; and (8) it is the goal of Congress to both preserve and foster employee ownership of S corporations through ESOPs. 3. Deferral of tax for certain sales of employer stock to employee stock ownership plan sponsored by S corporation (a) In general Section 1042(c)(1)(A) of the Internal Revenue Code of 1986 is amended by striking domestic C corporation and inserting domestic corporation . (b) Effective date The amendment made by subsection (a) shall apply to sales after the date of the enactment of this Act. 4. Deduction for interest on loan to finance purchase of employer securities by an employee stock ownership plan sponsored by an S corporation (a) In general Part VI of subchapter B of chapter 1 of the Internal Revenue Code of 1986 is amended by inserting after section 199 the following new section: 200. Interest on certain loans for the purchase of employer securities by an employee stock ownership plan sponsored by an S corporation (a) In general There shall be allowed as a deduction an amount equal to 50 percent of the interest received during the taxable year by a bank (within the meaning of section 581) with respect to a qualified securities acquisition loan. (b) Qualified securities acquisition loan (1) In general For purposes of this section, the term qualified securities acquisition loan means— (A) any loan to an employee stock ownership plan sponsored by an S corporation to the extent that the proceeds are used to acquire employer securities for the plan, and (B) any loan to an S corporation that sponsors an employee stock ownership plan to the extent that the proceeds of such loan are loaned to the employee stock ownership plan to acquire employer securities for the plan. For purposes of this paragraph, the term employer securities has the meaning given such term by section 409(l). (2) Terms Applicable to certain qualified securities acquisition loans For purposes of paragraph (1)(B), the term qualified securities acquisition loan shall not include any loan to the S corporation unless the loan to the