[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[S. 1300 Introduced in Senate (IS)]
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117th CONGRESS
1st Session
S. 1300
To amend the Internal Revenue Code of 1986 and the Small Business Act
to expand the availability of employee stock ownership plans in S
corporations, and for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
April 22, 2021
Mr. Cardin (for himself, Mr. Portman, Ms. Stabenow, Mr. Crapo, Ms.
Cantwell, Mr. Daines, Mr. Brown, Ms. Collins, Mr. Casey, Mr. Risch, Mr.
Whitehouse, Mr. Blunt, Ms. Hassan, Mr. Boozman, Mr. Leahy, Mrs.
Fischer, Mrs. Murray, Ms. Ernst, Mr. Sanders, Ms. Klobuchar, Mr.
Tester, Mrs. Shaheen, Mr. King, Mr. Booker, Mr. Peters, Mr. Van Hollen,
and Ms. Duckworth) introduced the following bill; which was read twice
and referred to the Committee on Finance
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 and the Small Business Act
to expand the availability of employee stock ownership plans in S
corporations, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Promotion and Expansion of Private
Employee Ownership Act of 2021''.
SEC. 2. FINDINGS.
Congress finds that--
(1) on January 1, 1998--nearly 25 years after the Employee
Retirement Income Security Act of 1974 was enacted and the
employee stock ownership plan (hereafter in this section
referred to as an ``ESOP'') was created--employees were first
permitted to be owners of subchapter S corporations pursuant to
the Small Business Job Protection Act of 1996 (Public Law 104-
188);
(2) with the passage of the Taxpayer Relief Act of 1997
(Public Law 105-34), Congress designed incentives to encourage
businesses to become ESOP-owned S corporations;
(3) since that time, several thousand companies have become
ESOP-owned S corporations, creating an ownership interest for
several million Americans in companies in every State in the
country, in industries ranging from heavy manufacturing to
technology development to services;
(4) while estimates show that 40 percent of working
Americans have no formal retirement account at all, every
United States worker who is an employee-owner of an S
corporation company through an ESOP has a valuable qualified
retirement savings account;
(5) recent studies have shown that employees of ESOP-owned
S corporations enjoy greater job stability than employees of
comparable companies;
(6) studies also show that employee-owners of S corporation
ESOP companies have amassed meaningful retirement savings
through their S ESOP accounts that will give them the means to
retire with dignity;
(7) under the Small Business Act (15 U.S.C. 631 et seq.)
and the regulations promulgated by the Administrator of the
Small Business Administration, a small business concern that
was eligible under the Small Business Act for the numerous
preferences of the Act is denied treatment as a small business
concern after an ESOP acquires more than 49 percent of the
business, even if the number of employees, the revenue of the
small business concern, and the racial, gender, or other
criteria used under the Act to determine whether the small
business concern is eligible for benefits under the Act remain
the same, solely because of the acquisition by the ESOP; and
(8) it is the goal of Congress to both preserve and foster
employee ownership of S corporations through ESOPs.
SEC. 3. DEFERRAL OF TAX FOR CERTAIN SALES OF EMPLOYER STOCK TO EMPLOYEE
STOCK OWNERSHIP PLAN SPONSORED BY S CORPORATION.
(a) In General.--Subparagraph (A) of section 1042(c)(1) 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.
SEC. 4. DEPARTMENT OF THE TREASURY TECHNICAL ASSISTANCE OFFICE.
(a) Establishment Required.--Before the end of the 90-day period
beginning on the date of enactment of this Act, the Secretary of the
Treasury shall establish the S Corporation Employee Ownership
Assistance Office to foster increased employee ownership of S
corporations.
(b) Duties of the Office.--The S Corporation Employee Ownership
Assistance Office shall provide--
(1) education and outreach to inform companies and
individuals about the possibilities and benefits of employee
ownership of S corporations; and
(2) technical assistance to assist S corporations in
sponsoring employee stock ownership plans.
SEC. 5. SMALL BUSINESS AND EMPLOYEE STOCK OWNERSHIP.
(a) In General.--The Small Business Act (15 U.S.C. 631 et seq.) is
amended--
(1) by redesignating section 49 as section 50; and
(2) by inserting after section 48 the following:
``SEC. 49. EMPLOYEE STOCK OWNERSHIP PLANS.
``(a) Definitions.--In this section--
``(1) the term `ESOP' means an employee stock ownership
plan, as defined in section 4975(e)(7) of the Internal Revenue
Code of 1986, as amended; and
``(2) the term `ESOP business concern' means a business
concern that was a small business concern eligible for a loan,
preference, or other program under this Act before the date on
which more than 49 percent of the business concern was acquired
by an ESOP.
``(b) Continued Eligibility.--In determining whether an ESOP
business concern qualifies as a small business concern for purposes of
a loan, preference, or other program under this Act, each ESOP
participant shall be treated as directly owning his or her
proportionate share of the stock in the ESOP business concern owned by
the ESOP.''.
(b) Effective Date.--The amendments made by this section shall take
effect on January 1 of the first calendar year beginning after the date
of the enactment of this Act.
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