Bipartisan Restoring Faith in Government Act
- Sponsor
- Rep. Fitzpatrick, Brian K. [R-PA-1]
- Committees
- Ways and Means Committee (primary)
- Last action
- Jan 9, 2025
Bottom line
The bill aims to enhance public trust by broadly restricting the financial investments of Members of Congress and their immediate families to prevent conflicts of interest and the appearance of impropriety.
What it actually does
This bill prohibits Members of Congress, their spouses, and dependents from owning or trading 'covered financial instruments,' which include most securities, security futures, and commodities, as well as synthetic interests like derivatives. It mandates divestment of these assets through sale or placement in a qualified blind trust within 90 days, with specific exceptions for widely held investment funds, government bonds, and Thrift Savings Plan investments. The bill also amends the Internal Revenue Code to allow for tax deferral on capital gains from assets sold to comply with these new conflict-of-interest requirements.
Proponents argue
Supporters argue that this legislation is essential for restoring public faith in government by eliminating any potential for insider trading or conflicts of interest, ensuring that legislative decisions are made solely for the public good. They contend that such restrictions are a necessary step to demonstrate integrity and accountability to constituents.
Opponents contend
Opponents might argue that these broad restrictions infringe on the personal financial freedom of Members of Congress and their families, potentially deterring qualified individuals from seeking public office. They may also assert that existing ethics rules and disclosure requirements are sufficient to manage conflicts of interest without such a sweeping ban.
The bill is concise and its core provisions are clearly articulated, making it accessible for a reader to understand and evaluate within a short timeframe.
Sec. 2, adding 5 U.S.C. 13152(a)
Restriction on Financial Investments for Covered Individuals
This provision establishes a general prohibition on Members of Congress, their spouses, and dependents (defined as 'covered individuals') from owning or trading 'covered financial instruments.' These instruments include most securities, security futures, commodities, and any comparable economic interests acquired through synthetic means like derivatives. The intent is to remove direct financial stakes that could create conflicts of interest.
Supporters argue
Supporters argue this direct prohibition is crucial for eliminating the appearance and reality of conflicts of interest, thereby enhancing public trust in the integrity of legislative decisions and preventing insider trading.
Critics contend
Critics might contend that such broad restrictions place an undue burden on the personal financial freedom of elected officials and their families, potentially discouraging qualified individuals from seeking public office.
Tradeoffs
This provision balances the imperative for public trust and ethical governance against the personal financial autonomy of public servants and their families.
Sec. 2, adding 5 U.S.C. 13152(a)(2)
Permitted Investments and Exceptions
The bill outlines specific exceptions to the general prohibition, allowing covered individuals to own or trade certain types of investments. These include widely held investment funds (such as mutual funds or ETFs), United States Treasury bills, notes, or bonds, any bond issued by a State or local government, and any investment under the Thrift Savings Plan. These categories are generally considered less susceptible to direct conflicts of interest or insider trading.
Sec. 2, adding 5 U.S.C. 13152(b) and (c)
Mandated Divestment and Qualified Blind Trust Requirements
Covered individuals are required to divest any prohibited financial instruments within 90 days of the bill's enactment or of becoming a covered individual. Divestment can occur through sale or placement into a qualified blind trust. Special rules apply to spouses receiving financial instruments as employment compensation, allowing divestment within 90 days of being contractually permitted to sell. Qualified blind trusts must receive prior approval from the supervising ethics office, and the trustee must certify annually that no information on trust assets or transactions has been provided to the covered individual. The trustee must also divest any placed assets within 6 months and cannot have a close personal or business relationship with the covered individual.
Sec. 2, adding 5 U.S.C. 13153
Enforcement and Civil Penalties
The bill establishes an enforcement framework, mandating that the supervising ethics office refer any covered individual believed to have willfully failed to comply with the investment restrictions to the Attorney General. The Attorney General is authorized to bring a civil action in federal court, where a civil penalty not exceeding $50,000 may be assessed against the non-compliant individual. Crucially, these penalties cannot be paid using official congressional allowances (Members' Representational Allowance, Senators' Official Personnel and Office Expense Account) or funds from any political committee.
Sec. 2(b), amending Section 1043 of the Internal Revenue Code of 1986
Income Tax Treatment for Conflict-of-Interest Sales
This section amends the Internal Revenue Code to treat divestments made to comply with this new law as sales required to comply with Federal conflict-of-interest requirements. This allows covered individuals to defer capital gains taxes on assets sold to meet the new restrictions, provided the proceeds are reinvested in permitted assets. This mechanism is similar to existing tax rules for executive branch officials who divest assets due to conflicts.
The definition of 'covered financial instrument' explicitly includes 'any economic interest comparable to an interest described in subclause (I) that is acquired through synthetic means, such as the use of a derivative, including an option, warrant, or other similar means.'
Sec. 2, adding 5 U.S.C. 13151(1)
Why it matters:This is standard legislative practice for defining terms, but the specific breadth of this definition is vital for closing potential loopholes and ensuring comprehensive coverage of modern financial instruments.
Case for: Proponents argue this broad definition is essential to prevent sophisticated financial instruments from being used to circumvent the spirit of the law, ensuring that the prohibition on conflicts of interest is truly comprehensive and future-proof.
Case against: No specific opposition is typically raised against anti-circumvention language, but some might argue that such broad language could inadvertently capture legitimate, non-conflicting financial planning tools if interpreted too broadly by ethics officials.
Estimated impact: This clause significantly broadens the scope of prohibited investments beyond simple stock ownership, impacting any covered individual who uses derivatives or other complex synthetic financial products for personal investment.
A loss from a transaction or holding involving a covered financial instrument that is conducted in violation of this section may not be deducted from the amount of income tax owed by the covered individual.
Sec. 2, adding 5 U.S.C. 13152(d)
Why it matters:This is a specific tax implication related to non-compliance, often placed in a dedicated subsection. While technically phrased, it adds a significant financial consequence beyond the civil penalties.
Case for: Supporters argue this provision prevents individuals from benefiting financially (through tax deductions) from transactions that are explicitly illegal under the act, thereby reinforcing the punitive nature of the enforcement mechanisms and deterring violations.
Case against: No specific opposition is typically raised against this type of provision, but some might argue it adds another layer of financial penalty that could be seen as excessive when combined with civil fines, particularly if the violation was not deemed 'willful' by the individual.
Estimated impact: This clause imposes an additional financial disincentive for non-compliance by removing a potential tax shelter for losses incurred from illegal trades, increasing the overall cost of violating the law.