ESOP Legal News- March 2012



White House corporate tax reform may eliminate certain ESOP tax benefits; Iowa house passes pro-ESOP legislation; White House budget proposes clarification of 1042 rollover; official discusses re-proposal of regulation; sixth circuit addresses presumption of prudence; district court dismisses ESOP claims against ESOP trustees; ESOP participant seeks class certification in action against Kodak Company; pro-ESOP legislation pending in House and Senate.

Excerpt from White House corporate tax reform may eliminate certain ESOP tax benefits

On February 22nd, the Obama Administration proposed corporate tax reforms [p. 10] that endorsed two commissioned tax reports proposing to eliminate ESOP tax benefits. The Administration explained that “[e]stablishing greater parity between large corporations and their large non-corporate counterparts should be considered as a way to help improve equity, reduce distortions in how businesses organize themselves, and finance lower tax rates,” The Administration further explained that “[a] variety of ways to do this have been proposed, including ones discussed in the 2005 report of President Bush’s Advisory Panel on Tax Reform [p. 126], and in reform options developed by President Obama’s Economic Recovery Advisory Board in 2010 [pp. 74-77].” The reports propose to eliminate tax benefits achieved by organizing as an S corporation by imposing a corporate level tax on certain S corporations. The Administration cautioned that “[i]t is essential that any changes in this area should not affect small businesses.”

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