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HR6440FEDERALFederal Billin committee

Proposed Tax Rule Change for Private Foundations and Employee Stock Ownership

Original title: 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 · November 15, 2023: Referred to the House Committee on Ways and Means.Sponsor: W. Steube

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What This Bill Would Do

This bill proposes a change to the tax code regarding how private foundations calculate their '.' It would allow certain stock purchased by a business from an employee stock ownership plan to be treated as 'outstanding' stock for tax purposes, provided specific conditions are met.

Why it matters

This bill changes the tax calculation for private foundations that own businesses, potentially affecting their tax liability if they purchase stock back from employee retirement plans.

Who It Would Affect

Groups the bill's text would affect if enacted, as described in the record. Being affected is not a position for or against it.

Directly affected

Private foundations

Foundations that hold business interests may see changes in how their ownership percentages are calculated for tax purposes.

Directly affected

Business enterprises with ESOPs

Businesses that buy back stock from their employee retirement plans may be affected by how that stock is classified for foundation tax compliance.

Key Facts

The bill amends Section 4943(c)(4)(A) of the Internal Revenue Code regarding taxes on private foundation excess business holdings.
It allows non-tradable voting stock purchased by a business from an employee stock ownership plan (ESOP) to be treated as 'outstanding' stock.
The stock must have been purchased on or after January 1, 2005, in connection with a plan distribution.
The stock must be held as treasury stock, cancelled, or retired by the business enterprise.

Show all 8 facts

The treatment of this stock as 'outstanding' is capped at a maximum of 49 percent of total holdings.
The rule does not apply to stock purchased from a plan within the first 10 years of the plan's establishment.
The amendments apply to taxable years ending after the date of the bill's enactment.
The bill includes a special rule for 'grandfathered' foundations regarding decreases in ownership percentages resulting from these specific stock purchases.

Frequently Asked Questions

What is an 'excess business holding' for a private foundation?

Under current tax law, private foundations are generally limited in the percentage of a business they can own; if they exceed these limits, they may be subject to excise taxes.

Does this bill apply to all stock purchases?

No, it only applies to voting stock that is not readily tradable on a securities market and was purchased from an under specific conditions.

What else do you want to know?

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Where This Stands

Currently in committee. The next step in the legislative lifecycle is Floor Vote.

Last action

Referred to the House Committee on Ways and Means.Nov 15, 2023

Version history

Only one version on file - nothing to compare yet. As later stages (committee substitute, engrossed, enrolled) are captured, the redline appears here.

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Full breakdown

Who this bill affects and the strongest case for and against it, written only from the bill’s own text.

Discoveries

1 pattern noticed across the record

Patterns POLISCOPE noticed across the record. These are observations to investigate, not conclusions.

policy shift100% confidence

Retroactive Application

The bill allows for the treatment of stock purchased as far back as January 1, 2005, to be considered under these new rules.

Internal Revenue Code of 1986

Connected Entities

W. Steube, Internal Revenue Code of 1986, House Ways and Means Committee and 1 more

PersonW. Steube“Member of the House of Representatives who introduced the bill.”Map →

otherInternal Revenue Code of 1986“The federal tax law being amended.”Map →

OrganizationHouse Ways and Means Committee“The committee to which the bill was referred.”Map →

otherHouse Committee on Education and Workforce“mentioned”Map →

Sources

Open source document

www.congress.gov

Analysis Score

0–100

Significance40
How much this matters to a regular citizen
Controversy10
Intensity of disagreement among stakeholders
Entertainment5
Compellingness for a non-policy-wonk reader
Buzz10
Current news / social attention level

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