SEC. 2. AUTHORITY OF STATE AND LOCAL GOVERNMENTS 
TO DIVEST FROM ENTITIES THAT ENGAGE IN 
COMMERCE OR INVESTMENT-RELATED BOY-
COTTS, DIVESTMENTS, OR SANCTIONS AC-
TIVITIES TARGETING ISRAEL. 
(a) AUTHORITY TO DIVEST.—Notwithstanding any 
other provision of law, a State or local government may 
adopt and enforce measures that meet the notice require-
ment of subsection (b) to divest the assets of the State 
or local government from, or prohibit investment of the 
assets of the State or local government in— 
(1) an entity that the State or local government 
determines, using credible information available to 
the public, engages in a commerce or investment-re-
lated boycott, divestment, or sanctions activity tar-
geting Israel; 
(2) a successor entity or subunit of an entity 
described in paragraph (1); or 
(3) an entity that owns or controls, is owned or 
controlled by, or is under common ownership or con-
trol with, an entity described in paragraph (1). 
(b) NOTICE REQUIREMENT.— 
(1) IN GENERAL.—A State or local government 
shall provide written notice to each entity to which 
a measure taken by the State or local government 
under subsection (a) is to be applied. 
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(2) RULE
OF
CONSTRUCTION.—Nothing in 
paragraph (1) shall be construed to prohibit a State 
or local government from taking additional steps to 
provide due process with respect to each entity de-
scribed in paragraph (1) for purposes of carrying 
out this section. 
(c) NONPREEMPTION.—A measure of a State or local 
government authorized under subsection (a) is not pre-
empted by any Federal law or regulation. 
(d) EFFECTIVE DATE.—This section applies to meas-
ures adopted by a State or local government before, on, 
or after the date of the enactment of this Act. 
(e) RULE OF CONSTRUCTION.—Nothing in this sec-
tion shall be construed to abridge the authority of a State 
to issue and enforce rules governing the safety, soundness, 
and solvency of a financial institution subject to its juris-
diction or the business of insurance pursuant to the Act 
of March 9, 1945 (59 Stat. 33, chapter 20; 15 U.S.C. 
1011 et seq.) (commonly known as the ‘‘McCarran-Fer-
guson Act’’). 
(f) DEFINITIONS.—In this section: 
(1) ASSETS.— 
(A) IN GENERAL.—Except as provided in 
subparagraph (B), the term ‘‘assets’’ means 
any pension, retirement, annuity, or endowment 
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fund, or similar instrument, that is controlled 
by a State or local government. 
(B) EXCEPTION.—The term ‘‘assets’’ does 
not include employee benefit plans covered by 
title I of the Employee Retirement Income Se-
curity Act of 1974 (29 U.S.C. 1001 et seq.). 
(2) BOYCOTT, DIVESTMENT, OR SANCTIONS AC-
TIVITY TARGETING ISRAEL.—The term ‘‘boycott, di-
vestment, or sanctions activity targeting Israel’’ 
means any activity that is intended to penalize, in-
flict economic harm on, or otherwise limit commer-
cial relations with Israel or persons doing business 
in Israel or in Israeli-controlled territories, for pur-
poses of coercing political action by, or imposing pol-
icy positions on, the Government of Israel. 
(3) ENTITY.—The term ‘‘entity’’ includes— 
(A) any corporation, company, business as-
sociation, partnership, or trust; and 
(B) any governmental entity, or instrumen-
tality of a government, including a multilateral 
development institution (as defined in section 
1701(c)(3) of the International Financial Insti-
tutions Act (22 U.S.C. 262r(c)(3))). 
(4) INVESTMENT.—The term ‘‘investment’’ in-
cludes— 
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(A) a commitment or contribution of funds 
or property; 
(B) a loan or other extension of credit; and 
(C) the entry into or renewal of a contract 
for goods or services. 
(5) STATE.—The term ‘‘State’’ means each of 
the several States, the District of Columbia, the 
Commonwealth of Puerto Rico, the Commonwealth 
of the Northern Mariana Islands, American Samoa, 
Guam, the United States Virgin Islands, and any 
other territory or possession of the United States. 
(6) STATE OR LOCAL GOVERNMENT.—The term 
‘‘State or local government’’ includes— 
(A) any State and any agency or instru-
mentality thereof; 
(B) any local government within a State, 
and any agency or instrumentality thereof; and 
(C) any other governmental instrumen-
tality of a State or locality. 
SEC. 3. SAFE HARBOR FOR CHANGES OF INVESTMENT 
POLICIES BY ASSET MANAGERS. 
Section 13(c)(1) of the Investment Company Act of 
1940 (15 U.S.C. 80a–13(c)(1)) is amended— 
(1) in subparagraph (A), by striking ‘‘; or’’ and 
inserting a semicolon; 
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(2) in subparagraph (B), by striking the period 
at the end and inserting ‘‘; or’’; and 
(3) by adding at the end the following: 
‘‘(C) engage in boycott, divestment, or 
sanctions activity targeting Israel described in 
section 2 of the Combating BDS Act of 2016.’’. 
Æ 
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