II 115th CONGRESS 1st Session S. 1843 IN THE SENATE OF THE UNITED STATES September 19, 2017 Mrs. Gillibrand (for herself and Mr. Durbin ) introduced the following bill; which was read twice and referred to the Committee on Finance A BILL To amend the Internal Revenue Code of 1986 to deny a deduction for excessive compensation of any employee of an employer, and for other purposes.

1. Short title This Act may be cited as the Stop CEO Excessive Pay Act . 2. Denial of deduction for payments of excessive compensation (a) In general Section 162 of the Internal Revenue Code of 1986 is amended by inserting after subsection (h) the following new subsections: (i) Excessive compensation (1) In general No deduction shall be allowed under this chapter for any excessive compensation for any employee of the taxpayer. (2) Excessive compensation For purposes of this subsection, the term excessive compensation means, with respect to any employee, the amount by which the compensation for services performed by such employee during the taxable year exceeds the lesser of— (A) the median of the compensation paid for services performed by all employees of the taxpayer during the taxable year, multiplied by 25, or (B) $1,000,000. (3) Other definitions and special rules For purposes of this subsection— (A) Compensation The term compensation includes wages, salary, fees, commissions, fringe benefits, deferred compensation, retirement contributions, options, bonuses, property, and any other form of remuneration that the Secretary determines is appropriate. (B) Employer All persons treated as a single employer under subsection (a) or (b) of section 52 or subsection (m) or (o) of section 414 shall be treated as a single taxpayer for purposes of this subsection. (C) Employee The term employee includes full-time, part-time, and seasonal employees. (4) Reporting Each employer which provides any excessive compensation to any employee during a taxable year shall file a report with the Secretary with respect to such taxable year including— (A) the amount of compensation of the employee of the taxpayer receiving the lowest amount of compensation during such taxable year, (B) the amount of compensation of the employee of the taxpayer receiving the highest amount of compensation during such taxable year, (C) the median compensation of all employees of the taxpayer during such taxable year, (D) the number of employees of the taxpayer who are receiving excessive compensation during such taxable year, and (E) the amount of compensation of each employee described in subparagraph (D) during such taxable year. Such report shall be filed at such time and in such manner as the Secretary may require. (j) Fines relating to executive compensation No deduction shall be allowed under this chapter for any fine paid to the Securities and Exchange Commission under section 16(h)(4) of the Securities Exchange Act of 1934. . (b) Effective date The amendment made by this section shall apply to taxable years beginning after the date of the enactment of this Act. 3. Amendment to the Securities Exchange Act of 1934 (a) In general Section 16 of the Securities Exchange Act of 1934 ( 15 U.S.C. 78p ) is amended by adding at the end the following: (h) Shareholder approval of executive compensation (1) Calculation of compensation For purposes of this subsection, the term compensation includes wages, salary, fees, commissions, fringe benefits, deferred compensation, retirement contributions, options, bonuses, property, and any other form of remuneration that the Commission, in consultation with the Secretary of the Treasury, determines is appropriate. (2) Limitation (A) In general Except as provided in subparagraph (B), the compensation paid to an employee of an issuer in any taxable year may not exceed the lesser of— (i) $1,000,000; or (ii) an amount that is 25 times the median amount of compensation paid to all employees of that issuer during that taxable year. (B) Exception An issuer may pay compensation described in subparagraph (A) to an employee of the issuer if, not more than 18 months before the last day of the taxable year in which the compensation is paid, not less than 50 percent of the shareholders of the issuer vote to approve the compensation through a proxy or consent or authorization for an annual or other meeting of the shareholders. (3) Proxy contents Proxy materials for a shareholder vote described in paragraph (2)(B) shall include, with respect to the most recent taxable year ending before the date on which the vote takes place— (A) the amount of compensation paid to the lowest paid employee of the issuer; (B) the amount of compensation paid to the highest paid employee of the issuer; (C) the median amount of compensation paid to all employees of the issuer; (D) the number of employees of the issuer who are paid compensation in an amount that is more than 25 times the amount described in subparagraph (C); and (E) the total amount of compensation paid to the employees described in subparagraph (D). (4) Money penalty (A) In general The Commission may impose a civil penalty against an issuer if— (i) the issuer, in a taxable year, pays compensation to an employee of the issuer in an amount that exceeds the lesser of— (I) $1,000,000; or (II) 25 times the median amount of compensation paid to all employees of that issuer during that taxable year; and (ii) (I) the issuer does not conduct a vote described in paragraph (2)(B) with respect to the compensation described in clause (i); or (II) less than 50 percent of the shareholders of the issuer vote to approve the compensation described in clause (i), in contravention of the requirement under paragraph (2)(B). (B) Amount of penalty The amount of the penalty imposed under subparagraph (A) shall be equal to the excess of— (i) the compensation described in subparagraph (A)(i); over (ii) the lesser of— (I) $1,000,000; or (II) the amount that is 25 times the median amount of compensation paid to all employees of the issuer during the taxable year in which that compensation is paid to that employee. . (b) Deadline for rulemaking Not later than 1 year after the date of enactment of this Act, the Securities and Exchange Commission shall issue any final rules and regulations required to carry out section 16(h) of the Securities Exchange Act of 1934, as added by subsection (a).