251 
† HR 1 EAS 
(E), (F), and (G) as subparagraphs (B), (C), (D), 
and (E), respectively. 
(2) CONFORMING AMENDMENTS.— 
(A) Paragraphs (5)(E) and (6)(D) of sec-
tion 162(m) are each amended by striking ‘‘sub-
paragraphs (B), (C), and (D)’’ and inserting 
‘‘subparagraph (B)’’. 
(B) Paragraphs (5)(G) and (6)(G) of sec-
tion 162(m) are each amended by striking ‘‘(F) 
and (G)’’ and inserting ‘‘(D) and (E)’’. 
(b) MODIFICATION OF DEFINITION OF COVERED EM-
PLOYEES.—Paragraph (3) of section 162(m) is amended— 
(1) in subparagraph (A), by striking ‘‘as of the 
close of the taxable year, such employee is the chief ex-
ecutive officer of the taxpayer or is’’ and inserting 
‘‘such employee is the principal executive officer or 
principal financial officer of the taxpayer at any 
time during the taxable year, or was’’, 
(2) in subparagraph (B)— 
(A) by striking ‘‘4’’ and inserting ‘‘3’’, and 
(B) by striking ‘‘(other than the chief execu-
tive officer)’’ and inserting ‘‘(other than any in-
dividual described in subparagraph (A))’’, and 
(3) by striking ‘‘or’’ at the end of subparagraph 
(A), by striking the period at the end of subparagraph
252 
† HR 1 EAS 
(B) and inserting ‘‘, or’’, and by adding at the end 
the following: 
‘‘(C) was a covered employee of the taxpayer 
(or any predecessor) for any preceding taxable 
year beginning after December 31, 2016.’’. 
(c) EXPANSION OF APPLICABLE EMPLOYER.— 
(1) IN GENERAL.—Section 162(m)(2) is amended 
to read as follows: 
‘‘(2) PUBLICLY HELD CORPORATION.—For pur-
poses of this subsection, the term ‘publicly held cor-
poration’ means any corporation which is an issuer 
(as defined in section 3 of the Securities Exchange 
Act of 1934 (15 U.S.C. 78c))— 
‘‘(A) the securities of which are required to 
be registered under section 12 of such Act (15 
U.S.C. 78l), or 
‘‘(B) that is required to file reports under 
section 15(d) of such Act (15 U.S.C. 78o(d)).’’. 
(2) 
CONFORMING
AMENDMENT.—Section 
162(m)(3), as amended by subsection (b), is amended 
by adding at the end the following flush sentence: 
‘‘Such term shall include any employee who would be 
described in subparagraph (B) if the reporting de-
scribed in such subparagraph were required as so de-
scribed.’’.
253 
† HR 1 EAS 
(d) SPECIAL RULE
FOR REMUNERATION PAID
TO 
BENEFICIARIES, ETC.—Paragraph (4) of section 162(m), as 
amended by subsection (a), is amended by adding at the 
end the following new subparagraph: 
‘‘(F) SPECIAL
RULE
FOR
REMUNERATION 
PAID
TO
BENEFICIARIES, ETC.—Remuneration 
shall not fail to be applicable employee remu-
neration merely because it is includible in the 
income of, or paid to, a person other than the 
covered employee, including after the death of the 
covered employee.’’. 
(e) EFFECTIVE DATE.— 
(1) IN GENERAL.—Except as provided in para-
graph (2), the amendments made by this section shall 
apply to taxable years beginning after December 31, 
2017. 
(2) EXCEPTION FOR BINDING CONTRACTS.—The 
amendments made by this section shall not apply to 
remuneration which is pursuant to a written binding 
contract which was in effect on November 2, 2017, 
and which was not modified in any material respect 
on or after such date.
254 
† HR 1 EAS 
SEC. 13602. EXCISE TAX ON EXCESS TAX-EXEMPT ORGANI-
ZATION EXECUTIVE COMPENSATION. 
