Bill > HR892

This bill, the S Corporation Modernization Act of 2013, proposes several changes to the Internal Revenue Code of 1986 concerning S corporations, which are businesses that pass income, losses, deductions, and credits through to their shareholders for federal tax purposes. Key provisions include making permanent the reduced five-year recognition period for built-in gains, which refers to the appreciation of assets a company held before it became an S corporation and is taxed when those assets are sold; repealing the rule that terminates an S corporation's status due to excessive passive investment income, which is income from investments like stocks and bonds; and increasing the threshold for passive investment income from 25% to 60% of gross receipts before a special tax is imposed, thereby providing more flexibility for S corporations with accumulated earnings and profits. Additionally, the bill expands the types of trusts that can be shareholders of an S corporation, specifically allowing Individual Retirement Accounts (IRAs) to hold S corporation stock and permitting Electing Small Business Trusts (ESBTs) to receive deductions for charitable contributions as if they were individuals, and it also makes permanent a rule that adjusts the basis of S corporation stock when the corporation makes charitable contributions of property.