ESOP Participants Do Not Have a Right to ESOP Valuation

In another appellate decision (Faircloth v. Lundy Packing Company, 4th Cir., 8/2/96), the U.S. Court of Appeals for the Fourth Circuit ruled that ESOP trustees are not required to provide a copy of the ESOP appraisal to participants who have requested it.

Merger of ESOP and 401(k) Plan Can Satisfy 30% Ownership Threshold for ESOPs

In Private Letter Ruling 9639071, for release on September 23, 1996, the IRS ruled that the employer stock owned in a 401(k) plan that is merged into an ESOP will count towards the total amount of stock owned by the ESOP for purposes of meeting the 30% threshold to qualify for section 1042 treatm

Employees Investing Heavily in Employer Stock

According to a new report from the Institute of Management and Administration, 42% of the funds employees invest in the 401(k) plans of large public firms are invested in company stock. In just the 246 companies surveyed, employer stock accounted for $133 billion in the employees' accounts.

Burlington Case Settled

Burlington Industries, NationsBank, and Morgan Stanley have agreed to pay $8.8 million each to settle a class action lawsuit brought by a group of Burlington employees. After legal fees are deducted, the remaining amount will go into Burlington's ESOP for current and former employees.

New Tax Bill Includes Significant Changes for Employee Ownership

The "Back to Small Business Job Protection Act" (the small business tax incentives feature of the Minimum Wage Bill) contains a number of provisions important to employee ownership. The bill has now been passed by the Congress and should be signed in the next few weeks by the President.

S Corporation Changes: ESOPs Allowed, but with Restrictions

Under current law, employee benefit trusts cannot own stock in an S corporation. The new law would change this, effective January 1, 1998, to allow ESOPs, profit sharing plans, stock bonus plans, and 401(k) plans to own stock in their companies.

Section 133 (the ESOP Lender Interest Exclusion) to Be Repealed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 This provision is repealed by the new bill, effective when the President signs it.

Tax Bill Contains Important Employee Ownership Provisions

Aside from the Subchapter S and section 133 provisions of H.R. 3448 described in the last update, the small business tax relief bill working its way through Congress contains other important provisions affecting employee ownership as well.