ESOP DIVIDENDS MAY BE REINVESTED WITHOUT LOSS OF DIVIDEND DEDUCTION.

SEC. 662. ESOP DIVIDENDS MAY BE REINVESTED WITHOUT LOSS OF DIVIDEND DEDUCTION. (a) In General.—Section 404(k)(2)(A) (defining applicable dividends) is amended by striking “or” at the end of clause (ii), by redesignating clause (iii) as clause (iv), and by inserting after clause (ii) the following new clause: “(iii) is, at the election of such participants or their beneficiaries— “(I) payable as provided in clause (i) or (ii), or “(II) paid to the plan and reinvested in qualifying employer securities, or”. (b) Standards for Disallowance.—Section 404(k)(5)(A) (relating to disallowance of deduction) is amended by inserting “avoidance or” before “evasion”. (c) Effective Date.—The amendments made by this section shall apply to taxable years beginning after December 31, 2001.