S Corporation Modernization Act of 2016

S Corporation Modernization Act of 2016

This bill amends the Internal Revenue Code, with respect to the tax treatment of S corporations, to:

• allow a nonresident alien to be a qualifying beneficiary of an electing small business trust (ESBT), which is a type of trust that is permitted to hold shares in an S corporation;
• allow S corporations to increase passive investment income from 25% to 60% without incurring additional taxes;
• eliminate a provision terminating the S corporation status of corporations with excessive passive income for three consecutive years;
• allow any S corporation bank to have individual retirement account shareholders;
• allow ESBTs to claim expanded tax deductions for charitable contributions; and
• allow an adjustment to the basis of an S corporation's assets upon the death of a shareholder, in the form of a 15-year amortization deduction.