H.R. 10595 — Stop Wall Street Looting Act

This section imposes joint and several liability on controlling private funds and holders of active interests for all liabilities of target firms and their affiliates. Liability covers acquisition-related debt, Federal and State civil penalties and restitution orders, WARN Act violations, multiemployer pension withdrawal liability, and unfunded pension benefit claims owed to the PBGC. The provision preserves existing ERISA controlled group liability rules.

This section voids as against public policy any indemnification by a target firm or its affiliate of a controlling private fund for liabilities under section 66 of the Stop Wall Street Looting Act, including those involving holders of an active interest in the fund. It applies the terms affiliate, controlling private fund, holder of an active interest, and target firm as defined in section 3 of that Act.

This section limits capital distributions and equity reductions by a target firm for 4 years after a private fund acquires control, capping any such distribution at 10 percent of the firm’s total financial obligations for each of the prior 2 years and barring commitments to future distributions above that threshold. It also prohibits plant closings or mass layoffs followed by relocation of U.S. operations overseas. Transfers or obligations made in violation are void, aiders and abettors face joint and several liability, and employees or creditors of a bankrupt target firm may sue in federal district court to recover assets plus attorney fees and costs.

This section extends the period for avoiding fraudulent transfers under 11 USC 548 to 15 years before the petition filing for transfers made in connection with a change in control transaction or during the protected period following such a transaction. It creates a presumption of insolvency for transfers by a target firm to control persons, affiliates, or insiders in those circumstances. It limits the 546(e) safe harbor for such transfers, grants creditors’ committees authority to examine conflicts of interest and the exclusive right to bring or settle avoidance actions, and extends the statute of limitations for related claims under 28 USC 3306 to 15 years.

This section disallows credits against the new surtax imposed on applicable payments received by investment firms from controlled target firms.

This section tightens the limitation on the deduction for business interest for applicable entities controlled by private funds (or related persons). If the taxpayer’s debt-to-equity ratio exceeds 1 at year-end, the 30 percent threshold is replaced by a higher percentage determined by the Secretary (at least 30 percent). It also bars new elections to treat any trade or business as an electing real property trade or business and revokes any such election in effect for the prior year, effective for the current and all future years; depreciation must then be recomputed under the regular rules as if the revocation were a change in use. The changes apply to taxable years beginning on or after the date of enactment.

This section requires investment companies exempt under section 3(c)(1) or 3(c)(7) of the Investment Company Act of 1940 that receive funds from a federal or state agency to publicly disclose the total funds received, workforce demographics, use of proceeds, jobs saved or wages preserved, beneficial owners, loans forgiven, and the chief executive officer pay ratio. It also bars such companies from acquiring any company or making distributions to shareholders during the two-year period after receipt.

This section requires the Secretary to exclude from participation in any Federal health care program any individual or entity that, on or after the date of enactment, sells assets to or newly pledges assets as collateral for a loan with a real estate investment trust. It exempts prior agreements to pledge the same asset.

This section repeals the special rule that permitted taxable REIT subsidiaries to own interests in qualified health care properties. The repeal applies to taxable years beginning after the date of enactment.

This section eliminates qualified REIT dividends from the qualified business income deduction under section 199A of the Internal Revenue Code. Taxpayers may no longer claim the 20 percent deduction on such dividends, leaving only qualified publicly traded partnership income eligible for that portion of the deduction. The changes apply to taxable years beginning after the date of enactment.

This section prohibits employers from permanently replacing employees who strike, discriminating against returning strikers, or locking out employees before a strike to influence collective bargaining positions. It bars employers from requiring or coercing employee attendance at campaign activities unrelated to job duties. It requires employers to maintain current wages, hours, and terms and conditions of employment during bargaining. It eliminates two categories of unfair labor practices by labor organizations.

This section increases the priority amount for unpaid wages and contributions to employee benefit plans in bankruptcy cases to $20,000 (from $10,000) per employee. It eliminates the 180-day limitation period tied to the petition date or business cessation, and deems severance pay earned in full upon layoff or termination.

This section grants administrative expense priority in bankruptcy to severance pay owed to non-insider, non-executive employees under a generally applicable plan or collective bargaining agreement for post-petition layoff or termination, which is deemed earned in full at that time, and to any post-petition contributions due under an employee welfare benefit plan.

This section grants priority as administrative expenses in bankruptcy cases to claims for back pay, civil penalties, or damages arising from violations of any federal or state labor and employment law, including the Worker Adjustment and Retraining Notification Act. It also defines the 60-day violation period under the Worker Adjustment and Retraining Notification Act as consisting of calendar days beginning on or after the date of the prohibited plant closing or mass layoff.

This section limits payments or transfers to senior executive officers, the 20 next most highly compensated employees, department or division managers, or consultants of a debtor in bankruptcy. It requires clear and convincing evidence that any such payment is essential to the business's survival or orderly liquidation, forms part of a workforce incentive program generally applicable to nonmanagement employees, and is reasonable in cost without being excessive or disproportionate to losses incurred by the nonmanagement workforce.

