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Introduced on March 10, 2025 by W. Greg Steube
Referred to the House Committee on Ways and Means.
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.
Adds a new clause (v) to section 4943(c)(4)(A) providing that, for purposes of clause (i), subparagraph (D), and paragraph (2) of that section, certain voting stock is disregarded.
Specifies the conditions under which voting stock is disregarded: (I) the stock is not readily tradable on an established securities market; (II) the stock 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 the business enterprise participate, in connection with a distribution from that plan; and (III) the stock is held by the business enterprise as treasury stock, cancelled, or retired.
Adds clause (vi) stating that section 4943(c)(4)(A)(ii) shall not apply with respect to any decrease in the percentage of holdings in a business enterprise that results from applying clause (v).
Effective-date rule: the amendments apply to taxable years ending after the date of enactment of this Act.
Effective-date rule for purchases: applies to purchases by a business enterprise of voting stock in taxable years beginning after December 31, 2019 (i.e., purchases on or after January 1, 2020).