S.1416 - Reduction of Excess Business Holding Accrual Act (119th Congress)
Summary
S.1416, the "Reduction of Excess Business Holding Accrual Act," aims to amend the Internal Revenue Code of 1986 concerning the tax on private foundation excess business holdings. The bill focuses on employee-owned stock purchased by a business enterprise through certain employee stock ownership retirement plans (ESOPs). It proposes that such stock, under specific conditions, be treated as outstanding voting stock for tax purposes, potentially altering the calculation of excess business holdings.
Expected Effects
The primary effect of this bill would be to change how employee-owned stock is treated when calculating the tax on private foundation excess business holdings. By treating certain employee-owned stock as outstanding, it could reduce the tax burden on private foundations that hold interests in businesses with ESOPs. This could incentivize more businesses to adopt ESOPs, as it makes them more attractive to private foundations.
Potential Benefits
- Encourages Employee Ownership: By providing tax benefits related to ESOPs, the bill could encourage more companies to adopt employee ownership models.
- Reduces Tax Burden: Private foundations holding interests in businesses with ESOPs may experience a reduced tax burden.
- Promotes Business Growth: The reduced tax burden could free up capital for businesses to invest in growth and expansion.
- Simplifies Tax Compliance: The bill aims to clarify the tax treatment of employee-owned stock, potentially simplifying compliance for private foundations and businesses.
- Incentivizes Long-Term Stock Holding: The bill encourages holding the stock as treasury stock, cancelled, or retired, which can promote long-term stability.
Potential Disadvantages
- Potential for Tax Avoidance: The changes could create loopholes that allow some private foundations to avoid paying their fair share of taxes.
- Complexity: The bill introduces additional complexity to the tax code, which could be difficult for some businesses and foundations to navigate.
- Limited Scope: The bill only addresses a specific aspect of private foundation tax law, and its overall impact on the economy may be limited.
- Unintended Consequences: Altering the tax code can sometimes lead to unintended consequences that are difficult to predict.
- Benefit Primarily to Wealthy: The primary beneficiaries are private foundations, which are typically associated with wealthy individuals or families.
Most Disadvantaged Areas:
Constitutional Alignment
This bill appears to align with the general constitutional principle of Congress's power to tax and regulate commerce (Article I, Section 8). It does not obviously infringe upon any specific constitutional right or protection. The amendment to the Internal Revenue Code falls under the purview of Congress's legislative authority.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).