I 
115TH CONGRESS 
1ST SESSION H. R. 4166 
To amend the Internal Revenue Code of 1986 to allow all employees of 
a firm to be counted as a single shareholder toward the shareholder 
limit of an S corporation. 
IN THE HOUSE OF REPRESENTATIVES 
OCTOBER 27, 2017 
Mr. SMITH of Nebraska introduced the following bill; which was referred to 
the Committee on Ways and Means 
A BILL 
To amend the Internal Revenue Code of 1986 to allow all 
employees of a firm to be counted as a single shareholder 
toward the shareholder limit of an S corporation. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. EMPLOYEES OF A FIRM COUNTED AS A SINGLE 
SHAREHOLDER 
TOWARD 
SHAREHOLDER 
LIMIT OF S CORPORATION. 
(a) IN GENERAL.—Subsection (c) of section 1361 of 
the Internal Revenue Code of 1986 is amended by adding 
at the end the following: 
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‘‘(7) EMPLOYEES
TREATED
AS
ONE
SHARE-
HOLDER.— 
‘‘(A) IN GENERAL.—For purposes of sub-
section (b)(1)(A), in the case of a corporation 
which has only employee shareholders, there 
shall be treated as one shareholder all employ-
ees (and their estates) of a corporation and any 
wholly owned business entities (as determined 
by the Secretary) of such corporation. 
‘‘(B) EMPLOYEE DEFINED.—For purposes 
of this paragraph— 
‘‘(i) IN
GENERAL.—The term ‘‘em-
ployee’’ means any individual (whether a 
resident alien, nonresident alien, or citizen) 
that would be an employee described under 
section 3121(d) (1) or (2). 
‘‘(ii) CERTAIN DETERMINATIONS WITH 
RESPECT
TO
SPOUSE
DISREGARDED.—In 
making the determination whether a cor-
poration has only employee shareholders, 
any current ownership in stock by a spouse 
of an employee by reason of a State com-
munity property law or other similar Fed-
eral, State, or foreign country law, shall be 
disregarded.’’. 
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(b) EXCEPTION
TO NONRESIDENT SHAREHOLDER 
PROHIBITION.—Subparagraph (C) of section 1361(b)(1) 
of such Code is amended to read as follows: 
‘‘(C) have a nonresident alien as a share-
holder (except for a nonresident alien that is a 
shareholder by reason of subsection (c)(7) or a 
nonresident alien spouse of an employee which 
is a shareholder in a corporation described in 
subsection (c)(7)), and’’. 
(c) WITHHOLDING WITH RESPECT TO NONRESIDENT 
ALIENS.—Section 1373 of such Code is amended by add-
ing at the end the following: 
‘‘(c) WITHHOLDING
WITH
RESPECT
TO
NON-
RESIDENT ALIENS.—The principles of sections 1441 and 
1446 shall apply to income allocable to, and distributions 
to, a nonresident alien shareholder of an S corporation (al-
lowed by reason of section 1361(b)(1)(C)). The Secretary 
may prescribe regulations to carry out the purposes of this 
subsection.’’. 
(d) DEFINING ITEMS OF INCOME FOR PURPOSES OF 
WITHHOLDING TAX
ON NONRESIDENT ALIENS.—Sub-
section (b) of section 1441 of such Code is amended by 
inserting before the period at the end of the first sentence 
the following: ‘‘, and any items of income described in sec-
tion 1366(a) allocable to a nonresident alien that is an 
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