,i  #aag? ,,congress  #a/ ,session  ,h4 
,r4 #difb  ,,9 ,,! ,,h\se ,,(           
,,repres5tatives  ,augu/ #f1 #bjba,mr4  
,l>son ( ,connecticut 7= himself1 ,mr4  
,pascrell1 & ,mr4 ,suozzi7 introduc$ !  
foll[+ bill2 :i* 0 ref]r$ to !          
,committee on ,ways & ,means  ,a ,,bill 
,to am5d ! ,int]nal ,rev5ue ,code (     
#aihf to provide t ! /ock ( c]ta9       
corporations is eligible = capital ga9s 
rates only if su* corporation ma9ta9s a 
plan = di/ribut+ equity to employees1 & 
= o!r purposes4  #a4 ,%ort title ,?is   
,act may be cit$ z ! ,%>e ,hold]        
,allocation = ,rew>ds to ,employees     
,plan ,act or z ! ,,%>e ,plan ,act4  #b4
 ,/ock ( c]ta9 corporations eligible =  
capital ga9s rates only if corporation  
ma9ta9s plan = di/ribut+ equity to      
employees  7a7 ,9 g5]al ,"p ,,iii (     
sub*apt] ,p ( *apt] #a ( ! ,int]nal     
,rev5ue ,code ( #aihf is am5d$ by add+  
at ! end ! foll[+ new section3  #abbd4  
,,%>e plans  7a7 ,9 g5]al ,= purposes ( 
section #abbb1 /ock ( any corporation   

:i* is sold or ex*ang$ dur+ any cal5d>  
ye> %all n be treat$ z held = m ?an #a  
ye> 7reg>dless ( ! hold+ p]iod ( su*    
/ock det]m9$ )\t reg>d to ?is section7  
unless-- 7#a7 su* corporation is n a    
cov]$ employ] = ! prec$+ cal5d> ye>1 or 
7#b7 su* corporation is a ,,%>e         
corporation = ! prec$+ cal5d> ye>4  7b7 
,cov]$ employ] ,= purposes ( ?is        
section1 ! t]m cov]$ employ] means1 )   
respect to any cal5d> ye>-- 7#a7 any    
dome/ic corporation any class ( /ock (  
:i* is regul>ly trad$ on an e/abli%$    
securities m>ket z ( ! la/ day ( su*    
cal5d> ye>1 &  7#b7 any o!r dome/ic     
corporation :i* employ$ on av]age m ?an 
#ejj eligible employees on bus9ess days 
dur+ su* cal5d> ye>4  ,su* t]m %all n   
include any ,s corporation4  7c7 ,,%>e  
corporation ,= purposes ( ?is section-- 
7#a7 ,9 g5]al ,! t]m ,,%>e corporation  
means1 ) respect to any cal5d> ye>1 any 
corporation :i* demon/rates to !        
satisfaction ( ! ,secret>y t su*        
corporation 7z ( ! close ( su* cal5d>   

ye>7 has-- 7,a7 a ,,%>e ratio ( n less  
?an #aj p]c5t1  7,b7 made di/ributions (
 common /ock ( su* corporation to       
employees ( su* corporation pursuant to 
a ,,%>e plan dur+ su* cal5d> ye> :i* 9 !
 aggregate equals or exce$s #b p]c5t ( !
 aggregate out/&+ %>es ( common /ock (  
su* corporation 7o!r ?an %>es held by   
su* corporation71 or  7,c7 made         
di/ributions ( common /ock ( su*        
corporation to employees ( su*          
corporation pursuant to a ,,%>e plan ) a
 fair m>ket value 7det]m9$ z ( ! date ( 
di/ribution ( ea* su* %>e7 :i* equals or
 exce$s ! applicable doll> am\nt p]     
employee :5 aggregat$ ) all su*         
di/ributions made dur+ su* cal5d> ye> & 
all prior cal5d> ye>s to su* employee4  
7#b7 ,applicable doll> am\nt ,! t]m     
applicable doll> am\nt means-- 7,a7 9 ! 
case ( ! cal5d> ye> prec$+ ! fir/ cal5d>
 ye> to :i* subsection 7a7 applies1     
#ej1jjj1 &  7,b7 9 ! case ( any         
subsequ5t cal5d> ye>1 ! applicable doll>
 am\nt 9 effect = ! prec$+ cal5d> ye>   

