ESOP Association – Advocacy Update

ESOP Association News

President’s Budget Says ESOPs Too Risky and Bad for Employees!

Reverses 39 Years of Executive Branch Support of ESOPs

In justifying a repeal of a tax incentive Congress enacted in 1984 permitting C corporations to have a tax deduction for dividends on ESOP stock paid to employee accounts, the President’s budget says that ESOPs are too risky and employees working in corporations with more than $5 million in gross revenue a year cannot understand how their work “impacts” the company where they work.

Such a statement is ridiculous.

The pages and pages of research that prove ESOP companies are more profitable, more productive, provide more sustainable jobs, with better retirement benefits, in the vast majority of instances, were never based on little companies with less than $5 million annual revenue. (For evidence, click here.)

99.5% of The ESOP Association’s corporate members have more than $5 million in revenue.

While the ESOP community has had debates over tax law details promoting ESOPs with the Administrations of Presidents Ford, Carter, Reagan, Bush I, Clinton, and Bush II, never ever has an Administration said ESOPs were no good. (See the following pages from the Department of Treasury’s Green Book which provides an explanation for President Obama’s Administration’s justification for repeal of the dividend deduction provision. Note the highlighted text under the Reasons for Change section – Green Book Explanation)

The ESOP community cannot sit by and let this characterization stand. It is wrong; it is dangerous to the future of your ESOP, and your clients ESOPs.

Please be alert to suggested communications to Congress as the work on tax reform proceeds.

Or just send a message NOW to your Senators and Representatives that you are dismayed, shocked, and flabbergasted with the Administration’s view of ESOPs being bad for employees.