II 

115TH CONGRESS 

1ST SESSION S. 20 

To amend the Internal Revenue Code of 1986 to expand the denial of 

deduction for certain excessive employee remuneration. 

IN THE SENATE OF THE UNITED STATES 

JANUARY 3, 2017 

Mr. VAN HOLLEN 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 expand 

the denial of deduction for certain excessive employee 

remuneration. 

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 ‘‘CEO–Employee Pay5 check Fairness Act of 2017’’. 

6 SEC. 2. EXPANSION OF DENIAL OF DEDUCTION FOR CER7 TAIN EXCESSIVE EMPLOYEE REMUNERA8 TION. 

9 (a) EXPANDED APPLICATION OF DEDUCTION DE10 NIAL IF PAY FAIRNESS REQUIREMENT NOT MET.—SecVerDate Sep 11 2014 23:50 Jan 03, 2017 Jkt 069200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\S20.IS S20

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1 tion 162(m) of the Internal Revenue Code of 1986 is 

2 amended by adding at the end the following new para3 graph: 

4 ‘‘(7) SPECIAL RULE IN CASE OF COMPANIES

5 NOT MEETING PAY FAIRNESS REQUIREMENT.— 

6 ‘‘(A) IN GENERAL.—In the case of a pub7 licly held corporation which does not meet the 

8 pay fairness requirement of subparagraph (B) 

9 for the taxable year— 

10 ‘‘(i) no deduction shall be allowed 

11 under this chapter for applicable employee 

12 remuneration with respect to any employee 

13 to the extent that the amount of such re14 muneration for the taxable year with re15 spect to such employee exceeds 

16 $1,000,000, and 

17 ‘‘(ii) paragraph (4) shall be applied 

18 without regard to subparagraphs (B), (C), 

19 and (D) thereof. 

20 For purposes of the preceding sentence, the 

21 term ‘employee’ includes any officer or director 

22 of the taxpayer and any former officer, director, 

23 or employee of the taxpayer. 


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1 ‘‘(B) PAY FAIRNESS REQUIREMENT.—The 

2 pay fairness requirement of this subparagraph 

3 is met if— 

4 ‘‘(i)(I) the average compensation paid 

5 by the taxpayer to or for all applicable 

6 United States employees for the taxable 

7 year, exceeds 

8 ‘‘(II) the inflation and productivity 

9 growth adjusted average of such compensa10 tion for the preceding taxable year, and 

11 ‘‘(ii) the aggregate compensation paid 

12 by the employer to or for all applicable 

13 United States employees for the taxable 

14 year is not less than the aggregate of such 

15 compensation for the preceding taxable 

16 year. 

17 ‘‘(C) APPLICABLE UNITED STATES EM18 PLOYEE.—For purposes of this paragraph, the 

19 term ‘applicable United States employee’ 

20 means, with respect to any taxable year, any 

21 employee— 

22 ‘‘(i) whose services with respect to the 

23 employer are substantially all performed 

24 within the United States, and 


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1 ‘‘(ii) whose compensation from the 

2 employer for the taxable year does not ex3 ceed the dollar amount in effect under sec4 tion 414(q)(1)(B)(i) with respect to the 

5 calendar year in which such taxable year 

6 begins. 

7 ‘‘(D) INFLATION AND PRODUCTIVITY

8 GROWTH ADJUSTED AVERAGE.—For purposes 

9 of subparagraph (B)(i)(II), the inflation and 

10 productivity growth adjusted average of com11 pensation for any taxable year shall be deter12 mined by multiplying— 

13 ‘‘(i) the average of the compensation 

14 paid by the taxpayer to or for all applica15 ble United States employees for the taxable 

16 year, by 

17 ‘‘(ii) the sum of the cost-of-living ad18 justment and the productivity adjustment 

19 for the taxable year. 

20 ‘‘(E) COST-OF-LIVING ADJUSTMENT.—For 

21 purposes of subparagraph (D)(ii), the cost-of22 living adjustment for any taxable year is the 

23 cost-of-living adjustment determined under sec24 tion 1(f)(3) for the calendar year in which the 

25 taxable year begins, determined by substituting 


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1 ‘the second preceding calendar year’ for ‘cal2 endar year 1992’ in subparagraph (B) thereof. 

3 ‘‘(F) PRODUCTIVITY ADJUSTMENT.—For 

4 purposes of subparagraph (D)(ii)— 

5 ‘‘(i) IN GENERAL.—The productivity 

6 adjustment for the taxable year is an 

7 amount (expressed as a percentage) equal 

8 to the average annual increase in the busi9 ness productivity index for the period be10 ginning with calendar year 2000 and end11 ing with the calendar year preceding the 

12 calendar year in which the taxable year be13 gins. 

