IRS: Compliance Issues at ESOP Companies

The IRS issued a news release on August 9 stating that as part of “an expanded focus on ensuring high-income taxpayers pay what they owe,” it was warning “businesses and tax professionals to be alert to a range of compliance issues that can be associated with Employee Stock Ownership Plans (ESOPs).”

The news release quotes IRS Commissioner Danny Werfel as stating, “The IRS is now taking swift and aggressive action to close this gap. Part of that includes alerting higher-income taxpayers and businesses to compliance issues and aggressive schemes involving complex or questionable transactions, including those involving ESOPs.”

The scope and intent of the announcement is not yet clear. NCEO analysis of the economic impact of employee ownership on working people demonstrates that it consistently improves economic well-being, and, on the whole, ESOPs accomplish Congress’s mission of improving retirement security: ESOP participants have nearly double the net household wealth of non-employee-owners, and analysis in our Litigation Review shows that litigation involving ESOPs has been declining.