chief operating officer or the highest paid 
employee, the term ‘compensation’ means 
wages (as defined in section 3121(a)) paid 
by the taxpayer during a calendar year. 
‘‘(ii) CEO AND
HIGHEST
PAID
EM-
PLOYEE.—In the case of the chief oper-
ating officer and the highest paid employee 
of the taxpayer, the term ‘compensation’ 
means total compensation for the calendar 
year, as reported in the Summary Com-
pensation Table reported to the Securities 
and Exchange Commission pursuant to 
Item 402 of Regulation S–K of the Securi-
ties and Exchange Commission. 
‘‘(4) SPECIAL RULE IF CONTRACTED OR FOR-
EIGN EMPLOYEE RATIO INCREASES.— 
‘‘(A) IN GENERAL.—If— 
‘‘(i) the total number of full-time em-
ployees, determined on an annual full-time 
equivalent basis, employed by the taxpayer 
in the United States for a taxable year is 
reduced by more than 10 percent, as com-
pared to the total number of full-time em-
ployees, determined on an annual full-time 
equivalent basis, employed by the taxpayer 
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smartinez on DSK4TPTVN1PROD with BILLS
in the United States for the preceding tax-
able year, and 
‘‘(ii) the total number of contracted 
employees or foreign full-time employees, 
determined on an annual full-time equiva-
lent basis, of the taxpayer for that taxable 
year has increased, as compared with the 
total number of contracted employees or 
foreign full-time employees, determined on 
an annual full-time equivalent basis, of the 
taxpayer for the preceding taxable year, 
then the applicable tax rate determined under 
paragraph (2) shall be increased by 50 percent. 
For taxpayers who first commence doing busi-
ness during the taxable year, the number of 
full-time employees, contracted employees, and 
foreign full-time employees for the immediately 
preceding prior taxable year shall be zero. 
‘‘(B) DEFINITIONS.—For purposes of this 
paragraph— 
‘‘(i) ANNUAL
FULL-TIME
EQUIVA-
LENT.—The term ‘annual full-time equiva-
lent’ means— 
‘‘(I) in the case of a full-time em-
ployee paid hourly qualified wages, the 
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total number of hours worked for the 
taxpayer by the employee, not to ex-
ceed 2,000 hours per employee, di-
vided by 2,000, and 
‘‘(II) in the case of a salaried 
full-time employee, the total number 
of weeks worked for the taxpayer by 
the employee divided by 52. 
‘‘(ii) CONTRACTED
FULL-TIME
EM-
PLOYEE.—The term ‘contracted full-time 
employee’ means an individual engaged by 
the taxpayer to provide a specific set of 
services established pursuant to the terms 
and conditions of a written employment 
contract that delineates the length of em-
ployment, the salary and bonuses (if any) 
to be paid, and the benefits that accrue to 
that individual. 
‘‘(iii) 
FOREIGN
FULL-TIME
EM-
PLOYEE.—The term ‘foreign full-time em-
ployee’ means a full-time employee of the 
taxpayer that is employed at a location 
other than the United States. 
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‘‘(iv) FULL-TIME
EMPLOYEE.—The 
term ‘full-time employee’ means an em-
ployee of the taxpayer that either— 
‘‘(I) is paid compensation by the 
taxpayer for services of not less than 
an average of 35 hours per week, or 
‘‘(II) is a salaried employee of 
the taxpayer and is paid compensation 
during the taxable year for full-time 
employment. 
‘‘(5) CONTROLLED GROUPS.—For purposes of 
this subsection, all persons treated as a single em-
ployer under subsection (b), (c), (m) or (o) of sec-
tion 414, shall be treated as one person. 
‘‘(6) REPORTS.—The taxpayer shall furnish 
such reports to the Secretary with respect to com-
pensation and such other matters as the Secretary 
may require. The reports required by this subsection 
shall be filed at such time and in such manner as 
may be required by the Secretary. 
‘‘(7) REGULATIONS.—The Secretary shall pre-
scribe such regulations and other guidance as may 
be necessary or appropriate to carry out this sub-
section, including any guidelines regarding the deter-
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mination of wages, average compensation, and com-
pensation ratio.’’. 
(b) EFFECTIVE DATE.—The amendment made by 
subsection (a) shall apply to taxable years beginning after 
the date of the enactment of this Act. 
Æ 
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