Employee Profit-Sharing Encouragement Act of 2025

Sponsor: Bonnie Watson Coleman (Democratic-NJ)December 3, 2025

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Introduced

In Committee

Passed One Chamber

Passed Both Chambers

Signed into Law

Referred to the House Committee on Ways and Means.

Businesses would need to share profits with employees to deduct executive pay from their taxes.

This bill would require some businesses to share profits with their employees. They would need to do this to deduct executive pay from their taxes. The goal is to encourage more companies to give cash profit-sharing to their workers. This includes part-timers who have been with the company for at least a year.

What Would Change

Today, businesses can deduct executive compensation from their taxes without needing to share profits with their employees. If this bill becomes law, certain businesses would lose that tax deduction for executive pay. This would happen unless they give at least 5 percent of their net income in cash profit-sharing to their employees. This includes part-timers who have worked there for at least one year. These changes would apply to tax years beginning after the bill is signed into law.

Key Provisions

Blocks certain employers from deducting executive pay unless they make qualified profit-sharing distributions to employees.
Requires qualified profit-sharing distributions to be cash payments under a written plan for employees, including part-timers employed for at least one year.
Sets a minimum for profit-sharing distributions at 5 percent of the employer's net income for the year.
Demands profit-sharing plans meet rules to prevent unfair treatment of employees.
Allows an exception for employers who can prove that making profit-sharing distributions would jeopardize their business.
Gives the Secretary of the Treasury power to prevent businesses from abusing these rules, such as by cutting other employee benefits to pay for profit-sharing.

View on Congress.gov

HR 6418 · 119th Congress · December 3, 2025 · AI Summary by gemini-2.5-flash · 9/10

Employee Profit-Sharing Encouragement Act of 2025

What Would Change

Key Provisions

Lobbying Activity