S. 1212: Promotion and Expansion of Private Employee Ownership Act of 2015

Posted by Aaron Juckett, CPA, CPC, QPA, QKA on Mon, Jun 01, 2015
Find me on:

US-senate

S. 1212: Promotion and Expansion of Private Employee Ownership Act of 2015 was introduced on May 6, 2015, by Sen. Benjamin Cardin [D-MD], and is co-sponsored by Ayotte, Kelly [R-NH], Blunt, Roy [R-MO], Collins, Susan [R-ME], Crapo, Michael [R-ID], Franken, Alan “Al” [D-MN], Heitkamp, Heidi [D-ND], Klobuchar, Amy [D-MN], Leahy, Patrick [D-VT], Risch, James [R-ID], Roberts, Pat [R-KS], Stabenow, Debbie [D-MI], Thune, John [R-SD], and Whitehouse, Sheldon [D-RI]. Baldwin, Tammy [D-WI], Sanders, Bernard “Bernie” [I-VT], King, Angus [I-ME], and Kirk, Mark [R-IL] have also co-sponsored the legislation.  It has been referred to the Senate Finance committee.

While the text of the legislation is not yet available, it appears to be modeled after S. 1512: Promotion and Expansion of Private Employee Ownership Act of 2011 from the 112th Congress.

The House version of this bill, H.R. 2096: Promotion and Expansion of Private Employee Ownership Act of 2015, was submitted in April 2015 by Rep. Reichert [R-WA].

Similar versions, H.R. 4837: Promotion and Expansion of Private Employee Ownership Act of 2014 and S. 742: The Promotion and Expansion of Private Employee Ownership Act of 2013 were submitted during the 113th Congress, and H.R. 1244: Promotion and Expansion of Private Employee Ownership Act of 2011 and S. 1512: Promotion and Expansion of Private Employee Ownership Act of 2011, were submitted in 2011 during the 112th Congress.

ESOP Association President, J. Michael Keeling commented on this legislation in a press release:

“Needless to say, it is extremely pleasing to see these Senate leaders, representing bi-partisanship, stand up for employee stock ownership through ESOPs.  The ESOP Association notes its appreciation for these members who have joined in support of employee ownership and taken the lead to address issues that relate to increasing ownership shares among average pay Americans,” stated ESOP Association President, J. Michael Keeling.  “Research proves that ESOPs are more profitable, more productive, and provide sustainable jobs. We need policies to encourage employee stock ownership, and the proposed policies in S. 1212, should address core social issues such as adequate retirement security and making sure working Americans have an ownership stake in our capitalistic system.”

This is the second piece of pro-ESOP legislation as part of the 114th Congress.  Here is the text of the legislation: 

114th CONGRESS

1st Session

S. 1212

IN THE SENATE OF THE UNITED STATES

May 6, 2015

Mr. Cardin (for himself, Mr. Roberts, Mr. Whitehouse, Mr. Crapo, Mr. Thune, Mr. Franken, Ms. Stabenow, Ms. Heitkamp, Mr. Leahy, Mr. Blunt, Mr. Risch, Ms. Ayotte, Ms. Collins, and Ms. Klobuchar) 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.

1. Short title

This Act may be cited as the Promotion and Expansion of Private Employee Ownership Act of 2015.

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.

3. Deferral of tax for certain sales of employer stock to employee stock ownership plan sponsored by S corporation

(a)   In general

Subparagraph (A) of section 1042(c)(1) of the Internal Revenue Code of 1986 is amended by striking domestic C corporation and inserting domestic corporation.

(b)   Effective date

The amendment made by subsection (a) shall apply to sales after the date of the enactment of this Act.

4. Department of 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 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. 

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 47 as section 48; and

(2) by inserting after section 46 the following:

Sec 47. 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, as amended; 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. 

aaron juckett 


Topics: legislation, In the News, Employee Plans News

Aaron Juckett, CPA, CPC, QPA, QKA
Written by Aaron Juckett, CPA, CPC, QPA, QKA

Aaron is President and Founder of ESOP Partners and provides implementation, administration, and consulting services to hundreds of companies. He is a member of The ESOP Association (TEA) and the National Center for Employee Ownership (NCEO).

Keep Your ESOP On Track and On Time
12 Benefits of Incorporating an ESOP in your Business Exit Strategy

Recent Posts