[Congressional Record Volume 164, Number 74 (Tuesday, May 8, 2018)]
[House]
[Pages H3810-H3812]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
MAIN STREET EMPLOYEE OWNERSHIP ACT OF 2018
Mr. CHABOT. Mr. Speaker, I move to suspend the rules and pass the
bill (H.R. 5236) to expand opportunities available to employee-owned
business concerns through Small Business Administration loan programs,
and for other purposes, as amended.
The Clerk read the title of the bill.
The text of the bill is as follows:
H.R. 5236
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 ``Main Street Employee
Ownership Act of 2018''.
SEC. 2. DEFINITIONS.
In this Act--
(1) the terms ``Administration'' and ``Administrator''
means the Small Business Administration and the Administrator
thereof, respectively;
(2) the term ``cooperative'' means an entity that is
determined to be a cooperative by the Administrator, in
accordance with applicable Federal and State laws and
regulations;
(3) the term ``employee-owned business concern'' means--
(A) a cooperative in which employees are eligible for
membership; and
(B) a qualified employee trust;
(4) the terms ``qualified employee trust'' and ``small
business concern'' have the meanings given those terms in
section 3 of the Small Business Act (15 U.S.C. 632); and
(5) the term ``small business development center'' means a
small business development center described in section 21 of
the Small Business Act (15 U.S.C. 648).
SEC. 3. EXPANSION OF 7(A) LOANS.
(a) In General.--Section 7(a) of the Small Business Act (15
U.S.C. 636(a)) is amended--
(1) in paragraph (15)--
(A) in subparagraph (A)--
(i) by striking ``this subsection to qualified employee
trusts'' and inserting ``this subsection--
``(i) to qualified employee trusts'';
(ii) in clause (i), as so designated--
(I) by inserting ``, and for any transaction costs
associated with purchasing,'' after ``purchasing'';
(II) by striking the period at the end and inserting ``;
and''; and
(iii) by adding at the end the following:
``(ii) to a small business concern under a plan approved by
the Administrator, if the proceeds from the loan are only
used to make a loan to a qualified employee trust, and for
any transaction costs associated with making that loan, that
results in the qualified employee trust owning at least 51
percent of the small business concern.'';
(B) in subparagraph (B)--
(i) in the matter preceding clause (i), by inserting ``or
by the small business concern'' after ``the trustee of such
trust'';
(ii) in clause (ii), by striking ``and'' at the end;
(iii) in clause (iii), by striking the period at the end
and inserting ``, and''; and
(iv) by adding at the end the following:
``(iv) with respect to a loan made to a trust, or to a
cooperative in accordance with paragraph (35)--
``(I) a seller of the small business concern may remain
involved as an officer, director, or key employee of the
small business concern when a qualified employee trust or
cooperative has acquired 100 percent of ownership of the
small business concern; and
``(II) any seller of the small business concern who remains
as an owner of the small business concern, regardless of the
percentage of ownership interest, shall be required to
provide a personal guarantee by the Administration.''; and
(C) by adding at the end the following:
``(F) A small business concern that makes a loan to a
qualified employee trust under subparagraph (A)(ii) is not
required to contain the same terms and conditions as the loan
made to the small business concern that is guaranteed by the
Administration under such subparagraph.
``(G) With respect to a loan made to a qualified employee
trust under this paragraph, or to a cooperative in accordance
with paragraph (35), the Administrator may, as deemed
appropriate, elect to not require any mandatory equity to be
provided by the qualified employee trust or cooperative to
make the loan.''; and
(2) by adding at the end the following:
``(35) Loans to cooperatives.--
``(A) Definition.--In this paragraph, the term
`cooperative' means an entity that is determined to be a
cooperative by the Administrator, in accordance with
applicable Federal and State laws and regulation.
``(B) Authority.--The Administration shall guarantee loans
made to a cooperative for the purpose described in paragraph
(15).''.
(b) Delegation of Authority to Preferred Lenders.--Section
5(b)(7) of the Small Business Act (15 U.S.C. 634(b)(7)) is
amended by inserting ``, including loans guaranteed under
paragraph (15) or (35) of section 7(a)'' after ``deferred
participation loans''.
SEC. 4. SMALL BUSINESS INVESTMENT COMPANY PROGRAM OUTREACH.
The Administrator shall provide outreach and educational
materials to companies licensed under section 301(c) of the
Small Business Investment Act of 1958 (15 U.S.C. 681(c)) to
increase the use of funds to make investments in company
transitions to employee-owned business concerns.
