S Corp. ESOPs Under Attack

May 9, 2000 (PLANSPONSOR.com) - Workers and managers descended on Washington today, charging that an Administration proposal would destroy S corporation ESOPs by taxing them out of existence.

At issue is a Fiscal Year 2001 budget proposal that seeks to raise nearly $1 billion in revenues over the next decade by heavily taxing most S corporation Employee Stock Ownership Plans. The protest in Washington was organized by the Employee-Owned S Corporations of America (ESCA), which includes more than 70 company members nationwide.

A similar Treasury Department proposal was defeated last year by the efforts of Congressman Jim Ramstad (R-MN) and Senator John Breaux (D-LA). Their legislation to preserve S Corporation ESOPs appears to have bipartisan support.

While benefits of S corporation ESOPs go directly to employee-owners. Some in the Administration see them as potential tax shelters.  This “defies logic,” claims ESCA chairman Thomas C. Berg. 

ESCA’s president, Stephanie Silverman, questioned the wisdom of the Administration’s proposal:  “At a time when the future of Social Security is being debated, why would Washington consider destroying a program that is generating retirement savings for workers with no government outlays?”

– Ann Bidou        editors@plansponsor.com