increas$ by #ej1jjj 7b n 9 excess (     
#bej1jjj74  7d7 ,,%>e ratio ,= purposes 
( ?is section-- 7#a7 ,9 g5]al ,! t]m    
,,%>e ratio means1 ) respect to any     
corporation = any cal5d> ye>1 ! ratio   
7express$ z a p]c5tage7 (-- 7,a7 !      
aggregate %>es ( common /ock ( su*      
corporation :i* h be5 grant$ to         
p>ticipat+ employees ( su* corporation  
pursuant to a ,,%>e plan dur+ su* cal5d>
 ye> or any prior cal5d> ye>1 divid$ by 
7,b7 ! aggregate out/&+ %>es ( common   
/ock ( su* corporation 7o!r ?an %>es    
held by su* corporation74  7#b7         
,treatm5t ( c]ta9 prior grants ,if su*  
corporation demon/rates to !            
satisfaction ( ! ,secret>y t1 dur+ ! #aj
 ye>s prec$+ ! date ( ! enactm5t ( ?is  
section1 su* corporation made grants (  
common /ock to eligible employees ( su* 
corporation :i* 7 n 9 ex*ange =         
comp5sation 7o!r ?an s]vice z an        
employee71 su* /ock %all be tak5 into   
acc\nt "u p>agraph 7#a77;,a74  7#c7     
,treatm5t ( conv]tible /ock ,9 ! case ( 

any class ( /ock ( any corporation :i*  
may be conv]t$ to common /ock1 su* /ock 
%all be tak5 into acc\nt z common /ock  
"u p>agraphs 7#a77;,b7 & 7#b7 on a fully
 dilut$ basis4  7#d7 ,exclusion (       
inc5tive equity  7,a7 ,9 g5]al ,inc5tive
 equity %all n be tak5 into acc\nt "u   
subp>agraph 7,a7 or 7,b7 ( p>agraph 7#a7
 7includ+ any /ock :i* w\ld o!rwise be s
 tak5 into acc\nt by reason ( p>agraph  
7#b7 or 7#c774  7,b7 ,inc5tive equity ,=
 purposes ( ?is p>agraph1 ! t]m inc5tive
 equity means any re/rict$ /ock grant$  
to an employee ( ! corporation1 any /ock
 acquir$ pursuant to an inc5tive /ock   
option grant$ to an employee ( !        
corporation1 or any simil> grant ( /ock 
or conv]tible equity4  7#e7 ,treatm5t ( 
=feit$ /ock ,9 ! case ( any /ock :i* is 
=feit$ 7by reason ( a failure to ve/ or 
o!rwise71 su* /ock %all n be tak5 into  
acc\nt "u p>agraph 7#a7 aft] ! second   
cal5d> ye> foll[+ ! cal5d> ye> 9 :i* su*
 /ock is s =feit$4  7e7 ,,%>e plan ,=   
purposes ( ?is section-- 7#a7 ,9 g5]al  

,! t]m ,,%>e plan means1 ) respect to   
any corporation1 a plan :i* provides =  
mak+ p]iodic di/ributions ( common /ock 
( su* corporation to ea* p>ticipat+     
employee ( su* corporation 7det]m9$ z ! 
date ( ea* su* p]iodic di/ribution74    
7#b7 ,p>ticipat+ employees  7,a7 ,9     
g5]al ,! t]m p>ticipat+ employee means1 
) respect to any corporation1 any       
eligible employee ( su* corporation :o  
is treat$ z a p>ticipat+ employee "u !  
t]ms ( ! plan4  7,b7 #hj-p]c5t          
requirem5t ,a plan %all n be treat$ z a 
,,%>e plan unless1 ) respect to ea*     
p]iodic di/ribution made "u su* plan1 at
 lea/ #hj p]c5t ( ! eligible employees (
 su* corporation are p>ticipat+         
employees ) respect to su* di/ribution4 
7#c7 ,eligible employee ,! t]m eligible 
employee means1 ) respect to any        
corporation1 any full-"t employee :o is 
bas$ 9 ! ,unit$ ,/ates & :o is n "o ( ! 
#a p]c5t ( employees receiv+ ! highe/   
annual comp5sation f su* corporation4   
7#d7 ,di/ribution requirem5ts  7,a7 ,9  

