[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2628 Introduced in House (IH)]
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118th CONGRESS
1st Session
H. R. 2628
To amend the Internal Revenue Code of 1986 to deny the deduction for
executive compensation unless the employer maintains profit-sharing
distributions for employees.
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IN THE HOUSE OF REPRESENTATIVES
April 13, 2023
Mrs. Watson Coleman (for herself, Mr. Carson, Mr. Green of Texas, and
Ms. Omar) introduced the following bill; which was referred to the
Committee on Ways and Means
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to deny the deduction for
executive compensation unless the employer maintains profit-sharing
distributions for employees.
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 ``Employee Profit-Sharing
Encouragement Act of 2023''.
SEC. 2. DENIAL OF DEDUCTION FOR EXECUTIVE COMPENSATION UNLESS EMPLOYER
MAINTAINS PROFIT-SHARING DISTRIBUTIONS.
(a) In General.--Section 162 of the Internal Revenue Code of 1986
is amended by redesignating subsection (s) as subsection (t) and by
inserting after subsection (r) the following new subsection:
``(s) Executive Compensation Paid by Employers Who Do Not Maintain
Profit-Sharing Distributions.--
``(1) In general.--In the case of a specified employer, no
deduction shall be allowed under this chapter for applicable
employee remuneration with respect to any highly compensated
individual (within the meaning of section 105(h)) for any
taxable year unless qualified profit-sharing distributions are
made during such taxable year.
``(2) Qualified profit-sharing distributions.--For purposes
of this subsection--
``(A) In general.--The term `qualified profit-
sharing distributions' means a cash distribution made
pursuant to a written plan of the employer under
which--
``(i) employees (including part-time
employees) who have been employed for at least
1 year as of the date of the distribution have
a right to such distribution, and
``(ii) the amount of such distributions are
defined under such plan on the basis of a
measure of the receipts, profit, revenues, or
earnings of such employer.
``(B) Minimum distribution requirements.--Such term
shall not include any distributions made pursuant to
such plan during the taxable year if the aggregate
distributions made pursuant to such plan during such
taxable year are less than 5 percent of the employer's
net income for the taxable year as determined pursuant
to the employer's books and records prepared in
accordance with the employer's accounting procedures.
``(C) Nondiscrimination.--Such term shall not
include any distributions made pursuant to such plan
during the taxable year unless such plan satisfies
requirements similar to the requirements of section
401(k)(3)(A)(ii) applied by treating the distributions
made pursuant to the plan as though such distributions
were contributions paid over to the trust referred to
in such section.
``(D) Exception if distributions would jeopardize
the business.--An employer shall not fail to be treated
as making qualified profit-sharing distributions during
the taxable year to the extent that such employer
establishes to the satisfaction of the Secretary by
clear and convincing evidence that making such
distributions would jeopardize the ability of the
employer to continue as a going concern.
``(3) Specified employer.--For purposes of this
subsection--
``(A) In general.--The term `specified employer'
means, with respect to any taxable year, any employer
which meets the gross receipts test of section 448(c)
(determined without regard to paragraph (4) thereof)
for such taxable year.
``(B) Application of gross receipts test to
individuals, etc.--For purposes of subparagraph (A), in
the case of any employer which is not a corporation or
a partnership, the gross receipts test referred to in
such subparagraph shall be applied in the same manner
as if each trade or business of such employer were a
corporation or partnership.
``(4) Applicable employee remuneration.--For purposes of
this subsection, the term `applicable employee remuneration'
has the meaning given such term by subsection (m)(4),
determined without regard to subparagraph (B) thereof.
``(5) Controlled groups.--For purposes of this subsection,
all persons treated as a single employer under subsection (b),
(c), (m), or (o) of section 414 shall be treated as one
employer.
``(6) Coordination.--Rules similar to the rules of
subparagraphs (D) and (E) of subsection (m)(4) shall apply for
purposes of this subsection.
``(7) Authority to address abuse.--The Secretary shall have
the authority to address any abuses by employers under this
subsection, including, but not limited to, a reduction in
employee compensation or benefits in conjunction with the
payment of qualified profit-sharing distributions.''.
(b) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after the date of the enactment of
this Act.
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