Lets more businesses get tax benefits and changes rules for deferred pay.
This bill would make it easier for many businesses to operate as S corporations by letting them have more owners and earn more passive income. It also changes how deferred compensation is taxed and lets non-U.S. citizens own S corporation stock. These changes aim to update tax rules for small and medium-sized businesses.
Today, S corporations are limited to 100 shareholders and can lose their status if more than 25 percent of their income is passive. Non-U.S. citizens and IRAs generally cannot be shareholders, and Section 409A strictly governs deferred compensation. If this bill becomes law, S corporations could have up to 250 shareholders, earn up to 60 percent passive income without penalty, and allow non-U.S. citizens and IRAs as owners. The rules for deferred compensation would also change with the repeal of Section 409A.
HR 9840 · 119th Congress · July 22, 2026 · AI Summary by gemini-2.5-flash · 8/10
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