S. 3270 - 2020 ESOP Fairness Act

116TH CONGRESS
2D SESSION

S. 3270

To amend the Internal Revenue Code of 1986 to allow
certain qualified over-the-counter securities to be treated
as readily traded on an established securities market for the purpose
of diversification requirements for employee stock ownership plans.

IN THE SENATE OF THE UNITED STATES

FEBRUARY 11, 2020

Mr. TILLIS (for himself and Mr. PETERS) 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 allow certain qualified over-the-counter securities to be treated as readily traded on an established securities market for the purpose of diversification requirements for employee stock ownership plans.

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 "2020 ESOP Fairness Act".

SEC. 2. CERTAIN SECURITIES TREATED AS PUBLICLY TRADED.

(a) IN GENERAL. — Paragraph (35) of section 401(a) of the Internal Revenue Code of 1986 is amended by adding at the end the following new subparagraph:

"(I) RULES RELATING TO PUBLICLY TRADED SECURITIES. — For purposes of this paragraph —

"(i) IN GENERAL. — The term 'publicly traded employer securities' means employer securities which are readily tradable on an established securities market.

"(ii) SPECIAL RULE. — A security shall be treated as described in clause (i) if the security —

"(I) is the subject of priced quotations by at least 2 dealers, published and made continuously available on an interdealer quotation system (as such term is used in section 13 of the Securities Exchange Act of 1934) which has made the request described in section 6(j) of such Act to be treated as an alternative trading system,

"(II) is not a penny stock (as defined by section 3(a)(51) of such Act),

"(III) is issued by a company which is not a shell company (as such term is used in section 4(d)(6) of the Securities Act of 1933) or a blank check company (as defined in section 7(b)(3) of such Act), and is not subject to bankruptcy proceedings,

"(IV) in the case of a security issued by a company incorporated in the United States, the issuer publishes, not less frequently than annually, financial statements audited by an independent auditor registered with the Public Company Accounting Oversight Board established under the Sarbanes-Oxley Act of 2002, and

"(V) in the case of a security issued by a company incorporated outside of the United States, the issuer —

"(aa) is subject to the reporting requirements of sections 13 or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)),

"(bb) is subject to the reporting requirements of section 230.257 of title 17, Code of Federal Regulations, or

"(cc) is exempt from such requirements under section 240.12g3–2(b) of title 17, Code of Federal Regulations, and has published all information which is required by such Act or Rule, as applicable, to be publicly available.".

(b) CONFORMING AMENDMENT. — Subparagraph (G) of section 401(a)(35) of the Internal Revenue Code of 1986 is amended by striking clause (v) and by redesignating clause (vi) as clause (v).

(c) EFFECTIVE DATE. — The amendments made by this section shall apply to plan years beginning after the date of the enactment of this Act.