26 U.S. Code § 133 - Repealed. Pub. L. 104–188, title I, § 1602(a), Aug. 20, 1996, 110 Stat. 1833]
Section, added Pub. L. 98–369, div. A, title V, § 543(a), July 18, 1984, 98 Stat. 891; amended Pub. L. 99–514, title XI, § 1173(b)(1)(A), (2), title XVIII, § 1854(c)(2)(A), (C), (D), Oct. 22, 1986, 100 Stat. 2515, 2879; Pub. L. 100–647, title I, § 1011B(h)(1), (2), Nov. 10, 1988, 102 Stat. 3490; Pub. L. 101–239, title VII, § 7301(a)–(c), Dec. 19, 1989, 103 Stat. 2346, 2347, prior to repeal, read as follows:
§ 133. Interest on certain loans used to acquire employer securities
(a) In general
Gross income does not include 50 percent of the interest received by—
(2) an insurance company to which subchapter L applies,
(3) a corporation actively engaged in the business of lending money, or
(b) Securities acquisition loan
(1) In general
(B) any loan to a corporation to the extent that, within 30 days, employer securities are transferred to the plan in an amount equal to the proceeds of such loan and such securities are allocable to accounts of plan participants within 1 year of the date of such loan.
For purposes of this paragraph, the term “employer securities” has the meaning given such term by section 409(l). The term “securities acquisition loan” shall not include a loan with a term greater than 15 years.
(2) Loans between related persons
(i) the employer of any employees who are covered by the plan; or
(ii) a member of a controlled group of corporations which includes such employer.
For purposes of this paragraph, subparagraphs (A) and (B) shall not apply to any loan which, but for such subparagraphs, would be a securitiesacquisition loan if such loan was not originated by the employer of any employees who are covered by the plan or by any member of the controlled group of corporations which includes such employer, except that this section shall not apply to any interest received on such loan during such time as such loan is held by such employer (or any member of such controlled group).
A loan to a corporation shall not fail to be treated as a securities acquisition loan merely because the proceeds of such loan are lent to an employee stock ownership plan sponsored by such corporation (or by any member of the controlled group of corporations which includes such corporation) if such loan includes—
(B) repayment terms providing for more rapid repayment of principal or interest on such loan, but only if allocations under the plan attributable to such repayment do not discriminate in favor of highly compensated employees (within the meaning of section 414(q)).
(4) Controlled group of corporations
For purposes of this paragraph, the term “controlled group of corporations” has the meaning given such term by section 409(l)(4).
(5) Treatment of refinancings
(B) meets the requirements of paragraphs (2) and (3).
(A) In general
A loan shall not be treated as a securitiesacquisition loan for purposes of this section unless, immediately after the acquisition or transfer referred to in subparagraph (A) or (B) of paragraph (1), respectively, the employee stock ownership plan owns more than 50 percent of—
(i) each class of outstanding stock of the corporation issuing the employer securities, or
(ii) the total value of all outstanding stock of the corporation.
(B) Failure to retain minimum stock interest
(i) In general
Subsection (a) shall not apply to any interest received with respect to a securitiesacquisition loan which is allocable to any period during which the employee stock ownership plan does not own stock meeting the requirements of subparagraph (A).
To the extent provided by the Secretary, clause (i) shall not apply to any period if, within 90 days of the first date on which the failure occurred (or such longer period not in excess of 180 days as the Secretary may prescribe), the plan acquires stock which results in its meeting the requirements of subparagraph (A).
For purposes of subparagraph (A)—
(i) In general
(ii) Treatment of certain rights
(D) Aggregation rule
For purposes of determining whether the requirements of subparagraph (A) are met, an employeestock ownership plan shall be treated as owning stock in the corporation issuing the employer securities which is held by any other employee stock ownership plan which is maintained by—
(i) the employer maintaining the plan, or
(ii) any member of a controlled group of corporations (within the meaning of section 409(l)(4)) of which the employer described in clause (i) is a member.
(7) Voting rights of employer securities
(A) the employeestock ownership plan meets the requirements of section 409(e)(2) with respect to all employer securities acquired by, or transferred to, the plan in connection with such loan (without regard to whether or not the employer has a registration-type class of securities), and
(ii) the requirements of subparagraph (A) are met with respect to such voting rights.
(c) Employee stock ownership plan
(d) Application with section 483 and original issue discount rules
In applying section 483 and subpart A of part V of subchapter P to any obligation to which this section applies, appropriate adjustments shall be made to the applicable Federal rate to take into account the exclusion under subsection (a).
(e) Period to which interest exclusion applies
(1) In general
In the case of—
(2) Excludable period
(A) In general
The 7-year period beginning on the date of such loan.
(B) Loans described in subsection (b)(1)(A)
If the term of an original securitiesacquisition loan described in subsection (b)(1)(A) is greater than 7 years, the term of such loan. This subparagraph shall not apply to a loan described in subsection (b)(3)(B).
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