SHARE Plan Act
Bill: H.R.4962 | Sponsor: Rep. Larson, John B. (D-CT)
Policy area: Taxation

Summary:
Share Holder Allocation for Rewards to Employees Plan Act or the SHARE Plan Act
This bill requires certain corporations (i.e., publicly traded domestic corporations and domestic corporations with more than 500 employees) to maintain a SHARE plan for their employees as a condition of eligibility for capital gains rates. The bill defines a SHARE plan as a plan requiring such corporations to make periodic distributions of their common stock to participating employees.
The bill excludes from the gross income of employees participating in a SHARE plan, for income tax purposes, SHARE plan stock received by such employees.

To amend the Internal Revenue Code of 1986 to provide that the stock of 
 certain corporations is eligible for capital gains rates only if such 
corporation maintains a plan for distributing equity to employees, and 
                          for other purposes.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Share Holder Allocation for Rewards 
to Employees Plan Act'' or as the ``SHARE Plan Act''.

SEC. 2. STOCK OF CERTAIN CORPORATIONS ELIGIBLE FOR CAPITAL GAINS RATES 
              ONLY IF CORPORATION MAINTAINS PLAN FOR DISTRIBUTING 
              EQUITY TO EMPLOYEES.

    (a) In General.--Part III of subchapter P of chapter 1 of the 
Internal Revenue Code of 1986 is amended by adding at the end the 
following new section:

``SEC. 1224. SHARE PLANS.

