REPEAL OF CERTAIN PROVISIONS RELATING TO EMPLOYEE STOCK OWNERSHIP PLANS.

SEC. 7304. REPEAL OF CERTAIN PROVISIONS RELATING TO EMPLOYEE STOCK OWNERSHIP PLANS. (a) Estate Tax Deduction.— (1) In general.—Section 2057 (relating to sales of employer securities to employee stock ownership plans or worker-owned corporations) is hereby repealed. (2) Conforming amendments.— (A) Paragraph (1) of section 409(n) is amended— (i) by striking “or section 2057” each place it appears. 103 STAT. 2353 (ii) by striking “or any decedent if the executor of the estate of such decedent makes a qualified sale to which section 2057 applies” in subparagraph (A)(i) thereof, and (iii) by striking “or the decedent” in subparagraph (A)(ii) thereof. (B) Paragraphs (2)(C)(i) and (3)(A)(iii) of section 409(n) are each amended by striking “or section 2057”. (C)(i) Section 4978A is hereby repealed. (ii) Section 4978(b)(2) is amended by striking “(determined as if such securities were disposed of in the order described in section 4978A(e)).” and inserting “determined as if such securities were disposed of— “(A) first, from section 133 securities (as defined in section 4978B(e)(2)) acquired during the 3-year period ending on the date of such disposition, beginning with the securities first so acquired. “(B) second, from section 133 securities (as so defined) acquired before such 3-year period unless such securities (or proceeds from the disposition) have been allocated to accounts of participants or beneficiaries.” “(C) third, from qualified securities to which section 1042 applied acquired during the 3-year period ending on the date of the disposition, beginning with the securities first so acquired, and “(D) then from any other employer securities. If subsection (d) or section 4978B(d) applies to a disposition, the disposition shall be treated as made from employer securities in the opposite order of the preceding sentence.” (iii) The table of sections for chapter 43 is amended by striking the item relating to section 4978A (D) Section 4979A is amended— (i) by striking “or section 2057” in subsection (b)(1), and (ii) by striking “or section 2057(d)” in subsection (c)(2). (E) The table of sections for part IV of subchapter A of chapter 11 is amended by striking the item relating to section 2057. (3) Effective date.—The amendments made by this subsection shall apply to the estates of decedents dying after the date of the enactment of this Act. (b) Liability for Payment of Estate Tax.— (1) In general.—Section 2210 (relating to liability for payment in case of transfer of employer securities) is hereby repealed. (2) Conforming amendments.— (A) Section 2002 is amended by striking “Except as provided in section 2210, the” and inserting “The”. (B) Section 6018 is amended by striking subsection (c). (C) The table of sections for subchapter C of chapter 11 is amended by striking the item relating to section 2210. (3) Effective date.—The amendments made by this subsection shall apply to estates of decedents dying after July 12, 1989. (c) Limitations on Defined Contribution Plans.— (1) In general.—Paragraph (6) of section 415(c) is amended to read as follows: 103 STAT. 2354 “(6) Special rule for employee stock ownership plans.—If no more than one-third of the employer contributions to an employee stock ownership plan (as described in section 4975(e)(7)) for a year which are deductible under paragraph (9) of section 404(a) are allocated to highly compensated employees (within the meaning of section 414(q)), the limitations imposed by this section shall not apply to— “(A) forfeitures of employer securities (within the meaning of section 409) under such an employee stock ownership plan if such securities were acquired with the proceeds of a loan (as described in section 404(a)(9)(A)), or “(B) employer contributions to such an employee stock ownership plan which are deductible under section 404(a)(9)(B) and charged against the participant’s account.” (2) Effective date.—The amendment made by this subsection shall apply to years beginning after July 12, 1989. (d) Special Rules Relating to Net Operating Losses.— (1) In general.—Section 382(l)(3) is amended by striking subparagraph (C) and by redesignating subparagraph (D) as subparagraph (C). (2) Effective date.—The amendments made by this subsection shall apply to acquisitions of employer securities after July 12, 1989, except that such amendments shall not apply to acquisitions after July 12, 1989, pursuant to a written binding contract in effect on July 12, 1989, and at all times thereafter before such acquisition.