(a) IN GENERAL.—Subchapter D of chapter 42 is 
amended by adding at the end the following new section: 
‘‘SEC. 4960. TAX ON EXCESS TAX-EXEMPT ORGANIZATION 
EXECUTIVE COMPENSATION. 
‘‘(a) TAX IMPOSED.—There is hereby imposed a tax 
equal to 20 percent of the sum of— 
‘‘(1) so much of the remuneration paid (other 
than any excess parachute payment) by an applicable 
tax-exempt organization for the taxable year with re-
spect to employment of any covered employee in ex-
cess of $1,000,000, plus 
‘‘(2) any excess parachute payment paid by such 
an organization to any covered employee. 
For purposes of the preceding sentence, remuneration shall 
be treated as paid when there is no substantial risk of for-
feiture of the rights to such remuneration. 
‘‘(b) LIABILITY FOR TAX.—The employer shall be liable 
for the tax imposed under subsection (a). 
‘‘(c) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section— 
‘‘(1) APPLICABLE TAX-EXEMPT ORGANIZATION.— 
The term ‘applicable tax-exempt organization’ means 
any organization which for the taxable year—
255 
† HR 1 EAS 
‘‘(A) is exempt from taxation under section 
501(a), 
‘‘(B) is a farmers’ cooperative organization 
described in section 521(b)(1), 
‘‘(C) has income excluded from taxation 
under section 115(1), or 
‘‘(D) is a political organization described in 
section 527(e)(1). 
‘‘(2) COVERED EMPLOYEE.—For purposes of this 
section, the term ‘covered employee’ means any em-
ployee (including any former employee) of an appli-
cable tax-exempt organization if the employee— 
‘‘(A) is one of the 5 highest compensated 
employees of the organization for the taxable 
year, or 
‘‘(B) was a covered employee of the organi-
zation (or any predecessor) for any preceding 
taxable year beginning after December 31, 2016. 
‘‘(3) REMUNERATION.—For purposes of this sec-
tion, the term ‘remuneration’ means wages (as de-
fined in section 3401(a)), except that such term shall 
not include any designated Roth contribution (as de-
fined in section 402A(c)) and shall include amounts 
required to be included in gross income under section 
457(f).
256 
† HR 1 EAS 
‘‘(4) REMUNERATION FROM RELATED ORGANIZA-
TIONS.— 
‘‘(A) IN GENERAL.—Remuneration of a cov-
ered employee by an applicable tax-exempt orga-
nization shall include any remuneration paid 
with respect to employment of such employee by 
any related person or governmental entity. 
‘‘(B) RELATED ORGANIZATIONS.—A person 
or governmental entity shall be treated as related 
to an applicable tax-exempt organization if such 
person or governmental entity— 
‘‘(i) controls, or is controlled by, the 
organization, 
‘‘(ii) is controlled by one or more per-
sons which control the organization, 
‘‘(iii) is a supported organization (as 
defined in section 509(f)(3)) during the tax-
able year with respect to the organization, 
‘‘(iv) is a supporting organization de-
scribed in section 509(a)(3) during the tax-
able year with respect to the organization, 
or 
‘‘(v) in the case of an organization 
which is a voluntary employees’ beneficiary 
association described in section 501(c)(9),
257 
† HR 1 EAS 
establishes, maintains, or makes contribu-
tions to such voluntary employees’ bene-
ficiary association. 
‘‘(C) LIABILITY FOR TAX.—In any case in 
which remuneration from more than one em-
ployer is taken into account under this para-
graph in determining the tax imposed by sub-
section (a), each such employer shall be liable for 
such tax in an amount which bears the same 
ratio to the total tax determined under sub-
section (a) with respect to such remuneration 
as— 
‘‘(i) the amount of remuneration paid 
by such employer with respect to such em-
ployee, bears to 
‘‘(ii) the amount of remuneration paid 
by all such employers to such employee. 
‘‘(5) EXCESS PARACHUTE PAYMENT.—For pur-
poses of determining the tax imposed by subsection 
(a)(2)— 
‘‘(A) IN GENERAL.—The term ‘excess para-
chute payment’ means an amount equal to the 
excess of any parachute payment over the por-
tion of the base amount allocated to such pay-
ment.
