New SHARE Plan Act Gives Tax Break to Corporations Distributing Stock, Makes Employee Equity Tax-Free

The Share Holder Allocation for Rewards to Employees Plan Act, or the SHARE Plan Act, is a massive proposal aiming to use the tax code to push large companies into sharing ownership with their employees. At its core, the bill offers a huge incentive: a 3 percentage point reduction on the corporate income tax rate for companies that qualify as a “SHARE corporation.” The trade-off is equally significant: these companies must set up formal plans to regularly distribute common stock to a broad base of their workforce, and for employees, receiving this stock becomes tax-free income.

The Corporate Tax Deal: Equity for an Edge

To snag that 3-point tax cut, a corporation has to be large (500+ full-time U.S. employees) and prove it’s serious about sharing equity. This proof comes in two main flavors: either the company’s total stock given to employees over time must hit a 5% “SHARE ratio,” or the company must distribute at least 1% of its outstanding common stock in that year alone (SEC. 2). Crucially, the total tax savings the company gets from this reduced rate can never exceed the total market value of the stock it has actually given to employees. This mechanism acts as a built-in cap, ensuring the tax break doesn't become a bigger subsidy than the actual employee benefit.

The Fine Print: Who Gets the Shares?

This isn't a scheme where executives load up on stock options while the rest of the team gets crumbs. The bill is surprisingly strict about broad participation. To qualify, the SHARE plan must include the lowest-paid 80% of all eligible employees in every distribution (SEC. 2). An eligible employee is defined as anyone working full-time in the U.S. who makes less than $250,000 in annual cash pay (a figure that will adjust with inflation). Furthermore, the stock must be given away for free and distributed in equal dollar amounts across all participating employees, though they can group employees by tenure. This means that for a large corporation to get the tax break, they must ensure their stock distributions are heavily weighted toward their rank-and-file workers—the folks on the floor, in customer service, or handling logistics—not just the executive suite.

The Employee Benefit: Tax-Free Stock

For employees, the biggest win is buried in Section 3. Under current law, when you receive stock as compensation, you generally pay income tax on its fair market value right away. The SHARE Plan Act changes this: stock received through a qualified SHARE plan is specifically excluded from an employee’s gross income for federal tax purposes (SEC. 3). Think about it: if your company gives you $5,000 worth of stock, you wouldn’t owe a penny in taxes on that $5,000 when you receive it. This is a massive shift, making employee equity a much more valuable form of compensation for the average worker.

The Catch: Regulatory Shield and Revenue Loss

While the employee benefits are clear, the bill introduces a couple of points that require a closer look. First, qualified SHARE corporations are granted broad protection: they cannot be “stopped, sued, or penalized by any federal, state, or local law” for setting up or running a valid SHARE plan (SEC. 2). This sweeping immunity raises questions about whether this provision could override existing state-level labor protections or securities regulations related to employee ownership. It’s a powerful shield that might preempt necessary oversight.

Second, this tax incentive is expensive. Reducing the corporate tax rate by 3 points for large companies, combined with making the stock distributions tax-free for employees and fully deductible for the corporation, represents a significant potential loss of federal revenue. Essentially, the government is footing a large part of the bill to encourage this shift toward employee ownership, meaning the tax burden is shifted away from these large corporations and their employees to other taxpayers.