    ``(a) In General.--For purposes of section 1222, stock of any 
corporation which is sold or exchanged during any calendar year shall 
not be treated as held for more than 1 year (regardless of the holding 
period of such stock determined without regard to this section) 
unless--
            ``(1) such corporation is not a covered employer for the 
        preceding calendar year, or
            ``(2) such corporation is a SHARE corporation for the 
        preceding calendar year.
    ``(b) Covered Employer.--For purposes of this section, the term 
`covered employer' means, with respect to any calendar year--
            ``(1) any domestic corporation any class of stock of which 
        is regularly traded on an established securities market as of 
        the last day of such calendar year, and
            ``(2) any other domestic corporation which employed on 
        average more than 500 eligible employees on business days 
        during such calendar year.
Such term shall not include any S corporation.
    ``(c) SHARE Corporation.--For purposes of this section--
            ``(1) In general.--The term `SHARE corporation' means, with 
        respect to any calendar year, any corporation which 
        demonstrates to the satisfaction of the Secretary that such 
        corporation (as of the close of such calendar year) has--
                    ``(A) a SHARE ratio of not less than 10 percent,
                    ``(B) made distributions of common stock of such 
                corporation to employees of such corporation pursuant 
                to a SHARE plan during such calendar year which in the 
                aggregate equals or exceeds 2 percent of the aggregate 
                outstanding shares of common stock of such corporation 
                (other than shares held by such corporation), or
                    ``(C) made distributions of common stock of such 
                corporation to employees of such corporation pursuant 
                to a SHARE plan with a fair market value (determined as 
                of the date of distribution of each such share) which 
                equals or exceeds the applicable dollar amount per 
                employee when aggregated with all such distributions 
                made during such calendar year and all prior calendar 
                years to such employee.
            ``(2) Applicable dollar amount.--The term `applicable 
        dollar amount' means--
                    ``(A) in the case of the calendar year preceding 
                the first calendar year to which subsection (a) 
                applies, $50,000, and
                    ``(B) in the case of any subsequent calendar year, 
                the applicable dollar amount in effect for the 
                preceding calendar year increased by $50,000 (but not 
                in excess of $250,000).
    ``(d) SHARE Ratio.--For purposes of this section--
            ``(1) In general.--The term `SHARE ratio' means, with 
        respect to any corporation for any calendar year, the ratio 
        (expressed as a percentage) of--
                    ``(A) the aggregate shares of common stock of such 
                corporation which have been granted to participating 
                employees of such corporation pursuant to a SHARE plan 
                during such calendar year or any prior calendar year, 
                divided by
                    ``(B) the aggregate outstanding shares of common 
                stock of such corporation (other than shares held by 
                such corporation).
            ``(2) Treatment of certain prior grants.--If such 
        corporation demonstrates to the satisfaction of the Secretary 
        that, during the 10 years preceding the date of the enactment 
        of this section, such corporation made grants of common stock 
        to eligible employees of such corporation which were not in 
        exchange for compensation (other than service as an employee), 
        such stock shall be taken into account under paragraph (1)(A).
            ``(3) Treatment of convertible stock.--In the case of any 
        class of stock of any corporation which may be converted to 
        common stock, such stock shall be taken into account as common 
        stock under paragraphs (1)(B) and (2) on a fully diluted basis.
            ``(4) Exclusion of incentive equity.--
                    ``(A) In general.--Incentive equity shall not be 
                taken into account under subparagraph (A) or (B) of 
                paragraph (1) (including any stock which would 
                otherwise be so taken into account by reason of 
                paragraph (2) or (3)).
                    ``(B) Incentive equity.--For purposes of this 
                paragraph, the term `incentive equity' means any 
                restricted stock granted to an employee of the 
                corporation, any stock acquired pursuant to an 
                incentive stock option granted to an employee of the 
                corporation, or any similar grant of stock or 
                convertible equity.
            ``(5) Treatment of forfeited stock.--In the case of any 
        stock which is forfeited (by reason of a failure to vest or 
        otherwise), such stock shall not be taken into account under 
        paragraph (1) after the second calendar year following the 
        calendar year in which such stock is so forfeited.
    ``(e) SHARE Plan.--For purposes of this section--
            ``(1) In general.--The term `SHARE plan' means, with 
        respect to any corporation, a plan which provides for making 
        periodic distributions of common stock of such corporation to 
        each participating employee of such corporation (determined as 
        the date of each such periodic distribution).
            ``(2) Participating employees.--
                    ``(A) In general.--The term `participating 
                employee' means, with respect to any corporation, any 
                eligible employee of such corporation who is treated as 
                a participating employee under the terms of the plan.
                    ``(B) 80-percent requirement.--A plan shall not be 
                treated as a SHARE plan unless, with respect to each 
                periodic distribution made under such plan, at least 80 
                percent of the eligible employees of such corporation 
                are participating employees with respect to such 
                distribution.
            ``(3) Eligible employee.--The term `eligible employee' 
        means, with respect to any corporation, any full-time employee 
        who is based in the United States and who is not one of the 1 
        percent of employees receiving the highest annual compensation 
        from such corporation.
            ``(4) Distribution requirements.--
                    ``(A) In general.--A plan shall not be treated as a 
                SHARE plan unless the distributions made under such 
                plan--
                            ``(i) are made without compensation (other 
                        than service as an employee),
                            ``(ii) may be sold or transferred without 
                        restriction--
                                    ``(I) after a holding period of not 
                                to exceed 3 years, and
                                    ``(II) during any period described 
                                in subclause (I), during any hardship 
                                of the employee (within the meaning of 
                                section 401(k)(2)(B)(i)(IV)),
                            ``(iii) except as provided in subparagraph 
                        (B), are made in equal amounts to each 
                        participating employee (determined in the 
                        aggregate with respect to any calendar year and 
                        properly adjusted with respect any employee not 
                        employed at all times during such calendar 
                        year), and
                            ``(iv) except in the case of a distribution 
                        made to an employee described in subparagraph 
                        (C), vest immediately in the recipient.
                    ``(B) Adjustments for period of service.--The 
                requirement of subparagraph (A)(iii) shall be treated 
                as met if such requirement is met when applied 
                separately to groups of participating employees divided 
                (under the terms of the corporation's SHARE plan) on 
                the basis of the period for which such employees have 
                been employed by the distributing corporation.
                    ``(C) Permissible restriction on vesting.--In the 
                case of any employee employed by the distributing 
                corporation for a period of less than 5 years, such 
                employee's interest in any distribution of stock under 
                a SHARE plan shall vest not later than the earlier of--
                            ``(i) the date on which such employee has 
                        been so employed for a period of 5 years, or
                            ``(ii) the first date after such 
                        distribution on which there is a change in the 
                        control of such distributing corporation.
    ``(f) Application to Partnerships.--
            ``(1) In general.--Rules similar to the rules of this 
        section and section 139I shall apply with respect to any 
        partnership.
            ``(2) Exception.--Paragraph (1) shall not apply to any 
        partnership if the principal business of such partnership is 
        the provision of legal, accounting, or medical services and 
        such partnership is majority owned by licensed lawyers, 
        accountants, or medical doctors, respectively.
            ``(3) Regulations.--As soon as practicable after the date 
        of the enactment of this Act, the Secretary shall issue such 
        regulations or other guidance as may be necessary or 
        appropriate to carry out the purposes of this subsection.
    ``(g) Publication by Treasury.--The Secretary shall make publicly 
available with respect to each calendar year--
            ``(1) a list of corporations which the Secretary has 
        identified as covered corporations,
            ``(2) a list of corporations which the Secretary has 
        identified as SHARE corporations, and
            ``(3) a list of corporations described in paragraph (1) 
        which are not described in paragraph (2).
    ``(h) Determination of Corporate Earnings and Profits.--
Distributions of stock under a SHARE plan shall not be taken into 
account in determining the earnings and profits of the distributing 
corporation.
    ``(i) Aggregation Rules.--In the case of any controlled group 
(within the meaning of section 1563(a))--
            ``(1) such group shall be treated as a single corporation 
        for purposes of applying subsection (b)(2), and
            ``(2) the Secretary may issue such regulations or other 
        guidance as the Secretary determines to be appropriate for 
        purposes of applying the provisions of this section to such 
        group, including regulations or other guidance that coordinates 
        or consolidates the SHARE plans of the corporations in such 
        group or allows or requires employees of any corporation in 
        such group to receive stock of another corporation in such 
        group pursuant to such SHARE plans.''.
    (b) Clerical Amendment.--The table of sections for part III of 
subchapter P of chapter 1 of the Internal Revenue Code of 1986 is 
amended by adding at the end the following new item:

``Sec. 1224. SHARE plans.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to stock sold or exchanged in calendar years beginning more than 
1 year after the date of the enactment of this Act.

SEC. 3. DISTRIBUTIONS OF STOCK ISSUED UNDER SHARE PLANS EXCLUDED FROM 
              GROSS INCOME.

    (a) In General.--Part III of subchapter B of chapter 1 of the 
Internal Revenue Code of 1986 is amended by inserting after section 
139H the following new section:

``SEC. 139I. SHARE PLAN DISTRIBUTIONS.

    ``(a) In General.--Gross income shall not include any SHARE plan 
stock received by an employee under a SHARE plan.
    ``(b) Exclusion of Certain Gain.--
            ``(1) In general.--In the case of the disposition during 
        any taxable year by any employee or former employee of SHARE 
        plan stock received by such employee under a SHARE plan, so 
        much of the taxpayer's net SHARE plan stock gain as does not 
        exceed the taxpayer's eligible expenses shall not be 
        recognized.
            ``(2) Net share plan stock gain.--For purposes of this 
        subsection, the term `net SHARE plan stock gain' means, with 
        respect to any taxpayer for any taxable year, the excess of--
                    ``(A) the aggregate gains from the disposition of 
                SHARE plan stock during such taxable year, over
                    ``(B) the aggregate losses from such dispositions.
            ``(3) Eligible expenses.--For purposes of this section--
                    ``(A) In general.--The term `eligible expenses' 
                means, with respect to any taxpayer for any taxable 
                year, amounts paid by such taxpayer during such taxable 
                year for--
                            ``(i) principal or interest on any 
                        qualified education loan (within the meaning of 
                        section 221),
                            ``(ii) medical care, not compensated for by 
                        insurance or otherwise, for the taxpayer, the 
                        taxpayer's spouse, or dependents (as defined in 
                        section 152, determined without regard to 
                        subsections (b)(1), (b)(2), and (d)(1)(B) 
                        thereof), and
                            ``(iii) principal or interest on 
                        indebtedness secured by the principal residence 
                        (within the meaning of section 121) of the 
                        taxpayer.
                    ``(B) Denial of double benefit.--No deduction or 
                credit shall be allowed under this title with respect 
                to any expense taken into account in determining the 
                amount excluded from gross income under this 
                subsection.
    ``(c) Definitions Related to SHARE Plans.--For purposes of this 
section--
            ``(1) SHARE plan.--The term `SHARE plan' has the meaning 
        given such term in section 1224.
            ``(2) SHARE plan stock.--The term `SHARE plan stock' means, 
        with respect to any employee, stock received by such employee 
        under a SHARE plan.''.
    (b) Clerical Amendment.--The table of sections for part III of 
subchapter B of chapter 1 of the Internal Revenue Code of 1986 is 
amended by inserting after the item relating to section 139H the 
following new item:

``Sec. 139I. SHARE plan distributions.''.
    (c) Effective Date.--The amendments made by this section shall 
apply to stock received in calendar years beginning after the date of 
the enactment of this Act, in taxable years ending after the beginning 
of the first such calendar year.
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