26 U.S.C. § 4979A

1. (a)If—there is hereby imposed a tax on such allocation or ownership equal to 50 percent of the amount involved.
   1. (1)there is a prohibited allocation of qualified securities by any employee stock ownership plan or eligible worker-owned cooperative,
   2. (2)there is an allocation described in section 664(g)(5)(A),
   3. (3)there is any allocation of employer securities which violates the provisions of section 409(p), or a nonallocation year described in subsection (e)(2)(C) with respect to an employee stock ownership plan, or
   4. (4)any synthetic equity is owned by a disqualified person in any nonallocation year,
2. (b)For purposes of this section, the term “prohibited allocation” means—
   1. (1)any allocation of qualified securities acquired in a sale to which section 1042 applies which violates the provisions of section 409(n), and
   2. (2)any benefit which accrues to any person in violation of the provisions of section 409(n).
3. (c)The tax imposed by this section shall be paid—
   1. (1)in the case of an allocation referred to in paragraph (1) or (2) of subsection (a), by—which made the written statement described in section 664(g)(1)(E) or in section 1042(b)(3)(B) (as the case may be), and
      1. (A)the employer sponsoring such plan, or
      2. (B)the eligible worker-owned cooperative,
   2. (2)in the case of an allocation or ownership referred to in paragraph (3) or (4) of subsection (a), by the S corporation the stock in which was so allocated or owned.
4. (d)The statutory period for the assessment of any tax imposed by this section on an allocation described in subsection (a)(2) of qualified employer securities shall not expire before the date which is 3 years from the later of—
   1. (1)the 1st allocation of such securities in connection with a qualified gratuitous transfer (as defined in section 664(g)(1)), or
   2. (2)the date on which the Secretary is notified of the allocation described in subsection (a)(2).
5. (e)For purposes of this section—
   1. (1)Except as provided in paragraph (2), terms used in this section have the same respective meanings as when used in sections 409 and 4978.
   2. (2)
      1. (A)The amount involved with respect to any tax imposed by reason of subsection (a)(3) is the amount allocated to the account of any person in violation of section 409(p)(1).
      2. (B)The amount involved with respect to any tax imposed by reason of subsection (a)(4) is the value of the shares on which the synthetic equity is based.
      3. (C)For purposes of subparagraph (A), the amount involved for the first nonallocation year of any employee stock ownership plan shall be determined by taking into account the total value of all the deemed-owned shares of all disqualified persons with respect to such plan.
      4. (D)The statutory period for the assessment of any tax imposed by this section by reason of paragraph (3) or (4) of subsection (a) shall not expire before the date which is 3 years from the later of—
         1. (i)the allocation or ownership referred to in such paragraph giving rise to such tax, or
         2. (ii)the date on which the Secretary is notified of such allocation or ownership.