H.R. 4739: Share Holder Allocation for Rewards to Employees Plan Act

The "Share Holder Allocation for Rewards to Employees Plan Act" (SHARE Plan Act) proposes changes to the Internal Revenue Code to encourage corporations to distribute company stock to their employees through a specific plan, known as a SHARE plan. Here are the main components of the bill:

Tax Incentives for Corporations

The bill introduces a reduced corporate tax rate for companies that maintain a SHARE plan. Specifically, eligible corporations can benefit from a tax rate that is 3 percentage points lower than the standard rate. However, this benefit is capped based on the total market value of the stocks distributed under such plans.

Definition of SHARE Corporation

To qualify as a SHARE corporation, a company must meet several criteria:

• Have an average of at least 500 full-time employees based in the United States.
• Be domiciled in the United States.
• Demonstrate a SHARE ratio of at least 5% or distribute at least 1% of its shares to employees under a SHARE plan.

SHARE Plan Specifications

A SHARE plan must include the following features:

• Periodic distributions of common stock to employees.
• Distributions must be the same amount for each participating employee.
• Vesting periods for the stock, not exceeding five years, with certain exceptions for retirement or termination without cause.
• Participation by at least the lowest compensated 80% of eligible employees when a distribution is made.

Exemptions from Gross Income

Stock received by employees under SHARE plans will not be counted as gross income, meaning employees will not be taxed on the value of the stock they receive as part of their compensation until they sell the stock.

Employee Eligibility and Compensation Limit

To participate in SHARE plans, employees must be full-time and earn less than $250,000 annually (adjusted for inflation in future years). This income threshold is designed to focus the benefits of the SHARE plans on lower- and middle-income employees.

Deduction for Stock Distributions

Corporations will be able to deduct the fair market value of the stocks they distribute under a SHARE plan from their taxable income, providing an additional financial incentive to implement these plans.

Corporate Right to Establish SHARE Plans

The bill assures that corporations cannot be hindered or penalized for establishing or maintaining SHARE plans, regardless of other local, state, or federal laws.

Aggregation Rules for Controlled Groups

For corporations that are part of a controlled group, the Secretary of the Treasury may provide guidelines to ensure the provisions of the SHARE Act are applied across all members of the group, allowing or requiring stock distributions among all employees regardless of their corporate affiliation within the group.

Publication and Transparency

The Secretary will publish a list annually of corporations identified as adhering to the SHARE plan requirements, promoting transparency about which companies are contributing to employee ownership.

Effective Date

The provisions of this bill would apply to taxable years starting more than one year after the date of enactment.

Relevant Companies

None found