§4978B. Tax on disposition of employer securities to which section 133 applied

(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).

(Added Pub. L. 101–239, title VII, §7301(d)(1), Dec. 19, 1989, 103 Stat. 2347 ; amended Pub. L. 101–508, title XI, §11701(e), Nov. 5, 1990, 104 Stat. 1388–507 .)

References in Text

Section 4978A (as in effect on the day before the date of enactment of this section), referred to in subsec. (d)(4), means section 4978A, as in effect before being repealed by Pub. L. 101–239, title VII, §7304(a)(2)(C)(i), Dec. 19, 1989, 103 Stat. 2353 .

Amendments

1990-Subsec. (d)(4). Pub. L. 101–508, §11701(e)(2), added par. (4).

Subsec. (e)(2). Pub. L. 101–508, §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.