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News & Views |Proposal on ESOP Stock Creeps Back Into BillThursday, August 5, 1999 OnLine The proposal to prohibit the allocation of stock of an employee stock ownership plan of a Subchapter S corporation was added back to the Taxpayer Refund and Relief Act of 1999 (H.R. 2448) late August 4. Under the provision, if there is a prohibited allocation of stock to a disqualified individual under an ESOP sponsored by an S corporation at least 50 percent of which is owned by disqualified individuals, an excise tax is imposed on the employer equal to 50 percent of the amount involved in the prohibited allocation, and the stock allocated in the prohibited allocation is treated as distributed to the disqualified individual. The newly added language would apply to plan years beginning after December 31, 2000,
except for ESOPs established after July 14 and ESOPs established on or before such date if
employer securities held by the plan consist of stock in a corporation with respect to
which an election under 1362(a) is not in effect on such date. |
The provision was included in the Senate version of the bill, and Senate staff said the proposal was dropped in conference. However, the final version of the bill, which was made available today, shows the provision was added back to the measure. The negotiators on the tax cut bill added the ESOP proposal back into the bill because there was a revenue shortfall, one aide speculated. The proposal would raise $47 million over ten years. The House plans to vote on the $792 billion tax cut later today and the Senate shortly
thereafter. President Clinton is expected to veto the bill. |
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