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 Report and www.esopassociation.org for the latest information, especially the home page “News” links to Advocacy Kits.
Present:On August 6, 2009, Senator Blanche L. Lincoln (D-AR) introduced S. 1612, the ESOP Promotion and Improvement Act of 2009. The legislation has four sections, including an entirely new proposal to remove a 35 year bias against ESOP companies by the Small Business Administration.Specifics of the new legislation can be found on the website at - http://www.esopassociation.org/gov/gov_bulletin_news.asp. Senator Mary L. Landrieu (D-LA) signed on as an original co-sponsor of the bill. The ESOP Association will be working with its members to make members of Congress aware of the concerns and hopes of ESOP advocates and assisting ESOP companies and employee owners in conveying their message to Congress.
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.