Reduction of Excess Business Holding Accrual Act

Clarifies how the excess business holdings tax applies when a company with an employee stock ownership plan (ESOP) buys back non‑public voting shares that employees receive in a distribution and then the company retires or holds those shares as treasury stock. These buybacks are ignored when calculating a private foundation’s ownership percentage, so a foundation isn’t penalized just because the company reduced its outstanding shares.

It also prevents using this rule to claim extra ownership reductions under a different clause. The change applies to tax years after enactment and retroactively to qualifying ESOP-related purchases made on or after January 1, 2020.