H.R. 4035

[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 4035 Introduced in House (IH)]

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119th CONGRESS
1st Session
H. R. 4035

To amend the Internal Revenue Code of 1986 to impose a tax on certain 
trading transactions.

_______________________________________________________________________

IN THE HOUSE OF REPRESENTATIVES

June 17, 2025

Ms. Hoyle of Oregon (for herself, Mr. Smith of Washington, Ms. Jayapal, 
Mr. McGovern, Ms. Pingree, Ms. Schakowsky, Ms. Tlaib, and Mrs. Watson 
Coleman) introduced the following bill; which was referred to the 
Committee on Ways and Means

_______________________________________________________________________

A BILL

To amend the Internal Revenue Code of 1986 to impose a tax on certain 
trading transactions.

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 ``Wall Street Tax Act of 2025''.

SEC. 2. TRANSACTION TAX.

(a) In General.--Chapter 36 of the Internal Revenue Code of 1986 is 
amended by inserting after subchapter B the following new subchapter:

``Subchapter C--Tax on Trading Transactions

``Sec. 4475. Tax on trading transactions.
``Sec. 4476. Derivative defined.

``SEC. 4475. TAX ON TRADING TRANSACTIONS.

``(a) Imposition of Tax.--There is hereby imposed a tax on each 
covered transaction with respect to any security.
``(b) Rate of Tax.--
``(1) In general.--The tax imposed under subsection (a) 
with respect to any covered transaction shall be the applicable 
percentage of the specified base amount with respect to such 
covered transaction.
``(2) Applicable percentage.--For purposes of this 
subsection, the applicable percentage shall be--
``(A) in the case of a covered transaction after 
December 31, 2025, and before January 1, 2027, 0.02 
percent,
``(B) in the case of a covered transaction after 
December 31, 2026, and before January 1, 2028, 0.04 
percent,
``(C) in the case of a covered transaction after 
December 31, 2027, and before January 1, 2029, 0.06 
percent,
``(D) in the case of a covered transaction after 
December 31, 2028, and before January 1, 2030, 0.08 
percent, and
``(E) in the case of a covered transaction after 
December 31, 2029, 0.1 percent.
``(c) Specified Base Amount.--For purposes of this section, the 
term `specified base amount' means--
``(1) except as provided in paragraph (2), the fair market 
value of a security (determined as of the time of the covered 
transaction), and
``(2) in the case of any payment with respect to a 
derivative, the amount of such payment.
``(d) Covered Transaction.--For purposes of this section--
``(1) In general.--The term `covered transaction' means--
``(A) except as provided in subparagraph (B), any 
purchase if--
``(i) such purchase occurs on, or is 
subject to the rules of, a qualified board or 
exchange located in the United States, or
``(ii) the purchaser or seller is a United 
States person, and
``(B) any transaction with respect to a derivative 
if--
``(i) such derivative is traded on, or is 
subject to the rules of, a qualified board or 
exchange located in the United States, or
``(ii) any party with rights under such 
derivative is a United States person.
``(2) Exception for initial issues.--No tax shall be 
imposed under subsection (a) on any covered transaction with 
respect to the initial issuance of any security described in 
subparagraph (A), (B), or (C) of subsection (e)(1).
``(e) Definitions and Special Rules.--For purposes of this 
section--
``(1) Security.--For purposes of this section, the term 
`security' means--
``(A) any share of stock in a corporation,
``(B) any partnership or beneficial ownership 
interest in a partnership or trust,
``(C) except as provided in paragraph (2), any 
note, bond, debenture, or other evidence of 
indebtedness, and
``(D) any derivative (as defined in section 4476).
``(2) Exception for certain traded short-term 
indebtedness.--A note, bond, debenture, or other evidence of 
indebtedness which--
``(A) is traded on, or is subject to the rules of, 
