Bill Amendment: IL HB3419 | 2017-2018 | 100th General Assembly

NOTE: For additional amemendments please see the Bill Drafting List

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Bill Title: EXPATRIATE CORP/FOREIGN HAVEN

Status: 2017-11-09 - Public Act . . . . . . . . . 100-0551 [HB3419 Detail]

Download: Illinois-2017-HB3419-House_Amendment_001.html

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Rep. Jaime M. Andrade, Jr.

Filed: 4/24/2017

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AMENDMENT TO HOUSE BILL 3419
AMENDMENT NO. ______. Amend House Bill 3419 by replacing
everything after the enacting clause with the following:
"Section 5. The Illinois Procurement Code is amended by
adding Sections 1-15.120 and 50-17 as follows:
(30 ILCS 500/1-15.120 new)
Sec. 1-15.120. Expatriated entity. "Expatriated entity"
means a foreign incorporated entity which is treated as an
inverted domestic corporation under subsection (b) of Section
835 of the Homeland Security Act of 2002, 6 U.S.C. 395(b), or
any subsidiary of such an entity. The federal regulations found
at 26 CFR 1.7874-3 may be used to determine when 6 U.S.C.
395(b)(3) applies.
(30 ILCS 500/50-17 new)
Sec. 50-17. Expatriated entities.

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(a) Except as provided in subsection (b) of this Section,
no business or member of a unitary business group, as defined
in the Illinois Income Tax Act, shall submit a bid for or enter
into a contract with a State agency under this Code if that
business or any member of the unitary business group is an
expatriated entity.
(b) An expatriated entity or a member of a unitary business
group with an expatriated entity as a member may submit a bid
for or enter into a contract with a State agency under this
Code if the appropriate chief procurement officer determines
that either of the following apply:
(1) the contract is awarded as a sole source
procurement under Section 20-25 of this Code, provided that
the appropriate chief procurement officer (i) includes in
the notice of intent to enter into a sole source contract a
prominent statement that the intended sole source
contractor is an expatriated entity and (ii) holds a public
hearing at which the chief procurement officer and
purchasing agency present written justification for the
use of a sole source contract with an expatriated entity
and any member of the public may present testimony; or
(2) the purchase is of pharmaceutical products, drugs,
biologics, vaccines, medical supplies, or devices used to
provide medical and health care or treat disease or used in
medical or research diagnostic tests, and medical
nutritionals regulated by the Food and Drug Administration

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under the Federal Food, Drug, and Cosmetic Act.
Section 10. The Illinois Pension Code is amended by
changing Section 1-110.16 as follows:
(40 ILCS 5/1-110.16)
Sec. 1-110.16. Transactions prohibited by retirement
systems; companies that boycott Israel, Iran-restricted
companies, and Sudan-restricted companies, and expatriated
entities.
(a) As used in this Section:
"Boycott Israel" means engaging in actions that are
politically motivated and are intended to penalize,
inflict economic harm on, or otherwise limit commercial
relations with the State of Israel or companies based in
the State of Israel or in territories controlled by the
State of Israel.
"Company" means any sole proprietorship, organization,
association, corporation, partnership, joint venture,
limited partnership, limited liability partnership,
limited liability company, or other entity or business
association, including all wholly owned subsidiaries,
majority-owned subsidiaries, parent companies, or
affiliates of those entities or business associations,
that exist for the purpose of making profit.
"Illinois Investment Policy Board" means the board

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established under subsection (b) of this Section.
"Direct holdings" in a company means all publicly
traded securities of that company that are held directly by
the retirement system in an actively managed account or
fund in which the retirement system owns all shares or
interests.
"Expatriated entity" has the meaning ascribed to it in
Section 1-15.120 of the Illinois Procurement Code.
"Indirect holdings" in a company means all securities
of that company that are held in an account or fund, such
as a mutual fund, managed by one or more persons not
employed by the retirement system, in which the retirement
system owns shares or interests together with other
investors not subject to the provisions of this Section or
that are held in an index fund.
"Iran-restricted company" means a company that meets
the qualifications under Section 1-110.15 of this Code.
"Private market fund" means any private equity fund,
private equity funds of funds, venture capital fund, hedge
fund, hedge fund of funds, real estate fund, or other
investment vehicle that is not publicly traded.
"Restricted companies" means companies that boycott
Israel, Iran-restricted companies, and Sudan-restricted
companies, and expatriated entities.
"Retirement system" means a retirement system
established under Article 2, 14, 15, 16, or 18 of this Code

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or the Illinois State Board of Investment.
"Sudan-restricted company" means a company that meets
the qualifications under Section 1-110.6 of this Code.
(b) There shall be established an Illinois Investment
Policy Board. The Illinois Investment Policy Board shall
consist of 7 members. Each board of a pension fund or
investment board created under Article 15, 16, or 22A of this
Code shall appoint one member, and the Governor shall appoint 4
members.
(c) Notwithstanding any provision of law to the contrary,
beginning January 1, 2016, Sections 110.15 and 1-110.6 of this
Code shall be administered in accordance with this Section.
(d) By April 1, 2016, the Illinois Investment Policy Board
shall make its best efforts to identify all Iran-restricted
companies, Sudan-restricted companies, and companies that
boycott Israel and assemble those identified companies into a
list of restricted companies, to be distributed to each
retirement system.
These efforts shall include the following, as appropriate
in the Illinois Investment Policy Board's judgment:
(1) reviewing and relying on publicly available
information regarding Iran-restricted companies,
Sudan-restricted companies, and companies that boycott
Israel, including information provided by nonprofit
organizations, research firms, and government entities;
(2) contacting asset managers contracted by the

