Employee Business Ownership and Capital Formation Act

Employee Business Ownership and Capital Formation Act - Provides that no income shall be recognized for income tax purposes under the Internal Revenue Code at the time an employer distributes securities of the employer or corporation to an employee under an employer business ownership plan. Requires that at the time such employee disposes of such securities the amount realized be taxed as ordinary income up to the fair market value of such securities at the time they were distributed and any amount realized over such fair market value be treated as gain from the sale or exchange of such security.

Defines employee business ownership plan as a plan which provides for the distribution of employer or corporation securities to its employees, meets the requirements of qualified pension, profit sharing, and stock bonus plans as outlined by the Code, and distributes all securities to persons who were members of the plan at any time during the taxable year. Provides a maximum limit for such distributions to each individual participant at the lesser of $500,000 or an amount equal to the fair market value of five percent of the employer securities determined as of the date of any contribution under the plan and an annual limit of the lesser of $25,000 or 25 percent of the participant's compensation.

Allows the employer to deduct contributions to such plans from taxable income as provided by the Code for contributions to any other stock bonus or profit sharing plan.

Provides that dividends on employer securities received by a participant (or former participant) or his spouse upon the transfer by bequest or inheritance to such spouse of employer securities previously distributed to the participant under such a plan and held by him at his death shall be excluded from gross income.

Makes technical conforming amendments to the Employee Retirement Income Security Act, the Securities Act, and the Securities and Exchange Act.