Ill STAT. 1076 PUBLIC LAW 105-34—AUG. 5, 1997 "(1) IN GENERAL.— For purposes of this section, the term 'qualified gratuitous transfer' means a transfer of quahfied employer securities to an employee stock ownership plan (as defined in section 4975(e)(7)) but only to the extent that— "(A) the securities transferred previously passed from a decedent dying before January 1, 1999, to a trust described in paragraph (1) or (2) of subsection (d), "(B) no deduction under section 404 is allowable with respect to such transfer, "(C) such plan contains the provisions required by paragraph (3), "(D) such plan treats such securities as being attributable to employer contributions but without regard to the limitations otherwise applicable to such contributions under section 404, and "(E) the employer whose employees are covered by the plan described in this paragraph files with the Secretary a verified written statement consenting to the application of sections 4978 and 4979A with respect to such employer. "(2) EXCEPTION.—The term 'quahfied gratuitous transfer' shall not include a transfer of qualified employer securities to an employee stock ownership plan unless— "(A) such plan was in existence on August 1, 1996, "(B) at the time of the transfer, the decedent and members of the decedent's family (within the meaning of section 2032A(e)(2)) own (directly or through the application of section 318(a)) no more than 10 percent of the value of the stock of the corporation referred to in paragraph (4), and "(C) immediately after the transfer, such plan owns (after the application of section 318(a)(4)) at least 60 percent of the value of the outstanding stock of the corporation. "(3) PLAN REQUIREMENTS. —^A plan contains the provisions required by this paragraph if such plan provides that— "(A) the qualified employer securities so transferred are allocated to plan participants in a manner consistent with section 401(a)(4), "(B) plan participants are entitled to direct the plan as to the manner in which such securities which are entitled to vote and are allocated to the account of such participant are to be voted, "(C) an independent trustee votes the securities so transferred which are not allocated to plan participants, "(D) each participant who is entitled to a distribution from the plan has the rights described in subparagraphs (A) and (B) of section 409(h)(1), "(E) such securities are held in a suspense account under the plan to be allocated each year, up to the limitations under section 415(c), after first allocating all other annual additions for the limitation year, up to the limitations under sections 415(c) and (e), and "(F) on termination of the plan, all securities so transferred which are not allocated to plan participants as of such termination are to be transferred to, or for the use of, an organization described in section 170(c).
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