Authors: David L. Brumbaugh, Government and Finance Division
Abstract: Income earned through an ESOP associated with an S-corporation (an S-ESOP) is both exempt from corporate level tax and tax-deferred under the individual income tax. In 1999, the Clinton Administration proposed raising taxes on S-ESOPs by applying the Unrelated Business Income Tax to S-ESOP income. Congress did not act on the Administration's proposal. The Administration's FY2001 budget contained a narrower version of its earlier proposal. In Congress, H.R. 3082 and S. 1732 were introduced; both based on the S-ESOP proposal contained in the earlier vetoed taxpayer Refund and Relief Act.
Pages: 6
Date: Updated September 25, 2000
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