APPLICATION OF NET OPERATING LOSS RULES TO STOCK ACQUIRED BY AN EMPLOYEE STOCK OWNERSHIP PLAN.

SEC. 5077. APPLICATION OF NET OPERATING LOSS RULES TO STOCK ACQUIRED BY AN EMPLOYEE STOCK OWNERSHIP PLAN. (a) In General.— Clause (ii) of section 382(1)(3)(C) of the 1986 Code is amended by striking “and” at the end of subclause (I), by striking the period at the end of subclause (II) and inserting in lieu thereof “, and”, and by adding at the end thereof the following: “(III) immediately after the acquisition the plan has a number of participants which is not less than 50 percent of the average number of employees of the loss corporation during the 3-year period ending with such acquisition. for purposes of subclause (III), except as provided in regulations, all members of an affiliated group which includes the loss corporation and which files a consolidated return shall be treated as 1 loss corporation.” (b) Effective Date.— (1) In General.— The amendment made by subsection (a) shall apply to acquisition after December 31, 1988. (2) Exception.— The amendment made by subsection (a) shall not apply to acquisitions after December 31, 1988, pursuant to a binding written contract entered into on or before October 21, 1988.