For the purposes of determining who is a 5% owner, and thus required to begin taking required minimum distributions after age 70-1/2, are shares allocated through an employee stock ownership plan that have not been distributed from the plan count?

Subject company has some employees nearing age 70-1/2 who own shares outright and also have shares allocated to them within the ESOP. Do the shares still inside the plan have to be counted when determining if they are 5% owners?

Any code or regulation citations you can include would be appreciated.

See Section 318(a)(2)(B)(i) regarding attribution from trusts and related guidance.

318(a)(2)(B)(i) Stock owned, directly or indirectly, by or for a trust (other than an employees' trust described in section 401(a) which is exempt from tax under section 501(a)) shall be considered as owned by its beneficiaries in proportion to the actuarial interest of such beneficiaries in such trust.

As I read "other than an employee's trust described in section 401(a)..." it sounds like I DO NOT need to count shares allocated within the ESOP when determining who is a 5% owner. Comments? Clarifications?[b]

That would be my reading. However, there are cases where you ignore that rule and count the ESOP shares. I'm not aware that required minimum distributions have any such exception. But I can't say that for sure.