[Senate Report 115-436]
[From the U.S. Government Publishing Office]


                                                     Calendar No. 348
115th Congress      }                        {                Report
                                 SENATE
 2d Session         }                        {                115-436

======================================================================



 
  SMALL BUSINESS EMPLOYEE OWNERSHIP PROMOTION ENHANCEMENT ACT OF 2017

                                _______
                                

               December 19, 2018.--Ordered to be printed

                                _______
                                

 Mr. Risch, from the Committee on Small Business and Entrepreneurship, 
                        submitted the following

                              R E P O R T

                         [To accompany S. 1538]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Small Business and Entrepreneurship, to 
which was referred the bill (S. 1538) to amend the Small 
Business Act to establish awareness of, and technical 
assistance for, the creation of employee stock ownership plans 
(ESOPs), and for other purposes, having considered the same, 
reports favorably thereon with an amendment in the nature of a 
substitute and recommends that the bill, as amended, do pass.

                            I. INTRODUCTION

    S. 1538 was introduced by Senator Gary C. Peters, for 
himself, and Senator James E. Risch, the Committee's Chairman, 
on July 12, 2017.
    This bill requires the SCORE Association, a Small Business 
Administration (SBA) resource partner, to establish a new 
position responsible for administering informational resources 
regarding ESOPs: the SCORE Employee Ownership Director. The 
Director's duties include coordinating efforts for employee 
ownership within SCORE chapters' nationwide and providing 
technical assistance that promotes or facilitates employee 
ownership plans. This role may be held by an existing SCORE 
employee.

              II. HISTORY (PURPOSE & NEED FOR LEGISLATION)

    Currently, there is no technical assistance program at SBA 
tasked with educating small business owners on ESOPs. Under an 
ESOP model, employees see direct benefits from a company's 
long-term success by allowing employees to share in the gains 
when a business is profitable. ESOPs are commonly formed when 
an owner of a privately-owned company departs the business, 
often for retirement. With owners of small businesses across 
the nation reaching retirement age, forming an ESOP can be an 
attractive option for those who want to keep a business' legacy 
in the hands of its employees. Despite the success of the ESOP 
model, many small businesses are not aware of how to transition 
their business to an ESOP and/or lack the necessary resources.

                      III. HEARINGS & ROUNDTABLES

    In the 113th Congress, the Committee held a roundtable on 
July 17, 2013 entitled ``Small Business Tax Reform: Making the 
Tax Code Work for Entrepreneurs and Startups.'' During this 
hearing, a witness, Mr. Michael Keeling, President of The ESOP 
Association, advocated for policies to expand employee 
ownership plans and noted that during the great recession 
employee stock-owned companies laid off employees at a rate of 
2.6 percent compared to conventionally-owned businesses that 
laid employees off at a rate of 12 percent. During the course 
of questioning, Senator Shaheen asked Mr. Keeling to share more 
information on why ESOPs were better positioned to lay off 
fewer employees and how they helped employees build wealth. In 
his closing remarks, Mr. Keeling discussed the history of ESOPs 
and how the ownership structure shares many virtues deemed 
essential to a free society and democracy. Chair Landrieu 
thanked Mr. Keeling for his remarks and agreed business 
ownership by employees is very important and beneficial to 
capitalism.

                        IV. DESCRIPTION OF BILL

    The bill amends the Small Business Act to task the SCORE 
Association with a new role in administering informational 
resources regarding ESOPs. The bill establishes a position 
within SCORE to lead efforts to provide information and general 
technical assistance that promotes or facilitates employee 
ownership plans.

                           V. COMMITTEE VOTE

    In compliance with rule XXVI (7)(b) of the Standing Rules 
of the Senate, the following vote was recorded on March 14, 
2018.
    A motion to adopt the Small Business Employee Ownership 
Promotion Enhancement Act of 2017, a bill to amend the Small 
Business Act to establish awareness of, and technical 
assistance for, the creation of employee stock ownership plans, 
and for other purposes, was approved unanimously by a roll call 
vote as part of a manager's package. Senators Risch, Rubio, 
Paul, Scott, Ernst, Inhofe, Young, Enzi, Rounds, Kennedy, 
Cardin, Cantwell, Shaheen, Heitkamp, Markey, Booker, Coons, 
Hirono, and Duckworth voted for the bill.

                           VI. COST ESTIMATE

    In compliance with rule XXVI (11)(a)(1) of the Standing 
Rules of the Senate, the Committee estimates the cost of the 
legislation will be equal to the amounts discussed in the 
following letter from the Congressional Budget Office:

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, June 26, 2018.
Hon. James E. Risch,
Chairman, Committee on Small Business and Entrepreneurship,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 1538, the Small 
Business Employee Ownership Enhancement Act of 2017.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Stephen 
Rabent.
            Sincerely,
                                                Keith Hall,
                                                          Director.
    Enclosure.

S. 1538--the Small Business Employee Ownership Enhancement Act of 2017

    The Service Corps of Retired Executives (SCORE) program 
provides access to counselors, advisors, and mentors to small 
businesses through the nonprofit SCORE Association. The Small 
Business Administration (SBA) pays a portion of the costs to 
administer the SCORE program. S. 1538 would require SCORE to 
appoint an individual to serve as the Employee Ownership 
Director who would provide additional information and 
assistance regarding employee ownership structures.
    Using information from the SBA, CBO estimates that S. 1538 
would cost less than $500,000 for the agency to implement the 
requirements of the bill; such spending would be subject to the 
availability of appropriated funds. Enacting S. 1538 would not 
affect direct spending or revenues; therefore, pay-as-you-go 
procedures do not apply.
    CBO estimates that enacting S. 1538 would not increase net 
direct spending or on-budget deficits in any of the four 
consecutive 10-year periods beginning in 2029.
    S. 1538 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act.
    The CBO staff contact for this estimate is Stephen Rabent. 
The estimate was reviewed by Theresa Gullo, Assistant Director 
for Budget Analysis.

                  VII. EVALUATION OF REGULATORY IMPACT

    In compliance with rule XXVI (11)(b) of the Standing Rules 
of the Senate, it is the opinion of the Committee that no 
significant additional regulatory impact will be incurred in 
carrying out the provisions of this legislation. There will be 
no additional impact on the personal privacy of companies or 
individuals who utilize the services provided.

                   VIII. SECTION-BY-SECTION ANALYSIS

Section 1. Short title

    This section provides the short title for the Act, the 
``Small Business Employee Ownership Promotion Enhancement Act 
of 2017''.

Sec. 2. SCORE program assistance

    This section directs SCORE to appoint an individual to 
serve as the SCORE Employee Ownership Director. Their duties 
will include offering technical assistance, distributing 
materials containing general information, and coordinating 
efforts between SCORE chapters nationwide. The Director will 
provide technical assistance for employee ownership options, 
including employee stock ownership plans, cooperatives, and 
other approaches that the Director deems appropriate. The 
Director will also provide statistics, including regional 
statistics from a SCORE chapter, on services provided to small 
businesses that may potentially undertake a form of employee 
ownership to the Administrator and the Office of 
Entrepreneurial Development.

                                  [all]