Employee Profit-Sharing Encouragement Act of 2025

[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 6418 Introduced in House (IH)]

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119th CONGRESS
  1st Session
                                H. R. 6418

 To amend the Internal Revenue Code of 1986 to deny the deduction for 
  executive compensation unless the employer maintains profit-sharing 
                      distributions for employees.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            December 3, 2025

 Mrs. Watson Coleman introduced the following bill; which was referred 
                   to the Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
 To amend the Internal Revenue Code of 1986 to deny the deduction for 
  executive compensation unless the employer maintains profit-sharing 
                      distributions for employees.

    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 ``Employee Profit-Sharing 
Encouragement Act of 2025''.

SEC. 2. DENIAL OF DEDUCTION FOR EXECUTIVE COMPENSATION UNLESS EMPLOYER 
              MAINTAINS PROFIT-SHARING DISTRIBUTIONS.

    (a) In General.--Section 162 of the Internal Revenue Code of 1986 
is amended by redesignating subsection (s) as subsection (t) and by 
inserting after subsection (r) the following new subsection:
    ``(s) Executive Compensation Paid by Employers Who Do Not Maintain 
Profit-Sharing Distributions.--
            ``(1) In general.--In the case of a specified employer, no 
        deduction shall be allowed under this chapter for applicable 
        employee remuneration with respect to any highly compensated 
        individual (within the meaning of section 105(h)) for any 
        taxable year unless qualified profit-sharing distributions are 
        made during such taxable year.
            ``(2) Qualified profit-sharing distributions.--For purposes 
        of this subsection--
                    ``(A) In general.--The term `qualified profit-
                sharing distributions' means a cash distribution made 
                pursuant to a written plan of the employer under 
                which--
                            ``(i) employees (including part-time 
                        employees) who have been employed for at least 
                        1 year as of the date of the distribution have 
                        a right to such distribution, and
                            ``(ii) the amount of such distributions are 
                        defined under such plan on the basis of a 
                        measure of the receipts, profit, revenues, or 
                        earnings of such employer.
                    ``(B) Minimum distribution requirements.--Such term 
                shall not include any distributions made pursuant to 
                such plan during the taxable year if the aggregate 
                distributions made pursuant to such plan during such 
                taxable year are less than 5 percent of the employer's 
                net income for the taxable year as determined pursuant 
                to the employer's books and records prepared in 
                accordance with the employer's accounting procedures.
                    ``(C) Nondiscrimination.--Such term shall not 
                include any distributions made pursuant to such plan 
                during the taxable year unless such plan satisfies 
                requirements similar to the requirements of section 
                401(k)(3)(A)(ii) applied by treating the distributions 
                made pursuant to the plan as though such distributions 
                were contributions paid over to the trust referred to 
                in such section.
                    ``(D) Exception if distributions would jeopardize 
                the business.--An employer shall not fail to be treated 
                as making qualified profit-sharing distributions during 
                the taxable year to the extent that such employer 
                establishes to the satisfaction of the Secretary by 
                clear and convincing evidence that making such 
                distributions would jeopardize the ability of the 
                employer to continue as a going concern.
            ``(3) Specified employer.--For purposes of this 
        subsection--
                    ``(A) In general.--The term `specified employer' 
                means, with respect to any taxable year, any employer 
                which meets the gross receipts test of section 448(c) 
                (determined without regard to paragraph (4) thereof) 
                for such taxable year.
                    ``(B) Application of gross receipts test to 
                individuals, etc.--For purposes of subparagraph (A), in 
                the case of any employer which is not a corporation or 
                a partnership, the gross receipts test referred to in 
                such subparagraph shall be applied in the same manner 
                as if each trade or business of such employer were a 
                corporation or partnership.
            ``(4) Applicable employee remuneration.--For purposes of 
        this subsection, the term `applicable employee remuneration' 
        has the meaning given such term by subsection (m)(4), 
        determined without regard to subparagraph (B) thereof.
            ``(5) Controlled groups.--For purposes of this subsection, 
        all persons treated as a single employer under subsection (b), 
        (c), (m), or (o) of section 414 shall be treated as one 
        employer.
            ``(6) Coordination.--Rules similar to the rules of 
        subparagraphs (D) and (E) of subsection (m)(4) shall apply for 
        purposes of this subsection.
            ``(7) Authority to address abuse.--The Secretary shall have 
        the authority to address any abuses by employers under this 
        subsection, including, but not limited to, a reduction in 
        employee compensation or benefits in conjunction with the 
        payment of qualified profit-sharing distributions.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.
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