SEC. 5. SMALL BUSINESS MICROLOAN PROGRAM OUTREACH.
The Administrator shall provide outreach and educational
materials to intermediaries under section 7(m) of the Small
Business Act (15 U.S.C. 636(m)) to increase the use of funds
to make loans to employee-owned business concerns, including
transitions to employee-owned business concerns.
SEC. 6. SMALL BUSINESS DEVELOPMENT CENTER OUTREACH AND
ASSISTANCE.
(a) Establishment.--The Administrator shall establish a
Small Business Employee Ownership and Cooperatives Promotion
Program to offer technical assistance and training on the
transition to employee ownership through cooperatives and
qualified employee trusts.
(b) Small Business Development Centers.--
(1) In general.--In carrying out the program established
under subsection (a), the Administrator shall enter into
agreements with small business development centers under
which the centers shall--
(A) provide access to information and resources on employee
ownership through cooperatives or qualified employee trusts
as a business succession strategy;
(B) conduct training and educational activities; and
(C) carry out the activities described in subparagraph (U)
of section 21(c)(3) of the Small Business Act (15 U.S.C.
648(c)(3)).
(2) Additional services.--Section 21(c)(3) of the Small
Business Act (15 U.S.C. 648(c)(3)) is amended--
(A) in subparagraph (S), by striking ``and'' at the end;
(B) in subparagraph (T), by striking the period at the end
and inserting ``; and''; and
(C) by adding at the end the following:
``(U) encouraging and assisting the provision of succession
planning to small business concerns with a focus on
transitioning to cooperatives, as defined in section
7(a)(35), and qualified employee trusts (collectively
referred to in this subparagraph as `employee-owned business
concerns'), including by--
``(i) providing training to individuals to promote the
successful management, governance, or operation of a business
purchased by those individuals in the formation of an
employee-owned business concern;
``(ii) assisting employee-owned business concerns that meet
applicable size standards established under section 3(a) with
education and technical assistance with respect to financing
and contracting programs administered by the Administration;
``(iii) coordinating with lenders on conducting outreach on
financing through programs administered by the Administration
that may be used to support the transition of ownership to
employees;
``(iv) supporting small business concerns in exploring or
assessing the possibility of transitioning to an employee-
owned business concern; and
``(v) coordinating with the cooperative development centers
of the Department of Agriculture, the land grant extension
network, the Manufacturing Extension Partnership, community
development financial institutions, employee ownership
associations and service providers, and local, regional and
national cooperative associations.''.
SEC. 7. INTERAGENCY WORKING GROUP.
(a) In General.--Not later than 90 days after the date of
enactment of this Act, the Administrator (or a designee of
the Administrator) shall coordinate and chair an interagency
working group, which shall--
(1) develop recommendations on how Federal programs can
promote, support, and increase the number of employee-owned
business concerns;
(2) ensure coordination with Federal agencies and national
and local employee ownership, cooperative, and small business
organizations; and
(3) publish a report on the activities of the interagency
working group that is indexed and maintained for public
review.
(b) Meetings.--The interagency working group shall meet at
such times as determined necessary by the, but not less than
biannually. Such meetings may occur in person or via
electronic resources.
SEC. 8. AMENDMENT TO REPORT TO CONGRESS ON STATUS OF
EMPLOYEE-OWNED FIRMS.
Section 7(a)(15)(E) of the Small Business Act (15 U.S.C.
636(a)(15)(E)) is amended by striking
[[Page H3811]]
``Administration.'' and inserting ``Administration, which
shall include--
``(i) the total number of loans made to employee-owned
business concerns that were guaranteed by the Administrator
under section 7(a) of the Small Business Act (15 U.S.C.
636(a)) or section 502 of the Small Business Investment Act
of 1958 (15 U.S.C. 696), including the number of loans made--
``(I) to small business concerns owned and controlled by
socially and economically disadvantaged individuals; and
``(II) to cooperatives in which employees are eligible for
membership;
``(ii) the total number of financings made to employee-
owned business concerns by companies licensed under section
301(c) of the Small Business Investment Act of 1958 (15
U.S.C. 696(c)), including the number of financings made--
``(I) to small business concerns owned and controlled by
socially and economically disadvantaged individuals; and
``(II) to cooperatives in which employees are eligible for
membership; and
``(iii) any outreach and educational activities conducted
by the Administration with respect to employee-owned business
concerns.''.
