S Corporation Modernization Act of 2025

This bill modernizes S corporation tax treatment with several key changes. It increases the passive investment income limit from 25% to 60% and removes excessive passive income as a termination event, making it easier for S corporations to maintain their status. The bill also allows nonresident aliens and IRAs to be shareholders, and creates a deduction for shareholders who inherit S corporation stock, allowing them to amortize built-in gains over 15 years. These changes aim to make S corporations more flexible and attractive for business owners and investors.