I 

114TH CONGRESS 

2D SESSION H. R. 5745 

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

trading transactions. 

IN THE HOUSE OF REPRESENTATIVES 

JULY 13, 2016 

Mr. DEFAZIO introduced the following bill; which was referred to the 

Committee on Ways and Means 

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 ‘‘Putting Main Street 

5 FIRST Act’’ or as the ‘‘Putting Main Street FIRST: Fin6 ishing Irresponsible Reckless Speculative Trading Act’’. 

7 SEC. 2. TRANSACTION TAX. 

8 (a) IN GENERAL.—Chapter 36 of the Internal Rev9 enue Code of 1986 is amended by inserting after sub10 chapter B the following new subchapter: 


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1 ‘‘Subchapter C—Tax on Trading Transactions 

‘‘Sec. 4475. Tax on trading transactions. 

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 0.03 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) EXCEPTIONS FROM TAX.— 

14 ‘‘(A) EXCEPTION FOR INITIAL ISSUES.— 

15 No tax shall be imposed under subsection (a) 

16 on any covered transaction with respect to the 

17 initial issuance of any security described in sub18 paragraph (A), (B), or (C) of subsection (e)(1). 

19 ‘‘(B) EXCEPTION FOR CERTAIN TRADED

20 SHORT-TERM INDEBTEDNESS.—A note, bond, 

21 debenture, or other evidence of indebtedness 

22 which— 

23 ‘‘(i) is traded on, or is subject to the 

24 rules of, a qualified board or exchange lo25 cated in the United States, and 


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1 ‘‘(ii) has a fixed maturity of not more 

2 than 100 days, 

3 shall not be treated as described in subsection 

4 (e)(1)(C). 

5 ‘‘(e) DEFINITIONS.—For purposes of this section— 

6 ‘‘(1) SECURITY.—The term ‘security’ means— 

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

8 ‘‘(B) any partnership or beneficial owner9 ship interest in a partnership or trust, 

10 ‘‘(C) any note, bond, debenture, or other 

11 evidence of indebtedness, and 

12 ‘‘(D) any derivative. 

13 ‘‘(2) DERIVATIVE.— 

14 ‘‘(A) IN GENERAL.—The term ‘derivative’ 

15 means any contract (including any option, for16 ward contract, futures contract, short position, 

17 swap, or similar contract) the value of which, or 

18 any payment or other transfer with respect to 

19 which, is (directly or indirectly) determined by 

20 reference to one or more of the following: 

21 ‘‘(i) Any security described in sub22 paragraph (A), (B), or (C) of paragraph 

23 (1). 


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1 ‘‘(ii) Any commodity which is actively 

2 traded (within the meaning of section 

3 1092(d)(1)). 

4 ‘‘(iii) Any currency. 

5 ‘‘(iv) Any rate, price, amount, index, 

6 formula, or algorithm. 

7 ‘‘(v) Any other item as the Secretary 

8 may prescribe. 

9 Such term shall not include any item described 

10 in clauses (i) through (v). 

11 ‘‘(B) EXCEPTIONS FROM TREATMENT AS

12 DERIVATIVES.— 

13 ‘‘(i) SECURITIES LENDING, SALE-RE14 PURCHASE, AND SIMILAR FINANCING

15 TRANSACTIONS.—To the extent provided 

16 by the Secretary, the term ‘derivative’ shall 

17 not include the right to the return of the 

18 same or substantially identical securities 

19 transferred in a securities lending trans20 action, sale-repurchase transaction, or 

21 similar financing transaction. 

22 ‘‘(ii) INSURANCE CONTRACTS, ANNU23 ITIES, AND ENDOWMENTS.—The term ‘de24 rivative’ shall not include any insurance, 

25 annuity, or endowment contract issued by 


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1 an insurance company to which subchapter 

2 L applies (or issued by any foreign cor3 poration to which such subchapter would 

4 apply if such foreign corporation were a 

5 domestic corporation). 

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

7 term ‘qualified board or exchange’ has the meaning 

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

9 ‘‘(f) BY WHOM PAID.— 

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

11 section shall be paid by— 

12 ‘‘(A) in the case of a transaction which oc13 curs on, or is subject to the rules of, a qualified 

14 board or exchange located in the United States, 

15 such qualified board or exchange, and 

16 ‘‘(B) in the case of a purchase not de17 scribed in subparagraph (A) which is executed 

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

19 which is a United States person, such broker. 

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

21 TRANSACTIONS.—In the case of any transaction to 

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

23 by this section shall be paid by— 

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

25 in subsection (d)(1)(A)— 


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

2 a United States person, and 

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

4 a United States person, and 

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

6 in subsection (d)(1)(B)— 

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

8 States person, and 

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

10 United States person. 

11 ‘‘(g) TREATMENT OF EXCHANGES AND PAYMENTS

12 WITH RESPECT TO DERIVATIVES.—For purposes of this 

13 section— 

14 ‘‘(1) TREATMENT OF EXCHANGES.— 

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

16 treated as the sale of the property transferred 

17 and a purchase of the property received by each 

18 party to the exchange. 

19 ‘‘(B) CERTAIN DEEMED EXCHANGES.—In 

20 the case of a distribution treated as an ex21 change for stock under section 302 or 331, the 

22 corporation making such distribution shall be 

23 treated as having purchased such stock for pur24 poses of this section. 


