1.Exemption from capital gains
rate increase for qualified gain from sale or exchange of qualified corporate
stock
(a)Any increase in capital gains rates resulting from
section 303 of the Jobs and Growth Tax Relief Reconciliation Act of 2003 shall
not apply to any qualified gain from the sale or exchange of qualified
corporate stock held by the taxpayer for more than 5 years.
(b)Qualified
corporate stockFor purposes of this section, the term
qualified corporate stock
means any stock in a C corporation (as
defined in section 1361(a)(2) of the Internal Revenue Code of 1986), if—
(1)as of the date of
sale and during substantially all of the taxpayer’s holding period for such
stock, such corporation has a principal place of business in the United States
and meets the active business requirements of section 1202(e) of such
Code,
(2)for at least two
years preceding the date of sale, such corporation has paid for at least 60
percent of each full time employee’s health insurance coverage, and
(3)for at least two
years preceding the date of sale, such corporation has contributed to a defined
contribution plan in a manner that meets the safe harbor non-discrimination
requirements under section 401(k)(12) of such Code.
(c)For purposes of this section, the term qualified
gain
means any gain from the sale of stock constituting more than 50
percent of the total voting power of all classes entitled to vote and more than
50 percent of the total value of stock of such corporation, if—
(1)during the
applicable period, an amount equal to at least 5 percent of the sales proceeds
is transferred to or for the benefit of eligible employees of the corporation,
and
(2)without taking
into account the amount transferred under paragraph (1), the aggregate amount
paid as compensation and benefits to eligible employees of the corporation
during each year of the applicable period is at least equal to the base
amount.
(d)For
purposes of this section—
(1)The term eligible employee
means any
full-time employee, other than an employee who, any time during the 2-year
period preceding the date of sale, is—
(A)a key employee
within the meaning of section 416(i) of such Code,
(B)an employee whose
annual W–2 wages exceed $250,000, or,
(C)an employee whose
principal place of employment is outside the United States.
(2)The term applicable period
means the
calendar year in which the sale of the qualified corporate stock occurs and the
immediately preceding calendar year.
(3)The term base amount
means an amount equal
to—
(A)the average annual
total compensation and benefits paid to eligible employees of the corporation
during the three calendar year period immediately preceding the applicable
period, multiplied by
(B)the cost of living
adjustment for the first year of the applicable period.
(e)The
Secretary of the Treasury shall prescribe such regulations as may be necessary
or appropriate to carry out the purposes of this paragraph.
(f)This section shall apply to gain from the sale of stock in
taxable years beginning after the date of the enactment of this Act and before
the date that is 5 years after the date of such enactment.