What is IRC Section 409(p) and what does it provide?
A.2 In 2001, Congress added IRC Section 409(p) to address concerns about ownership structures involving S corporations and ESOPs that concentrate the benefits of the ESOP in a small number of persons. In general, this section imposes income and excise taxes when there are prohibited allocations under an S corporation ESOP in a nonallocation year. The rules under IRC Section 409(p) are complex. For more information on the application of IRC Section 409(p), click on the following links for the text of temporary regulations published on July 21, 2003 and December 17, 2004.
