H.R. 2014 — Reduction of Excess Business Holding Accrual Act

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 foundation may own.

[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2014 Introduced in House (IH)]

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119th CONGRESS
  1st Session
                                H. R. 2014

 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.


_______________________________________________________________________


                    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.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Reduction of Excess Business Holding 
Accrual Act''.

SEC. 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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Reduction of Excess Business Holding Accrual Act

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