1. Certain purchases of employee-owned stock disregarded for purposes of foundation tax on excess business holdings (a) In general Section 4943(c)(4)(A) of the Internal Revenue Code of 1986 is amended by adding at the end the following new clause: (v) Certain purchases of employee-owned stock disregarded For purposes of clause (i), subparagraph (D), and paragraph (2), any voting stock which— (I) is not readily tradable on an established securities market, (II) is purchased by the business enterprise on or after January 1, 2005, from a stock bonus or profit sharing plan described in section 401(a) in which employees of such business enterprise participate, in connection with a distribution from such plan, and (III) is held by the business enterprise as treasury stock, cancelled, or retired, shall be treated as outstanding voting stock, but only to the extent so treating such stock would not result in permitted holdings exceeding 49 percent (determined without regard to this clause). The preceding sentence shall not apply with respect to the purchase of stock from a plan during the 10-year period beginning on the date the plan is established. . (b) Effective date (1) In general The amendments made by this section shall apply to taxable years ending after the date of enactment of this Act and to purchases by a business enterprise of voting stock in taxable years beginning before, on, or after the date of enactment of this Act. (2) Special rule for grandfathered foundations in case of decrease in ownership by reason of pre-enactment purchases Section 4943(c)(4)(A)(ii) of such Code shall not apply with respect to any decrease in the percentage of holdings in a business enterprise by reason of section 4943(c)(4)(A)(v) of such Code (as added by this Act).