Reduction of Excess Business Holding Accrual Act
Summary
What This Bill Does
The Reduction of Excess Business Holding Accrual Act changes how the private foundation excess business holdings tax treats certain employee-owned stock transactions. Section 4943 generally limits private foundations' holdings in business enterprises. This bill says that, for specified accrual and permitted-holding calculations, voting stock that is not readily tradable on an established securities market is disregarded if the business enterprise purchased it on or after January 1, 2020 from an employee stock ownership plan in which the business's employees participate, the purchase was connected to a distribution from that ESOP, and the shares are held as treasury stock, cancelled, or retired. It also prevents a related decrease in percentage holdings from triggering a separate rule and applies to taxable years ending after enactment and qualifying purchases in taxable years beginning after December 31, 2019.
Who Benefits and How
Employee-owned businesses benefit because buying back ESOP-distributed nonpublic shares does not worsen specified foundation excess-holding calculations. Private foundations holding business interests benefit from more favorable treatment when ESOP shares are retired, cancelled, or held as treasury stock. ESOP participants benefit if businesses can repurchase distributed shares without creating unintended foundation tax pressure. Tax advisers for employee-owned firms benefit from a clearer statutory rule for post-2019 stock repurchases.
Who Bears the Burden and How
The IRS must administer a narrower excess-business-holdings calculation for qualifying ESOP stock purchases. Private foundations and businesses must document that shares were nonpublic, ESOP-related, purchased after January 1, 2020, and retired, cancelled, or held as treasury stock. Federal taxpayers may bear revenue loss if fewer foundation holdings accrue toward excise tax exposure. Foundation compliance officers must update section 4943 tracking for retroactive qualifying purchases.
Key Provisions
- Amends section 4943 excess business holding rules for certain ESOP-related stock repurchases.
- Excludes nonpublic voting stock purchased from an ESOP after January 1, 2020 when held as treasury stock, cancelled, or retired.
- Blocks a related decrease in holdings percentage from triggering the referenced accrual rule.
- Applies to taxable years ending after enactment and purchases in taxable years beginning after December 31, 2019.
Evidence Chain:
This summary is generated from the full bill text using AI analysis. Expand "Detailed Analysis" below for identified beneficiaries/burden bearers with clause-level evidence links.
At a Glance
What This Bill Does
Excludes certain post-2019 purchases of nonpublic employee-owned stock from excess-business-holding accrual calculations when a business buys ESOP-distributed shares and holds them as treasury stock, cancels them, or retires them.
Key Policy Areas
Tax, Employee Ownership, Private Foundations
Primary Purpose
Excludes certain post-2019 purchases of nonpublic employee-owned stock from excess-business-holding accrual calculations when a business buys ESOP-distributed shares and holds them as treasury stock, cancels them, or retires them.
Policy Domains
Resolution provisions
Identified Gains
- Employee-owned businesses
- Private foundations holding business interests
- ESOP participants
- Tax advisers
Identified Costs
- Internal Revenue Service
- Private foundation compliance officers
- Federal taxpayers
- Foundation tax preparers
Legislative Progress
In CommitteeMr. Steube introduced the following bill; which was referred to …
Referred to the House Committee on Ways and Means.
Introduced in House
Stakeholder Effects
cui bono?How this legislation distributes effects. Mention counts reflect frequency, not effect magnitude.
Bill Structure & Actor Mappings
Who is "The Secretary" in each section?
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