a qualified board or exchange located in the United 
States, and
``(B) has a fixed maturity of not more than 100 
days,
shall not be treated as described in paragraph (1)(C).
``(3) Qualified board or exchange.--The term `qualified 
board or exchange' has the meaning given such term by section 
1256(g)(7).
``(f) By Whom Paid.--
``(1) In general.--The tax imposed by this section shall be 
paid by--
``(A) in the case of a transaction which occurs on, 
or is subject to the rules of, a qualified board or 
exchange located in the United States, such qualified 
board or exchange, and
``(B) in the case of a purchase not described in 
subparagraph (A) which is executed by a broker (as 
defined in section 6045(c)(1)) which is a United States 
person, such broker.
``(2) Special rules for direct, etc., transactions.--In the 
case of any transaction to which paragraph (1) does not apply, 
the tax imposed by this section shall be paid by--
``(A) in the case of a transaction described in 
subsection (d)(1)(A)--
``(i) the purchaser if the purchaser is a 
United States person, and
``(ii) the seller if the purchaser is not a 
United States person, and
``(B) in the case of a transaction described in 
subsection (d)(1)(B)--
``(i) the payor if the payor is a United 
States person, and
``(ii) the payee if the payor is not a 
United States person.
``(g) Treatment of Exchanges and Payments With Respect to 
Derivatives.--For purposes of this section--
``(1) Treatment of exchanges.--
``(A) In general.--An exchange shall be treated as 
the sale of the property transferred and a purchase of 
the property received by each party to the exchange.
``(B) Certain deemed exchanges.--In the case of a 
distribution treated as an exchange for stock under 
section 302 or 331, the corporation making such 
distribution shall be treated as having purchased such 
stock for purposes of this section.
``(2) Payments with respect to derivatives treated as 
separate transactions.--Except as otherwise provided by the 
Secretary, any payment with respect to any derivative shall be 
treated as a separate transaction for purposes of this section.
``(h) Application to Transactions by Controlled Foreign 
Corporations.--
``(1) In general.--For purposes of this section, a 
controlled foreign corporation shall be treated as a United 
States person.
``(2) Special rules for payment of tax on direct, etc., 
transactions.--In the case of any transaction which is a 
covered transaction solely by reason of paragraph (1) and which 
is not described in subsection (f)(1)--
``(A) Payment by united states shareholders.--Any 
tax which would (but for this paragraph) be payable 
under subsection (f)(2) by the controlled foreign 
corporation shall, in lieu thereof, be paid by the 
United States shareholders of such controlled foreign 
corporation as provided in subparagraph (B).
``(B) Pro rata shares.--Each such United States 
shareholder shall pay the same proportion of such tax 
as--
``(i) the stock which such United States 
shareholder owns (within the meaning of section 
958(a)) in such controlled foreign corporation, 
bears to
``(ii) the stock so owned by all United 
States shareholders in such controlled foreign 
corporation.
``(C) Definitions.--For purposes of this 
subsection, the terms `United States shareholder' and 
`controlled foreign corporation' have the meanings 
given such terms in sections 951(b) and 957(a), 
respectively.
``(i) Administration.--The Secretary shall carry out this section 
in consultation with the Securities and Exchange Commission and the 
Commodity Futures Trading Commission.
``(j) Guidance; Regulations.--The Secretary shall--
``(1) provide guidance regarding such information reporting 
concerning covered transactions as the Secretary deems 
appropriate, and
``(2) prescribe such regulations as are necessary or 
appropriate to prevent avoidance of the purposes of this 
section, including the use of non-United States persons in such 
transactions.

``SEC. 4476. DERIVATIVE DEFINED.

