[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[S. 2515 Introduced in Senate (IS)]
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118th CONGRESS
1st Session
S. 2515
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
July 26, 2023
Mr. Cardin (for himself, Mr. Daines, Ms. Stabenow, Mr. Crapo, Mr.
Brown, Mr. Grassley, Mr. Van Hollen, Mr. Barrasso, Ms. Klobuchar, Mr.
Young, Mr. Tester, Mr. Cassidy, Mr. Booker, Mrs. Blackburn, Ms. Smith,
Mr. Risch, Mr. Sanders, Ms. Collins, Mr. King, Mr. Moran, Mr. Reed, and
Mr. Welch) 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 2023''.
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. FULL DEFERRAL OF TAX FOR CERTAIN SALES OF EMPLOYER STOCK TO
EMPLOYEE STOCK OWNERSHIP PLAN SPONSORED BY S CORPORATION.
(a) Acceleration of Deferral.--Section 114(c) of the SECURE 2.0 Act
of 2022 is amended by striking ``December 31, 2027'' and inserting
``the date of the enactment of the Promotion and Expansion of Private
Employee Ownership Act of 2023''.
(b) Repeal of Limitation.--
(1) In general.--Section 1042 of the Internal Revenue Code
of 1986, as amended by section 114 of the SECURE 2.0 Act of
2022, is amended by striking subsection (h).
(2) Effective date.--The amendment made by paragraph (1)
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; 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.
SEC. 6. ESTABLISHMENT OF THE ADVOCATE FOR EMPLOYEE OWNERSHIP.
(a) In General.--Subtitle A of title III of the Employee Retirement
Income Security Act of 1974 (29 U.S.C. 1201 et seq.) is amended by
adding at the end the following:
``SEC. 3005. ADVOCATE FOR EMPLOYEE OWNERSHIP.
``(a) In General.--The Secretary of Labor shall appoint an Advocate
for Employee Ownership within the Employee Ownership Initiative
established under section 346(b)(1) of the SECURE 2.0 Act of 2022
(division T of the Consolidated Appropriations Act, 2023 (Public Law
117-328)). The appointment shall be made without regard to the
provisions of title 5, United States Code, relating to appointments in
the competitive service or Senior Executive Service.
``(b) Duties.--The Advocate for Employee Ownership shall--
``(1) consult with the head of the Employee Ownership
Initiative established under section 346(b)(1) of the SECURE
2.0 Act of 2022 (division T of the Consolidated Appropriations
Act, 2023 (Public Law 117-328));
``(2) act as a liaison between the Department of Labor,
employee ownership advocates, employers considering employee
ownership, workers interested in employee ownership, and other
stakeholders, including employee stock ownership plan sponsors
and participants;
``(3) provide public education and assistance related to
the expansion of employee ownership through the establishment
and maintenance of practices that promote employee ownership,
including the use of employee stock ownership plans;
``(4) provide assistance for purposes of resolving a
dispute with the Department of Labor to any employee stock
ownership plan sponsor, fiduciary, or participant and help
facilitate communication between such entities and the
Department of Labor for such purposes;
``(5) in consultation with the S Corporation Employee
Ownership Assistance Office of the Department of the Treasury
established under section 4 of the Promotion and Expansion of
Private Employee Ownership Act of 2023, identify and recommend
potential legislative and administrative changes, including
related to access to capital issues, to increase practices that
promote employee ownership plans, including the use of employee
stock ownership plans; and
``(6) coordinate with other Federal agencies, including the
Administrator of the Small Business Administration, the
Secretary of the Treasury, and the Secretary of Commerce, and
State and local governments on outreach and education to inform
employees and employers about the possibilities and benefits of
employee ownership as a business ownership succession planning
option.
``(c) Consultation and Input.--The Secretary shall solicit advice
and input from the Advocate for Employee Ownership in developing
regulations or interpretations of this Act that relate to employee
stock ownership plans.
``(d) Compensation.--The Advocate for Employee Ownership shall be
entitled to compensation at the same rate as the rate of basic pay in
effect for a position at level V of the Executive Schedule under
section 5316 of title 5, United States Code.
``(e) Annual Report.--
``(1) In general.--Not later than December 31 of each
calendar year beginning after the date of enactment of this
section, the Advocate for Employee Ownership shall submit a
report to the Committee on Health, Education, Labor, and
Pensions of the Senate and the Committee on Education and the
Workforce of the House of Representatives on the activities of
the Office of the Advocate for Employee Ownership during the
fiscal year ending during such calendar year, including the
contents described in paragraph (2).
``(2) Content.--Each report submitted under paragraph (1)
shall--
``(A) summarize the assistance requests received by
the Advocate for Employee Ownership during the fiscal
year ending during the calendar year of such report;
``(B) describe the activities, including the
activities described under paragraphs (3) and (4) of
subsection (b), and evaluate the effectiveness of the
Advocate for Employee Ownership during such fiscal
year;
``(C) describe any significant problems the
Advocate for Employee Ownership has identified during
such fiscal year and ways to mitigate such problems;
``(D) contain recommendations for any
administrative or legislative action that may be
appropriate to resolve barriers to, and to incentivize,
practices that promote employee ownership, including
the use of employee stock ownership plans; and
``(E) describe progress related to employee
ownership in businesses in the United States.
``(3) Concurrent submission.--The Advocate for Employee
Ownership shall submit a copy of each report submitted under
paragraph (1) to the Secretary of Labor, and any other
appropriate official, at the same time such report is submitted
under paragraph (1).
``(4) Public availability.--The Advocate for Employee
Ownership shall make a copy of each report submitted under
paragraph (1) available to the public.
``(5) Definition of employee stock ownership plan.--For
purposes of this section, the term `employee stock ownership
plan' has the meaning given the term in section 4975(e)(7) of
the Internal Revenue Code of 1986.
``(f) Authorization of Appropriations.--There is authorized to be
appropriated such sums as may be necessary to carry out subsection
(d).''.
(b) Clerical Amendment.--The table of contents in section 1 of the
Employee Retirement Income Security Act of 1974 (29 U.S.C. 1001 note)
is amended by inserting after the item relating to section 3004 the
following new item:
``Sec. 3005. Advocate for employee ownership.''.
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