II 

115TH CONGRESS 

1ST SESSION S. 1788 

To encourage companies to expand employee ownership, and for other 

purposes. 

IN THE SENATE OF THE UNITED STATES 

SEPTEMBER 11, 2017 

Ms. BALDWIN (for herself and Mrs. GILLIBRAND) introduced the following 

bill; which was read twice and referred to the Committee on Finance 

A BILL 

To encourage companies to expand employee ownership, and 

for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Worker Owned Wealth 

5 Act’’. 

6 SEC. 2. DEFINITION. 

7 In this Act, the term ‘‘ESOP’’ means an employee 

8 stock ownership plan, as defined in section 4975(e)(7) of 

9 the Internal Revenue Code of 1986. 


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1 SEC. 3. EMPLOYEE OWNERSHIP REVOLVING LOAN FUNDS. 

2 (a) IN GENERAL.—The Secretary of the Treasury 

3 shall establish in each field office in the Department of 

4 the Treasury an Employee Ownership Revolving Loan 

5 Fund that makes— 

6 (1) low-interest loans to business owners seek7 ing to establish employee ownership in the business; 

8 and 

9 (2) loan guarantees to private lenders who 

10 make loans to ESOPs. 

11 (b) STAFF.— 

12 (1) IN GENERAL.—The Secretary of the Treas13 ury may, without regard to the civil service laws (in14 cluding regulations), appoint and terminate such 

15 personnel as may be necessary to enable the Sec16 retary to carry out this section. 

17 (2) COMPENSATION.—The Secretary of the 

18 Treasury may fix the compensation of personnel 

19 without regard to chapter 51 and subchapter III of 

20 chapter 53 of title 5, United States Code, relating 

21 to classification of positions and General Schedule 

22 pay rates, except that the rate of pay for personnel 

23 may not exceed the rate payable for level V of the 

24 Executive Schedule under section 5316 of that title. 


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1 (c) AUTHORIZATION OF APPROPRIATIONS.—There is 

2 authorized to be appropriated $1,000,000,000 to carry out 

3 this section. 

4 SEC. 4. EXCLUSION OF INTEREST ON LOANS USED TO AC5 QUIRE EMPLOYER SECURITIES FOR EM6 PLOYEE STOCK OWNERSHIP PLANS. 

7 (a) IN GENERAL.—Part III of subchapter B of chap8 ter 1 of the Internal Revenue Code of 1986 is amended 

9 by inserting after section 132 the following new section: 

10 ‘‘SEC. 133. INTEREST ON CERTAIN LOANS USED TO AC11 QUIRE EMPLOYER SECURITIES. 

12 ‘‘(a) ALLOWANCE OF EXCLUSION.— 

13 ‘‘(1) IN GENERAL.—Except as provided in para14 graph (2), gross income does not include the applica15 ble percentage of the interest received by— 

16 ‘‘(A) a bank (within the meaning of section 

17 581), 

18 ‘‘(B) an insurance company to which sub19 chapter L applies, 

20 ‘‘(C) a corporation actively engaged in the 

21 business of lending money, or 

22 ‘‘(D) a regulated investment company (as 

23 defined in section 851), 

24 with respect to a securities acquisition loan. 


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1 ‘‘(2) ANNUAL LIMITATION.—The aggregate 

2 amount of interest which may be excluded by a tax3 payer under paragraph (1) for any taxable year shall 

4 not exceed $20,000,000. 

5 ‘‘(3) APPLICABLE PERCENTAGE.—For purposes 

6 of this section— 

7 ‘‘(A) IN GENERAL.—Except as provided in 

8 subparagraph (B), the applicable percentage of 

9 a taxpayer with respect to any securities acqui10 sition loan is 50 percent. 

