U.S. Sens. Ben Cardin (D-MD) and Steve Daines (R-MT) introduced a bill this week in the Senate that would foster the growth of S corporations that are owned by Employee Stock Ownership Plans (S-ESOP).
Their bill, the Promotion and Expansion of Private Employee Ownership Act (S. 2515), seeks to eliminate barriers that businesses and their owners currently face in establishing a new S-ESOP or expanding the employee-ownership stake in an S corporation.
“Employee ownership provides small business owners and workers incredible opportunities to build generational wealth and create resiliency for their businesses. We need to preserve and expand this structure to enable more businesses to grow and to allow employees to accrue valuable benefits,” Cardin, chair of the Senate Small Business Committee, said. “Americans deserve the opportunity to build generational wealth and ESOPS are a proven path toward this goal.”
Specifically, the bill would incentivize owners of S Corporations to sell their stock to an ESOP by providing deferral treatment for contributions of S Corporation stock to an ESOP provided certain reinvestment requirements are met. It would also provide technical assistance for companies that may be interested in forming an S-ESOP and ensure that small businesses that become ESOPs retain their SBA certification. In addition, it affirms the importance of preserving the S-ESOP structure in the Internal Revenue Code.
Finally, it would create the position of an “Employee Ownership Advocate” at the Department of Labor to support the formation and success of employee ownership. Among its charges, the advocate would have a mandate to assist employee-owned companies and review ESOP-related regulations before they are finalized.
“While Montana workers and businesses struggle to navigate this challenging economy, it’s important we strengthen creative ways to help folks grow their wealth and reach financial security. ESOPs help expand ownership of the economy to middle class Montanans and make it easier for folks to invest toward a comfortable retirement,” Daines said. “America is the land of opportunity, and our bipartisan bill will help protect and preserve the American dream for Montanans from all walks of life.”
Estimates place the number of employee stock ownership plans at more than 6,500 serving almost 14 million participants. ESOPs have a proven record of keeping small businesses and jobs in their local communities, rewarding employees, and creating more productive and resilient businesses.
The senate bill is cosponsored by U.S. Sens. Debbie Stabenow (D-MI), Mike Crapo (R-ID), Sherrod Brown (D-OH), Susan Collins (R-ME), Amy Klobuchar (D-MN), Jim Risch (R-ID), Jon Tester (D-MT), Bill Cassidy (R-LA), Angus King (I-ME), Marsha Blackburn (R-TN), Cory Booker (D-NJ), John Barrasso (R-WY), Bernie Sanders (I-VT), Todd Young (R-IN), Chris Van Hollen (D-MD), Chuck Grassley (R-IA), Jack Reed (D-RI), Tina Smith (D-MN) and Peter Welch (D-VT).
U.S. Reps. Earl Blumenauer (D-OR) and Mike Kelly (R-PA), both members of the House Ways and Means Committee, have introduced a companion bill in the House of Representatives.