CEO Accountability and Responsibility Act
Bill: H.R.3301 | Sponsor: Rep. DeSaulnier, Mark (D-CA)
Policy area: Taxation

Summary:
CEO Accountability and Responsibility Act
This bill increases the corporate income tax rate for publicly traded corporations that pay their chief executive officers or highest paid employees more than 100 times the median compensation of all their U.S. employees or that increase the number of contracted or foreign employees.
The bill also requires an executive agency, in the evaluation of bids or proposals for federal contracts, to give preference to a bidder that has a compensation ratio of highly paid to all employees of less than 50 to 1 in the previous calendar year.

To amend the Internal Revenue Code of 1986 to adjust the rate of income 
tax of a publicly traded corporation based on the ratio of compensation 
 of the corporation's highest paid employee to the median compensation 
      of all the corporation's employees, and for other purposes.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``CEO Accountability and 
Responsibility Act''.

SEC. 2. INCOME TAX RATE OF PUBLICLY TRADED CORPORATIONS BASED ON 
              COMPENSATION RATIO.

    (a) In General.--Section 11 of the Internal Revenue Code of 1986 is 
amended by adding at the end the following:
    ``(e) Tax Rate of Publicly Traded Corporations Based on 
Compensation Ratio.--
            ``(1) In general.--In the case of a publicly traded 
        corporation (as defined in section 162(m)(2)), in the amount of 
        tax under subsection (b) shall be determined--
                    ``(A) by adjusting the highest rate of tax 
                applicable to the taxpayer by the percentage point 
                adjustment specified in paragraph (2), and
                    ``(B) by making proper adjustments to--
                            ``(i) the dollar amount in clause (ii) of 
                        the second sentence of paragraph (1), and
                            ``(ii) the dollar amount in clause (ii) of 
                        the third sentence of paragraph (1).
            ``(2) Adjustment of tax rate.--For purposes of paragraph 
        (1), the percentage points specified in this paragraph shall be 
        determined as follows:


------------------------------------------------------------------------
                                               The percentage point
     ``If the compensation ratio is:              adjustment is:
------------------------------------------------------------------------
More than 100 but not more than 150.....          +0.5 percentage points
More than 150 but not more than 200.....            +1 percentage points
More than 200 but not more than 250.....          +1.5 percentage points
More than 250 but not more than 300.....            +2 percentage points
More than 300 but not more than 400.....          +2.5 percentage points
More than 400...........................           +3 percentage points.
------------------------------------------------------------------------

            ``(3) Definitions.--For purposes of this subsection--
                    ``(A) Compensation ratio.--The term `compensation 
                ratio' means, with respect to any taxable year, a 
                ratio--
                            ``(i) the numerator of which is the amount 
                        equal to the greater of the compensation of the 
                        chief executive officer or the highest paid 
                        employee of the taxpayer for the calendar year 
                        preceding the beginning of the taxable year, 
                        and
                            ``(ii) the denominator of which is the 
                        amount equal to the median compensation of all 
                        employees employed by the taxpayer in the 
                        United States for the calendar year preceding 
                        the beginning of the taxable year.
                    ``(B) Compensation.--
                            ``(i) Employees.--In the case of employees 
                        of the taxpayer other than the chief executive 
                        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 employee.--In 
                        the case of the chief executive officer and the 
                        highest paid employee of the taxpayer, the term 
                        `compensation' means total compensation for the 
                        calendar year, as reported in the Summary 
                        Compensation Table reported to the Securities 
                        and Exchange Commission pursuant to Item 402 of 
                        Regulation S-K of the Securities and Exchange 
                        Commission.
            ``(4) Special rule if contracted or foreign employee ratio 
        increases.--
                    ``(A) In general.--If--
                            ``(i) the total number of full-time 
                        employees, 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 compared to the 
                        total number of full-time employees, determined 
                        on an annual full-time equivalent basis, 
                        employed by the taxpayer in the United States 
                        for the preceding taxable year, and
                            ``(ii) the total number of contracted 
                        employees or foreign full-time employees, 
                        determined on an annual full-time equivalent 
                        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 business 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 equivalent.--The 
                        term `annual full-time equivalent' means--
                                    ``(I) in the case of a full-time 
                                employee paid hourly qualified wages, 
                                the total number of hours worked for 
                                the taxpayer by the employee, not to 
                                exceed 2,000 hours per employee, 
                                divided 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 employee.--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 employment, the salary and bonuses (if any) 
                        to be paid, and the benefits that accrue to 
                        that individual.
                            ``(iii) Foreign full-time employee.--The 
                        term `foreign full-time employee' means a full-
                        time employee of the taxpayer that is employed 
                        at a location other than the United States.
                            ``(iv) Full-time employee.--The term `full-
                        time employee' means an employee 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 employer under subsection (b), 
        (c), (m) or (o) of section 414 shall be treated as one person.
            ``(6) Reports.--The taxpayer shall furnish such reports to 
        the Secretary with respect to compensation 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 prescribe such 
        regulations and other guidance as may be necessary or 
        appropriate to carry out this subsection, including any 
        guidelines regarding the determination of wages, average 
        compensation, and compensation 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.

SEC. 3. CONTRACTING PREFERENCE FOR ENTITIES WITH CERTAIN PAY RATIOS.

    (a) Amendment.--Chapter 47 of title 41, United States Code, is 
amended by inserting after section 4714 the following new section:
``Sec. 4715. Preference for entities with certain pay ratios
    ``(a) Preference.--In the evaluation of bids or proposals for a 
contract for the procurement of goods or services, the head of an 
executive agency shall provide a preference to an entity that for the 
previous calendar year has a compensation ratio of less than 50-to-1.
    ``(b) Compensation Ratio Defined.--In this section, the term 
`compensation ratio' has the meaning given that term in section 
11(e)(3)(A) of the Internal Revenue Code of 1986, except the ratio 
determined for the calendar year preceding the calendar year of the 
contract to which this section applies.''.
    (b) Clerical Amendment.--The table of sections at the beginning of 
such chapter is amended by inserting after the item relating to section 
4714 the following new item:

``4715. Preference for entities with certain pay ratios.''.
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