11 ‘‘(B) LOWER PERCENTAGES FOR LARGER

12 FINANCIAL INSTITUTIONS.—If, for any taxable 

13 year in which a taxpayer enters into a securities 

14 acquisition loan— 

15 ‘‘(i) the average adjusted bases of all 

16 assets of the taxpayer are equal to or 

17 greater than $2,000,000,000 but less than 

18 or equal to $10,000,000,000, the tax19 payer’s applicable percentage with respect 

20 to interest received by the taxpayer on 

21 such loan (including any refinancing of 

22 such loan treated as a securities acquisi23 tion loan) for such taxable year and any 

24 succeeding taxable year shall be 25 per25 cent, and 


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1 ‘‘(ii) the average adjusted bases of all 

2 assets of the taxpayer are greater than 

3 $10,000,000,000, the taxpayer’s applicable 

4 percentage with respect to interest received 

5 by the taxpayer on such loan (including 

6 any refinancing of such loan treated as a 

7 securities acquisition loan) for such taxable 

8 year and any succeeding taxable year shall 

9 be 10 percent. 

10 ‘‘(4) CONTROLLED GROUP OF CORPORA11 TIONS.—All members of a controlled group of cor12 porations (as defined in section 409(l)(4)) shall be 

13 treated as 1 taxpayer for purposes of applying para14 graphs (2) and (3). 

15 ‘‘(b) SECURITIES ACQUISITION LOAN.— 

16 ‘‘(1) IN GENERAL.—For purposes of this sec17 tion, the term ‘securities acquisition loan’ means— 

18 ‘‘(A) any loan to a corporation or to an 

19 employee stock ownership plan to the extent 

20 that the proceeds are used to acquire employer 

21 securities for the plan, or 

22 ‘‘(B) any loan to a corporation to the ex23 tent that, within 30 days, employer securities 

24 are transferred to the plan in an amount equal 

25 to the proceeds of such loan and such securities 


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1 are allocable to accounts of plan participants 

2 within 1 year of the date of such loan. 

3 For purposes of this paragraph, the term ‘employer 

4 securities’ has the meaning given such term by sec5 tion 409(l). The term ‘securities acquisition loan’ 

6 shall not include a loan with a term greater than 15 

7 years, except that in the case of a securities acquisi8 tion loan which is a refinancing loan described in 

9 paragraph (5), such term may not extend beyond the 

10 last day of the original securities acquisition loan 

11 which such loan is refinancing. 

12 ‘‘(2) LOANS BETWEEN RELATED PERSONS.— 

13 The term ‘securities acquisition loan’ shall not in14 clude— 

15 ‘‘(A) any loan made between corporations 

16 which are members of the same controlled 

17 group of corporations, or 

18 ‘‘(B) any loan made between an employee 

19 stock ownership plan and any person that is— 

20 ‘‘(i) the employer of any employees 

21 who are covered by the plan, or 

22 ‘‘(ii) a member of a controlled group 

23 of corporations which includes such em24 ployer. 


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1 For purposes of this paragraph, subparagraphs 

2 (A) and (B) shall not apply to any loan which, 

3 but for such subparagraphs, would be a securi4 ties acquisition loan if such loan was not origi5 nated by the employer of any employees who 

6 are covered by the plan or by any member of 

7 the controlled group of corporations which in8 cludes such employer, except that this section 

9 shall not apply to any interest received on such 

10 loan during such time as such loan is held by 

11 such employer (or any member of such con12 trolled group). 

13 ‘‘(3) TERMS APPLICABLE TO CERTAIN SECURI14 TIES ACQUISITION LOANS.—A loan to a corporation 

15 shall not fail to be treated as a securities acquisition 

16 loan merely because the proceeds of such loan are 

17 lent to an employee stock ownership plan sponsored 

18 by such corporation (or by any member of the con19 trolled group of corporations which includes such 

20 corporation) if such loan includes— 

21 ‘‘(A) repayment terms which are substan22 tially similar to the terms of the loan of such 

23 corporation from a lender described in sub24 section (a), or 


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1 ‘‘(B) repayment terms providing for more 

2 rapid repayment of principal or interest on such 

3 loan, but only if allocations under the plan at4 tributable to such repayment do not discrimi5 nate in favor of highly compensated employees 

6 (within the meaning of section 414(q)). 

7 ‘‘(4) CONTROLLED GROUP OF CORPORA8 TIONS.—For purposes of this subsection, the term 

9 ‘controlled group of corporations’ has the meaning 

10 given such term by section 409(l)(4). 