14 ‘‘(ii) BUSINESS PRODUCTIVITY

15 INDEX.—The term ‘business productivity 

16 index’ means the nonfarm business produc17 tivity index published by the Bureau of 

18 Labor Statistics as adjusted by the Sec19 retary to account for depreciation. 

20 ‘‘(G) COMPENSATION.—For purposes of 

21 this subparagraph, the term ‘compensation’ 

22 means, with respect to any employee, the sum 

23 of— 


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1 ‘‘(i) the employee’s wages on which 

2 the tax under section 3101(b) is imposed, 

3 plus 

4 ‘‘(ii) any amount described in para5 graph (9), (11), (12), or (14) of section 

6 6051(a) with respect to the employee. 

7 ‘‘(H) AGGREGATION RULES.—Rules simi8 lar to the rules of paragraph (5)(B)(iii) shall 

9 apply for purposes of this paragraph. 

10 ‘‘(I) REGULATIONS.—The Secretary may 

11 prescribe such regulations as are necessary to 

12 carry out the purposes of this paragraph, in13 cluding adjustments to the pay fairness require14 ments of subparagraph (B)— 

15 ‘‘(i) to prevent avoidance of this para16 graph through changes in the composition 

17 of the taxpayer’s workforce, and 

18 ‘‘(ii) to account for significant, non19 tax-motivated changes in the size and com20 position of the taxpayer’s workforce (in21 cluding mergers, spinoffs, or changes in 

22 the occupational composition of a tax23 payer’s workforce).’’. 

24 (b) MODIFICATION OF DEFINITION OF COVERED EM25 PLOYEES.— 


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1 (1) IN GENERAL.—Paragraph (3) of section 

2 162(m) of the Internal Revenue Code of 1986 is 

3 amended— 

4 (A) in subparagraph (A), by striking ‘‘as 

5 of the close of the taxable year, such employee 

6 is the chief executive officer of the taxpayer or 

7 is’’ and inserting ‘‘such employee is the chief 

8 executive officer or the chief financial officer of 

9 the taxpayer at any time during the taxable 

10 year, or was’’; 

11 (B) in subparagraph (B) by striking 

12 ‘‘(other than the chief executive officer)’’ and 

13 inserting ‘‘(other than any individual described 

14 in subparagraph (A))’’; and 

15 (C) by striking ‘‘or’’ at the end of subpara16 graph (A), by striking the period at the end of 

17 subparagraph (B) and inserting ‘‘, or’’, and by 

18 adding at the end the following: 

19 ‘‘(C) was a covered employee of the tax20 payer (or any predecessor) for any preceding 

21 taxable year beginning after December 31, 

22 2014.’’. 

23 (2) TECHNICAL AMENDMENT.—Section 

24 162(m)(3)(B) of such Code is amended by striking 

25 ‘‘4 highest’’ and inserting ‘‘3 highest’’. 


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1 (c) APPLICABLE EMPLOYEE REMUNERATION PAID

2 TO BENEFICIARIES, ETC.—Paragraph (4) of section 

3 162(m) of the Internal Revenue Code of 1986 is amended 

4 by adding at the end the following new subparagraph: 

5 ‘‘(H) SPECIAL RULE FOR REMUNERATION

6 PAID TO BENEFICIARIES, ETC.—Remuneration 

7 shall not fail to be applicable employee remu8 neration merely because it is includible in the 

9 income of, or paid to, a person other than the 

10 covered employee, including after the death of 

11 the covered employee.’’. 

12 (d) EXPANSION OF APPLICABLE EMPLOYER TO IN13 CLUDE NON-LISTED PUBLIC COMPANIES.—Paragraph 

14 (2) of section 162(m) of the Internal Revenue Code of 

15 1986 is amended to read as follows: 

16 ‘‘(2) PUBLICLY HELD CORPORATION.—For pur17 poses of this subsection, the term ‘publicly held cor18 poration’ means any corporation which is an issuer 

19 (as defined in section 3 of the Securities Exchange 

20 Act of 1934) and which— 

21 ‘‘(A) has a class of securities registered 

22 under section 12 of such Act, or 

23 ‘‘(B) is required to file reports under sec24 tion 15(d) of such Act.’’. 


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1 (e) EFFECTIVE DATE.—The amendments made by 

2 this section shall apply to taxable years beginning after 

3 December 31, 2016. 

Æ 


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