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retirement systems that invest in Iran-restricted
companies, Sudan-restricted companies, and companies that
boycott Israel;
(3) contacting other institutional investors that have
divested from or engaged with Iran-restricted companies,
Sudan-restricted companies, and companies that boycott
Israel; and
(4) retaining an independent research firm to identify
Iran-restricted companies, Sudan-restricted companies, and
companies that boycott Israel.
The Illinois Investment Policy Board shall review the list
of restricted companies on a quarterly basis based on evolving
information from, among other sources, those listed in this
subsection (d) and distribute any updates to the list of
restricted companies to the retirement systems and the State
Treasurer.
By April 1, 2018, the Illinois Investment Policy Board
shall make its best efforts to identify all expatriated
entities and include those companies in the list of restricted
companies distributed to each retirement system and the State
Treasurer. These efforts shall include the following, as
appropriate in the Illinois Investment Policy Board's
judgment:
(1) reviewing and relying on publicly available
information regarding expatriated entities, including
information provided by nonprofit organizations, research

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firms, and government entities;
(2) contacting asset managers contracted by the
retirement systems that invest in expatriated entities;
(3) contacting other institutional investors that have
divested from or engaged with expatriated entities; and
(4) retaining an independent research firm to identify
expatriated entities.
(e) The Illinois Investment Policy Board shall adhere to
the following procedures for companies on the list of
restricted companies:
(1) For each company newly identified in subsection
(d), the Illinois Investment Policy Board shall send a
written notice informing the company of its status and that
it may become subject to divestment or shareholder activism
by the retirement systems.
(2) If, following the Illinois Investment Policy
Board's engagement pursuant to this subsection (e) with a
restricted company, that company ceases activity that
designates the company to be an Iran-restricted company, a
Sudan-restricted company, or a company that boycotts
Israel, or an expatriated entity, the company shall be
removed from the list of restricted companies and the
provisions of this Section shall cease to apply to it
unless it resumes such activities.
(f) Except as provided in subsection (f-1) of this Section
the The retirement system shall adhere to the following

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procedures for companies on the list of restricted companies:
(1) The retirement system shall identify those
companies on the list of restricted companies in which the
retirement system owns direct holdings and indirect
holdings.
(2) The retirement system shall instruct its
investment advisors to sell, redeem, divest, or withdraw
all direct holdings of restricted companies from the
retirement system's assets under management in an orderly
and fiduciarily responsible manner within 12 months after
the company's most recent appearance on the list of
restricted companies.
(3) The retirement system may not acquire securities of
restricted companies.
(4) The provisions of this subsection (f) do not apply
to the retirement system's indirect holdings or private
market funds. The Illinois Investment Policy Board shall
submit letters to the managers of those investment funds
containing restricted companies requesting that they
consider removing the companies from the fund or create a
similar actively managed fund having indirect holdings
devoid of the companies. If the manager creates a similar
fund, the retirement system shall replace all applicable
investments with investments in the similar fund in an
expedited timeframe consistent with prudent investing
standards.

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(f-1) The retirement system shall adhere to the following
procedures for restricted companies that are expatriated
entities:
(1) To the extent that the retirement system believes
that shareholder activism would be more impactful than
divestment, the retirement system shall have the authority
to engage with a restricted company prior to divesting.
(2) Subject to any applicable State or federal laws,
methods of shareholder activism utilized by the retirement
system may include, but are not limited to, bringing
shareholder resolutions and proxy voting on shareholder
resolutions.
(3) The retirement system shall report on its
shareholder activism and the outcome of such efforts to the
Illinois Investment Policy Board by April 1 of each year.
(4) If the engagement efforts of the retirement system
are unsuccessful, then it shall adhere to the procedures
under subsection (f) of this Section.
(g) Upon request, and by April 1 of each year at least
annually, each retirement system shall provide the Illinois
Investment Policy Board with information regarding investments
sold, redeemed, divested, or withdrawn in compliance with this
Section.
(h) Notwithstanding any provision of this Section to the
contrary, a retirement system may cease divesting from
companies pursuant to subsection (f) if clear and convincing

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evidence shows that the value of investments in such companies
becomes equal to or less than 0.5% of the market value of all
assets under management by the retirement system. For any
cessation of divestment authorized by this subsection (h), the
retirement system shall provide a written notice to the
Illinois Investment Policy Board in advance of the cessation of
divestment, setting forth the reasons and justification,
supported by clear and convincing evidence, for its decision to
cease divestment under subsection (f).
(i) The cost associated with the activities of the Illinois
Investment Policy Board shall be borne by the boards of each
pension fund or investment board created under Article 15, 16,
or 22A of this Code.
(j) With respect to actions taken in compliance with this
Section, including all good-faith determinations regarding
companies as required by this Section, the retirement system
and Illinois Investment Policy Board are exempt from any
conflicting statutory or common law obligations, including any
fiduciary duties under this Article and any obligations with
respect to choice of asset managers, investment funds, or
investments for the retirement system's securities portfolios.
(k) It is not the intent of the General Assembly in
enacting this amendatory Act of the 99th General Assembly to
cause divestiture from any company based in the United States
of America. The Illinois Investment Policy Board shall consider
this intent when developing or reviewing the list of restricted

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companies.
(l) If any provision of this amendatory Act of the 99th
General Assembly or its application to any person or
circumstance is held invalid, the invalidity of that provision
or application does not affect other provisions or applications
of this amendatory Act of the 99th General Assembly that can be
given effect without the invalid provision or application.
(m) If any provision of this amendatory Act of the 100th
General Assembly or its application to any person or
circumstance is held invalid, the invalidity of that provision
or application does not affect other provisions or applications
of this amendatory Act of the 100th General Assembly that can
be given effect without the invalid provision or application.
(Source: P.A. 99-128, eff. 7-23-15.)".