Section 133 Update

The ability of lenders to exclude 50% of the interest income they receive on ESOP loans remains up in the air. When Congress passed the Budget Reconciliation Act, this provision was eliminated, but President Clinton vetoed the bill and it remains in much-discussed limbo. The "section 133" provision is retroactive to the date Congress passed the bill, however, so any company using that provision runs the risk of having the tax benefit retroactively removed. On the other hand, if there is no budget agreement, an increasingly likely scenario, then the bill will die, and a new Congress would have to start all over again.