A bill to amend the Internal Revenue Code of 1986 for purposes of the tax on private foundation excess business holdings to treat as outstanding any employee-owned stock purchased by a business enterprise pursuant to certain employee stock ownership retirement plans.
Bill: S.1982 | Sponsor: Sen. Stabenow, Debbie (D-MI)
Policy area: Taxation

Summary:
This bill excludes certain purchases of employee-owned stock from being considered as outstanding voting stock for the purpose of the excise tax on excess business holdings of a private foundation in a business enterprise.
The bill applies to any voting stock that is (1) not readily tradable on an established securities market; (2) purchased by the business enterprise on or after January 1, 2005, from an employee stock ownership plan in which employees of the business enterprise participate, in connection with a distribution from the plan; and (3) held by the business enterprise as treasury stock, cancelled, or retired.

To amend the Internal Revenue Code of 1986 for purposes of the tax on 
private foundation excess business holdings to treat as outstanding any 
  employee-owned stock purchased by a business enterprise pursuant to 
           certain employee stock ownership retirement plans.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. CERTAIN PURCHASES OF EMPLOYEE-OWNED STOCK DISREGARDED FOR 
              PURPOSES OF FOUNDATION TAX ON EXCESS BUSINESS HOLDINGS.

    (a) In General.--Section 4943(c)(4)(A) of the Internal Revenue Code 
of 1986 is amended by adding at the end the following new clause:
                    ``(v) For purposes of clause (i), subparagraph (D), 
                and paragraph (2), any voting stock which--
                            ``(I) is not readily tradable on an 
                        established securities market,
                            ``(II) is purchased by the business 
                        enterprise on or after January 1, 2005, from an 
                        employee stock ownership plan (as defined in 
                        section 4975(e)(7)) in which employees of such 
                        business enterprise participate, in connection 
                        with a distribution from such plan, and
                            ``(III) is held by the business enterprise 
                        as treasury stock, cancelled, or retired,
                shall be treated as outstanding voting stock, but only 
                to the extent so treating such stock would not result 
                in permitted holdings exceeding 49 percent (determined 
                without regard to this clause). The preceding sentence 
                shall not apply with respect to the purchase of stock 
                from a plan during the 10-year period beginning on the 
                date the plan is established.''.
    (b) Effective Date.--
            (1) In general.--The amendments made by this section shall 
        apply to taxable years ending after the date of the enactment 
        of this Act and to purchases by a business enterprise of voting 
        stock in taxable years beginning before, on, or after the date 
        of the enactment of this Act.
            (2) Special rule for grandfathered foundations in case of 
        decrease in ownership by reason of pre-enactment purchases.--
        Section 4943(c)(4)(A)(ii) of the Internal Revenue Code of 1986 
        shall not apply with respect to any decrease in the percentage 
        of holdings in a business enterprise by reason of the 
        application of section 4943(c)(4)(A)(v) of such Code (as added 
        by this section).
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