Proposed Tax Rule Change for Private Foundations and Employee Stock Ownership

• •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.
• •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.

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.

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