SEC. 9. REPORT ON COOPERATIVE LENDING.
(a) Sense of Congress.--It is the sense of Congress that
cooperatives have a unique business structure and are unable
to access the lending programs of the Administration
effectively due to loan guarantee requirements that are
incompatible with the business structure of cooperatives.
(b) Study and Report.--
(1) Study.--The Administrator, in coordination with
lenders, stakeholders, and Federal agencies, shall study and
recommend practical alternatives for cooperatives that will
satisfy the loan guarantee requirements of the
Administration.
(2) Report.--Not later than 120 days after the date of
enactment of this Act, the Administrator shall submit to
Congress the recommendations developed under paragraph (1)
and a plan to implement such recommendations.
SEC. 10. AMENDMENT TO DEFINITION OF QUALIFIED EMPLOYEE TRUST.
Section 3(c)(2)(A)(ii) of the Small Business Act (15 U.S.C.
632(c)(2)(A)(ii)) is amended to read as follows:
``(ii) which provides that each participant is entitled to
direct the plan trustee as to the manner of how to vote the
qualified employer securities (as defined in section
4975(e)(8) of the Internal Revenue Code of 1986), which are
allocated to the account of such participant with respect to
a corporate matter which (by law or charter) must be decided
by a vote conducted in accordance with section 409(e) of the
Internal Revenue Code of 1986; and''.
The SPEAKER pro tempore. Pursuant to the rule, the gentleman from
Ohio (Mr. Chabot) and the gentlewoman from New York (Ms. Velazquez)
each will control 20 minutes.
The Chair recognizes the gentleman from Ohio.
General Leave
Mr. CHABOT. Mr. Speaker, I ask unanimous consent that all Members may
have 5 legislative days within which to revise and extend their remarks
and include extraneous material on the bill under consideration.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Ohio?
There was no objection.
Mr. CHABOT. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, ownership structures of businesses come in numerous
shapes and sizes. Whether they follow a traditional model or an
employee-owned structure, small businesses across the Nation continue
to face a difficult lending environment.
Although the SBA bridges the gap for many of the Nation's small
firms, 100-percent-employee-owned firms face uncertainty as they
navigate the SBA's 7(a) Loan Program.
To strengthen the 7(a) Loan Program for employee-owned small
businesses and worker cooperatives, Ranking Member Velazquez introduced
H.R. 5236, the Main Street Employee Ownership Act of 2018.
In order to provide clarity for program participants, H.R. 5236 would
update reporting statistics to ensure accurate data is captured.
The bill also codifies ownership transition plans.
Additionally, H.R. 5236 requires the SBA's resource partners to have
educational material available to explain the nuances of these uniquely
structured businesses.
Although the requirements for personal guarantees within the 7(a)
Loan Program prove challenging to some of these business structures,
H.R. 5236 importantly preserves this hallmark and requires the SBA to
work with industry representatives to develop ways to satisfy the
guarantee while reducing its burdens.
Employee-owned small businesses are an important part of the small
business ecosystem. We must continue to streamline the processes and
procedures in place at the SBA for all small businesses. H.R. 5236, Ms.
Velazquez's legislation, is a step in the right direction that provides
clarity for employee-owned small businesses and worker cooperatives.
Mr. Speaker, I want to thank the ranking member, Ms. Velazquez, who
has spearheaded this legislation.
I urge my colleagues to vote ``yes'' on H.R. 5236, and I reserve the
balance of my time.
Ms. VELAZQUEZ. Mr. Speaker, I yield myself such time as I may
consume.
Mr. Speaker, I rise in support of H.R. 5236, the Main Street Employee
Ownership Act, a commonsense measure to improve SBA's lending and
training programs to enable employees to purchase the companies they
work for.
As baby boomers near retirement, the country faces a substantial
dilemma: Roughly half of privately held companies are owned by baby
boomers, and fewer than 15 percent have a formal exit plan in place.
And while it is wonderful to think that family members will take over
the business, this is a relatively rare occurrence. Some will be bought
out; others will close. This will have significant secondary economic
impacts that will ripple through our local communities.
Mr. Speaker, I have been working with Senator Gillibrand's office to
help address this looming problem.
The bill before us will reward workers and invest in our Main Street
economy by improving the lending landscape for employee-owned
businesses, such as employee stock ownership plans and co-ops.
