[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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