAL.—For purposes of this 

18 subchapter, the term ‘derivative’ shall not in19 clude any contract with respect to interests in 

20 real property (as defined in section 

21 856(c)(5)(C)) if such contract requires physical 

22 delivery of such real property. 

23 ‘‘(B) OPTIONS TO SETTLE IN CASH.— 

24 ‘‘(i) IN GENERAL.—For purposes of 

25 subparagraph (A), a contract which proVerDate Sep 11 2014 04:04 Mar 15, 2019 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S647.IS S647

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1 vides for an option of cash settlement shall 

2 not be treated as requiring physical deliv3 ery of real property unless the option is— 

4 ‘‘(I) not exercisable uncondition5 ally, and 

6 ‘‘(II) exercisable only in unusual 

7 and exceptional circumstances. 

8 ‘‘(ii) OPTION OF CASH SETTLE9 MENT.—For purposes of clause (i), a con10 tract provides an option of cash settlement 

11 if the contract settles in (or could be set12 tled in) cash or property other than the 

13 underlying real property. 

14 ‘‘(2) SECURITIES LENDING, SALE-REPURCHASE, 

15 AND SIMILAR FINANCING TRANSACTIONS.—To the 

16 extent provided by the Secretary, for purposes of 

17 this subchapter, the term ‘derivative’ shall not in18 clude the right to the return of the same or substan19 tially identical securities transferred in a securities 

20 lending transaction, sale-repurchase transaction, or 

21 similar financing transaction. 

22 ‘‘(3) OPTIONS RECEIVED IN CONNECTION WITH

23 THE PERFORMANCE OF SERVICES.—For purposes of 

24 this subchapter, the term ‘derivative’ shall not in25 clude any option described in section 83(e)(3) reVerDate Sep 11 2014 04:04 Mar 15, 2019 Jkt 089200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S647.IS S647

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1 ceived in connection with the performance of serv2 ices. 

3 ‘‘(4) INSURANCE CONTRACTS, ANNUITIES, AND

4 ENDOWMENTS.—For purposes of this subchapter, 

5 the term ‘derivative’ shall not include any insurance, 

6 annuity, or endowment contract issued by an insur7 ance company to which subchapter L applies (or 

8 issued by any foreign corporation to which such sub9 chapter would apply if such foreign corporation were 

10 a domestic corporation). 

11 ‘‘(5) DERIVATIVES WITH RESPECT TO STOCK

12 OF MEMBERS OF SAME WORLDWIDE AFFILIATED

13 GROUP.—For purposes of this subchapter, the term 

14 ‘derivative’ shall not include any derivative (deter15 mined without regard to this paragraph) with re16 spect to stock issued by any member of the same 

17 worldwide affiliated group (as defined in section 

18 864(f)) in which the taxpayer is a member. 

19 ‘‘(6) COMMODITIES USED IN NORMAL COURSE

20 OF TRADE OR BUSINESS.—For purposes of this sub21 chapter, the term ‘derivative’ shall not include any 

22 contract with respect to any commodity if— 

23 ‘‘(A) such contract requires physical deliv24 ery with the option of cash settlement only in 

25 unusual and exceptional circumstances, and 


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1 ‘‘(B) such commodity is used (and is used 

2 in quantities with respect to which such deriva3 tive relates) in the normal course of the tax4 payer’s trade or business (or, in the case of an 

5 individual, for personal consumption). 

6 ‘‘(c) CONTRACTS WITH EMBEDDED DERIVATIVE

7 COMPONENTS.— 

8 ‘‘(1) IN GENERAL.—If a contract has derivative 

9 and nonderivative components, then each derivative 

10 component shall be treated as a derivative for pur11 poses of this subchapter. If the derivative component 

12 cannot be separately valued, then the entire contract 

13 shall be treated as a derivative for purposes of this 

14 subchapter. 

15 ‘‘(2) EXCEPTION FOR CERTAIN EMBEDDED DE16 RIVATIVE COMPONENTS OF DEBT INSTRUMENTS.—A 

17 debt instrument shall not be treated as having a de18 rivative component merely because— 

19 ‘‘(A) such debt instrument is denominated 

20 in a nonfunctional currency (as defined in sec21 tion 988(c)(1)(C)(ii)), or 

22 ‘‘(B) payments with respect to such debt 

23 instrument are determined by reference to the 

24 value of a nonfunctional currency (as so de25 fined). 


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1 ‘‘(d) TREATMENT OF AMERICAN DEPOSITORY RE2 CEIPTS AND SIMILAR INSTRUMENTS.—Except as other3 wise provided by the Secretary, for purposes of this sub4 chapter, American depository receipts (and similar instru5 ments) with respect to shares of stock in foreign corpora6 tions shall be treated as shares of stock in such foreign 

7 corporations.’’. 

8 (b) INFORMATION REPORTING WITH RESPECT TO

9 CONTROLLED FOREIGN CORPORATIONS.—Section 

10 6038(a)(1)(B) of such Code is amended by inserting ‘‘and 

11 transactions which are covered transactions for purposes 

12 of section 4475 by reason of the application of section 

13 4475(h)(1) to such corporation’’ before the semicolon at 

14 the end. 

15 (c) CONFORMING AMENDMENT.—The table of sub16 chapters for chapter 36 of such Code is amended by in17 serting after the item relating to subchapter B the fol18 lowing new item: 

‘‘Subchapter C. Tax on trading transactions.’’. 

19 (d) EFFECTIVE DATE.—The amendments made by 

20 this section shall apply to transactions after December 31, 

21 2019. 

Æ 


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