Stop Subsidizing Multimillion Dollar Corporate Bonuses Act
- Bill Number
- H.R. 3140
- Origin Chamber
- House
- Congress
- 119th Congress, Session 1
- Policy Area
- Taxation
- Status
- Introduced
- Latest Action
- 2025-05-01: Referred to the House Committee on Ways and Means.
- Last Updated
- 2026-05-14T08:08:47Z
AI-Generated Summary
Purpose of the Legislation
The "Stop Subsidizing Multimillion Dollar Corporate Bonuses Act" (H.R. 3140) aims to limit tax deductions for high levels of compensation paid by certain corporations. It expands existing rules in the Internal Revenue Code to prevent companies from reducing their taxable income through excessive pay packages, particularly for top executives and service providers, thereby increasing federal tax revenue.
Key Provisions
- Expansion of Non-Deductible Compensation: Amends Section 162(m) of the Internal Revenue Code to deny tax deductions for compensation exceeding $1 million paid to "covered individuals." This replaces prior limits focused only on employees with broader coverage for any "individual" providing services.
- Definition of Covered Individual: Includes:
- Anyone performing services (directly or indirectly) for the company or its predecessors in taxable years starting after December 31, 2020.
- Former employees who were the principal executive officer (e.g., CEO), principal financial officer (e.g., CFO), or among the three highest-paid officers in years from 2017 to 2020, based on compensation reported to shareholders under securities laws.
- Broader Definition of Affected Companies: Expands "publicly held corporation" to include any company required to file reports with the Securities and Exchange Commission (SEC) under Section 15(d) at any point in the three taxable years ending with the current year, even if it no longer issues publicly traded securities.
- Regulatory Authority: Grants the Secretary of the Treasury (through the IRS) power to issue rules for implementation, including requirements for reporting compensation and measures to block attempts to avoid the rules (e.g., routing pay through pass-through entities like partnerships).
- Effective Date: Applies to taxable years beginning after December 31, 2024.
Significant Changes to Existing Law
- From Employees to Individuals: Shifts focus from "covered employees" to "covered individuals," capturing non-employees such as independent contractors or consultants who receive high compensation.
- Retroactive Inclusion of Former Executives: Brings in past high earners from 2017–2020, ensuring long-term executives remain subject to the deduction limit even after leaving the company.
- Wider Company Scope: Previously limited to companies with publicly traded securities; now includes those that filed SEC reports in recent years but may no longer be publicly traded, closing loopholes for companies going private.
- Enhanced IRS Oversight: Adds explicit authority for regulations to prevent evasion, removing a prior conforming clause and streamlining enforcement.
Potential Impacts
- On Government Agencies: The IRS gains tools for better enforcement and reporting, potentially increasing federal tax collections by billions from disallowed deductions, which could fund public programs without raising tax rates.
- On Citizens: High-income individuals (e.g., executives) may face indirect effects through companies adjusting pay structures to minimize tax hits, possibly shifting more compensation to non-deductible forms like stock options. Everyday taxpayers could benefit from higher corporate taxes reducing the federal deficit.
- On International Relations: Minimal direct impact, though multinational corporations might restructure global pay to comply, potentially affecting U.S. competitiveness in attracting executive talent compared to countries with more lenient tax rules on compensation.
Main Stakeholders Affected
- Corporations: Primarily publicly held or recently reporting companies, facing higher taxable income due to lost deductions on multimillion-dollar pay packages.
- Executives and Service Providers: CEOs, CFOs, top officers, and high-paid contractors or consultants, whose compensation over $1 million becomes non-deductible for the employer, possibly influencing negotiation of bonuses or perks.
- Federal Government (IRS and Treasury): Responsible for enforcement, reporting rules, and collecting additional revenue.
- Shareholders and Investors: Indirectly affected as companies may alter compensation to optimize taxes, impacting stock performance or governance.
Notable Legal, Constitutional, or Political Implications
- Legal: Strengthens tax code enforcement by broadening definitions and anti-avoidance measures, but could lead to litigation over what constitutes "services" or indirect payments. Aligns with SEC reporting requirements without needing new securities laws.
- Constitutional: No apparent challenges; it modifies tax deductions (a congressional power under Article I) without infringing on free speech or due process, as it targets corporate tax benefits rather than individual rights.
- Political: Represents a progressive push to curb executive excess and corporate tax perks, potentially sparking debate on income inequality and corporate accountability. As introduced by Democratic lawmakers and referred to the House Ways and Means Committee, it may face partisan opposition in a divided Congress, influencing broader tax reform discussions.
This summary was generated by AI and may contain inaccuracies. Refer to the official source document for the authoritative text.
Sponsor
Cosponsors (22)
Rep. Casar, Greg [D-TX-35], Rep. Chu, Judy [D-CA-28], Rep. Cohen, Steve [D-TN-9], Rep. DeLauro, Rosa L. [D-CT-3], Rep. Deluzio, Christopher R. [D-PA-17], Rep. Espaillat, Adriano [D-NY-13], Rep. Garamendi, John [D-CA-8], Rep. García, Jesús G. "Chuy" [D-IL-4], Rep. Johnson, Henry C. "Hank" [D-GA-4], Rep. Lee, Summer L. [D-PA-12], Rep. Magaziner, Seth [D-RI-2], Rep. Moore, Gwen [D-WI-4], Del. Norton, Eleanor Holmes [D-DC-At Large], Rep. Raskin, Jamie [D-MD-8], Rep. Salinas, Andrea [D-OR-6], Rep. Schakowsky, Janice D. [D-IL-9], Rep. Stansbury, Melanie A. [D-NM-1], Rep. Takano, Mark [D-CA-39], Rep. Tlaib, Rashida [D-MI-12], Rep. Tokuda, Jill N. [D-HI-2], Rep. Watson Coleman, Bonnie [D-NJ-12], Rep. Grijalva, Adelita S. [D-AZ-7]
Recent Actions
- 2025-05-01: Referred to the House Committee on Ways and Means.
- 2025-05-01: Introduced in House
- 2025-05-01: Introduced in House
Bill Versions
- Stop Subsidizing Multimillion Dollar Corporate Bonuses Act — issued 2025-05-01 — PDF (5 pages)