H.R.2014 - Reduction of Excess Business Holding Accrual Act (119th Congress)
Summary
H.R. 2014, 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 proposes that employee-owned stock purchased by a business enterprise through certain employee stock ownership retirement plans should be treated as outstanding voting stock. This treatment applies under specific conditions, including that the stock is not readily tradable, is purchased after January 1, 2020, and is held as treasury stock, cancelled, or retired.
Expected Effects
The primary effect of this bill would be to alter the calculation of excess business holdings for private foundations. This change could potentially reduce the tax burden on these foundations. It may also incentivize businesses to repurchase employee-owned stock, influencing employee ownership structures.
Potential Benefits
- Potentially reduces the tax burden on private foundations, freeing up resources for charitable activities.
- May encourage businesses to repurchase employee-owned stock, potentially benefiting employees through stock distributions.
- Could simplify the administration of tax regulations related to private foundation holdings.
- May promote employee ownership by making it more attractive for businesses to establish or maintain employee stock ownership plans (ESOPs).
- Could lead to increased investment in businesses with ESOPs, boosting their growth and stability.
Potential Disadvantages
- May create a loophole that allows private foundations to avoid taxes on excess business holdings.
- Could disproportionately benefit larger private foundations with significant business holdings.
- The complexity of the provisions may lead to confusion and potential for misinterpretation.
- The 10-year restriction on stock purchases from newly established plans might discourage the formation of new ESOPs.
- Potential for unintended consequences related to the valuation and treatment of employee-owned stock.
Constitutional Alignment
The bill falls under the purview of Congress's power to lay and collect taxes, duties, imposts, and excises as outlined in Article I, Section 8, Clause 1 of the Constitution. The bill does not appear to infringe upon any specific constitutional rights or limitations. The amendment to the Internal Revenue Code is within the legislative authority granted to Congress.
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).