II

106TH CONGRESS

2D SESSION S. 2244

To increase participation in employee stock purchase plans and individual

retirement plans so that American workers may share in the growth

in the United States economy attributable to international trade agreements.

IN THE SENATE OF THE UNITED STATES

MARCH 9, 2000

Mr. WYDEN (for himself and Mr. BAUCUS) introduced the following bill; which

was read twice and referred to the Committee on Finance

A BILL

To increase participation in employee stock purchase plans

and individual retirement plans so that American workers may share in the growth in the United States economy attributable to international trade agreements.

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; AMENDMENT OF 1986 CODE.

4 (a) SHORT TITLE.—This Act may be cited as the

5 ‘‘Working Families Trade Bonus Act’’.

6 (b) AMENDMENT OF 1986 CODE.—Except as other7 wise expressly provided, whenever in this Act an amend8 ment or repeal is expressed in terms of an amendment
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1 to, or repeal of, a section or other provision, the reference

2 shall be considered to be made to a section or other provi3 sion of the Internal Revenue Code of 1986.

4 SEC. 2. FINDINGS AND PURPOSE.

5 (a) FINDINGS.—Congress finds that—

6 (1) exports represent a growing share of United

7 States production, and exports have accounted for

8 more than 10 percent of the United States gross do9 mestic product in recent years,

10 (2) export growth represented more than 36

11 percent of overall United States growth in gross do12 mestic product between 1987 and 1997,

13 (3) international trade flows in the United

14 States have grown twice as fast as the economy

15 since 1950, and, in real terms, the growth rate for

16 international trade has averaged about 6.5 percent a

17 year,

18 (4) between 1987 and 1997, more than

19 5,500,000 United States jobs have been created by

20 international trade,

21 (5) the globalization of the United States econ22 omy demands that appropriate domestic policy meas23 ures be undertaken to assure American workers

24 enjoy the benefits of globalization rather than be un25 dermined by it, and
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1 (6) when the domestic economy and United

2 States companies achieve growth and profits from

3 international trade, workers ought to share in the

4 benefits.

5 (b) PURPOSE.—It is the purpose of this Act to assist

6 American workers in benefiting directly when inter7 national trade produces domestic economic growth.

8 TITLE I—TRADE BONUS

9 SEC. 101. DETERMINATION AND ANNOUNCEMENT OF

10 TRADE BONUS.

11 (a) DETERMINATION.—

12 (1) IN GENERAL.—The Secretary of Commerce

13 or the Secretary’s delegate shall, for each calendar

14 year after 1998, determine whether international

15 trade of the United States contributed to an increase

16 in the gross domestic product of the United States

17 for such calendar year.

18 (2) TIME FOR DETERMINATION; SUBMISSION.—

19 The Secretary shall make and submit to the Presi20 dent the determination under paragraph (1) as soon

21 as practicable after the close of a calendar year, but

22 in no event later than June 1 of the next calendar

23 year. Such determination shall be made on the basis

24 of the most recent available data as of the time of

25 the determination.
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1 (b) INCLUSION IN BUDGET.—The President shall in2 clude the determination under subsection (a) with the sup3 plemental summary of the budget for the fiscal year begin4 ning in the calendar year following the calendar year for

5 which the determination was made.

6 TITLE II—PROVISIONS TO EN7 SURE WORKERS SHARE IN

8 TRADE BONUS

9 SEC. 201. UNITED STATES POLICY ON INTERNATIONAL

10 TRADE BONUS.

11 (a) GENERAL POLICY OF THE UNITED STATES.—It

12 is the policy of the United States that if there is an in13 crease in the portion of the gross domestic product of the

14 United States for any calendar year which is attributable

15 to international trade of the United States—

16 (1) workers ought to share in the benefits of

17 the increase through—

18 (A) the establishment of employee stock

19 purchase plans by employers that have not al20 ready done so,

21 (B) the expansion of employee stock pur22 chase plans of employers that have already es23 tablished such plans, and

24 (C) the opportunity to make additional

25 contributions to individual retirement plans if
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1 the workers are unable to participate in em2 ployee stock purchase plans,

3 (2) employers should contribute additional com4 pensation to such employee stock purchase plans in

5 an amount up to $2,000 per employee, and

6 (3) workers should contribute additional

7 amounts up to $2,000 to individual retirement

8 plans.

