IRS Audits Tribune’s ESOP; Bankruptcy Court Approves Bonuses, Denies Severance

imageThe Internal Revenue Service is investigating Tribune Company’s ESOP (employee stock ownership plan), which was a key part of Sam Zell’s plan to take the company private two years ago. The use of the ESOP plan has also drawn a lawsuit from employees as well as an investigation by the Labor Department. According to the Chicago Sun-Times, the IRS is looking at the Tribune’s April 1, 2007, acquisition of $250 million in new shares that were purchased through company’s ESOP.

The IRS is trying to determine whether the purchase “was for the benefit of employees.” If so, it would qualify as tax exempt. If not, the bankrupt Tribune might have to pay corporate income taxes and an excise tax on the transaction. Incidentally, the IRS has recently gone after Tribune’s Chicago rival, The Sun-Times Media Group, for over $600 million in back taxes.

More after the jump

A Tribune rep sent this statement to paidContent: “We are aware of Monday’s filing by the IRS with the bankruptcy court and will respond to it within the normal framework of the Chapter 11 process. We believe we have provided complete, timely and accurate financial information at all times.”

$13M in bonuses approved, not a dime of severance: The court overseeing Tribune’s bankruptcy proceedings has approved $13 million in bonus payments to roughly 700 employees, but the $2 million in severance being sought by the company for 60 staffers it let go was denied, Chicago Tribune reported. The severance payments could not go through because the 60 workers were laid off just before Tribune sought bankruptcy protection. The company’s severance policies were changed as a result of the bankruptcy filing. The bankruptcy court did approve severance payments for two former employees let go after Tribune filed for Chapter 11. Tribune had argued that it needed to pay the bonuses so that it could retain and motivate essential management during a difficult economic environment.

Photo Credit: sheilaellen

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