HR6418119th CongressWALLET

Employee Profit-Sharing Encouragement Act of 2025

Sponsored By: Representative Watson Coleman, Bonnie [D-NJ-12]

Introduced

Summary

Links executive pay tax deductions to employee profit-sharing. This bill would deny a tax deduction for certain compensation paid to highly compensated individuals unless the employer makes qualified profit-sharing distributions to employees.

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  • Employers would face a new condition to deduct executive pay. They must adopt a written cash profit-sharing plan tied to receipts, profit, revenues, or earnings.
  • Highly compensated employees could cause their pay to be non-deductible for employers if the company does not meet the distribution rules.
  • Workers, including part-time employees with at least 1 year of service, would gain rights to cash distributions under the plan. Distributions count only if aggregate payouts equal at least 5% of the employer's net income and the plan meets nondiscrimination rules.

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Bill Overview

Analyzed Economic Effects

1 provisions identified: 0 benefits, 0 costs, 1 mixed.

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.

Sponsors & CoSponsors

Sponsor

Watson Coleman, Bonnie [D-NJ-12]

NJ • D

Cosponsors

  • Rep. Omar, Ilhan [D-MN-5]

    MN • D

    Sponsored 12/17/2025

Roll Call Votes

No roll call votes available for this bill.

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