Senator George Allen (R-VA) has co-sponsored the pro-ESOP bill recently introduced by Senator Blanche Lincoln (“D-AR”) S1319. Congressmen Cantor (“R-VA”) and Goode (“R-VA”) have co-sponsored the companion bill introduced by Representative Nancy Johnson (“R-CT”) H.R.3111.
The three Virginians have been strong supporters of ESOPs, and all three co-sponsored a similar bill in the previous session of Congress.
The primary features of the bill would repeal the punitive 10% penalty tax on S Corporation dividends paid to employee owners (employees pay ordinary income tax when the cash dividends are received). Passage of this provision would cause many S Corporation ESOPs to pay cash dividends to their employees. The bill also permits sellers of stock to a S Corporation ESOP to elect the tax-deferred rollover under IRC1042. Stockholders in C Corporations have had this option available for over twenty years.
Those Interested in Employee Ownership Through ESOPs Should
Speak Out for Proposed Pro-ESOP Legislation
Congress is moving to implement various aspects of President Bush’s call for building an ownership society. It is very important that the ESOP community makes a strong, pro-ESOP offense, and in doing so, makes a case that ESOPs should be an integral part of any set of policies to develop an ownership society. The provisions of H.R. 3111 and S. 1319 will be beneficial to many current sponsors of ESOPs, and lead to more ESOPs, which will strengthen the voice of ESOPs in the national debate over an ownership society.