Good news for the S corporation community! Ways and Means Member Mike Carey (R-OH) has teamed up with Senator Tim Sheehy (R-MT) to introduce the House version of the S Corporation Modernization Act of 2026 (H.R. 9840).  “S Corp Mod” has a long history of simplifying the rules for Main Street businesses, making it easier for them to remain viable in an increasingly difficult business environment.

S corporations were created 70 years ago to help small and family-owned businesses better compete with public companies. At the time, Republicans and Democrats alike were alarmed that too much economic activity was being consolidated into a small number of large, multinational corporations. Today, S corporations are America’s most common form of business organization with more than 6 million located in every community and in every industry, employing more than one-in-four private sector workers.

Despite their popularity, the rules governing S corporations remain among the most restrictive of any business form. To address this, the S Corporation Association and its congressional champions began to identify helpful provisions under the umbrella of S Corp Modernization starting in the 1990s, with a number of these provisions being enacted into law over the past three decades. This year’s bill will build on that success and make it easier for S corporations to compete and grow by:

  • Increasing their access to capital;
  • Expanding the number and types of shareholders eligible to own S corporation stock; and
  • Easing limitations that penalize S corporations compared to other business forms.

In his statement introducing the bill, Representative Carey made clear the importance of these reforms:

“S corporations are the backbone of our economy, supporting tens of millions of jobs and driving economic growth in communities across the country,” said Rep. Carey. “Unfortunately, many of the rules governing S corporations haven’t kept pace with today’s economy and create unnecessary hurdles for S corporations, both large and small. The S Corporation Modernization Act updates these outdated policies, reduces complexity, and gives job creators the flexibility they need to invest, grow, and keep more Americans employed.”

As a long-time business owner and champion for Main Street businesses, Senator Sheehy joined Representative Carey in marking the House introduction:

“Across Montana, S corporations are the backbone of our economy – from family ranches and Main Street businesses to local manufacturers that keep our rural communities strong. This legislation makes long-overdue updates to modernize the tax code, helping these businesses access capital, grow, and pass opportunities on to the next generation. By cutting unnecessary barriers and modernizing the rules, we’re ensuring Montana’s small businesses can create jobs and continue to invest in the communities they call home.” – Senator Tim Sheehy

The provisions included in the new version of S Corporation Modernization will help thousands of businesses operating in dozens of industries, including engineering companies:

“The American Council of Engineering Companies (ACEC) supports the S Corp Modernization Act and thanks Congressman Mike Carey and Senator Tim Sheehy for introducing the legislation. Employee ownership is central to many engineering firms across the country. ACEC particularly appreciates the provision that would treat all employee-owners as one shareholder. This reasonable modification of the S corp shareholder cap aligns the treatment of employee-owners with that of ESOPs and of family-owned businesses. It will allow engineering firms to offer ownership to additional employees without having to bear the costs and administrative burdens of changing their business structure. ACEC urges enactment of the S Corp Modernization Act.”

Independent community banks also strongly support S Corporation Modernization and its provisions to allow IRAs to own S corporation stock:

“ICBA thanks Senator Sheehy and Representative Carey for introducing the S Corporation Modernization Act. Many community banks have chosen the S Corporation model to help them remain independent in a competitive marketplace and better serve their communities. However, shareholder restrictions have not been modernized for over 20 years. The S Corporation Modernization Act would provide that all employees of a bank count as a single shareholder for the purposes of the shareholder cap and allow individual retirement accounts, or IRAs, to invest in S corporations. These provisions will allow the community banks that have chosen this model to raise more capital to provide more credit in their local economies and meet regulatory requirements.”

Finally, S-Corp President Brian Reardon made the following statement in support of the bill’s introduction:

“The S corporation is America’s most popular form of business organization and it deserves rules adapted to the economy we live in today. The S Corporation Modernization Act would ensure the continued success of these businesses by increasing their access to capital while easing many of the rules that limit their growth.”

S Corporation Modernization has a long history of support from the business community and its introduction in the House today is another step forward for Main Street. S-Corp is prepared to work with our champions to see these important provisions enacted into law soon.