258 
† HR 1 EAS 
‘‘(B) PARACHUTE
PAYMENT.—The term 
‘parachute payment’ means any payment in the 
nature of compensation to (or for the benefit of) 
a covered employee if— 
‘‘(i) such payment is contingent on 
such employee’s separation from employ-
ment with the employer, and 
‘‘(ii) the aggregate present value of the 
payments in the nature of compensation to 
(or for the benefit of) such individual which 
are contingent on such separation equals or 
exceeds an amount equal to 3 times the base 
amount. 
Such term does not include any payment de-
scribed in section 280G(b)(6) (relating to exemp-
tion for payments under qualified plans) or any 
payment made under or to an annuity contract 
described in section 403(b) or a plan described 
in section 457(b). 
‘‘(C) BASE AMOUNT.—Rules similar to the 
rules of 280G(b)(3) shall apply for purposes of 
determining the base amount. 
‘‘(D) 
PROPERTY
TRANSFERS; 
PRESENT 
VALUE.—Rules similar to the rules of para-
259 
† HR 1 EAS 
graphs (3) and (4) of section 280G(d) shall 
apply. 
‘‘(6) COORDINATION WITH DEDUCTION LIMITA-
TION.—Remuneration the deduction for which is not 
allowed by reason of section 162(m) shall not be taken 
into account for purposes of this section. 
‘‘(d) REGULATIONS.—The Secretary shall prescribe 
such regulations as may be necessary to prevent avoidance 
of the tax under this section, including regulations pre-
venting employees from being misclassified as contractors 
or from being compensated through a pass-through or other 
entity to avoid such tax.’’. 
(b) CLERICAL AMENDMENT.—The table of sections for 
subchapter D of chapter 42 is amended by adding at the 
end the following new item: 
‘‘Sec. 4960. Tax on excess tax-exempt organization executive compensation.’’. 
(c) EFFECTIVE DATE.—The amendments made by this 
section shall apply to taxable years beginning after Decem-
ber 31, 2017. 
SEC. 13603. TREATMENT OF QUALIFIED EQUITY GRANTS. 
(a) IN GENERAL.—Section 83 is amended by adding 
at the end the following new subsection: 
‘‘(i) QUALIFIED EQUITY GRANTS.— 
‘‘(1) IN GENERAL.—For purposes of this sub-
title—
260 
† HR 1 EAS 
‘‘(A) TIMING OF INCLUSION.—If qualified 
stock is transferred to a qualified employee who 
makes an election with respect to such stock 
under this subsection, subsection (a) shall be ap-
plied by including the amount determined under 
such subsection with respect to such stock in in-
come of the employee in the taxable year deter-
mined under subparagraph (B) in lieu of the 
taxable year described in subsection (a). 
‘‘(B) TAXABLE
YEAR
DETERMINED.—The 
taxable year determined under this subpara-
graph is the taxable year of the employee which 
includes the earliest of— 
‘‘(i) the first date such qualified stock 
becomes transferable (including, solely for 
purposes of this clause, becoming transfer-
able to the employer), 
‘‘(ii) the date the employee first be-
comes an excluded employee, 
‘‘(iii) the first date on which any stock 
of the corporation which issued the qualified 
stock becomes readily tradable on an estab-
lished securities market (as determined by 
the Secretary, but not including any market 
unless such market is recognized as an es-
261 
† HR 1 EAS 
tablished securities market by the Secretary 
for purposes of a provision of this title other 
than this subsection), 
‘‘(iv) the date that is 5 years after the 
first date the rights of the employee in such 
stock are transferable or are not subject to 
a substantial risk of forfeiture, whichever 
occurs earlier, or 
‘‘(v) the date on which the employee re-
vokes (at such time and in such manner as 
the Secretary provides) the election under 
this subsection with respect to such stock. 
