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On March 7th, the ESOP Association submitted its comments to the House Ways and Means Committee on Tax Reform. The Committee held a hearing addressing the treatment of closely-held businesses in the context of tax reform. In its comments, the Association sought to clarify myths surrounding ESOPS, including that laws favoring ESOPS were developed exclusively by the Senate, and that S corporations sponsoring ESOPs are tax exempt. The Association stated that the House Ways and Means Committee adopted an amendment making an ESOP a permitted S corporation shareholder. In addition, the Association stated that the law permits only tax deferral in the context of S corporation ESOPs because participants pay taxes on distributions when they retire, leave the company with a vested account balance, become disabled, or die. The Association also urged Congress to consider job sustainability when reforming Federal tax law.
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