There are 7,000 such companies in existence all over the Nation,
contributing to our local communities and economies. However,
businesses seeking to transition to employee-owned status face
difficulty in obtaining adequate capital to cover the oftentimes
prohibitive costs.
The SBA was authorized to loan to ESOPs in 1979. Unfortunately, this
tool has rarely been used due to misunderstanding of the business
structure and cumbersome transition requirements.
This bill seeks to align common industry practices with SBA protocols
to encourage more lending to ESOPs and co-ops. By codifying current SBA
standards of practice and easing some burdensome guarantee
restrictions, it is my hope we will keep local enterprises in their
communities, saving jobs along the way and preventing economic
dislocation for many workers.
Mr. Speaker, I urge Members to support this legislation, and I
reserve the balance of my time.
Mr. CHABOT. Mr. Speaker, I reserve the balance of my time.
Ms. VELAZQUEZ. Mr. Speaker, I yield 2 minutes to the gentleman from
Colorado (Mr. Polis).
Mr. POLIS. Mr. Speaker, I thank the gentlewoman from New York for
yielding me time.
Mr. Speaker, I rise in support of H.R. 5236, the Main Street
Employment Act of 2018, that will help employee-owned companies.
Employee ownership is an important part of helping workers build
wealth. In addition to the income gap in this country, we also have a
wealth gap. When a company does well, everybody should do well, not
just the investors.
This bill helps promote employee-owned businesses by making changes
to the Small Business Administration's loan program that helps
employee-owned businesses access capital. It is currently a barrier in
the rules that actually gives a disadvantage to employee-owned
businesses, when, as a society, as a Nation, we should be encouraging
employee ownership.
The SBA Loan Guarantee Program is often the only financing that many
small businesses can get early on to get off the ground. This bill
would open up SBA lending for cooperatives, which we often call co-ops,
and also strengthens the lending program for ESOPs, which is another
form of employee-owned company.
There is a very successful ESOP in the district I am honored to
represent called New Belgium Brewery that makes among the best beer in
the world.
This bill also creates a small business employee ownership and
cooperative program, which helps employers and employees understand how
to create employee-owned businesses, providing some of the help for
succession planning, coordinating with other programs
[[Page H3812]]
to help employee-owned businesses succeed.
Employee-owned businesses are anchor businesses in our communities.
They provide good, stable jobs and help employees build value and
wealth over time and participate in the governance of the company. They
align the incentives of workers with owners and management and are good
for overall economic productivity as well.
This bill builds on the bipartisan language that I helped secure in
the omnibus appropriations bill directing the SBA to encourage employee
ownership. Passing this bill will make those changes in the 1-year
spending bill that expires September 30 permanent.
Mr. Speaker, I encourage all Members to support this very important
piece of bipartisan legislation.
Ms. VELAZQUEZ. Mr. Speaker, I yield myself the balance of my time.
Mr. Speaker, there is no question that we need to support our Main
Street small businesses, especially those that fall outside of
traditional business structures. H.R. 5236 does just that by requiring
more training and clarifying lending protocols.
Today's bill is endorsed by at least 25 organizations, including
America's SBDCs, the American Sustainable Business Council, the
Association for Enterprise Opportunity, ESCA, and a variety of co-ops
and employee-owner associations.
Mr. Speaker, I would like to thank Justin Pelletier and Jon Cardinal
for their tireless work on this complex topic.
Mr. Speaker, I urge Members to support this bill, and I yield back
the balance of my time.
Mr. CHABOT. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, I will conclude by saying that employee-owned businesses
really populate the streets and neighborhoods of many cities across
this Nation. They are unique in form but face many of the same hurdles
that other small businesses face.
H.R. 5236 streamlines how employee-owned businesses operate under the
important rules of the SBA 7(a) Loan Program. While preserving
important characteristics of the program, H.R. 5236 will help employee-
owned businesses as they seek capital to grow, expand, and create much-
needed jobs.
Mr. Speaker, I want to again thank and commend the ranking member,
Ms. Velazquez, for her leadership on this legislation.
I would urge my colleagues to support H.R. 5236, and I yield back the
balance of my time.
The SPEAKER pro tempore (Mr. Hill). The question is on the motion
offered by the gentleman from Ohio (Mr. Chabot) that the House suspend
the rules and pass the bill, H.R. 5236, as amended.
The question was taken; and (two-thirds being in the affirmative) the
rules were suspended and the bill, as amended, was passed.
A motion to reconsider was laid on the table.
____________________