Bar Group Urges Different Approach on ESOP S Corporation Reform

The New York State Bar Association's Tax Section has urged the Administration to change its proposals to tax ESOPs in S corporations. While the Section agreed that the ESOP should have to pay an unrelated business income tax on its pro-rata share of S corporation earnings, it argued that if the ESOP does pay the tax, participants should get an exclusion for items of previously taxed income. It also argued that S corporation ESOPs should be subject to the same tax benefits as C corporation ESOPs.