Overview

Title

To amend the Internal Revenue Code of 1986 to increase the number of eligible shareholders of an S corporation.

ELI5 AI

S. 1371 is a bill that wants to let more people own a special kind of business called an S corporation, increasing from 100 to 250 people. This change would start after December 31, 2025, so the companies can invite more friends to join them.

Summary AI

S. 1371 is a bill introduced to amend the Internal Revenue Code of 1986. The bill seeks to increase the number of eligible shareholders in an S corporation from 100 to 250. This change aims to provide more flexibility and opportunities for forming S corporations. The amendment will be effective for taxable years beginning after December 31, 2025.

Published

2025-04-09
Congress: 119
Session: 1
Chamber: SENATE
Status: Introduced in Senate
Date: 2025-04-09
Package ID: BILLS-119s1371is

Keywords AI

s corporation internal revenue code shareholders tax amendment corporate governance economic impact fiscal implications s-cap act of 2025 market dynamics legislation 2025

Sources

Bill Statistics

Size

Sections:
2
Words:
212
Pages:
2
Sentences:
7

Language

Nouns: 61
Verbs: 18
Adjectives: 6
Adverbs: 1
Numbers: 14
Entities: 25

Complexity

Average Token Length:
4.05
Average Sentence Length:
30.29
Token Entropy:
4.37
Readability (ARI):
16.09

AnalysisAI

Summary of the Bill

The proposed legislation, known as the "S-Corporation Additional Participation Act of 2025" or the "S-CAP Act of 2025," seeks to amend the Internal Revenue Code of 1986. The key change is to increase the maximum number of eligible shareholders for an S corporation from 100 to 250. This change would take effect for tax years beginning after December 31, 2025.

Significant Issues

One of the primary issues with the bill is that it does not provide clear reasoning or justification for increasing the number of eligible shareholders. Without this rationale, it is difficult to assess whether the change is necessary or beneficial. Additionally, there is no analysis or estimation regarding the economic impact of such a legislative change, which raises questions about its potential fiscal implications. Furthermore, the bill lacks details on transitional measures or preparations needed for stakeholders to adjust to the change by the effective date, further contributing to uncertainty.

Impact on the Public

The increase in the number of eligible shareholders for S corporations could have broad implications for the public. Overall, the change may be intended to stimulate economic growth by encouraging more investment and participation in small businesses. Allowing more investors could potentially lead to more robust business development and job creation. However, without a detailed impact analysis, it is difficult to predict the precise economic outcomes or identify any new risks.

Impact on Specific Stakeholders

For current and potential S corporation shareholders, the bill could offer new opportunities for investment and participation. Small businesses might benefit from increased access to capital and a larger pool of investors, potentially leading to expansion and innovation. However, current S corporations and their management may face adjustments as they adapt to the governance changes that might accompany the increase in shareholder numbers.

Conversely, the lack of clarity and detailed analysis within the bill could lead to uncertainty among business owners and investors. Without understanding the reasons behind the change or the potential impacts, stakeholders may be cautious or hesitant in planning their future business strategies. This uncertainty could dampen some of the anticipated positive effects, at least in the short term.

In conclusion, while the S-CAP Act of 2025 proposes a seemingly straightforward change to tax law, the absence of a clear rationale and impact analysis raises questions about its overall efficacy and preparedness. The legislation's success may depend on addressing these gaps to ensure a transition that benefits stakeholders and supports economic growth effectively.

Issues

  • The amendment increases the number of eligible shareholders for S corporations from 100 to 250 without providing a clear rationale for this increase (Section 2). This raises concerns about transparency and the potential for unintended consequences, such as impacts on market dynamics or changes in corporate governance practices.

  • There is a lack of analysis or estimation regarding the economic impact or fiscal implications of allowing more shareholders in S corporations (Section 2). This information is crucial for evaluating whether the change will encourage economic growth or introduce new risks.

  • The effective date for the amendment is set for taxable years beginning after December 31, 2025 (Section 2). Without an explanation or transitional measures, stakeholders are left uncertain about the preparedness required for this legislative change.

  • The section entitled 'Short title' lacks detailed context about the Act's provisions or implications (Section 1). This absence of information makes it challenging to assess the full scope and potential societal impact of the legislation.

Sections

Sections are presented as they are annotated in the original legislative text. Any missing headers, numbers, or non-consecutive order is due to the original text.

1. Short title Read Opens in new tab

Summary AI

The S-CAP Act of 2025 can also be called the S-Corporation Additional Participation Act of 2025.

2. Increase in number of shareholders to qualify as an S corporation Read Opens in new tab

Summary AI

The section of the bill proposes to change the Internal Revenue Code by allowing more shareholders in an S corporation, increasing the limit from 100 to 250. This change would start affecting tax years after December 31, 2025.