I 
119TH CONGRESS 
1ST SESSION H. R. 6418 
To amend the Internal Revenue Code of 1986 to deny the deduction for 
executive compensation unless the employer maintains profit-sharing dis-
tributions for employees. 
IN THE HOUSE OF REPRESENTATIVES 
DECEMBER 3, 2025 
Mrs. WATSON COLEMAN 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 deny the 
deduction for executive compensation unless the employer 
maintains profit-sharing distributions for employees. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Employee Profit-Shar-
ing Encouragement Act of 2025’’. 
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SEC. 2. DENIAL OF DEDUCTION FOR EXECUTIVE COM-
PENSATION UNLESS EMPLOYER MAINTAINS 
PROFIT-SHARING DISTRIBUTIONS. 
(a) IN GENERAL.—Section 162 of the Internal Rev-
enue Code of 1986 is amended by redesignating subsection 
(s) as subsection (t) and by inserting after subsection (r) 
the following new subsection: 
‘‘(s) EXECUTIVE COMPENSATION PAID BY EMPLOY-
ERS WHO DO NOT MAINTAIN PROFIT-SHARING DIS-
TRIBUTIONS.— 
‘‘(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
DISTRIBU-
TIONS.—For purposes of this subsection— 
‘‘(A) IN
GENERAL.—The term ‘qualified 
profit-sharing distributions’ means a cash dis-
tribution made pursuant to a written plan of 
the employer under which— 
‘‘(i) employees (including part-time 
employees) who have been employed for at 
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least 1 year as of the date of the distribu-
tion 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
REQUIRE-
MENTS.—Such term shall not include any dis-
tributions made pursuant to such plan during 
the taxable year if the aggregate distributions 
made pursuant to such plan during such tax-
able year are less than 5 percent of the employ-
er’s net income for the taxable year as deter-
mined pursuant to the employer’s books and 
records prepared in accordance with the em-
ployer’s accounting procedures. 
‘‘(C) 
NONDISCRIMINATION.—Such 
term 
shall not include any distributions made pursu-
ant 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 con-
tributions paid over to the trust referred to in 
such section. 
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‘‘(D) 
EXCEPTION
IF
DISTRIBUTIONS 
WOULD JEOPARDIZE THE BUSINESS.—An em-
ployer 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’ means, with respect to any taxable 
year, any employer which meets the gross re-
ceipts test of section 448(c) (determined with-
out regard to paragraph (4) thereof) for such 
taxable year. 
‘‘(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 subpara-
graph shall be applied in the same manner as 
if each trade or business of such employer were 
a corporation or partnership. 
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‘‘(4) 
APPLICABLE
EMPLOYEE
REMUNERA-
TION.—For purposes of this subsection, the term 
‘applicable employee remuneration’ has the meaning 
given such term by subsection (m)(4), determined 
without regard to subparagraph (B) thereof. 
‘‘(5) CONTROLLED GROUPS.—For purposes of 
this subsection, all persons treated as a single em-
ployer under subsection (b), (c), (m), or (o) of sec-
tion 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, includ-
ing, but not limited to, a reduction in employee com-
pensation or benefits in conjunction with the pay-
ment 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. 
Æ 
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