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In Technical Advice Memorandum (TAM) 9503002, issued January 9, 1995, the IRS said that a plan that allows employees to use their 401(k) deferrals to repay an ESOP loan does not violate ERISA.

On August 25, the IRS published REG-133578-05, proposed regulations that cover two ESOP dividend deduction scenarios. In the first, it said it would not allow companies to deduct the cost of repurchasing shares from departing employees.

For many years, there has been uncertainty about whether contributions to repay the principal on an ESOP loan are deductible in addition to contributions made to 401(k), profit sharing, and other defined contribution retirement plans.

The IRS has announced that there was not enough inflation to trigger changes in the various limits on annual contributions and annual additions in defined contribution plans, and that definitions for highly compensated employees and the amount over which ESOP distributions can be paid out in more

Monika Templeton, director of employee plans examination, told an IRS phone forum that about half of all 401(k) plans that have been audited have errors in calculating compensation and that stock option and ESPP exercises cause one of the most common problems.

The 2017 tax bill contained provisions that allowed employees in private companies that provide nonqualified stock options and restricted stock units to at least 80% of their workforce to defer taxation on the awards until up to five years after termination.

In temporary regulations issued July 9 (EE-96-85), the IRS has made it easier to comply with filing requirements under Section 1042 of the Code. That section allows certain sellers to qualified ESOPs to defer capital gains taxes on the sale by reinvesting in qualified replacement property (QRP).

In Revenue Ruling 2004-4, the IRS ruled that ESOP S corporation structures in which individuals are given options to buy stock in subsidiaries of the parent corporation will be subject to rules limiting synthetic equity holdings of plan participants.

In 2006, the IRS issued rules requiring companies to file a new letter of determination every five years, based on a five-year reporting cycle determined by employer identification numbers.

For the last few years, the IRS has been raising the issue of whether companies should be withholding taxes on gains made from employee exercises of incentive stock options when there is a disqualifying disposition and on employee purchases of stock in an employee stock purchase plan.