9 (b) GUIDELINES.—It is the policy of the United

10 States that any employer establishing or expanding an em11 ployee stock purchase plan under the policy stated under

12 subsection (a) should—

13 (1) provide that the amount of additional stock

14 each employee is able to purchase in any year there

15 is a trade bonus is the amount determined by the

16 employer but not in excess of $2,000,

17 (2) make the plan available to the widest range

18 of employees without discriminating in favor of high19 ly compensated employees,

20 (3) allow for the purchase of the maximum

21 amount of stock allowed by law at the lowest price

22 allowed by law, and

23 (4) ensure that the establishment or expansion

24 of such plan—
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1 (A) provides employees with compensation

2 that is in addition to the compensation they

3 would normally receive, and

4 (B) does not result in a lack of diversifica5 tion of an employee’s assets, particularly such

6 employee’s retirement assets.

7 SEC. 202. ELIMINATION OF CAPITAL GAINS TAX ON GAIN

8 FROM STOCK ACQUIRED THROUGH EM9 PLOYEE STOCK PURCHASE PLAN.

10 (a) IN GENERAL.—Part I of subchapter P of chapter

11 1 (relating to treatment of capital gains) is amended by

12 adding at the end the following new section:

13 ‘‘SEC. 1203. EXCLUSION FOR GAIN FROM STOCK ACQUIRED

14 THROUGH EMPLOYEE STOCK PURCHASE

15 PLAN.

16 ‘‘(a) GENERAL RULE.—Gross income of an employee

17 shall not include gain from the sale or exchange of stock—

18 ‘‘(1) which was acquired by the employee pursu19 ant to an exercise of a trade bonus stock option

20 granted under an employee stock purchase plan (as

21 defined in section 423(b)), and

22 ‘‘(2) with respect to which the requirements of

23 section 423(a) have been met before the sale or ex24 change.
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1 ‘‘(b) TRADE BONUS STOCK OPTION.—For purposes

2 of this section—

3 ‘‘(1) IN GENERAL.—The term ‘trade bonus

4 stock option’ means an option which—

5 ‘‘(A) is granted under an employee stock

6 purchase plan (as defined in section 423(b)) for

7 a plan year beginning in a calendar year fol8 lowing a calendar year for which a trade bonus

9 percentage has been determined under section

10 101 of the Working Families Trade Bonus Act,

11 and

12 ‘‘(B) the employer designates, at such time

13 and in such manner as the Secretary may pre14 scribe, as a trade bonus stock option.

15 ‘‘(2) ANNUAL LIMITATION.—Options may not

16 be designated as trade bonus stock options with re17 spect to an employee for any plan year to the extent

18 that the fair market value of the stock which may

19 be purchased with such options (determined as of

20 the time the options are granted) exceeds $2,000.’’

21 (b) CONFORMING AMENDMENTS.—

22 (1) Paragraph (9) of section 1(h) (relating to

23 maximum capital gains rate) is amended by striking

24 ‘‘and section 1202 gain’’ and inserting ‘‘section
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1 1202 gain, and gain excluded from gross income

2 under section 1203(a)’’.

3 (2) Section 172(d)(2)(B) (relating to modifica4 tions with respect to net operating loss deduction) is

5 amended by striking ‘‘section 1202’’ and inserting

6 ‘‘sections 1202 and 1203’’.

7 (3) Section 642(c)(4) (relating to adjustments)

8 is amended by inserting ‘‘or 1203(a)’’ after ‘‘section

9 1202(a)’’ and by inserting ‘‘or 1203’’ after ‘‘section

10 1202’’.

11 (4) Section 643(a)(3) (defining distributable

12 net income) is amended by striking ‘‘section 1202’’

13 and inserting ‘‘sections 1202 and 1203’’.

14 (5) Section 691(c)(4) (relating to coordination

15 with capital gain provisions) is amended by inserting

16 ‘‘1203,’’ after ‘‘1202,’’.

17 (6) The second sentence of section 871(a)(2)

18 (relating to capital gains of aliens present in the

19 United States 183 days or more) is amended by in20 serting ‘‘or 1203’’ after ‘‘section 1202’’.

21 (7) The table of sections of part I of subchapter

22 P of chapter 1 is amended by adding at the end the

23 following:

‘‘Sec. 1203. Exclusion for gain from stock acquired through employee stock purchase plan.’’
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1 (c) EFFECTIVE DATE.—The amendments made by

2 this section shall apply to stock acquired on and after the

3 date of the enactment of this Act.

4 SEC. 203. TRADE BONUS CONTRIBUTIONS TO INDIVIDUAL

5 RETIREMENT PLANS.

6 (a) IN GENERAL.—Section 219(b) (relating to max7 imum amount of deduction) is amended by adding at the

8 end the following new paragraph:

9 ‘‘(5) ADDITIONAL CONTRIBUTIONS IN TRADE

10 BONUS YEARS.—

11 ‘‘(A) IN GENERAL.—If there is a deter12 mination under section 101 of the Working

13 Families Trade Bonus Act that there is a trade

14 bonus for any calendar year, then, in the case

15 of an eligible individual, the dollar amount in

16 effect under paragraph (1)(A) for taxable years

17 beginning in the subsequent calendar year shall

18 be increased by $2,000.