‘‘(2) QUALIFIED STOCK.— 
‘‘(A) IN
GENERAL.—For purposes of this 
subsection, the term ‘qualified stock’ means, with 
respect to any qualified employee, any stock in 
a corporation which is the employer of such em-
ployee, if— 
‘‘(i) such stock is received— 
‘‘(I) in connection with the exer-
cise of an option, or 
‘‘(II) in settlement of a restricted 
stock unit, and 
‘‘(ii) such option or restricted stock 
unit was granted by the corporation—
262 
† HR 1 EAS 
‘‘(I) in connection with the per-
formance of services as an employee, 
and 
‘‘(II) during a calendar year in 
which such corporation was an eligible 
corporation. 
‘‘(B) LIMITATION.—The term ‘qualified 
stock’ shall not include any stock if the employee 
may sell such stock to, or otherwise receive cash 
in lieu of stock from, the corporation at the time 
that the rights of the employee in such stock first 
become transferable or not subject to a substan-
tial risk of forfeiture. 
‘‘(C) ELIGIBLE
CORPORATION.—For pur-
poses of subparagraph (A)(ii)(II)— 
‘‘(i) IN GENERAL.—The term ‘eligible 
corporation’ means, with respect to any cal-
endar year, any corporation if— 
‘‘(I) no stock of such corporation 
(or any predecessor of such corpora-
tion) is readily tradable on an estab-
lished securities market (as determined 
under paragraph (1)(B)(iii)) during 
any preceding calendar year, and
263 
† HR 1 EAS 
‘‘(II) such corporation has a writ-
ten plan under which, in such calendar 
year, not less than 80 percent of all 
employees who provide services to such 
corporation in the United States (or 
any possession of the United States) 
are granted stock options, or restricted 
stock units, with the same rights and 
privileges to receive qualified stock. 
‘‘(ii) SAME RIGHTS AND PRIVILEGES.— 
For purposes of clause (i)(II)— 
‘‘(I) except as provided in sub-
clauses (II) and (III), the determina-
tion of rights and privileges with re-
spect to stock shall be made in a simi-
lar manner as under section 423(b)(5), 
‘‘(II) employees shall not fail to be 
treated as having the same rights and 
privileges to receive qualified stock 
solely because the number of shares 
available to all employees is not equal 
in amount, so long as the number of 
shares available to each employee is 
more than a de minimis amount, and
264 
† HR 1 EAS 
‘‘(III) rights and privileges with 
respect to the exercise of an option 
shall not be treated as the same as 
rights and privileges with respect to 
the settlement of a restricted stock unit. 
‘‘(iii) EMPLOYEE.—For purposes of 
clause (i)(II), the term ‘employee’ shall not 
include any employee described in section 
4980E(d)(4) or any excluded employee. 
‘‘(iv) SPECIAL
RULE
FOR
CALENDAR 
YEARS BEFORE 2018.—In the case of any 
calendar year beginning before January 1, 
2018, clause (i)(II) shall be applied without 
regard to whether the rights and privileges 
with respect to the qualified stock are the 
same. 
‘‘(3) QUALIFIED
EMPLOYEE; 
EXCLUDED
EM-
PLOYEE.—For purposes of this subsection— 
‘‘(A) IN GENERAL.—The term ‘qualified em-
ployee’ means any individual who— 
‘‘(i) is not an excluded employee, and 
‘‘(ii) agrees in the election made under 
this subsection to meet such requirements as 
are determined by the Secretary to be nec-
essary to ensure that the withholding re-
265 
† HR 1 EAS 
quirements of the corporation under chapter 
24 with respect to the qualified stock are 
met. 
