Project 2025 Tracker / What’s done, what’s next

27. Financial Regulatory Agencies · Minor · Needs Congress

Exempt crowdfunding shareholders from the S corp 100-shareholder limit

Not started

831 27. Financial Regulatory Agencies

“Congress should: … Amend the Internal Revenue Code to disregard crowdfunding and Regulation A shareholders for purposes of the 100-shareholder limit for Subchapter S corporations.”

What has happened

  1. Not started

    Section 1361(b)(1)(A) of the Internal Revenue Code still caps a Subchapter S corporation at 100 shareholders and still counts crowdfunding and Regulation A holders among them. No 119th-Congress bill would disregard them. The two S corporation bills in the Corpus - S. 2017, the S Corporation Modernization Act of 2025 (referred to Senate Finance 2025-06-10) and H.R. 9840, the S Corporation Modernization Act of 2026 (referred to House Ways and Means 2026-07-22) - do something else with the same object: they let employees of a firm count as a single shareholder, admit nonresident aliens and IRAs as eligible shareholders, and in the House version raise the shareholder ceiling outright. Raising or reallocating the cap is not disregarding a class of holder, so under playbook §3b's rule that progress is measured on this ask the Status does not move. Public Law 119-21 amended Subchapter S nowhere relevant to the shareholder count.

    No action found yet. This entry is the starting point, not a finding.

Research log

What was searched, and what didn’t count as evidence

Research notes

  • The instrument is a tax bill, not a securities one, which is why the Financial Services committee record is silent: the change would amend 26 U.S.C. 1361(b) or (c) to exclude holders who acquired shares under Regulation Crowdfunding or Regulation A from the 100-shareholder count.
  • What the S corporation bills actually contain, read from the introduced texts: built-in gain treatment on a shareholder’s death, passive investment income modifications, nonresident aliens as permitted shareholders, employees of a firm counted as one shareholder, IRAs as eligible shareholders, transfer of suspended losses, and (H.R. 9840 section 9 only) an increase in the number of shareholders. Neither text contains “crowdfunding” or “Regulation A”.
  • Both are at the referral rung in any case - S. 2017 to Senate Finance, H.R. 9840 to House Ways and Means - which playbook §3b leaves at not started even if the substance had matched.
  • The SEC has no role here; nothing in its window record addresses the tax treatment of crowdfunding shareholders.
Action
other
Object
Internal Revenue Code 100-shareholder limit for Subchapter S corporations
ID
2138