5

it (because of the requirements of section 44C) to the

account of each participant (who is an employee of the employer at the close of the plan year) as of the close of each plan year in an amount which bears substantially the same proportion to the amount of all such

securities allocable to all participants in the plan for that plan year as the amount of compensation paid to such participant (disregarding any compensation in excess of the first $100,000 per year) bears to the compensation paid to all such participants during that year (disregarding any compensation in excess of the first $100,000 with respect to any participant). Notwithstanding the preceding sentence, the allocation to participants' accounts may be extended over whatever period may be necessary to comply with the requirements of section 415. For purposes of this paragraph, the amount of compensation paid to a participant for a year is the amount of such participant's compensation within the meaning of section 415 (c) (3) for such year.

"(4) The plan must provide that each participant has a nonforfeitable right to any stock allocated to his account under paragraph (3), and that no stock allocated to a participant's account may be distributed from that account before the end of the eighty-fourth

month beginning after the month in which the stock

6

is allocated to the account except in the case of separa

tion from the service, death, or disability.

"(5) The plan must provide that, in the case of

securities issued by an employer which has a class of securities registered under section 12 of the Securities Exchange Act of 1934, or which would be required to be so registered except for the exemption from registration provided in subsection (g) (2) (8) or (g) (2) (9) of that section, each participant is entitled to direct the plan as to the manner in which any employer securities

which are allocated to the account of the participant are to be voted.

“(6) On making a claim for credit under section 44C, the employer shall state in such claim that it agrees, as a condition of receiving any such credit

"(A) to transfer employer securities to the plan having a value at the time of the claim equal to the amount of the credit claimed under section 44C for the taxable year of which at least onehalf (in value) shall consist of new employer se

curities (as defined in section 44C (b)),

"(B) except as provided in subparagraph (C), to effect the transfer not later than 30 days after the time (including extensions) for filing its income tax

return for a taxable year, and

7

"(C) in the case of an employer whose credit (as determined under section 44C (a)) for a taxable

year, exceeds the limitations of subsection (c) of such section to effect that portion of the transfer allocable to credit carryovers of such excess credit

at the time required under subparagraph (B) for

the taxable year to which such portion is carried

over.

9 For purposes of meeting the requirements of this para

graph, a transfer of cash shall be treated as a transfer of employer securities if the cash is, under the plan, used to purchase employer securities.

"(7) Notwithstanding any other provision of law to the contrary, if the plan does not meet the requirements of section 401

"(A) stock transferred under paragraph (6) and allocated to the account of any participant under paragraph (3) and dividends thereon shall not be considered income of the participant or his beneficiary under this chapter until actually distributed

or made available to the participant or his bene

ficiary and, at such time, shall be taxable under sec

tion 72 (treating the participant or his beneficiary

as having a basis of zero in the contract),

"(B) no amount shall be allocated to any par

8

ticipant in excess of the amount which might be

allocated if the plan met the requirements of section 401, and

"(C) the plan must meet the requirements of

sections 410 and 415.

"(8) (A) Except as provided in subparagraph (B) (iii), if the amount of the credit determined under section 46 is recaptured or redetermined in accordance with the provisions of section 47 and the amount of the credit claimed under section 44C for the taxable year to which

such recapture or redetermination relates was computed under paragraph (1) of section 44C (a), the amounts

transferred to the plan under this subsection in subsec

tion (e) and allocated under the plan shall remain in the plan or in participant accounts, as the case may be,

and continue to be allocated in accordance with the plan.

"(B) If the amount of the credit determined under section 46 for a taxable year is recaptured in accordance with the provisions of section 47 and the amount of the credit claimed under section 44C for the taxable year to

which such recapture relates was computed under para

graph (1) of section 44C (a) –

"(i) the employer may reduce the amount

required to be transferred to the plan under para

graph (6) of this subsection, or under paragraph

33-902 O 78 - 2

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15

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17

18

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(3) of subsection (e), for the current taxable year or any succeeding taxable years by the portion of the amount so recaptured which is attributable to reduction in the qualified investment (as determined under section 46 (c) and (d) of the employer),

"(ii) notwithstanding the provisions of paragraph (12), the employer may deduct such portion,

subject to the limitations of section 404 (relating to

deductions for contributions to an employees' trust or plan), or

66

"(iii) if the requirements of subsection (c)

(1) are met, the employer may withdraw from the plan an amount not in excess of such portion.

"(C) If the amount of the credit claimed by an

employer for a prior taxable year under section 38 is reduced because of a redetermination of the qualified

investment for such prior taxable year which becomes final during the taxable year, and the employer trans

ferred amounts to a plan which were taken into account 20 for purposes of this subsection for that prior taxable

21

222

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year, then

"(i) the employer may reduce the amount it

is required to transfer to the plan under paragraph (6) of this subsection, or under paragraph (3) of subsection (e). for the taxable year or any succeed