We recently discussed ESCA's position on Section 3701 of H.R. 3970: Tax Reduction and Reform Act of 2007, otherwise known in the ESOP world as the Rangel Corporate Tax Proposal. Progress, But No Victory, No Let Up is an Employee Ownership Blog post discussing Section 3701, including the progress in getting ESOP companies to understand the negative consequences of the bill:
There is progress in turning this impression around, as more and more S corporations with ESOPs are realizing that if Chair Rangel's provision became law, it would have a significant negative impact on their ability to compete, and on the likelihood of new S ESOPs being created by seller financing, or mezzanine financing...And as this impression grows of the potential negative impact if Section 3701 becomes law, more and more ESOP advocates are voicing their concerns to offices of U.S. Representatives....As a result of more companies expressing their views to their elected members of the House of Representatives, agents of The ESOP Association were asked to give more detail to top tax lawyers/staffers of the House Ways and Means staff. These views were given, but no views were changed.
The article points out that now that the proposal has been introduced and "scored", the proposal is fair game. The worst case scenario is that it is introduced in another tax bill as a way to raise revenue. It refers readers to their Advocacy Kit and stresses the importance of sharing your opposition with your member of the U.S. House "today, if not sooner". The article concludes with the following:
To repeat, despite evidence that some members of Congress have registered concern about Section 3701 to the House Ways and Means, there is no evidence that the leadership of the Ways and Means Committee is willing to alter the provisions of Section 3701. The provision, as introduced, can be so harmful our ESOP community should not wait to see if it will be considered. It could be considered at any time.
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