Reduction of Excess Business Holding Accrual Act

As background, a federal excise tax is imposed on a private foundation that owns more than 20% of the voting stock in a corporation, reduced by the percentage of voting stock held by all disqualified persons (excess business holdings). However, a private foundation with excess business holdings on May 26, 1969 (grandfathered private foundation) may own a greater percentage of voting stock in certain circumstances.

Under the bill, stock is treated as outstanding voting stock if such stock is

not readily tradable on an established securities market;

repurchased from an ESOP on or after January 1, 2020; and

held by the corporation as treasury stock, cancelled, or retired.

However, such stock is not treated as outstanding voting stock if it is repurchased within the first 10 years of establishing the ESOP or, as a result of the repurchase, the permitted holdings of the private foundation would exceed 49% of the voting stock in the corporation.

Finally, under the bill, such stock does not reduce the percentage of voting stock a grandfathered private foundation may own.