S Corporation Modernization Act of 2026

This bill would change federal tax rules for S corporations, which are businesses whose income is taxed to their owners. It would raise the maximum number of shareholders from 100 to 250, count a company's employees as one shareholder, and allow nonresident aliens and individual retirement accounts (including Roth IRAs) to own S corporation stock, with new withholding taxes for nonresident alien owners. It would raise the passive investment income threshold from 25 percent to 60 percent and end the rule that ends S corporation status for too much passive income. It would also create a deduction tied to built-in gains when a shareholder dies, allow suspended losses to transfer at death, and repeal the tax code section (409A) that governs nonqualified deferred compensation plans.

Full text and official record on Congress.gov

Sponsors

• Mike Carey Republican sponsor
• 0 cosponsors