ESOP Legal News- March 2012

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INSIDE THIS ISSUE:

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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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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