Advocate

Legislative History & Victories of The ESOP Association--the only national voice for ALL ESOPs.

The ESOP Association’s legislative agenda, expanding benefits for the employees and sponsors of ESOPs, both S and C corporations, has the support of key members of Congress, and passage of several proposals is expected over the next few years. Stay tuned to the ESOP Reportwww.esopassociation.org, and www.esopassociationblog.org for the latest information, especially the homepage “News” links to Advocacy Kits.

Present: The proposed Tax Reform Act of 2014 was released February 26, 2014 by Congressman Dave Camp (R-MI). ESOP Association President, J. Michael Keeling provided members with an update. It should be noted that the proposal did not lessen the tax laws promoting ESOPs.

On April 17, 2013, the “Promotion and Expansion of Private Employee Ownership Act of 2013,” S.742, was introduced by Senator Ben Cardin (D-MD) and co-sponsored by a bi-partisan group of Senators including, Roy Blunt (R-MO), Amy Klobuchar (D-MN), Mary L. Landrieu (D-LA), Pat Roberts (R-KS), Debbie Stabenow (D-MI), and John Thune (R-SD). S. 742 would amend the Internal Revenue Code of 1986 and the Small Business Act to expand the availability of ESOPs in S corporations and expand opportunities for existing S ESOP corporations.

On February 13, 2013, Senator Kelly Ayotte (R-NH) introduced S. 273, a bill to modify the definition of fiduciary under the Employee Retirement Income Security Act of 1974 to exclude appraisers of ESOPs. The bill is co-sponsored by Senators Roy Blunt (R-MO), Mary L. Landrieu (D-LA), and Mitch McConnell (R-KY). This bill is a response to the Department of Labor’s proposed anti-ESOP regulation mandating all private ESOP company appraisers be ERISA fiduciaries.

On May 17, 2013, Congressmen Brett S. Guthrie (R-KY), David Loebsack (D-IA), and Congresswoman Lynn Jenkins (R-KS) introduced H.R. 2041. H.R. 2041 is the companion bill to S. 273 introduced by Senator Kelly Ayotte in February 2013.

2011:
On March 29, 2011, H.R. 1244the “Promotion and Expansion of Private Employee Ownership Act of 2011,” was introduced by a bi-partisan group of key members of the House Ways and Means Committee: Congressmen David G. Reichert (R-WA), Ron Kind (D-WI), Charles W. Boustany, Jr. (R-LA), Earl Blumenauer (D-OR), Erik Paulsen (R-MN), and Bill Pascrell (D-NJ).

On September 7, 2011, S. 1512, the Senate companion bill to the “Promotion and Expansion of Private Employee Ownership Act of 2011,” was introduced by a bi-partisan group of Senators: Senators Benjamin Cardin (D-MD), Pat Roberts (R-KS), and Olympia J. Snowe (R-ME).

The ESOP Association expresses strong support for both H.R. 1244 and S. 1512.

On June 21, 2011, Senator Kelly Ayotte (R-NH) introduced today S. 1232, a bill to modify the definition of fiduciary under the Employee Retirement Income Security Act (ERISA) of 1974 to exclude appraisers of employee stock ownership plans. The bill is co-sponsored by Senators Olympia Snowe (R-ME), Susan Collins (R-ME), Scott Brown (R-MA), and Mary Landrieu (D-LA). This bill is a response to the Department of Labor’s (DOL) proposed anti-ESOP regulation mandating all private ESOP company appraisers be ERISA fiduciaries.

Since late October 2010, The ESOP Association, and the ESOP community, has protest­ed vigorously against the DOL proposed regulation to make all appraisers of private ESOP company stock ERISA fiduciaries.

On September 19, 2011, the DOL issued a press release announcing it would issue a new version of the regula­tion revising the definition of ERISA fiduciaries in January 2012, and begin the com­ment period, in essence, all over again.
The ESOP Association will keep you posted on this regulatory proposal, and other efforts to stop the DOL from mandating that appraisers of private ESOP company stock be ERISA fiduciaries.

2006: The ESOP Association, in coalition with other major employee benefit groups play a major role in Congress’ enacting law to make permanent many provisions of EGTRRA that benefit sponsors of defined contribution plans, such as ESOPs.

2005: Congress enacts an expansion of how S Corp ESOPs can use distributions from current profits to the ESOP by permitting the ESOP to use the cash to pay the ESOP debt.

2001: The ESOP Association, working through a nationwide grassroots program, stopped efforts to limit the tax benefits of S corporations sponsoring ESOPs. Congress approved an initiative by the Association to expand the tax deduction paid on ESOP stock. Various pro- ESOP proposals became law upon congressional adoption and the President’s signature of the popular ERISA reform legislation, known as H.R. 10, Portman-Cardin, which is included in the New Tax Law. In this work, 80% of the House and Senate members of key tax committees took openly pro-ESOP positions.

1997: Leading the lobbying effort, The ESOP Association persuades Congress and the Administration to perfect the 1996 Subchapter S ESOP Law, so that beginning in 1998; it will be advantageous for Subchapter S Corporations to sponsor employee ownership through an ESOP. The same legislation (the Taxpayers Relief Act of 1997) also permits a tax-deductible transfer of certain stock from a charitable remainder trust to an ESOP.

1996: The ESOP Association lobbies for new law to permit Subchapter S corporations to sponsor ESOPs and succeeds in the Small Business Job Protection Act.

1989: During work on the 1989 deficit reduction bill, several proposals are made to repeal the tax incentive that permits the deduction of dividends paid on the ESOP stock. The ESOP Association lobbies to preserve the deductibility of dividends, and the provision is maintained.

1986: The ESOP Association lobbies for perfecting legislation of the 1984 ESOP incentives. For example, The ESOP Association lobbied for the deductibility of dividends on ESOP stock paid to plan participants and the deductibility of dividends used to pay debt. The ESOP Association’s positions are included in the Tax Reform Act of 1986.

1984: The ESOP Association lobbies for several major tax incentives for ESOPs – deductible dividends paid on ESOP stock; tax free rollover for gains on stock sold to an ESOP; interest income exclusion for 50% of income earned by ESOP lender; and assumption of estate tax by ESOP. All become part of the 1984 tax act (DEFRA).

1981: The ESOP Association lobbies for 25% of pay plus interest as a special level of deductible contributions to leveraged ESOPs. This pro-ESOP proposal becomes part of the 1981 tax law (ERTA).

Regulations: Regulatory arena victories are also impressive. For example, in the late ‘70s, The ESOP Association helped push positive leveraged ESOP regulations. Since then, The ESOP Association has successfully stopped each and every major regulatory proposal that would limit ESOP creation, including efforts by government regulators to limit ESOP benefits of companies with government contracts. Since 2000, The ESOP Association has developed positive relationships with the major agencies that regulate ESOPs to such a degree that no significant regulations having ESOPs have been issued.

All of these major ESOP tax incentives have provided tax savings of approximately $50 billion since 1984 for ESOP corporate sponsors.