Marriott Settles ESOP Tax Dispute

Marriott International, Inc. reached a settlement in an investigation of its ESOP by the IRS and Department of Labor. The government alleged that Marriott's leveraged ESOP resulted in unwarranted tax deductions. Neither the IRS nor Marriott revealed the nature of the charges, but, based on what we have learned from people familiar with the situation, Marriott was using a questionable approach in how it claimed tax deductions for its plan. Marriott's original release indicated the issue was using loan forgiveness into repay an ESOP loan, a very standard practice. There is no indication that this practice itself was questioned, but rather other issues with the structure. The government sought $1 billion in payments, but settled for $220 million to be repaid to the federal government as well as state and local governments. The settlement is easily the largest in any ESOP investigation.