SF 2247 (LSB 5804SS (4) 89)

SENATE FILE 2247

BY  NUNN

A BILL FOR

An Act relating to the trading and holding of certain securities by members of the general assembly and their spouses and including applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  NEW SECTION.  68B.41  Definitions.
   For purposes of this subchapter, unless the context requires otherwise:
   1.  “Blind trust” means a trust established by or for the benefit of a member of the general assembly or the member’s spouse for divestiture of all control and knowledge of assets. A trust qualifies as a blind trust if the member of the general assembly and the member’s spouse has no knowledge of the holdings and sources of income of the trust, the trustee is independent of and is not associated with, employed by, or related to the member of the general assembly or the member’s spouse, and the trustee has sole discretion as to the management of the trust assets.
   2.  a.  “Covered financial instrument” means any of the following:
   (1)  An investment in a security or security future as each is defined in section 3(a) of the federal Securities Exchange Act of 1934.
   (2)  A commodity as defined in section 1a of the federal Commodity Exchange Act.
   (3)  Any economic interest comparable to an instrument described in subparagraph (1) or (2) acquired through synthetic means, such as the use of a derivate, including an option, warrant, or other similar means. 
   b.  “Covered financial instrument” does not mean any of the following:
   (1)  A diversified mutual fund.
   (2)  A diversified exchange-traded fund.
   (3)  A United States treasury bill, note, or bond.
   3.  “Ethics committee” means the senate ethics committee or house ethics committee, as applicable.
   4.  “Newly elected member” means a member of the general assembly who was not a member of the immediately preceding general assembly.
    Sec. 2.  NEW SECTION.  68B.42  Holding or trading covered financial instruments —— prohibition.
   1.  Except as provided in subsection 2, a member of the general assembly or the member’s spouse shall not, during a regular or extraordinary session of the general assembly, hold, purchase, or sell a covered financial instrument.
   2.  Subsection 1 shall not apply to any of the following:
   a.  A newly elected member of the general assembly or the member’s spouse until seven days after the member has taken the oath of office. 
   b.  A covered financial instrument held in a blind trust or purchased or sold by the trustee of the blind trust.
    Sec. 3.  NEW SECTION.  68B.43  Penalties.
   1.  A member of the general assembly or the member’s spouse shall disgorge to the department of revenue any profit from a transaction or holding involving a covered financial instrument that violates this subchapter for deposit in the general fund.
   2.  A loss from a transaction or holding involving a covered financial instrument that violates this subchapter shall not be deducted from the amount of income tax the member of the general assembly or the member’s spouse owes to this state.
   3.  If a member of the general assembly or the member’s spouse holds or conducts a transaction that violates this subchapter, the ethics committee may hold a hearing and the member may be subject to additional punishment under the applicable code of ethics. 
    Sec. 4.  NEW SECTION.  68B.44  Certification of compliance —— audits.
   1.  Annually, not later than seven days after the convening of the regular session, each member of the general assembly shall file with the chief clerk of the house or the secretary of the senate, as applicable, a written certification that the member and the member’s spouse are in compliance with this subchapter. The filed certifications shall be published on the general assembly’s internet site in a searchable database.
   2.  The board shall audit each member of the general assembly for compliance with this subchapter every two years. The board shall submit to the ethics committee the results of the audits. The board may adopt rules to administer this subsection.
    Sec. 5.  Section 422.7, Code 2022, is amended by adding the following new subsection:
   NEW SUBSECTION.  51.  Add, to the extent excluded, the ordinary or capital loss realized by the taxpayer in a transaction that violates section 68B.43, subsection 2.
    Sec. 6.  CODE EDITOR DIRECTIVE.  The Code editor shall designate sections 68B.41 through 68B.44, as enacted in this Act, as a new subchapter in chapter 68B.
    Sec. 7.  APPLICABILITY.  This Act applies beginning with the first regular session of the Ninetieth General Assembly.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
   This bill relates to the trading and holding of certain securities by members of the general assembly and their spouses.
   The bill prohibits a member of the general assembly or the member’s spouse from trading or holding certain securities while the general assembly is in session. The bill does not prohibit the trading or holding of diversified mutual funds, diversified exchange-traded funds, or United States treasury bills, notes, or bonds. In addition, the bill does not prohibit the trading or holding of securities that the member or member’s spouse has placed into a blind trust. Under the bill, a blind trust is a trust established by or for the benefit of the member or the member’s spouse for divestiture of all control and knowledge of assets. To qualify, the member and the member’s spouse cannot have any knowledge of the holdings and sources of income of the trust, the trustee must be independent of and not associated with, employed by, or related to the member or the member’s spouse, and the trustee must have sole discretion as to the management of the trust assets.
   If a member or a member’s spouse violates the provisions of the bill, any gain from a transaction is disgorged to the department of revenue for transfer to the general fund. If the transaction results in a loss, the member and the member’s spouse cannot deduct the loss from their state income taxes. The senate or house ethics committee, as applicable, may impose additional punishment under the applicable code of ethics for violations of the bill.
   The bill requires members of the general assembly to annually file with the chief clerk of the house or the secretary of the senate, as applicable, a written certification that the member and the member’s spouse are in compliance with the bill. The filed certifications must be published on the general assembly’s internet site in a searchable database.
   The bill requires the Iowa ethics and campaign disclosure board to audit each member of the general assembly for compliance with the bill every two years and to submit to the ethics committee the results of the audits. The bill authorizes the board to adopt rules to administer this requirement.
   The bill applies beginning with the first regular session of the 90th General Assembly.