``(a) In General.--For purposes of this subchapter, except as 
otherwise provided in this section, the term `derivative' means any 
contract (including any option, forward contract, futures contract, 
short position, swap, or similar contract) the value of which, or any 
payment or other transfer with respect to which, is (directly or 
indirectly) determined by reference to one or more of the following:
``(1) Any share of stock in a corporation.
``(2) Any partnership or beneficial ownership interest in a 
partnership or trust.
``(3) Any evidence of indebtedness.
``(4) Except as provided in subsection (b)(1), any real 
property.
``(5) Any commodity which is actively traded (within the 
meaning of section 1092(d)(1)).
``(6) Any currency.
``(7) Any rate, price, amount, index, formula, or 
algorithm.
``(8) Any other item as the Secretary may prescribe.
Except as provided in regulations prescribed by the Secretary to 
prevent the avoidance of the purposes of this subchapter, such term 
shall not include any item described in paragraphs (1) through (8).
``(b) Exceptions.--
``(1) Certain real property.--
``(A) In general.--For purposes of this subchapter, 
the term `derivative' shall not include any contract 
with respect to interests in real property (as defined 
in section 856(c)(5)(C)) if such contract requires 
physical delivery of such real property.
``(B) Options to settle in cash.--
``(i) In general.--For purposes of 
subparagraph (A), a contract which provides for 
an option of cash settlement shall not be 
treated as requiring physical delivery of real 
property unless the option is--
``(I) not exercisable 
unconditionally, and
``(II) exercisable only in unusual 
and exceptional circumstances.
``(ii) Option of cash settlement.--For 
purposes of clause (i), a contract provides an 
option of cash settlement if the contract 
settles in (or could be settled in) cash or 
property other than the underlying real 
property.
``(2) Securities lending, sale-repurchase, and similar 
financing transactions.--To the extent provided by the 
Secretary, for purposes of this subchapter, the term 
`derivative' shall not include the right to the return of the 
same or substantially identical securities transferred in a 
securities lending transaction, sale-repurchase transaction, or 
similar financing transaction.
``(3) Options received in connection with the performance 
of services.--For purposes of this subchapter, the term 
`derivative' shall not include any option described in section 
83(e)(3) received in connection with the performance of 
services.
``(4) Insurance contracts, annuities, and endowments.--For 
purposes of this subchapter, the term `derivative' shall not 
include any insurance, annuity, or endowment contract issued by 
an insurance company to which subchapter L applies (or issued 
by any foreign corporation to which such subchapter would apply 
if such foreign corporation were a domestic corporation).
``(5) Derivatives with respect to stock of members of same 
worldwide affiliated group.--For purposes of this subchapter, 
the term `derivative' shall not include any derivative 
(determined without regard to this paragraph) with respect to 
stock issued by any member of the same worldwide affiliated 
group (as defined in section 864(f)) in which the taxpayer is a 
member.
``(6) Commodities used in normal course of trade or 
business.--For purposes of this subchapter, the term 
`derivative' shall not include any contract with respect to any 
commodity if--
``(A) such contract requires physical delivery with 
the option of cash settlement only in unusual and 
exceptional circumstances, and
``(B) such commodity is used (and is used in 
quantities with respect to which such derivative 
relates) in the normal course of the taxpayer's trade 
or business (or, in the case of an individual, for 
personal consumption).
``(c) Contracts With Embedded Derivative Components.--
``(1) In general.--If a contract has derivative and 
nonderivative components, then each derivative component shall 
be treated as a derivative for purposes of this subchapter. If 
the derivative component cannot be separately valued, then the 
entire contract shall be treated as a derivative for purposes 
of this subchapter.
``(2) Exception for certain embedded derivative components 
of debt instruments.--A debt instrument shall not be treated as 
having a derivative component merely because--
``(A) such debt instrument is denominated in a 
nonfunctional currency (as defined in section 
988(c)(1)(C)(ii)), or
``(B) payments with respect to such debt instrument 
are determined by reference to the value of a 
nonfunctional currency (as so defined).
``(d) Treatment of American Depository Receipts and Similar 
Instruments.--Except as otherwise provided by the Secretary, for 
purposes of this subchapter, American depository receipts (and similar 
instruments) with respect to shares of stock in foreign corporations 
shall be treated as shares of stock in such foreign corporations.''.
(b) Information Reporting With Respect to Controlled Foreign 
Corporations.--Section 6038(a)(1)(B) of such Code is amended by 
inserting ``and transactions which are covered transactions for 
purposes of section 4475 by reason of the application of section 
4475(h)(1) to such corporation'' before the semicolon at the end.
(c) Conforming Amendment.--The table of subchapters for chapter 36 
of such Code is amended by inserting after the item relating to 
subchapter B the following new item:

``subchapter c. tax on trading transactions''.

(d) Effective Date.--The amendments made by this section shall 
apply to transactions after December 31, 2025.
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