# 119-s-2017: S Corporation Modernization Act of 2025

119-s-2017, S Corporation Modernization Act of 2025, is a 119th Congress bill sponsored by Sen. Sheehy, Tim [R-MT] (R-MT); status introduced; PRIA reads it as touching household money (as of 2026-08-09).

- Canonical: https://policyrisk.com/legislation/119-s-2017
- As of: 2026-08-09
- Plain-text twin of the page above; the HTML and this file carry the same facts.

## Facts
- Bill: 119-s-2017
- Congress: 119
- Title: S Corporation Modernization Act of 2025
- Status: introduced
- Introduced: 2025-06-10
- Sponsor: Sen. Sheehy, Tim [R-MT] (R-MT)
- Cosponsors: 0
- Policy area: Taxation
- Touches household money: yes
- Last recorded action: 2026-08-09

## Summary

**This bill would let heirs claim a new, long-term deduction for an S corporation shareholder's built-in gains at death to reduce immediate tax on stepped-up basis.** It also would create a withholding system for nonresident alien shareholders and update who can count as S corporation shareholders.

## Provisions PRIA read

- 15-year tax relief for S corp heirs: benefit, high. This bill would let heirs or estates of S corporation shareholders amortize certain built-in gains over 15 years. The S corporation must elect the rule for the shareholder. If the S corp sells built-in-gain property, some remaining deductions can be accelerated and past excess deductions can be rec…
- IRAs allowed to own S stock: benefit, medium. This bill would allow individual retirement accounts, including Roth IRAs, to be S corporation shareholders starting January 1, 2026. It would change related prohibited-transaction language so IRAs can hold S stock as eligible shareholders. This could let retirement accounts more often buy and hold…
- Higher passive-income limit for S corps: benefit, medium. This bill would raise the passive investment income threshold for S corporations from 25% to 60% for tax years after December 31, 2024. It would repeal the rule that treated excessive passive income as causing an S election to terminate. The bill also expands the definition of passive receipts but…
- New rules for deferred executive pay: mixed, high. This bill would repeal section 409A and replace it with a new statutory framework for nonqualified deferred compensation for tax years after December 31, 2025. It would redefine covered plans, add aggregation rules, treat notional earnings as includible, and create a 12‑month exception for short de…
- Noncitizen S corp ownership and withholding: mixed, medium. This bill would allow nonresident alien individuals to be S corporation shareholders for tax years after December 31, 2024. At the same time, S corporations with U.S.-connected income would have to withhold tax equal to the top individual rate on the NRA shareholders' share of that income. Transfer…

## Related bills

- 119-s-4744: Take Care of America’s Veterans Act
- 119-s-3923: Weather Research and Forecasting Innovation Reauthorization Act of 2026
- 119-s-1462: Fix Our Forests Act
- 119-s-3597: National Quantum Initiative Reauthorization Act of 2026
- 119-s-2142: GOLDEN DOME Act of 2025
- 119-s-306: Fire Ready Nation Act of 2025

## Sources
- [119-s-2017 on Congress.gov](https://www.congress.gov/bill/119th-congress/senate-bill/2017)

## Related
- [119-s-4744: Take Care of America’s Veterans Act](https://policyrisk.com/legislation/119-s-4744)
- [119-s-3923: Weather Research and Forecasting Innovation Reauthorization Act of 2026](https://policyrisk.com/legislation/119-s-3923)
- [119-s-1462: Fix Our Forests Act](https://policyrisk.com/legislation/119-s-1462)
- [119-s-3597: National Quantum Initiative Reauthorization Act of 2026](https://policyrisk.com/legislation/119-s-3597)
- [119-s-2142: GOLDEN DOME Act of 2025](https://policyrisk.com/legislation/119-s-2142)
- [119-s-306: Fire Ready Nation Act of 2025](https://policyrisk.com/legislation/119-s-306)
- [All bills in Congress](https://policyrisk.com/legislation)

Source: PRIA, https://policyrisk.com/legislation/119-s-2017 (as of 2026-08-09).