Foreign Subsidiary Participation in an ESOP Does Not Disqualify ESOP

In PLR 200205050, the IRS ruled that participation by employees of a foreign subsidiary in a U.S. company's ESOP did not disqualify the ESOP. It is common in ESOPs to exclude employees with no W-2 income, or non-resident aliens with no U.S. source income. If that were the case, participation by foreign employees would be a plan violation. If these employees are not excluded, however, and the subsidiary is a member of a control group, then they can be included.