19 ‘‘(B) ELIGIBLE INDIVIDUAL.—For pur20 poses of subparagraph (A), the term ‘eligible in21 dividual’ means, with respect to any taxable

22 year, any individual other than an individual

23 who is eligible to receive a trade bonus stock

24 option (as defined in section 1203(b)) for a

25 plan year beginning in the taxable year.’’
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1 (b) CONFORMING AMENDMENTS.—

2 (1) Section 408(a)(1) is amended by striking

3 ‘‘in excess of $2,000 on behalf of any individual’’

4 and inserting ‘‘on behalf of any individual in excess

5 of the amount in effect for such taxable year under

6 section 219(b)(1)(A)’’.

7 (2) Section 408(b)(2)(B) is amended by strik8 ing ‘‘$2,000’’ and inserting ‘‘the dollar amount in

9 effect under section 219(b)(1)(A)’’.

10 (3) Section 408(b) is amended by striking

11 ‘‘$2,000’’ in the matter following paragraph (4) and

12 inserting ‘‘the dollar amount in effect under section

13 219(b)(1)(A)’’.

14 (4) Section 408(j) is amended by striking

15 ‘‘$2,000’’.

16 (5) Section 408(p)(8) is amended by striking

17 ‘‘$2,000’’ and inserting ‘‘the dollar amount in effect

18 under section 219(b)(1)(A)’’.

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

20 this section shall apply to taxable years beginning after

21 December 31, 2000.

22 SEC. 204. CREDIT FOR SMALL EMPLOYER STOCK PUR23 CHASE PLAN START-UP COSTS.

24 (a) IN GENERAL.—Subpart D of part IV of sub25 chapter A of chapter 1 (relating to business related cred-
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1 its) is amended by adding at the end the following new

2 section:

3 ‘‘SEC. 45D. SMALL EMPLOYER STOCK PURCHASE PLAN

4 CREDIT.

5 ‘‘(a) GENERAL RULE.—For purposes of section 38,

6 in the case of an eligible employer, the small employer

7 stock purchase plan credit determined under this section

8 for any taxable year is an amount equal to the qualified

9 start-up costs paid or incurred by the taxpayer during the

10 taxable year.

11 ‘‘(b) LIMITS ON START-UP COSTS.—In the case of

12 qualified start-up costs not paid or incurred directly for

13 the establishment of a qualified stock purchase plan, the

14 amount of the credit determined under subsection (a) for

15 any taxable year shall not exceed the lesser of 50 percent

16 of such costs or—

17 ‘‘(1) $2,000 for the first taxable year ending

18 after the date the employer established the qualified

19 employer plan to which such costs relate,

20 ‘‘(2) $1,000 for each of the second and third

21 such taxable years, and

22 ‘‘(3) zero for each taxable year thereafter.

23 ‘‘(c) DEFINITIONS.—For purposes of this section—

24 ‘‘(1) ELIGIBLE EMPLOYER.—
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1 ‘‘(A) IN GENERAL.—The term ‘eligible em2 ployer’ means, with respect to any year, an em3 ployer which has 100 or fewer employees who

4 received at least $5,000 of compensation from

5 the employer for the preceding year.

6 ‘‘(B) REQUIREMENT FOR NEW QUALIFIED

7 EMPLOYER PLANS.—Such term shall not in8 clude an employer if, during the 3-taxable year

9 period immediately preceding the 1st taxable

10 year for which the credit under this section is

11 otherwise allowable for a qualified stock pur12 chase plan of the employer, the employer and

13 each member of any controlled group including

14 the employer (or any predecessor of either) es15 tablished or maintained an employee stock pur16 chase plan with respect to which contributions

17 were made, or benefits were accrued, for sub18 stantially the same employees as are in the

19 qualified stock purchase plan.

20 ‘‘(2) QUALIFIED START-UP COSTS.—The term

21 ‘qualified start-up costs’ means any ordinary and

22 necessary expenses of an eligible employer which are

23 paid or incurred in connection with—
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1 ‘‘(A) the establishment or maintenance of

2 a qualified stock purchase plan in which em3 ployees are eligible to participate, and

4 ‘‘(B) providing educational information to

5 employees regarding participation in such plan

6 and the benefits of participating in the plan.

7 Such term does not include services related to retire8 ment planning, including tax preparation, account9 ing, legal, or brokerage services.