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1 ‘‘(2) PAYMENTS WITH RESPECT TO DERIVA2 TIVES TREATED AS SEPARATE TRANSACTIONS.—Ex3 cept as otherwise provided by the Secretary, any 

4 payment with respect any derivative shall be treated 

5 as a separate transaction for purposes of this sec6 tion. 

7 ‘‘(h) APPLICATION TO TRANSACTIONS BY CON8 TROLLED FOREIGN CORPORATIONS.— 

9 ‘‘(1) IN GENERAL.—For purposes of this sec10 tion, a controlled foreign corporation shall be treated 

11 as a United States person. 

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

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

14 transaction which is a covered transaction solely by 

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

16 in subsection (f)(1)— 

17 ‘‘(A) PAYMENT BY UNITED STATES SHARE18 HOLDERS.—Any tax which would (but for this 

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

20 by the controlled foreign corporation shall, in 

21 lieu thereof, be paid by the United States 

22 shareholders of such controlled foreign corpora23 tion as provided in subparagraph (B). 


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1 ‘‘(B) PRO RATA SHARES.—Each such 

2 United States shareholder shall pay the same 

3 proportion of such tax as— 

4 ‘‘(i) the stock which such United 

5 States shareholder owns (within the mean6 ing of section 958(a)) in such controlled 

7 foreign corporation, bears to 

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

9 States shareholders in such controlled for10 eign corporation. 

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

12 subsection, the terms ‘United States share13 holder’ and ‘controlled foreign corporation’ have 

14 the meanings given such terms in sections 

15 951(b) and 957(a), respectively. 

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

17 out this section in consultation with the Securities and Ex18 change Commission and the Commodity Futures Trading 

19 Commission. 

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

21 shall— 

22 ‘‘(1) provide guidance regarding such informa23 tion reporting concerning covered transactions as the 

24 Secretary deems appropriate, and 


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

2 or appropriate to prevent avoidance of the purposes 

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

4 States persons in such transactions.’’. 

5 (b) CREDIT WITH RESPECT TO CERTAIN TAX-FA6 VORED ACCOUNTS TO OFFSET TRANSACTION TAX.—Sub7 part C of part IV of subchapter A of chapter 1 of such 

8 Code is amended by inserting after section 36B the fol9 lowing new section: 

10 ‘‘SEC. 36C. OFFSET FOR TRANSACTION TAX WITH RESPECT 

11 TO CERTAIN TAX-FAVORED ACCOUNTS. 

12 ‘‘(a) IN GENERAL.—There shall be allowed as a cred13 it against the tax imposed by this subtitle for the taxable 

14 year an amount equal to 0.03 percent of the qualified tax15 favored account contributions of the taxpayer for the tax16 able year. 

17 ‘‘(b) QUALIFIED TAX-FAVORED ACCOUNT CON18 TRIBUTIONS.—For purposes of this section, the term 

19 ‘qualified tax-favored account contributions’ means, with 

20 respect to any taxable year, the sum of— 

21 ‘‘(1) with respect to qualified retirement plans 

22 (as defined in section 4974(c)) of the taxpayer, the 

23 amount contributed to such plans for such taxable 

24 year to the extent that such contributions are allow25 able as a deduction or are excludable from gross inVerDate Sep 11 2014 02:19 Jul 21, 2016 Jkt 059200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H5745.IH H5745

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1 come (or, in the case of a Roth IRA (as defined in 

2 section 408A(b)), the amount contributed), 

3 ‘‘(2) with respect to Archer MSAs of the tax4 payer, the amount allowed as a deduction under sec5 tion 220 for such taxable year, 

6 ‘‘(3) with respect to health savings accounts of 

7 the taxpayer, the amount allowed as a deduction 

8 under section 223 for such taxable year, plus 

9 ‘‘(4) with respect to qualified tuition programs 

10 (as defined in section 529), qualified ABLE pro11 grams (as defined in section 529A), and Coverdell 

12 education savings accounts (as defined in section 

13 530), with respect to which the taxpayer is the des14 ignated beneficiary (or, in the case of a designated 

15 beneficiary with respect to whom another taxpayer is 

16 allowed a deduction under section 151, such other 

17 taxpayer in lieu of such designated beneficiary), the 

18 amount contributed for such taxable year.’’. 

19 (c) INFORMATION REPORTING WITH RESPECT TO

20 CONTROLLED FOREIGN CORPORATIONS.—Section 

21 6038(a)(1)(B) of such Code is amended by inserting ‘‘and 

22 transactions which are covered transactions for purposes 

23 of section 4475 by reason of the application of section 

24 4475(h)(1) to such corporation’’ before the semicolon at 

25 the end. 


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1 (d) CONFORMING AMENDMENTS.— 

2 (1) Section 1324(b)(2) of title 31, United 

3 States Code, is amended by inserting ‘‘, 36C’’ after 

4 ‘‘36B’’. 

5 (2) The table of sections for subpart C of part 

6 IV of subchapter A of chapter 1 of the Internal Rev7 enue Code of 1986 is amended by inserting before 

8 the item relating to section 37 the following new 

9 item: 

‘‘Sec. 36C. Offset for transaction tax on contributions to certain tax-favored accounts.’’. 

10 (3) The table of subchapters for chapter 36 of 

11 such Code is amended by inserting after the item re12 lating to subchapter B the following new item: 

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

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

14 this section shall apply to transactions after December 31, 

15 2017. 

Æ 


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