The ESOP Promotion and Improvement Act of 2009 (S. 1612) was introduced on August 6, 2009 by Sen. Blanche Lincoln [D-AR]. Sen. Mary Landrieu [D-LA], the chair of the Senate Committee on Small Business and Entrepreneurship, is a co-sponsor. The bill has been referred to the Senate Finance Committee. The ESOP Association is hailing the release of the bill in a press release:

In summary, the proposed Act will repeal the punitive 10% penalty tax on S corporations' distributions from current earnings, also referred to as dividends, paid on ESOP stock that are passed through to ESOP participants in cash; clarify that dividends paid by C corporations on ESOP stock are not a preference item in calculating the corporate alternative minimum tax; permit sellers of stock to an ESOP on an S corporation to utilize the ESOP tax benefit referred to as the tax deferred rollover or the 1042 treatment; permit proceeds received from a 1042 transaction to be invested in mutual funds consisting of operating U.S. corporation securities; redefine what is a 25% or more owner for purposes of IRC 1042 to be 25% or more ownership of voting stock, or 25% or more ownership of all stock of the corporation, not 25% of any class of stock; clarify that a small business certified by the Small Business Administration for SBA programs is still eligible for SBA status, if acquired 50% or more by an ESOP, if the workforce and economic demographics of the small business is the same after the ESOP acquisition.

New Pro-ESOP Promotion Proposal Introduced in Senate provides more details and highlights the new section of the bill that provides that companies eligible for the Small Business Administration (SBA) programs would remain eligible under certain circumstances.

Forms of this bill have been introduced in the past, most recently with The ESOP Promotion and Improvement Act of 2007 (S.1322).