We recently discussed the The 111th United States Congress and yesterday watched the inauguration of President Barack Obama. Now is a good time to reiterate the importance of ESOP advocacy. During last year's national ESOP Association Annual Conference in Washington, DC, members of the Illinois state chapter visited Capitol Hill to meet with Congressional members (and/or their staff):
The purpose of these meetings was to talk about ESOPs and to lobby against the provision in the recently proposed Charles Rangel tax bill which seeks to impose a heavy tax burden on deferred compensation arrangements in S corporation ESOP companies and on seller/secondary lender financed S ESOP transactions
In general, everyone we met with had a favorable opinion on ESOPs, some in fact had very strong ones. While we encountered some skepticism during our 2007 visits given the bad press the Chicago Tribune transaction was creating, no one had anything negative to say about ESOPs this year.
While nearly all knew of the Rangel tax bill, none knew of its provisions negatively impacting S ESOPs prior to the day of our meeting. We discussed with everyone our feeling that the S ESOP tax provision was likely added as a knee-jerk reaction to the Sam Zell-Chicago Tribune transaction, but was very over reaching in its impact. A little education by us certainly went a long way in each of our visits. Nearly everyone agreed the unintended consequences of the S ESOP tax provision in the Rangel bill was not good.
The recap documents their discussions, including one with then Senator, now President Barack Obama:
For the third year in a row, our chapter met with his Legislative Counsel, Ian Solomon. Although the Senator was in the office the day of our meeting, our group missed him by an hour.
We had a very thoughtful and intelligent discussion with Ian about ESOPs. He expressed to us the Senator's generally strong support for ESOPs. In fact, Ian made a connection which none of us considered when we put together our own talking points for the meeting. Ian indicated he had a conversation with the Senator that morning about his travels around the country for the presidential primaries and made a comment about his observations regarding the economic struggles of middle class and low income workers everywhere he went. As we were talking about all the great facts about ESOPs, the general performance of ESOP companies, and the retirement account balances of ESOP participants, Ian commented on how the expansion of employee ownership through ESOPs could serve as a tool to provide greater economic opportunities to middle class and low income workers across the country. We all certainly agreed.
Ian did not know about the S ESOP tax provision in the Rangel bill, but understood our concerns about it and said he would examine it more closely. He also said he would take a closer look at the ESOP Promotion and Improvement Act of 2007 sponsored by Senator Blanche Lincoln (D-AK).
The recap ended with their thoughts on the visit:
Overall, we were incredibly pleased at the results of all the visits. Our two days on the Hill provided a fantastic reminder of how critically important it is for all of us not to take the current legislation benefiting ESOPs for granted. We need to constantly remind our representatives in Washington how great they are for their constituents, keeping this issue on the top of their minds as debate begins about raising new tax revenues. We need to remember we have no one but ourselves to advocate the issues which impact us as an ESOP community and those of our fellow employees. Any opportunity that each of us gets to talk up the great benefits of ESOPs to one of our Senators or your Representative, we must all commit to take it.