Tax Excessive CEO Pay Act of 2021
Bill: S.794 | Sponsor: Sen. Sanders, Bernard (I-VT)
Policy area: Taxation

Summary:
Tax Excessive CEO Pay Act of 2021
This bill increases the current 21% income tax rate of corporations whose ratio of compensation of their principal executive  officers or other highest compensated employees to median worker compensation is more than 50 to 1, in which case the increase is 0.5%. The pay ratio disparity extends from 100 to 1 to 500 to 1, in which case the increase is 5%. The bill exempts from such increase certain corporations based upon their average annual gross receipts.

To amend the Internal Revenue Code of 1986 to impose a corporate tax 
 rate increase on companies whose ratio of compensation of the CEO or 
other highest paid employee to median worker compensation is more than 
                    50 to 1, 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 ``Tax Excessive CEO Pay Act of 2021''.

SEC. 2. CORPORATE TAX INCREASE 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 new subsection:
    ``(e) Tax Increase Based on Pay Ratio.--
            ``(1) In general.--
                    ``(A) Increase imposed.--In the case of any 
                corporation (except as provided in subparagraph 
                (B)(ii)(II)) the pay ratio of which is greater than 50 
                to 1 for a taxable year, the 21 percent rate under 
                subsection (b) for such taxable year shall be increased 
                by the penalty determined under paragraph (2).
                    ``(B) Pay ratio.--For purposes of this subsection--
                            ``(i) In general.--The term `pay ratio' 
                        means the ratio described in section 
                        229.402(u)(1)(iii) of title 17, Code of Federal 
                        Regulations (or any successor thereto), except 
                        that if the highest compensated employee of the 
                        corporation is not the principal executive 
                        officer, the ratio shall be determined based on 
                        the compensation of such highest compensated 
                        employee.
                            ``(ii) Corporations not subject to sec 
                        filing.--In the case of a corporation which 
                        (without regard to this clause) is not subject 
                        to the authorities described in section 
                        229.10(a) of title 17, Code of Federal 
                        Regulations (or any successor thereto)--
                                    ``(I) Large corporations.--If the 
                                average annual gross receipts of such 
                                corporation for the 3-taxable-year 
                                period ending with the taxable year 
                                which precedes such taxable year are at 
                                least $100,000,000, such corporation 
                                shall calculate and report its pay 
                                ratio according to the method which the 
                                Secretary shall prescribe by 
                                regulations consistent with the 
                                regulation described in clause (i).
                                    ``(II) Other private corporations 
                                exempt.--Subparagraph (A) shall not 
                                apply to any such corporation if the 
                                average annual gross receipts of such 
                                corporation for the 3-taxable-year 
                                period ending with the taxable year 
                                which precedes such taxable year are 
                                less than $100,000,000.
            ``(2) Amount of penalty.--The penalty determined under this 
        paragraph is an increase, expressed in percentage points, 
        determined in accordance with the following table:

``If the pay ratio is:                                 The increase is:
        Greater than 50 to 1, but not greater than 100 to 1        0.5 
        Greater than 100 to 1, but not greater than 200 to           1 
            1.
        Greater than 200 to 1, but not greater than 300 to           2 
            1.
        Greater than 300 to 1, but not greater than 400 to           3 
            1.
        Greater than 400 to 1, but not greater than 500 to           4 
            1.
        Greater than 500 to 1..............................       5.''.

    (b) Conforming Amendments.--
            (1) The following sections of the Internal Revenue Code of 
        1986 are each amended by inserting ``applicable to the 
        corporation (after the application of section 11(e))'' after 
        ``section 11(b)'':
                    (A) Section 280C(c)(3)(B)(ii)(II).
                    (B) Paragraphs (2)(B) and (6)(A)(ii) of section 
                860E(e).
                    (C) Section 7874(e)(1)(B).
            (2) Section 852(b)(3)(A) of such Code is amended by 
        inserting ``(after the application of section 11(e))'' after 
        ``section 11(b)''.
            (3) Paragraphs (1) and (2) of section 1445(e)(1) of such 
        Code are each amended by striking ``in effect for the taxable 
        year under section 11(b)'' and inserting ``applicable to such 
        corporation under section 11 for the taxable year''.
            (4) Section 1446(b)(2)(B) of such Code is amended by 
        striking ``specified in section 11(b)'' and inserting 
        ``applicable to such corporation under section 11 for the 
        taxable year''.
    (c) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after December 31, 2021.
    (d) Regulations.--The Secretary of the Treasury (or the Secretary's 
delegate) shall issue regulations as necessary to prevent avoidance of 
the purposes of the amendments made by subsection (a), including 
regulations to prevent the manipulation of the compensation ratio under 
section 11(e) of the Internal Revenue Code of 1986 by changes to the 
composition of the workforce (including by using the services of 
contractors rather than employees).
                                 <all>