Republican Nebraska Sen. Pete Ricketts introduced a legislative package on Thursday to protect America’s economic strength and tax benefits from Communist China, the Daily Caller News Foundation has learned.
The package contains four bills seeking to counter efforts from the Chinese Communist Party (CCP) and other adversaries to “disrupt American prosperity.” The bills in the package are The No Capital Gains Allowance for Americans Adversaries Act, the PRC Military and Human Rights Capital Markets Sanctions Act, the No China in Index Funds Act and the Protecting Endowments from Our Adversaries Act.
“Communist China is the greatest threat to the American way of life,” Ricketts said in a press release. “Communist China is actively threatening a rules-based system that has maintained peace and prosperity for over 80 years. America’s markets are supposed to benefit Americans. We can’t allow our markets to fund our adversaries like Communist China.”
The first bill in the package, the No Capital Gains Allowance for Americans Adversaries Act, would treat capital gains made on stock shares of Chinese, Russian, Belarusian, Iranian and North Korean companies as ordinary income. Investments in such stocks would not be eligible for lower capital gains tax rates. The “step-up-basis,” which following a stockholders’ death, reduces an heir’s tax liability by ignoring gains that accumulated before the inheritance, would be eliminated for assets from these countries.
The Securities and Exchange Commission (SEC) would also be directed to keep a public list of assets that fall under the act, and whomever is selling their covered securities would have to tell the buyer that sales of those assets will be viewed as ordinary income.
Under the People’s Republic of China (PRC) Military and Human Rights Capital Markets Sanctions Act, the president would create a public list of sanctioned companies and their affiliates, including companies that target human rights violators such as those that use coerced labor in production, produce dangerous technologies or have connections to the Chinese military. The act would also prevent Americans from purchasing, selling or holding publicly traded assets issued by a sanctioned company on the President’s list, as well as any derivatives of publicly issued assets, or a security that provides investment exposure. After the legislation’s enactment, U.S. citizens would have 180 days to divest from the assets.
Evaluating the risks of investing in Chinese companies can present difficulties, so the No China in Index Funds Act would prohibit index funds from investing in Chinese companies, also leaving 180 days to divest.
The final act of the legislation package, the Protecting Endowments from our Adversaries Act, only applies to private college and university endowments over $1 billion. It would disincentivize endowments from investing in entities that are on certain U.S. government lists such as the Entity List, which identifies national security risks, the Military End User List, the Unverified List and the Federal Communications Commission (FCC) Covered List.
Also, if an endowment invests in any company on the lists, the act would impose a 50% excise tax on the principal investment at the time of purchase, and impose a 100% excise tax on the realized gains one year after a company is listed. This specific bill, however, would not take effect until the December following its passage.
A recent DCNF investigation revealed there has been undercover Chinese spy operations in seven American cities, including Omaha, operating to “monitor and intimidate dissidents” since 2018. DCNF investigative reporter Philip Lenczycki testified in front of the Nebraska state legislature in February in support of a bill targeting the operations, which passed on May 30.
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