Treasury & IRS Tighten Regulations Surrounding ESOP Plans
The Treasury Department and IRS has issued proposed temporary regulations
designed to shut down abusive tax shelter schemes involving ESOP-based pension schemes.
Section 409(p) of the tax code generally prohibits accruals or allocations
under an employee stock ownership plan (ESOP) that holds stock of an S corporation,
where the ownership interest in the ESOP or in rights to acquire the corporation
are so concentrated among 10% owners that they hold 50% or more of the interests
in the corporation. The regulations replace proposed temporary regulations that were issued
in 2003 and address a wide variety of issues under section 409(p), including
the key definitions of a prohibited accrual or allocation, a disqualified person
and a non-allocation year. “These regulations support our efforts to shut down abusive schemes,
in this case those skirting pension laws," IRS Commissioner Mark W. Everson
commented. Greg Jenner, Treasury Acting Assistant Secretary for Tax Policy, added: “These
regulations respond to the comments we received from the public on the 2003
regulations, including comments recommending changes to ensure that ESOPs holding
S corporation stock are not used inappropriately as tax shelter devices.” The regulations will generally go into effect for plan years beginning on or after
Jan. 1, 2005, subject to several special effective date rules. A public hearing
on the regulations is scheduled for April 20, 2005.
.
|
|
IMPORTANT NOTICE: TAX-NEWS.COM has taken reasonable care in sourcing and presenting the information contained on this site, but accepts no responsibility for any financial or other loss or damage that may result from its use. In particular, users of the site are advised to take appropriate professional advice before committing themselves to involvement in offshore jurisdictions, offshore trusts or offshore investments. All materials on this site copyright TAX-NEWS.COM 1999 to 2007. Contact us for further information.