United States 116th Congress Status: In Committee 1 D cosponsors

S 2423 — 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.

Last action — Read twice and referred to the Committee on Finance.

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  1. ✓
    Introduced
  2. 2
    In Committee
  3. 3
    Passed Senate
  4. 4
    Passed House
  5. 5
    To Executive
  6. 6
    Enacted

This bill died with 116th Congress. It reached “In Committee” and never advanced before the session ended, so it can no longer move — a new version would have to be reintroduced in the current session.

This bill is no longer active — its legislative session has ended, so there is no live prognosis. It would have to be reintroduced in the current session to move again.

In plain language

The bill amends tax rules for private foundations regarding employee-owned stock.

This bill changes how certain employee-owned stocks are treated for private foundation taxation, allowing them not to be counted as outstanding stock. This applies specifically to stocks purchased from employee stock ownership plans after January 1, 2005.

Summary

This bill amends the Internal Revenue Code to exclude certain purchases of employee-owned stock from being considered as outstanding voting stock for the purpose of the tax on excess business holdings of a private foundation in a business enterprise. The bill applies to any voting stock that is (1) not readily tradable on an established securities market; (2) purchased by the business enterprise on or after January 1, 2005, from an employee stock ownership plan in which employees of the business enterprise participate, in connection with a distribution from the plan; and (3) held by the business enterprise as treasury stock, cancelled, or retired.

Bill Text

Sections of law this bill changes

1 section in 1 law

From the bill's own amending language, matched to the official United States Code (current through Public Law 119-121).

Private foundations; and certain other tax-exempt organizations · 26 U.S.C. ch. 42 1 section
  • § 4943 Taxes on excess business holdings Amends

    26 U.S.C. § 4943 — at 4943(c)(4)(A)

    The law today

    (a) Initial tax (1) Imposition There is hereby imposed on the excess business holdings of any private foundation in a business enterprise during any taxable year which ends during the taxable period a tax equal to 10 percent of the value of such holdings. (2) Special rules The tax imposed by paragraph (1)— (A) shall be imposed on the last day of the taxable year, but (B) with respect to the private foundation’s holdings in any business enterprise, shall be determined as of that day during the taxable year when the foundation’s excess holdings in such enterprise were the greatest. (b) Additional tax In any case in which an initial tax is imposed under subsection (a) with respect to the holdings of a private foundation in any business enterprise, if, at the close of the taxable period with respect to such holdings, the foundation still has excess business holdings in such enterprise, there is hereby imposed a tax equal to 200 percent of such excess business holdings. (c) Excess business holdings For purposes of this section— (1) In general The term “excess business holdings” means, with respect to the holdings of any private foundation in any business enterprise, the amount of stock or other interest in the enterprise which the foundation would have to dispose of to a person other than a disqualified person in order for the remaining holdings of the foundation in such enterprise to be permitted holdings. (2) Permitted holdings in a corporation (A) In general The permitted holdings of any private foundation in an incorporated business enterprise are— (i) 20 percent of the voting stock, reduced by (ii) the percentage of the voting stock owned by all disqualified persons. In any case in which all disqualified persons together do not own more than 20 percent of the voting stock of an incorporated business enterprise, nonvoting stock held by the private foundation shall also be treated as permitted holdings. (B) 35 percent rule where third person has effective control of enterprise If— (i) the private foundation and all disqualified persons together do not own more than 35 percent of the voting stock of an incorporated business enterprise, and (ii) it is established to the satisfaction of the Secretary that effective control of the corporation is in one or more persons who are not disqualified persons with respect to the foundation, then subparagraph (A) shall be applied by substituting 35 percent for 20 percent. (C) 2 percent de minimis rule A private foundation shall not be treated as having excess business holdings in any corporation in which it (together with all other private foundations which are described in section 4946(a)(1)(H)) owns not more than 2 percent of the voting stock and not more than 2 percent in value of all outstanding shares of all classes of stock. (3) Permitted holdings in partnerships, etc. The permitted holdings of a private foundation in any business enterprise which is not incorporated shall be determined under regulations prescribed by the Secretary. Such regulations shall be consistent in principle with paragraphs (2) and (4), except that— (A) in the case of a partnership or joint venture, “profits interest” shall be substituted for “voting stock”, and “capital interest” shall be substituted for “nonvoting stock”, (B) in the case of a proprietorship, there shall be no permitted holdings, and (C) in any other case, “beneficial interest” shall be substituted for “voting stock”. (4) Present holdings (A) (i) In applying this section with respect to the holdings of any private foundation in a business enterprise, if such foundation and all disqualified persons together have holdings in such enterprise in excess of 20 percent of the voting stock on May 26, 1969, the percentage of such holdings shall be substituted for “20 percent,” and for “35 percent” (if the percentage of such holdings is greater than 35 percent), wherever it appears in paragraph (2), but in no event shall the percentage so substituted b...

    12 other bills also change this section · Follow it → Official text at uscode.house.gov ↗

How this bill changes current law

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AI-generated reading aid from the bill's amendatory text — verify against the official bill.

The bill amends the Internal Revenue Code to treat certain employee-owned stock as outstanding for tax purposes related to private foundation excess business holdings.

  • Section 4943(c)(4)(A)

    (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, 2005, 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.

    This change allows specific employee-owned stock to be counted as outstanding, potentially impacting the tax liabilities of private foundations.

  • Section 4943(c)(4)(A)(ii)

    Section 4943(c)(4)(A)(ii) of the Internal Revenue Code of 1986 shall not apply with respect to any decrease in the percentage of holdings in a business enterprise by reason of the application of section 4943(c)(4)(A)(v) of such Code (as added by this section).

    This change provides a special rule for grandfathered foundations regarding ownership decreases due to pre-enactment purchases.

Action History

  1. Introduced in Senate

  2. Read twice and referred to the Committee on Finance.

Sponsors

Sponsorship breakdown

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1 sponsors · 0 co-sponsors · 546 not signed on

Sponsors (1)

Co-sponsors (0)

None.

Not signed on (546)

546 members have not signed on to this bill.

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"Not signed on" means a member has not sponsored or co-sponsored this bill — it does not imply opposition. Members flagged Voted No have a recorded No vote on this bill.

Whip count is in markup. Polling the chamber and every recorded vote this session. Only the first open is slow. It’s instant for you after this. Calling the roll · Tallying · Engrossing

Subjects

taxation
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Frequently asked questions

What does S 2423 do?
This bill amends the Internal Revenue Code to exclude certain purchases of employee-owned stock from being considered as outstanding voting stock for the purpose of the tax on excess business holdings of a private foundation in a business enterprise. The bill applies to any voting stock that is (1) not readily tradable on an established securities market; (2) purchased by the business enterprise on or after January 1, 2005, from an employee stock ownership plan in which employees of the business enterprise participate, in connection with a distribution from the plan; and (3) held by the business enterprise as treasury stock, cancelled, or retired.
Who sponsors S 2423?
S 2423 is sponsored by Stabenow, Debbie (Democratic).
What is the current status of S 2423?
This bill died with 116th Congress. It reached “In Committee” and never advanced before the session ended, so it can no longer move — a new version would have to be reintroduced in the current session.
Where can I track S 2423?
Track S 2423 free on One Click Politics — get push/email alerts when it moves.

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