from the corporation to the ESOP maintained by the employer
2004 Instructions for Schedule E
corporation. A ‘‘back to back loan’’ constitutes a ‘‘securities
acquisition loan’’ under Code section 133 if the following
requirements are satisfied:
ESOP Annual Information
1. The loan from the employer corporation to the ESOP
qualifies as an exempt loan under Treasury Regulation sections
54.4975-7 and 54.4975-11;
2. The repayment terms of the loan from the corporation to
the ESOP are ‘‘substantially similar’’ (as defined in Temporary
Purpose of Schedule
Income Tax Regulations section 1.133-1T) to the repayment
Use this schedule to satisfy the requirements under Code
terms of the loan from the corporation to the lender; and
section 6047(e) for an annual information return for an
3. If the loan from the corporation to the ESOP provides for
employee stock ownership plan (ESOP).
more rapid repayment of principal and interest, the allocations
under the ESOP attributable to such repayments do not
Who Must File
discriminate in favor of highly compensated employees (within
Every employer or plan administrator of a pension benefit plan
the meaning of Code section 414(q)).
that contains ESOP benefits must file a Schedule E (Form
Line 8. An immediate allocation loan is any loan to an
employer corporation to the extent that, within 30 days,
How To File
employer securities are transferred to the ESOP maintained by
File Schedule E (Form 5500) annually as an attachment to
the corporation in an amount equal to the proceeds of the loan
Form 5500 or 5500-EZ. If more than one securities acquisition
and the securities are allocable to the accounts of plan
loan (see specific instructions for lines 7 through 12) is
participants within one year of the date of the loan. (See Code
outstanding, you must file one Schedule E (Form 5500) and an
attachment for each additional securities acquisition loan and
Line 9c. The transition rules of Act section 7301(f)(2) through
label the attachment “Schedule E, lines 7 through 12 –
(6) of the Omnibus Budget Reconciliation Act of 1989 (OBRA),
Additional Securities Acquisition Loans.” Each attachment
P.L. 101-239, provide that the amendments made to Code
must provide answers to questions 7 through 12, be in a similar
section 133 by OBRA will not apply to certain loans that satisfy
format to, and on the same size paper as, the Schedule E.
the requirements of those paragraphs. In general, the
Check the Schedule E box on the Form 5500 (Part II, line
amendments made by OBRA will not apply to:
10a(4)) if a Schedule E is attached to the Form 5500.
1. Loans made pursuant to a binding written commitment in
Note. The Small Business Job Protection Act repealed the
effect on June 6, 1989, and at all times thereafter before the
partial interest exclusion of Code section 133 effective, in
loan was made, or pursuant to a written binding contract (or
general, with respect to loans made after August 20, 1996.
tender offer registered with the Securities and Exchange
However, Schedule E (Form 5500) must be filed for securities
Commission (SEC)) in effect on June 6, 1989, and at all times
acquisition loans made to ESOPs before August 21, 1996,
thereafter before such securities were acquired.
loans made pursuant to a written binding contract in effect
2. If subparagraph 1 does not apply, loans made pursuant
before June 10, 1996, and at all times thereafter before the loan
to a binding written commitment in effect on July 10, 1989, and
was made, and certain loans made after August 20, 1996, to
at all times thereafter before the loan was made, but only to the
refinance a securities acquisition loan originally made on or
extent that the proceeds were used to acquire employer
before August 20, 1996.
securities pursuant to a certain binding written contract (or
tender offer registered with the SEC) in effect on July 10, 1989,
If the employer maintaining the ESOP is an S
and at all times thereafter before the securities are acquired.
corporation and Schedule E is attached to a Form 5500,
3. Any loan made on or before July 10, 1992, pursuant to a
enter 2Q and other applicable codes on Form 5500, Part
written agreement entered into before July 10, 1989, if the
II, line 8.
agreement evidences the intent of the borrower to enter, on a
periodic basis, into securities acquisition loans described in
Code section 133(b)(1)(B) (as in effect before December 19,
Lines A, B, C, and D. This information should be the same as
1989). This rule applies only if one or more securities
reported in Part II of the Form 5500 to which this Schedule E is
acquisition loans were made to the borrower on or before July
attached. You may abbreviate the plan name (if necessary) to
fit in the space provided.
Line 1b. Code section 409(p) precludes an ESOP from making
See Act section 7301(f)(2) to determine the specific
allocations in a nonallocation year (as defined in Code section
requirements of the transition rules described above. See Act
409(p)(3)) to any disqualified person (within the meaning of
section 7301(f)(3) through (6) for additional transition rules on
Code section 409(p)(4)). If an ESOP fails Code section 409(p),
refinancings, collective-bargaining agreements, filings with the
allocations are taxed to the disqualified person (see Code
United States, and the 30% test for certain loans.
section 409(p)(2)) and an excise tax is imposed on the S
Line 10. If the loan is a back to back loan or an immediate
corporation under Code section 4979A.
allocation loan, enter the amount of interest paid by the
Answer line 1b if the ESOP was established after March 12,
employer corporation to the lender(s) during the plan year.
2001, or if the employer securities held by the plan consist of
Line 12b. The repeal of Code section 133 by Act section 1602
stock in an S corporation that did not have an S election in
of SBJPA 1996 does not apply to a refinancing of an ESOP
effect on that date (see Notice 2002-2, Q&A-15, 2002-2 I.R.B.
securities acquisition loan made after August 20, 1996, or
285, for when an S corporation election is in effect.
pursuant to a binding contract in effect before June 10, 1996, if:
Line 4. If the schedule does not provide enough space, enter
1. The refinancing loan meets the requirements of Code
“ATTACHED” and provide the required formula(s) as an
section 133 in effect on August 20, 1996,
attachment to Schedule E.
2. The outstanding principal amount of the loan is not
Lines 7 through 12. A ‘‘securities acquisition loan’’ is an
exempt loan to an ESOP to the extent that the proceeds are
3. The term of the original loan is not extended.
used to acquire employer securities for the plan.
Line 7. A ‘‘back to back loan’’ is a securities acquisition loan
Line 18. If there are more than three classes of stock, include
from a lender to an employer corporation followed by a loan
an attachment with the information required for elements (a)
Instructions for Schedule E (Form 5500)