This bill changes how the IRS counts company shares when figuring the tax on private foundations that own part of a business. If a company buys back non-public shares from its employee stock ownership plan (ESOP) on or after January 1, 2020, and those shares are held as treasury stock, canceled, or retired, the shares are still counted as if they exist. This can make the foundation’s ownership share look smaller, but only up to a limit so permitted holdings don’t go over 49%. This special counting rule doesn’t apply during the first 10 years after an ESOP is created. It applies to tax years ending after the bill becomes law .

Key points:

• Who is affected: Private foundations that own parts of companies, and businesses with ESOPs holding non-public company stock.
• What changes: Certain ESOP shares a company bought back after 1/1/2020 are treated as still “outstanding,” which can reduce a foundation’s measured share, but not beyond a 49% cap; this doesn’t apply in the first 10 years of a new ESOP.
• When: Effective for taxable years ending after the date this becomes law.