Plain English
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Reduction of Excess Business Holding Accrual Act This bill treats certain stock repurchased by a corporation from an employee stock ownership plan (ESOP) as outstanding voting stock for purposes of the federal excise tax imposed on a private foundation’s excess business holdings. Thus, a private foundation may exclude such stock in calculating present holdings in a corporation and liability for the excise tax. (Exceptions apply.) As background, a federal excise tax is imposed on a private foundation that owns more than 20% of the voting stock in a corporation, reduced by the percentage of voting stock held by all disqualified persons (excess business holdings). However, a private foundation with excess business holdings on May 26, 1969 (grandfathered private foundation) may own a greater percentage of voting stock in certain circumstances. Under the bill, stock is treated as outstanding voting stock if such stock is not readily tradable on an established securities market; repurchased from an ESOP on or after January 1, 2020; and held by the corporation as treasury stock, cancelled, or retired. However, such stock is not treated as outstanding voting stock if it is repurchased within the first 10 years of establishing the ESOP or, as a result of the repurchase, the permitted holdings of the private foundation would exceed 49% of the voting stock in the corporation. Finally, under the bill, such stock does not reduce the percentage of voting stock a grandfathered private found
Market Impact Map
Action Timeline
2025-03-10
Referred to the House Committee on Ways and Means.
2025-03-10
Introduced in House
2025-03-10
Introduced in House
Full Bill Text
119 HR 2014 IH: Reduction of Excess Business Holding Accrual Act U.S. House of Representatives 2025-03-10 text/xml EN Pursuant to Title 17 Section 105 of the United States Code, this file is not subject to copyright protection and is in the public domain. I 119th CONGRESS 1st Session H. R. 2014 IN THE HOUSE OF REPRESENTATIVES March 10, 2025 Mr. Steube introduced the following bill; which was referred to the Committee on Ways and Means A BILL To amend the Internal Revenue Code of 1986 for purposes of the tax on private foundation excess business holdings to treat as outstanding any employee-owned stock purchased by a business enterprise pursuant to certain employee stock ownership retirement plans. 1. Short title This Act may be cited as the Reduction of Excess Business Holding Accrual Act . 2. Certain purchases of employee-owned stock disregarded for purposes of foundation tax on excess business holdings (a) In general Section 4943(c)(4)(A) of the Internal Revenue Code of 1986 is amended by adding at the end the following new clauses: (v) For purposes of clause (i), subparagraph (D), and paragraph (2), any voting stock which— (I) is not readily tradable on an established securities market, (II) is purchased by the business enterprise on or after January 1, 2020, from an employee stock ownership plan (as defined in section 4975(e)(7)) in which employees of such business enterprise participate, in connection with a distribution from such plan, and (III) is held by the business enterprise as treasury stock, cancelled, or retired, shall be treated as outstanding voting stock, but only to the extent so treating such stock would not result in permitted holdings exceeding 49 percent (determined without regard to this clause). The preceding sentence shall not apply with respect to the purchase of stock from a plan during the 10-year period beginning on the date the plan is established. (vi) Section 4943(c)(4)(A)(ii) shall not apply with respect to any decrease in the percentage of holdings in a business enterprise by reason of the application of clause (v). . (b) Effective date The amendments made by this section shall apply to taxable years ending after the date of the enactment of this Act and to purchases by a business enterprise of voting stock in taxable years beginning after December 31, 2019.
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