10 ‘‘(3) QUALIFIED STOCK PURCHASE PLAN.—

11 ‘‘(A) IN GENERAL.—The term ‘qualified

12 stock purchase plan’ means an employee stock

13 purchase plan which—

14 ‘‘(i) allows an employer to designate

15 options as trade bonus stock options for

16 purposes of section 1203,

17 ‘‘(ii) limits the amount of options

18 which may be so designated for any em19 ployee to not more than $2,000 per year,

20 and

21 ‘‘(iii) does not discriminate in favor of

22 highly compensated employees (within the

23 meaning of section 414(q)).

24 ‘‘(B) EMPLOYEE STOCK PURCHASE

25 PLAN.—The term ‘employee stock purchase
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1 plan’ has the meaning given such term by sec2 tion 423(b).

3 ‘‘(d) SPECIAL RULES.—

4 ‘‘(1) AGGREGATION RULES.—All persons treat5 ed as a single employer under subsection (a) or (b)

6 of section 52, or subsection (n) or (o) of section 414,

7 shall be treated as one person. All qualified stock

8 purchase plans of an employer shall be treated as a

9 single qualified stock purchase plan.

10 ‘‘(2) DISALLOWANCE OF DEDUCTION.—No de11 duction shall be allowable under this chapter for any

12 qualified start-up costs for which a credit is deter13 mined under subsection (a).

14 ‘‘(3) ELECTION NOT TO CLAIM CREDIT.—This

15 section shall not apply to a taxpayer for any taxable

16 year if such taxpayer elects to have this section not

17 apply for such taxable year.’’

18 (b) CREDIT ALLOWED AS PART OF GENERAL BUSI19 NESS CREDIT.—Section 38(b) (defining current year busi20 ness credit) is amended by striking ‘‘plus’’ at the end of

21 paragraph (11), by striking the period at the end of para22 graph (12) and inserting ‘‘, plus’’, and by adding at the

23 end the following new paragraph:

24 ‘‘(13) in the case of an eligible employer (as de25 fined in section 45D(c)), the small employer stock
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1 purchase plan credit determined under section

2 45D(a).’’

3 (c) PORTION OF CREDIT REFUNDABLE.—Section

4 38(c) (relating to limitation based on amount of tax) is

5 amended by adding at the end the following new para6 graph:

7 ‘‘(4) PORTION OF SMALL EMPLOYER PENSION

8 PLAN CREDIT REFUNDABLE.—

9 ‘‘(A) IN GENERAL.—In the case of the

10 small employer stock purchase plan credit

11 under subsection (b)(13), the aggregate credits

12 allowed under subpart C shall be increased by

13 the lesser of—

14 ‘‘(i) the credit which would be allowed

15 without regard to this paragraph and the

16 limitation under paragraph (1), or

17 ‘‘(ii) the amount by which the aggre18 gate amount of credits allowed by this sec19 tion (without regard to this paragraph)

20 would increase if the limitation under

21 paragraph (1) were increased by the tax22 payer’s applicable payroll taxes for the tax23 able year.

24 ‘‘(B) TREATMENT OF CREDIT.—The

25 amount of the credit allowed under this para-
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1 graph shall not be treated as a credit allowed

2 under this subpart and shall reduce the amount

3 of the credit allowed under this section for the

4 taxable year.

5 ‘‘(C) APPLICABLE PAYROLL TAXES.—For

6 purposes of this paragraph—

7 ‘‘(i) IN GENERAL.—The term ‘applica8 ble payroll taxes’ means, with respect to

9 any taxpayer for any taxable year—

10 ‘‘(I) the amount of the taxes im11 posed by sections 3111 and 3221(a)

12 on compensation paid by the taxpayer

13 during the taxable year,

14 ‘‘(II) 50 percent of the taxes im15 posed by section 1401 on the self-em16 ployment income of the taxpayer dur17 ing the taxable year, and

18 ‘‘(III) 50 percent of the taxes im19 posed by section 3211(a)(1) on

20 amounts received by the taxpayer dur21 ing the calendar year in which the

22 taxable year begins.

23 ‘‘(ii) AGREEMENTS REGARDING FOR24 EIGN AFFILIATES.—Section 24(d)(3)(C)

25 shall apply for purposes of clause (i).’’
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1 (d) CONFORMING AMENDMENT.—The table of sec2 tions for subpart D of part IV of subchapter A of chapter

3 1 is amended by adding at the end the following new item:

‘‘Sec. 45D. Small employer stock purchase plan credit.’’

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

5 this section shall apply to costs paid or incurred in connec6 tion with qualified stock purchase plans established after

7 the date of the enactment of this Act.

Æ