g5]al ,a plan %all n be treat$ z a ,,%>e
 plan unless ! di/ributions made "u su* 
plan-- 7i7 are made )\t comp5sation 7o!r
 ?an s]vice z an employee71  7ii7 may be
 sold or transf]r$ )\t re/riction-- 7,i7
 aft] a hold+ p]iod ( n to exce$ #c     
ye>s1 &  7,,ii7 dur+ any p]iod describ$ 
9 subclause 7,i71 dur+ any h>d%ip ( !   
employee 7)9 ! mean+ ( section          
#dja7k77#b77;,b77i77,,iv771  7iii7      
except z provid$ 9 subp>agraph 7,b71 are
 made 9 equal am\nts to ea* p>ticipat+  
employee 7det]m9$ 9 ! aggregate )       
respect to any cal5d> ye> & prop]ly     
adju/$ ) respect any employee n employ$ 
at all times dur+ su* cal5d> ye>71 &    
7iv7 except 9 ! case ( a di/ribution    
made to an employee describ$ 9          
subp>agraph 7,c71 ve/ imm$iately 9 !    
recipi5t4  7,b7 ,adju/m5ts = p]iod (    
s]vice ,! requirem5t ( subp>agraph      
7,a77iii7 %all be treat$ z met if su*   
requirem5t is met :5 appli$ sep>ately to
 gr\ps ( p>ticipat+ employees divid$ 7"u
 ! t]ms ( ! corporation's ,,%>e plan7 on

 ! basis ( ! p]iod = :i* su* employees h
 be5 employ$ by ! di/ribut+ corporation4
  7,c7 ,p]missible re/riction on ve/+ ,9
 ! case ( any employee employ$ by !     
di/ribut+ corporation = a p]iod ( less  
?an #e ye>s1 su* employee's int]e/ 9 any
 di/ribution ( /ock "u a ,,%>e plan %all
 ve/ n lat] ?an ! e>li] (-- 7i7 ! date  
on :i* su* employee has be5 s employ$ = 
a p]iod ( #e ye>s1 or  7ii7 ! fir/ date 
aft] su* di/ribution on :i* !re is a    
*ange 9 ! control ( su* di/ribut+       
corporation4  7f7 ,application to       
p>tn]%ips  7#a7 ,9 g5]al ,rules simil>  
to ! rules ( ?is section & section      
#aci;,i %all apply ) respect to any     
p>tn]%ip4  7#b7 ,exception ,p>agraph    
7#a7 %all n apply to any p>tn]%ip if !  
pr9cipal bus9ess ( su* p>tn]%ip is !    
provision ( legal1 acc\nt+1 or m$ical   
s]vices & su* p>tn]%ip is majority own$ 
by lic5s$ lawy]s1 acc\ntants1 or m$ical 
doctors1 respectively4  7#c7            
,regulations ,z soon z practicable aft] 
! date ( ! enactm5t ( ?is ,act1 !       

,secret>y %all issue su* regulations or 
o!r guidance z may be necess>y or       
appropriate to c>ry out ! purposes ( ?is
 subsection4  7g7 ,publication by       
,treasury ,! ,secret>y %all make        
publicly available ) respect to ea*     
cal5d> ye>-- 7#a7 a li/ ( corporations  
:i* ! ,secret>y has id5tifi$ z cov]$    
corporations1  7#b7 a li/ ( corporations
 :i* ! ,secret>y has id5tifi$ z ,,%>e   
corporations1 &  7#c7 a li/ (           
corporations describ$ 9 p>agraph 7#a7   
:i* are n describ$ 9 p>agraph 7#b74  7h7
 ,det]m9ation ( corporate e>n+s & pr(its
 ,di/ributions ( /ock "u a ,,%>e plan   
%all n be tak5 into acc\nt 9 det]m9+ !  
e>n+s & pr(its ( ! di/ribut+            
corporation4  7i7 ,aggregation rules ,9 
! case ( any controll$ gr\p 7)9 ! mean+ 
( section #aefc7;a77-- 7#a7 su* gr\p    
%all be treat$ z a s+le corporation =   
purposes ( apply+ subsection 7b77#b71 & 
7#b7 ! ,secret>y may issue su*          
regulations or o!r guidance z !         
,secret>y det]m9es to be appropriate =  