This section prohibits approval of any compensation plan, program, or transfer benefiting an insider, senior executive officer, one of the 20 highest-compensated employees, a department or division manager, or a consultant if the debtor discontinued or reduced severance pay for nonmanagement employees on or after one year before the petition filing. It also requires prior court approval after notice and a hearing for any transfer or obligation subject to section 503(c).

This section limits court approval of payments or distributions under a chapter 11 reorganization plan to insiders, senior executive officers, the 20 next most highly compensated employees, department or division managers, or consultants. Such payments must form part of a program generally applicable to all debtor employees and must not be excessive or disproportionate relative to distributions to the nonmanagement workforce. It further requires court approval that any disclosed compensation is reasonable compared to comparable positions at peer companies in the same industry and is not disproportionate in light of economic concessions made by the nonmanagement workforce.

This section deems unpaid post-petition employee wages, accrued vacation, severance, and other compensation, as well as contributions due under employee welfare benefit plans, to be reasonable and necessary costs of preserving or disposing of collateral that benefit secured creditors. It requires trustees to recover those amounts from secured claims for payment to employees or plans, even if the trustee has waived surcharge rights under an agreement with the creditor.

This section authorizes the trustee to avoid transfers to or for the benefit of an insider, senior executive officer, any of the 20 highest-compensated employees, department or division managers, or consultants of the debtor if made under a pre-petition retention, bonus, or incentive plan that does not meet the requirements of section 363(b)(3) or 503(c). Subsection (c) defenses do not apply. A creditors’ committee or any party in interest may commence recovery if the trustee does not, with costs borne by the estate.

This section requires courts approving sales or leases of estate property under section 363 or chapter 11 plans to give substantial weight to preserving jobs and maintaining employment terms and conditions for the debtor's workforce. Among qualifying offers, the court must select the one that best meets these criteria. Purchasers or lessees must represent the transaction's employment effects, which the court incorporates into its order, and the court gains jurisdiction to enforce compliance with remedies for material violations.

This section defines a gift card as a prepaid paper or electronic promise, card, or device redeemable at a single merchant or affiliated group for goods or services. It extends seventh priority in bankruptcy to allowed unsecured claims of individuals up to $1,800 arising from the purchase of an unredeemed gift card.

This section specifies that references to amendments or repeals in the title are to sections or provisions of the Internal Revenue Code of 1986.

This section revises the rules for partnership interests transferred in connection with services. It requires that the fair market value of such an interest equal the amount a partner would receive if the partnership sold all assets at fair market value and distributed the net proceeds in liquidation. The recipient is treated as having elected to include that value in gross income in the year of transfer unless the recipient elects otherwise. The rules apply to interests transferred after the date of enactment.

This section requires that net capital gain allocated to an investment services partnership interest be treated as ordinary income, and limits any ordinary loss recharacterization to the amount of previously recharacterized gains. It treats gain on the disposition of such an interest as ordinary income, requires gain recognition on distributions of property with respect to the interest, and subjects the interest to the rules of section 751 as unrealized receivables or inventory items.

This section directs the Securities and Exchange Commission to issue final rules within one year requiring controlling private funds to annually report, using generally accepted accounting principles, the fund’s name, address, vintage year, general and limited partners, equity ownership percentages, regulatory and net assets under management, debt by creditor type and location, gross performance, performance net of fees, financial statements, target firm debt-to-equity ratios, gross asset values, total debt, long-term and payment-in-kind debt, defaults, bankruptcy filings, and ownership by U.S. citizens, foreign individuals, brokers, insurers, investment companies, pension plans, governments, banks, sovereign wealth funds, and other investors, as well as aggregate fees collected from target firms and limited partners categorized by type and purpose.

This section extends ERISA fiduciary duties to managers of private funds in which employee benefit plans invest, treating such funds like registered investment companies for purposes of plan asset rules. It prohibits investment advisers from requiring pension plans subject to ERISA to waive fiduciary duties owed to other persons. It requires general partners of controlling private funds to provide identical terms and benefits to all limited partners.

This section requires investment advisers to private funds to disclose to potential investors a list of all other managed private funds, including active and liquidated ones. For each fund, advisers must report the term and any extensions, performance net of fees using the public market equivalent, control relationships with target firms including employee counts at acquisition and exit, bankruptcies, state and local regulatory actions, and penalties or settlements. Advisers must also provide the percentage breakdown of divestment methods for target firms, such as sales to other private funds, private entities, public issuers, bankruptcies, or initial public offerings.

This section directs the Securities and Exchange Commission to amend its rules within 180 days of enactment to require investment advisers that file Form PF to report quarterly on all investments of the private funds they advise and all loans made by the adviser.

This section expands the definition of securitizer under the risk retention requirements to include a manager of a collateralized debt obligation. It requires such a manager to obtain and retain the required credit risk portion for any asset it does not hold, either directly or through a wholly owned affiliate, and treats any transfer caused by the manager as a transfer by the securitizer.

This section prohibits willful evasion of any provision of this Act or amendments made by this Act through any activity, including agreements, contracts, transactions, or entity structuring.

This section establishes severability for the Act, providing that if any provision or amendment is held invalid or unconstitutional, the remainder of the Act and its amendments shall remain in full effect and unaffected.