Employee Profit-Sharing Encouragement Act of 2025

Tax deductions tied to employee profit-sharing

This bill would deny an employer a tax deduction for certain pay to highly compensated workers unless the employer makes cash profit-sharing payments to employees in the same taxable year. Payments would be under a written plan that gives employees, including part-time workers with at least one year of service, a right to the payment. The plan would base amounts on receipts, profits, revenue, or earnings and must total at least 5% of the employer's net income for the year. Employers in a controlled group would be treated as one employer. Employers could avoid the denial if they prove by clear and convincing evidence that paying would threaten the business's ability to continue as a going concern. The rule would apply to taxable years beginning after enactment and the IRS would have authority to address abuses.