Washington

House members voted 328-93 Thursday to impose a 90% tax on bonuses paid to employees with family incomes above $250,000 at companies that have received at least $5 billion in government bailout money.

The House action was on a bill approved Wednesday by the House Ways and Means Committee.

The bill, H.R. 1586, was introduced by Ways and Means Chairman Charles Rangel, D-N.Y., in response to public and congressional anger over $165 million in bonuses paid last week to executives of American International Group Inc., New York.

In explaining how Ways and Means arrived at the 90% tax rate, Rangel said, ”We figured that the local and state governments would take care of the other 10%.”

The people have said, ‘No,’” Rep. Earl Pomeroy, D-N.D., shouted on the House floor. “In fact, they said, ‘Hell no, and give us our money back.’”

Pomeroy is a former North Dakota insurance commissioner.

H.R. 1596 would apply to bonuses paid since Jan. 1 by AIG or any other company that has accepted more than $5 billion in bailout money. The bill excludes commission payments, expense reimbursements and fringe benefits from the definition of “bonus.”

An employee affected by the bill could avoid the 90% tax by agreeing to waive the right to the bonus.

AIG paid the bonuses that sparked the fury to executives and former executives of its AIG Financial Products Corp. unit.

Problems with the credit default swaps and other arrangements the unit sold forced AIG to seek a federal bailout in September 2008.

AIG Chairman Edward Liddy testified Wednesday before a congressional hearing that some recipients of the payments already had returned the money, and that he was asking others to do so.

New York Attorney General Andrew Cuomo said this afternoon that he will take AIG to court if the company fails to comply by the end of the day with a subpoena seeking a list of the bonus recipients.

An AIG representative says the insurer will “respond appropriately” to Cuomo’s subpoena.

Links to the text of the bill and other information about it are available here.

The following is the text of the bill posted on the Library of Congress legislative Web site:

HR 1586 IH

111th CONGRESS

1st Session

H. R. 1586

To impose an additional tax on bonuses received from certain TARP recipients.

IN THE HOUSE OF REPRESENTATIVES

March 18, 2009

Mr. RANGEL (for himself, Mr. ISRAEL, Mr. PETERS, Mrs. MALONEY, Mr. STARK, Mr. LEVIN, Mr. LEWIS of Georgia, Mr. TANNER, Mr. POMEROY, Mr. THOMPSON of California, Mr. LARSON of Connecticut, Mr. BLUMENAUER, Mr. PASCRELL, Ms. BERKLEY, Mr. VAN HOLLEN, Mr. MEEK of Florida, Mr. DAVIS of Alabama, Mr. DAVIS of Illinois, Mr. ETHERIDGE, Ms. LINDA T. SANCHEZ of California, Mr. HIGGINS, Mr. YARMUTH, Mr. DINGELL, Mr. CONNOLLY of Virginia, Ms. FUDGE, Mr. LUJAN, Mr. MAFFEI, Mr. PERRIELLO, Mr. CARNEY, Ms. CASTOR of Florida, Ms. CLARKE, Mr. COHEN, Mr. ELLISON, Mr. HALL of New York, Mr. HARE, Mr. KLEIN of Florida, Mr. LOEBSACK, Ms. SCHAKOWSKY, Mr. SIRES, Mr. WELCH, Mr. WILSON of Ohio, Mr. WU, and Mr. HILL) introduced the following bill; which was referred to the Committee on Ways and Means

A BILL

To impose an additional tax on bonuses received from certain TARP recipients.

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

SECTION 1. BONUSES RECEIVED FROM CERTAIN TARP RECIPIENTS.

(a) In General- In the case of an employee or former employee of a covered TARP recipient, the tax imposed by chapter 1 of the Internal Revenue Code of 1986 for any taxable year shall not be less than the sum of–

(1) the tax that would be determined under such chapter if the taxable income of the taxpayer for such taxable year were reduced (but not below zero) by the TARP bonus received by the taxpayer during such taxable year, plus

(2) 90 percent of the TARP bonus received by the taxpayer during such taxable year.

(b) TARP Bonus- For purposes of this section–

(1) IN GENERAL- The term `TARP bonus’ means, with respect to any individual for any taxable year, the lesser of–

(A) the aggregate disqualified bonus payments received from covered TARP recipients during such taxable year, or

(B) the excess of–

(i) the adjusted gross income of the taxpayer for such taxable year, over

(ii) $250,000 ($125,000 in the case of a married individual filing a separate return).

(2) DISQUALIFIED BONUS PAYMENT-

(A) IN GENERAL- The term `disqualified bonus payment’ means any retention payment, incentive payment, or other bonus which is in addition to any amount payable to such individual for service performed by such individual at a regular hourly, daily, weekly, monthly, or similar periodic rate.

(B) EXCEPTIONS- Such term shall not include commissions, welfare or fringe benefits, or expense reimbursements.

(C) WAIVER OR RETURN OF PAYMENTS- Such term shall not include any amount if the employee irrevocably waives the employee’s entitlement to such payment, or the employee returns such payment to the employer, before the close of the taxable year in which such payment is due. The preceding sentence shall not apply if the employee receives any benefit from the employer in connection with the waiver or return of such payment.

(3) REIMBURSEMENT OF TAX TREATED AS TARP BONUS- Any reimbursement by a covered TARP recipient of the tax imposed under subsection (a) shall be treated as a disqualified bonus payment to the taxpayer liable for such tax.

(c) Covered TARP Recipient- For purposes of this section–

(1) IN GENERAL- The term `covered TARP recipient’ means–

(A) any person who receives after December 31, 2007, capital infusions under the Emergency Economic Stabilization Act of 2008 which, in the aggregate, exceed $5,000,000,000,

(B) the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation,

(C) any person who is a member of the same affiliated group (as defined in section 1504 of the Internal Revenue Code of 1986, determined without regard to paragraphs (2) and (3) of subsection (b)) as a person described in subparagraph (A) or (B), and

(D) any partnership if more than 50 percent of the capital or profits interests of such partnership are owned directly or indirectly by one or more persons described in subparagraph (A), (B), or (C).

(2) EXCEPTION FOR TARP RECIPIENTS WHO REPAY ASSISTANCE- A person shall be treated as described in paragraph (1)(A) for any period only if–

(A) the excess of the aggregate amount of capital infusions described in paragraph (1)(A) with respect to such person over the amounts repaid by such person to the Federal Government with respect to such capital infusions, exceeds

(B) $5,000,000,000.

(d) Other Definitions- Terms used in this section which are also used in the Internal Revenue Code of 1986 shall have the same meaning when used in this section as when used in such Code.

(e) Coordination With Internal Revenue Code of 1986- Any increase in the tax imposed under chapter 1 of the Internal Revenue Code of 1986 by reason of subsection (a) shall not be treated as a tax imposed by such chapter for purposes of determining the amount of any credit under such chapter or for purposes of section 55 of such Code.

(f) Regulations- The Secretary of the Treasury, or the Secretary’s delegate, shall prescribe such regulations or other guidance as may be necessary or appropriate to carry out the purposes of this section.

(g) Effective Date- This section shall apply to disqualified bonus payments received after December 31, 2008, in taxable years ending after such date.