(Added Pub. L. 101-239, title VII, Sec. 7301(d)(1), Dec. 19, 1989, 103 Stat. 2347, and amended Pub. L. 101-508, title XI, Sec. 11701(e), Nov. 5, 1990, 104 Stat. 1388-507, and repealed Pub. L. 104-188, title I, 1602, Aug. 20, 1996, 110 Stat. 1755.)
BACKGROUND NOTES
AMENDMENTS
1996 - Pub. L. 104-188, Sec. 1602, repealed sec. 4978B. Before repeal, it read as follows:
(a) IMPOSITION OF TAX. --In the case of an employee stock ownership plan which has
acquired section 133 securities, there is hereby imposed a tax on each taxable event
in an amount equal to the amount determined under subsection (b).
(b) AMOUNT OF TAX. --
(1) IN GENERAL. --The amount of the tax imposed by subsection (a) shall be equal to
10 percent of the amount realized on the disposition to the extent allocable to section
133 securities under section 4978(b)(2).
(2) DISPOSITIONS OTHER THAN SALES OR EXCHANGES. --For purposes of paragraph (1), in
the case of a disposition of employer securities which is not a sale or exchange,
the amount realized on such disposition shall be the fair market value of such securities
at the time of disposition.
(c) TAXABLE EVENT. --For purposes of this section, the term ‘taxable event’ means
any of the following dispositions:
(1) DISPOSITIONS WITHIN 3 YEARS.
--Any disposition of any employer securities by an employee stock ownership plan within
3 years after such plan acquired section 133 securities if --
(A) the total number of employer securities held by such plan after such disposition
is less than the total number of employer securities held after such acquisition,
or
(B) except to the extent provided in regulations, the value of employer securities
held by such plan after the disposition is 50 percent or less of the total value of
all employer securities as of the time of the disposition.
For purposes of subparagraph
(B), the aggregation rule of section 133(b)(6)(D) shall apply.
(2) STOCK DISPOSED OF BEFORE ALLOCATION. -- Any disposition of section 133 securities
to which paragraph (1) does not apply if --
(A) such disposition occurs before such securities are allocated to accounts of participants
or their beneficiaries, and
(B) the proceeds from such disposition are not so allocated.
(d) SECTION NOT TO APPLY TO CERTAIN DISPOSITIONS. --
(1) IN GENERAL. -- This section shall not apply to any disposition described in paragraph
(1), (3), or (4) of section 4978(d).
(2) CERTAIN REORGANIZATIONS.
-- For purposes of this section, any exchange of section 133 securities for employer
securities of another corporation in any reorganization described in section 368(a)(1)
shall not be treated as a disposition, but the employer securities received shall
be treated as section 133 securities and as having been held by the plan during the
period the securities which were exchanged were held.
(3) FORCED DISPOSITION OCCURRING BY OPERATION OF STATE LAW. -- Any forced disposition
of section 133 securities by an employee stock ownership plan occurring by operation
of a State law shall not be treated as a disposition. This paragraph shall only apply
to securities which, at the time the securities were acquired by the plan, were regularly
traded on an established securities market.
(4) Coordination with other taxes This section shall not apply to any disposition
which is subject to tax under section 4978 or section 4978A (as in effect on the day
before the date of enactment of this section).
(e) DEFINITIONS AND SPECIAL RULES. -- For purposes of this section --
(1) LIABILITY FOR PAYMENT OF TAXES. -- The tax imposed by this section shall be paid
by the employer.
(2) Section 133 Securities--
The term “section 133 securities” means employer securities acquired by an employee
stock ownership plan in a transaction to which section 133 applied.
(3) DISPOSITION. -- The term
‘disposition’ includes any distribution.
(4) ORDERING RULES. -- For ordering rules for dispositions of employer securities,
see section 4978(b)(2).
1990 - Subsec. (d)(4). Pub. L. 101-508, Sec. 11701(e)(2), added par. (4).
Subsec. (e)(2). Pub. L. 101-508, Sec. 11701(e)(1), amended par. (2) generally. Prior to amendment, par. (2) read as follows: ‘The term
‘section 133 securities’ means employer securities acquired by an employee stock ownership
plan in a transaction to which section 133 applied, except that such term shall not
include -
‘(A) qualified securities (as defined in section 4978(e)(2)), or
‘(B) qualified employer securities
(as defined in section 4978A(f)(2), as in effect on the day before the date of the
enactment of this section).’
EFFECTIVE DATE OF 1990 AMENDMENT
Amendment by Pub. L. 101-508 effective, except as otherwise provided, as if included in the provision of the Revenue
Reconciliation Act of 1989, Pub. L. 101-239, title VII, to which such amendment relates, see section 11701(n) of Pub. L. 101-508, set out as a note under section 42 of this title.
EFFECTIVE DATE
Section applicable, except as otherwise provided, to loans made after July 10, 1989,
see section 7301(f) of Pub. L. 101-239, set out as a note under section 133 of this title.
SECTION REFERRED TO IN OTHER SECTIONS
This section is referred to in section 4978 of this title.
EFFECTIVE DATE OF REPEAL
Repeal by Pub. L. 104-188, 1602, effective for loans made after the date of the enactment of this Act [August
20, 1996]. Sec. 1602(c) also provided the following rules:
“(2) Refinancings.--The amendments made by this section shall not apply to loans made
after the date of the enactment of this Act to refinance securities acquisition loans
(determined without regard to section 133(b)(1)(B) of the Internal Revenue Code of 1986, as in effect on the day before the date of the enactment of this Act) made
on or before such date or to refinance loans described in this paragraph if--
(A) the refinancing loans meet the requirements of section 133 of such Code (as so
in effect),
(B) immediately after the refinancing the principal amount of the loan resulting from
the refinancing does not exceed the principal amount of the refinanced loan (immediately
before the refinancing), and
(C) the term of such refinancing loan does not extend beyond the last day of the term
of the original securities acquisition loan.
For purposes of this paragraph, the term “securities acquisition loan” includes a
loan from a corporation to an employee stock ownership plan described in section 133(b)(3)
of such Code (as so in effect).
(3) Exception.--Any loan made pursuant to a binding written contract in effect before
June 10, 1996, and at all times thereafter before such loan is made, shall be treated
for purposes of paragraphs (1) and (2) as a loan made on or before the date of the
enactment of this Act.”
