California Offers Settlement for Taxpayers in Abusive ESOPs
NCEO founder and senior staff member
In FTB Notice 2008-04, the State of California has offered a resolution for sellers in certain abusive ESOP transactions. The transactions covered are those in which a 100% ESOP was formed, but the profits of the plan were substantially siphoned off back to the seller or an entity the seller controls. The resolution specifically exempts ESOPs that are subject to "transactions covered by Revenue Ruling 2003-6, 2003-1 C.B. 286; (2) transactions covered by Revenue Ruling 2004-4, 2004-1 C.B. 414; and (3) Management S corporation ESOP transactions described in the IRS's Transaction-specific Frequently Asked Questions released as part of IRS Announcement 2005-80, 2005-2 C.B. 967." These transactions were covered by a previous settlement offer.
Taxpayers seeking resolution under this procedure need to file with the state before September 13, 2008.