S. 2423

116TH CONGRESS
1ST SESSION

S. 2423

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.

IN THE SENATE OF THE UNITED STATES

AUGUST 1, 2019

Ms. STABENOW (for herself and Mr. PETERS) introduced the following bill;
which was read twice and referred to the Committee on Finance

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.

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).