purposes ( apply+ ! provisions ( ?is    
section to su* gr\p1 includ+ regulations
 or o!r guidance t coord9ates or        
consolidates ! ,,%>e plans ( !          
corporations 9 su* gr\p or all[s or     
requires employees ( any corporation 9  
su* gr\p to receive /ock ( ano!r        
corporation 9 su* gr\p pursuant to su*  
,,%>e plans4  4  7b7 ,cl]ical am5dm5t ,!
 table ( sections = "p ,,iii ( sub*apt] 
,p ( *apt] #a ( ! ,int]nal ,rev5ue ,code
 ( #aihf is am5d$ by add+ at ! end !    
foll[+ new item3  ,sec4 #abbd4 ,,%>e    
plans4  4  7c7 ,effective date ,!       
am5dm5ts made by ?is section %all apply 
to /ock sold or ex*ang$ 9 cal5d> ye>s   
beg9n+ m ?an #a ye> aft] ! date ( !     
enactm5t ( ?is ,act4  #c4 ,di/ributions 
( /ock issu$ "u ,,%>e plans exclud$ f   
gross income  7a7 ,9 g5]al ,"p ,,iii (  
sub*apt] ,b ( *apt] #a ( ! ,int]nal     
,rev5ue ,code ( #aihf is am5d$ by ins]t+
 aft] section #aci;,h ! foll[+ new      
section3  #aci;,i4 ,,%>e plan           
di/ributions  7a7 ,9 g5]al ,gross income

 %all n include any ,,%>e plan /ock     
receiv$ by an employee "u a ,,%>e plan4 
7b7 ,exclusion ( c]ta9 ga9  7#a7 ,9     
g5]al ,9 ! case ( ! disposition dur+ any
 taxable ye> by any employee or =m]     
employee ( ,,%>e plan /ock receiv$ by   
su* employee "u a ,,%>e plan1 s mu* ( ! 
taxpay]'s net ,,%>e plan /ock ga9 z does
 n exce$ ! taxpay]'s eligible exp5ses   
%all n be recogniz$4  7#b7 ,net ,,%>e   
plan /ock ga9 ,= purposes ( ?is         
subsection1 ! t]m net ,,%>e plan /ock   
ga9 means1 ) respect to any taxpay] =   
any taxable ye>1 ! excess (-- 7,a7 !    
aggregate ga9s f ! disposition ( ,,%>e  
plan /ock dur+ su* taxable ye>1 ov]     
7,b7 ! aggregate losses f su*           
dispositions4  7#c7 ,eligible exp5ses ,=
 purposes ( ?is section-- 7,a7 ,9 g5]al 
,! t]m eligible exp5ses means1 ) respect
 to any taxpay] = any taxable ye>1      
am\nts paid by su* taxpay] dur+ su*     
taxable ye> =-- 7i7 pr9cipal or int]e/  
on any qualifi$ education loan 7)9 !    
mean+ ( section #bba71  7ii7 m$ical c>e1

 n comp5sat$ = by insurance or o!rwise1 
= ! taxpay]1 ! taxpay]'s sp\se1 or      
dep5d5ts 7z def9$ 9 section #aeb1       
det]m9$ )\t reg>d to subsections        
7b77#a71 7b77#b71 & 7d77#a77;,b7 !re(71 
&  7iii7 pr9cipal or int]e/ on          
indebt$ness secur$ by ! pr9cipal        
resid5ce 7)9 ! mean+ ( section #aba7 ( !
 taxpay]4  7,b7 ,d5ial ( d\ble b5efit   
,no d$uction or cr$it %all be all[$ "u  
?is title ) respect to any exp5se tak5  
into acc\nt 9 det]m9+ ! am\nt exclud$ f 
gross income "u ?is subsection4  7c7    
,def9itions relat$ to ,,%>e plans ,=    
purposes ( ?is section-- 7#a7 ,,%>e plan
 ,! t]m ,,%>e plan has ! mean+ giv5 su* 
t]m 9 section #abbd4  7#b7 ,,%>e plan   
/ock ,! t]m ,,%>e plan /ock means1 )    
respect to any employee1 /ock receiv$ by
 su* employee "u a ,,%>e plan4  4  7b7  
,cl]ical am5dm5t ,! table ( sections =  
"p ,,iii ( sub*apt] ,b ( *apt] #a ( !   
,int]nal ,rev5ue ,code ( #aihf is am5d$ 
by ins]t+ aft] ! item relat+ to section 
#aci;,h ! foll[+ new item3  ,sec4       

#aci;,i4 ,,%>e plan di/ributions4  4    
7c7 ,effective date ,! am5dm5ts made by 
?is section %all apply to /ock receiv$ 9
 cal5d> ye>s beg9n+ aft] ! date ( !     
enactm5t ( ?is ,act1 9 taxable ye>s end+
 aft] ! beg9n+ ( ! fir/ su* cal5d> ye>4