‘‘(B) EXCLUDED EMPLOYEE.—The term ‘ex-
cluded employee’ means, with respect to any cor-
poration, any individual— 
‘‘(i) who was a 1-percent owner (with-
in the meaning of section 416(i)(1)(B)(ii)) 
at any time during the 10 preceding cal-
endar years, 
‘‘(ii) who is or has been at any prior 
time— 
‘‘(I) the chief executive officer of 
such corporation or an individual act-
ing in such a capacity, or 
‘‘(II) the chief financial officer of 
such corporation or an individual act-
ing in such a capacity, 
‘‘(iii) who bears a relationship de-
scribed in section 318(a)(1) to any indi-
vidual described in subclause (I) or (II) of 
clause (ii), or 
‘‘(iv) who was for any of the 10 pre-
ceding taxable years one of the 4 highest 
compensated officers of such corporation, de-
266 
† HR 1 EAS 
termined with respect to each such taxable 
year on the basis of the shareholder disclo-
sure rules for compensation under the Secu-
rities Exchange Act of 1934 (as if such rules 
applied to such corporation). 
‘‘(4) ELECTION.— 
‘‘(A) TIME
FOR
MAKING
ELECTION.—An 
election with respect to qualified stock shall be 
made under this subsection no later than 30 
days after the first date the rights of the em-
ployee in such stock are transferable or are not 
subject to a substantial risk of forfeiture, which-
ever occurs earlier, and shall be made in a man-
ner similar to the manner in which an election 
is made under subsection (b). 
‘‘(B) LIMITATIONS.—No election may be 
made under this section with respect to any 
qualified stock if— 
‘‘(i) the qualified employee has made 
an election under subsection (b) with respect 
to such qualified stock, 
‘‘(ii) any stock of the corporation 
which issued the qualified stock is readily 
tradable on an established securities market 
(as 
determined 
under 
paragraph
267 
† HR 1 EAS 
(1)(B)(iii)) at any time before the election 
is made, or 
‘‘(iii) such corporation purchased any 
of its outstanding stock in the calendar year 
preceding the calendar year which includes 
the first date the rights of the employee in 
such stock are transferable or are not subject 
to a substantial risk of forfeiture, unless— 
‘‘(I) not less than 25 percent of 
the total dollar amount of the stock so 
purchased is deferral stock, and 
‘‘(II) the determination of which 
individuals from whom deferral stock 
is purchased is made on a reasonable 
basis. 
‘‘(C) DEFINITIONS AND SPECIAL RULES RE-
LATED
TO
LIMITATION
ON
STOCK
REDEMP-
TIONS.— 
‘‘(i) DEFERRAL STOCK.—For purposes 
of this paragraph, the term ‘deferral stock’ 
means stock with respect to which an elec-
tion is in effect under this subsection. 
‘‘(ii) DEFERRAL STOCK WITH RESPECT 
TO ANY INDIVIDUAL NOT TAKEN INTO AC-
COUNT
IF
INDIVIDUAL
HOLDS
DEFERRAL
268 
† HR 1 EAS 
STOCK WITH LONGER DEFERRAL PERIOD.— 
Stock purchased by a corporation from any 
individual shall not be treated as deferral 
stock for purposes of subparagraph (B)(iii) 
if such individual (immediately after such 
purchase) holds any deferral stock with re-
spect to which an election has been in effect 
under this subsection for a longer period 
than the election with respect to the stock so 
purchased. 
‘‘(iii) PURCHASE OF ALL OUTSTANDING 
DEFERRAL
STOCK.—The requirements of 
subclauses (I) and (II) of subparagraph 
(B)(iii) shall be treated as met if the stock 
so purchased includes all of the corpora-
tion’s outstanding deferral stock. 
‘‘(iv) REPORTING.—Any corporation 
which has outstanding deferral stock as of 
the beginning of any calendar year and 
which purchases any of its outstanding 
stock during such calendar year shall in-
clude on its return of tax for the taxable 
year in which, or with which, such calendar 
year ends the total dollar amount of its out-
standing stock so purchased during such
269 
† HR 1 EAS 
calendar year and such other information 
as the Secretary requires for purposes of ad-
ministering this paragraph. 
‘‘(5) CONTROLLED
GROUPS.—For purposes of 
this subsection, all persons treated as a single em-
ployer under section 414(b) shall be treated as 1 cor-
poration. 
