December 19, 2006
HP-207

Washington, DC- Treasury and the IRS issued final regulations today under section 409(p) of the Internal Revenue Code with respect to an employee stock ownership plan (ESOP) that holds stock of a Subchapter S corporation.

The final regulations are the culmination of a process that began when the Economic Growth and Tax Relief Reconciliation Act of 2001 enacted section 409(p), which ensures that the special tax benefits afforded to ESOPs that hold Subchapter S corporation stock do not extend to cases in which the ownership is concentrated among a small number of owners.

The regulations, effective for plan years that begin on or after January 1, 2006, replace existing temporary regulations with various modifications to reflect comments received.

Download Final Regulations [PDF]