Definition: In this task, you are given text for US Congressional and California state bills, your task is to generate a summary for this bill.
Input: SECTION 1. SHORT TITLE.

This Act may be cited as the ''Employee Participation Incentive Act
of 2005''.

SEC. 2. MAXIMUM RATE OF INCOME TAX FOR C CORPORATIONS WITH SUBSTANTIAL
EMPLOYEE OWNERSHIP.

(a) In General.--Section 11 of the Internal Revenue Code of 1986
(relating to tax on corporations) is amended by redesignating
subsections (c) and (d) as subsections (d) and (e), respectively, and
by inserting after subsection (b) the following new subsection:
''(c) Maximum Rate of 30 Percent for Corporations With Substantial
Employee Ownership.--
''(1) In general.--Except as provided in subsection (b)(2),
the maximum rate of tax under subsection (b) shall be 30
percent with respect to any corporation if, with respect to
such corporation--
''(A) the employee voting percentage is at least 20
percent, and
''(B) the employee value percentage is at least 20
percent.
''(2) Definitions.--For purposes of this subsection--
''(A) Employee voting percentage.--The term
'employee voting percentage' means the percentage of
the total voting power of the stock of such corporation
which is held directly by employees of such
corporation.
''(B) Employee value percentage.--The term
'employee value percentage' means the percentage of the
total value of the stock of such corporation which is
held directly by employees of such corporation.
''(C) Stock.--The term 'stock' has the meaning
given such term under section 1504.
''(3) Determination of ownership averages.--
''(A) In general.--The determination of the
employee voting percentage and the employee value
percentage shall be made on the last day of the taxable
year of the corporation.
''(B) Holdings of 5 percent-shareholders and highly
compensated employees disregarded.--Each such
percentage shall be determined without regard to the
holdings of any highly compensated employee (as defined
in section 414(q)). Notwithstanding the preceding
sentence, the holdings of 5-percent owners (as defined
in such section) shall be taken into account if the
corporation has 50 or fewer employees.
''(C) Controlled groups.--In the case of
corporations which are treated as a single employer
under section 52(a)--
''(i) such corporations shall be treated as
1 corporation for purposes of subparagraph (B),
and
''(ii) the Secretary shall prescribe
regulations--
''(I) for the application of this
subsection in the case of corporations
filing a consolidated return, and
''(II) to prevent the abuse of the
purposes of this subsection.''.
(b) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2005.

SEC. 3. EXCLUSION FROM GROSS INCOME FOR COMPENSATION PAID IN STOCK BY
CERTAIN CORPORATIONS.

(a) In General.--Part III of subchapter B of chapter 1 of the
Internal Revenue Code of 1986 (relating to items specifically excluded
from gross income) is amended by inserting after section 139A the
following new section:

''SEC. 139B. COMPENSATION PAID IN STOCK BY CERTAIN CORPORATIONS.

''(a) In General.--In the case of an employee of an eligible
corporation, gross income of such employee does not include
remuneration received in the form of stock of such corporation or of
any parent or subsidiary (within the meaning of section 422(b)) of such
corporation.
''(b) Limitation.--The amount excluded under subsection (a) from
the gross income of an employee for any taxable year shall not exceed
20 percent of the wages (as defined in section 3401(a) without regard
to paragraph (23)) which would (but for this section) be includible in
gross income for such year.
''(c) Eligible Corporation.--For purposes of this section, the term
'eligible corporation' means, with respect to any taxable year of an
employee, any corporation if--
''(1) the corporation offers to pay remuneration for
services performed during the calendar year in which or with
which such taxable year ends in the form of stock of such
corporation to at least 95 percent of such corporation's full-
time employees, and
''(2) at least 95 percent of the value of the stock which
is so offered during such calendar year is offered to employees
whose wages (as defined in section 3401(a)) are among the
bottom 75 percent of the employees when ranked on the basis of
such wages.
''(d) Basis.--The amount excluded from gross income under this
section shall not be taken into account in determining the basis of the
stock.''.
(b) Exclusion From Withholding.--Subsection (a) of section 3401 of
such Code is amended by striking ''or'' at the end of paragraph (21),
by striking the period at the end of paragraph (22) and inserting '';
or'', and by adding at the end the following new paragraph:
''(23) in the form of stock if at the time such stock is
paid it is reasonable to believe that the employee will be able
to exclude such stock from income under section 139B.''.
(c) Clerical Amendment.--The table of sections for such part III is
amended by inserting after the item relating to section 139A the
following new item:

''139B. Compensation paid in stock by certain corporations.''.
(d) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2005.

SEC. 4. DEDUCTION ALLOWED TO ELIGIBLE CORPORATIONS AT TIME QUALIFIED
STOCK OPTION GRANTED.

(a) In General.--Subsection (a) of section 421 of the Internal
Revenue Code of 1986 (relating to general rules for certain stock
options) is amended by adding at the end the following flush sentence:
''Paragraph (2) shall not apply to options granted during any calendar
year for which the corporation is an eligible corporation (as defined
in section 139B(c)).''.
(b) Effective Date.--The amendment made by subsection (a) shall
apply to options granted after the date of the enactment of this Act.
Output:
Employee Participation Incentive Act of 2005 - Amends the Internal Revenue Code to: (1) cap at 30 percent the maximum income tax rate for corporations that have a 20 percent or greater employee ownership rate; (2) exclude from employee gross income up to 20 percent of wages paid in stock; and (3) allow such corporations a tax deduction for certain stock options granted to employees.