‘‘(6) NOTICE
REQUIREMENT.—Any corporation 
which transfers qualified stock to a qualified employee 
shall, at the time that (or a reasonable period before) 
an amount attributable to such stock would (but for 
this subsection) first be includible in the gross income 
of such employee— 
‘‘(A) certify to such employee that such 
stock is qualified stock, and 
‘‘(B) notify such employee— 
‘‘(i) that the employee may be eligible 
to elect to defer income on such stock under 
this subsection, and 
‘‘(ii) that, if the employee makes such 
an election— 
‘‘(I) the amount of income recog-
nized at the end of the deferral period 
will be based on the value of the stock 
at the time at which the rights of the
270 
† HR 1 EAS 
employee in such stock first become 
transferable or not subject to substan-
tial risk of forfeiture, notwithstanding 
whether the value of the stock has de-
clined during the deferral period, 
‘‘(II) the amount of such income 
recognized at the end of the deferral pe-
riod will be subject to withholding 
under section 3401(i) at the rate deter-
mined under section 3402(t), and 
‘‘(III) the responsibilities of the 
employee (as determined by the Sec-
retary under paragraph (3)(A)(ii)) 
with respect to such withholding. 
‘‘(7) RESTRICTED
STOCK
UNITS.—This section 
(other than this subsection), including any election 
under subsection (b), shall not apply to restricted 
stock units.’’. 
(b) WITHHOLDING.— 
(1) TIME
OF
WITHHOLDING.—Section 3401 is 
amended by adding at the end the following new sub-
section: 
‘‘(i) QUALIFIED STOCK FOR WHICH AN ELECTION IS 
IN EFFECT UNDER SECTION 83(i).—For purposes of sub-
section (a), qualified stock (as defined in section 83(i)) with
271 
† HR 1 EAS 
respect to which an election is made under section 83(i) 
shall be treated as wages— 
‘‘(1) received on the earliest date described in 
section 83(i)(1)(B), and 
‘‘(2) in an amount equal to the amount included 
in income under section 83 for the taxable year which 
includes such date.’’. 
(2) AMOUNT OF WITHHOLDING.—Section 3402 is 
amended by adding at the end the following new sub-
section: 
‘‘(t) RATE OF WITHHOLDING FOR CERTAIN STOCK.— 
In the case of any qualified stock (as defined in section 
83(i)(2)) with respect to which an election is made under 
section 83(i)— 
‘‘(1) the rate of tax under subsection (a) shall 
not be less than the maximum rate of tax in effect 
under section 1, and 
‘‘(2) such stock shall be treated for purposes of 
section 3501(b) in the same manner as a non-cash 
fringe benefit.’’. 
(c) COORDINATION WITH OTHER DEFERRED COM-
PENSATION RULES.— 
(1) ELECTION TO APPLY DEFERRAL TO STATU-
TORY OPTIONS.—
272 
† HR 1 EAS 
(A) INCENTIVE
STOCK
OPTIONS.—Section 
422(b) is amended by adding at the end the fol-
lowing: ‘‘Such term shall not include any option 
if an election is made under section 83(i) with 
respect to the stock received in connection with 
the exercise of such option.’’. 
(B) EMPLOYEE STOCK PURCHASE PLANS.— 
Section 423 is amended— 
(i) by adding at the end of subsection 
(a) the following flush sentence: 
‘‘The preceding sentence shall not apply to any share of 
stock with respect to which an election is made under sec-
tion 83(i).’’, and 
(ii) in subsection (b)(5), by striking 
‘‘and’’ before ‘‘the plan’’ and by inserting ‘‘, 
and the rules of section 83(i) shall apply in 
determining which employees have a right 
to make an election under such section’’ be-
fore the semicolon at the end. 
(2) EXCLUSION
FROM
DEFINITION
OF
NON-
QUALIFIED
DEFERRED
COMPENSATION
PLAN.—Sub-
section (d) of section 409A is amended by adding at 
the end the following new paragraph: 
‘‘(7) TREATMENT OF QUALIFIED STOCK.—An ar-
rangement under which an employee may receive