Well, sort of. Technically speaking, S-Corps by definition pay no federal income tax since they're pass-through entities. If the sole shareholder of an S-Corp was an ESOP, the income is passing through to it. The ESOP has beneficiaries (the employees) whose shares sit in a trust. Income to the ESOP isn't taxed at the moment of filing, it's deferred: when the beneficiaries take distributions according to their shares, they pay ordinary income tax in that year.