Administration to Oppose Section 133 Changes

The Budget Reconciliation Act passed by Congress contains a provision to eliminate section 133 of the Internal Revenue Code. Section 133 allows lenders to exclude 50% of the interest income they receive on loans to majority ESOPs passing through full voting rights.

The Administration vetoed the budget bill, of course, and negotiations have been going on ever since. Until now, however, the Administration has not taken a position on section 133. At a February 27th meeting of the Steelworker-sponsored Worker Ownership Institute, however, Labor Secretary Robert Reich announced that the Administration would oppose the change. While it is not clear what impact this will have if a budget agreement is reached, it augurs well for future efforts to reduce ESOP tax benefits, a process that would be made much harder if the Administration opposes them.