ESOPs Prepare for Tax Reform
Posted 6-14-2011 | By Sarah Gengenbach (Niklaus) | Download Article
HLB Tautges Redpath hosted the Employee-owned S Corporations of America (ESCA) for an educational discussion regarding the importance of protecting S-Corp ESOP companies as federal policymakers begin discussing tax reform in an economic climate of balancing budgets and an expanding deficit.
Stephanie Silverman, President and Executive Director of ESCA, spoke to the group of 75 attendees and predicted that the stars could align for tax reform in 2013. Silverman clearly stated the next two years are a crucial time for ESOP companies to continue to cultivate advocates on Capitol Hill, to educate members of Congress about the benefits of employee ownership, and to communicate the importance of ESOP companies to the community and to economic growth. Below are some highlights from Silverman's presentation:
- ESOPs are considered a "tax expenditure" which puts them front and center in tax reform and deficit reduction discussions.
- Expenditures are being tagged as "loopholes" grouped together with no differentiation.
- President Obama's Bipartisan Deficit Commission recommended eliminating all expenditures, and then possibly returning a few.
- Proposals are circulating to restructure "pass-through" entities - such as S corporations with receipts over $50 million.
Silverman commented that survival is the key to any scenario; however, efforts need to be made now to start protecting S-Corp ESOP companies for what tax reform may bring. Silverman offered the following recommendations:
- Communicate benefits of S-Corp ESOPs such as:
- Retirement Security
- Employment commitment and advantages
- Rewarding structure for the business and the community
- Share ESOP company stories locally to build more support for private, employee-owned companies.
- Increase advocacy efforts, particularly with new members of Congress and those on key committees. ESOP companies need a strong voice on Capitol Hill.
- Grow ESCA membership to show support, provide a stronger voice, and create a larger group of companies making it more "risky" to defeat.
For more information, please contact Sarah Niklaus, HLB Tautges Redpath ESOP industry leader, at sniklaus@hlbtr.com or 651-407-5846.