Employee Profit-Sharing Encouragement Act of 2023

To amend the Internal Revenue Code of 1986 to deny the deduction for executive compensation unless the employer maintains profit-sharing distributions for employees. 1. Short title This Act may be cited as the Employee Profit-Sharing Encouragement Act of 2023 2. Denial of deduction for executive compensation unless employer maintains profit-sharing distributions (a) In general Section 162 (s) Executive compensation paid by employers who do not maintain profit-Sharing distributions (1) In general In the case of a specified employer, no deduction shall be allowed under this chapter for applicable employee remuneration with respect to any highly compensated individual (within the meaning of section 105(h)) for any taxable year unless qualified profit-sharing distributions are made during such taxable year. (2) Qualified profit-sharing distributions For purposes of this subsection— (A) In general The term qualified profit-sharing distributions (i) employees (including part-time employees) who have been employed for at least 1 year as of the date of the distribution have a right to such distribution, and (ii) the amount of such distributions are defined under such plan on the basis of a measure of the receipts, profit, revenues, or earnings of such employer. (B) Minimum distribution requirements Such term shall not include any distributions made pursuant to such plan during the taxable year if the aggregate distributions made pursuant to such plan during such taxable year are less than 5 percent of the employer’s net income for the taxable year as determined pursuant to the employer’s books and records prepared in accordance with the employer’s accounting procedures. (C) Nondiscrimination Such term shall not include any distributions made pursuant to such plan during the taxable year unless such plan satisfies requirements similar to the requirements of section 401(k)(3)(A)(ii) applied by treating the distributions made pursuant to the plan as though such distributions were contributions paid over to the trust referred to in such section. (D) Exception if distributions would jeopardize the business An employer shall not fail to be treated as making qualified profit-sharing distributions during the taxable year to the extent that such employer establishes to the satisfaction of the Secretary by clear and convincing evidence that making such distributions would jeopardize the ability of the employer to continue as a going concern. (3) Specified employer For purposes of this subsection— (A) In general The term specified employer (B) Application of gross receipts test to individuals, etc For purposes of subparagraph (A), in the case of any employer which is not a corporation or a partnership, the gross receipts test referred to in such subparagraph shall be applied in the same manner as if each trade or business of such employer were a corporation or partnership. (4) Applicable employee remuneration For purposes of this subsection, the term applicable employee remuneration (5) Controlled groups For purposes of this subsection, all persons treated as a single employer under subsection (b), (c), (m), or (o) of section 414 shall be treated as one employer. (6) Coordination Rules similar to the rules of subparagraphs (D) and (E) of subsection (m)(4) shall apply for purposes of this subsection. (7) Authority to address abuse The Secretary shall have the authority to address any abuses by employers under this subsection, including, but not limited to, a reduction in employee compensation or benefits in conjunction with the payment of qualified profit-sharing distributions. . (b) Effective date The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

Summary: Employee Profit-Sharing Encouragement Act of 2023 This bill denies the business tax deduction for the remuneration of highly-compensated corporate employees unless the corporation has average annual gross receipts of less than $25 million and maintains a plan for making qualified profit-sharing distributions to its employees. The bill defines qualified profit-sharing distributions as cash distributions under a written employer plan that gives employees who have been employed for at least one year a right to profit-sharing distributions and bases the amount of such distributions on the measure of the receipts, profit, revenues, or earnings of the employer.