Page:United States Statutes at Large Volume 115 Part 1.djvu/156

 115 STAT. 134 PUBLIC LAW 107-16^JUNE 7, 2001 "(B) EMPLOYER SECURITIES.— The term 'employer security' has the meaning given such term by section 409(1). "(C) SYNTHETIC EQUITY.— The term 'synthetic equity' means any stock option, warrant, restricted stock, deferred issuance stock right, or similar interest or right that gives the holder the right to acquire or receive stock of the S corporation in the future. Except to the extent provided in regulations, synthetic equity also includes a stock appreciation right, phantom stock unit, or similar right to a future cash payment based on the value of such stock or appreciation in such value. "(7) REGULATIONS AND GUIDANCE. — "(A) IN GENERAL.—The Secretary shall prescribe such regulations as may be necessary to carry out the purposes of this subsection. " (B) AVOIDANCE OR EVASION.—The Secretary may, by regulation or other guidance of general applicability, provide that a nonallocation year occurs in any case in which the principal purpose of the ownership structure of an S corporation constitutes an avoidance or evasion of this subsection.". (b) COORDINATION WITH SECTION 4975(e)(7). —The last sentence 26 USC 4975. of section 4975(e)(7) (defining employee stock ownership plan) is amended by inserting ", section 409(p)," after "409(n)". (c) EXCISE TAX.— (1) APPLICATION OF TAX.— Subsection (a) of section 4979A (relating to tax on certain prohibited allocations of employer securities) is amended— (A) by striking "or" at the end of paragraph (1), and (B) by striking all that follows paragraph (2) and inserting the following: "(3) there is any allocation of employer securities which violates the provisions of section 409(p), or a nonallocation year described in subsection (e)(2)(C) with respect to an employee stock ownership plan, or "(4) any synthetic equity is owned by a disqualified person in any nonallocation year, there is hereby imposed a tax on such allocation or ownership equal to 50 percent of the amount involved.". (2) LIABILITY.— Section 4979A(c) (defining liability for tax) is amended to read as follows: "(c) LIABILITY FOR TAX.— The tax imposed by this section shall be paid— "(1) in the case of an allocation referred to in paragraph (1) or (2) of subsection (a), by— "(A) the employer sponsoring such plan, or "(B) the eligible worker-owned cooperative, which made the written statement described in section 664(g)(1)(E) or in section 1042(b)(3)(B) (as the case may be), and "(2) in the case of an allocation or ownership referred to in paragraph (3) or (4) of subsection (a), by the S corporation the stock in which was so allocated or owned.". (3) DEFINITIONS.— Section 4979A(e) (relating to definitions) is amended to read as follows: "(e) DEFINITIONS AND SPECIAL RULES. —For purposes of this section—

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