Section 133 (the ESOP Lender Interest Exclusion) to Be Repealed

Section 133 of the Internal Revenue Code allows lenders to exclude up to 50% of the interest income they receive on loans to ESOPs owning more than 50% of a company's shares. This provision is repealed by the new bill, effective when the President signs it. However, loans for which a binding commitment is in place as of June 10, 1996, but which have not actually been completed by the signature date, will be allowed.

This provision of the tax code has been used only rarely in recent years, so its elimination is not expected to have a significant impact.