11 ‘‘(5) TREATMENT OF REFINANCINGS.—The 

12 term ‘securities acquisition loan’ shall include any 

13 loan which— 

14 ‘‘(A) is (or is part of a series of loans) 

15 used to refinance a loan described in subpara16 graph (A) or (B) of paragraph (1), and 

17 ‘‘(B) meets the requirements of paragraphs 

18 (2) and (3). 

19 ‘‘(6) PLAN REQUIREMENTS.— 

20 ‘‘(A) IN GENERAL.—A loan shall not be 

21 treated as a securities acquisition loan for pur22 poses of this section unless, immediately after 

23 the acquisition or transfer referred to in sub24 paragraph (A) or (B) of paragraph (1), respecVerDate Sep 11 2014 04:34 Sep 13, 2017 Jkt 069200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S1788.IS S1788

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1 tively, the employee stock ownership plan meets 

2 the requirements of subparagraphs (B) and (C). 

3 ‘‘(B) PLAN MUST HOLD MORE THAN 5

4 PERCENT OF STOCK AFTER ACQUISITION OR

5 TRANSFER.—An employee stock ownership plan 

6 meets the requirements of this subparagraph if 

7 the plan owns more than 5 percent of— 

8 ‘‘(i) each class of outstanding stock of 

9 the corporation issuing the employer secu10 rities, or 

11 ‘‘(ii) the total value of all outstanding 

12 stock of the corporation. 

13 ‘‘(C) PLAN MUST COVER AT LEAST 50 PER14 CENT OF NONHIGHLY COMPENSATED EMPLOY15 EES.— 

16 ‘‘(i) IN GENERAL.—An employee stock 

17 ownership plan meets the requirements of 

18 this subparagraph if at least 50 percent of 

19 the employees of each employer maintain20 ing the plan who are not highly com21 pensated employees (as defined in section 

22 414(q)) are participants in the plan. 

23 ‘‘(ii) CERTAIN EMPLOYEES MAY BE

24 EXCLUDED.—For purposes of clause (i), 


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1 an employer may elect to exclude under the 

2 plan employees— 

3 ‘‘(I) who have not attained the 

4 age of 21 before the close of a plan 

5 year, 

6 ‘‘(II) who have less than 1 year 

7 of service with the employer as of any 

8 day during the plan year, 

9 ‘‘(III) who are covered under an 

10 agreement which the Secretary of 

11 Labor finds to be a collective bar12 gaining agreement if there is evidence 

13 that the benefits covered under the 

14 employee stock ownership plan were 

15 the subject of good faith bargaining 

16 between employee representatives and 

17 the employer, or 

18 ‘‘(IV) who are described in sec19 tion 410(b)(3)(C) (relating to non20 resident aliens working outside the 

21 United States). 

22 ‘‘(D) FAILURE TO MEET REQUIRE23 MENTS.— 

24 ‘‘(i) IN GENERAL.—Subsection (a) 

25 shall not apply to any interest received 


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1 with respect to a securities acquisition loan 

2 which is allocable to any period during 

3 which the employee stock ownership plan 

4 does not meet the requirements of sub5 paragraphs (B) and (C). 

6 ‘‘(ii) EXCEPTION.—To the extent pro7 vided by the Secretary, clause (i) shall not 

8 apply to any period if, within 90 days of 

9 the first date on which the failure occurred 

10 (or such longer period not in excess of 180 

11 days as the Secretary may prescribe), the 

12 plan takes such actions as are required to 

13 meet the requirements of subparagraphs 

14 (B) and (C). 

15 ‘‘(E) STOCK.—For purposes of subpara16 graph (B)— 

17 ‘‘(i) IN GENERAL.—The term ‘stock’ 

18 means stock other than stock described in 

19 section 1504(a)(4). 

20 ‘‘(ii) TREATMENT OF CERTAIN

21 RIGHTS.—The Secretary may provide that 

22 warrants, options, contracts to acquire 

23 stock, convertible debt interests and other 

24 similar interests be treated as stock for 1 

25 or more purposes under subparagraph (B). 


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1 ‘‘(F) AGGREGATION RULE.—For purposes 

2 of determining whether the requirements of 

3 subparagraph (B) are met, an employee stock 

4 ownership plan shall be treated as owning stock 

5 in the corporation issuing the employer securi6 ties which is held by any other employee stock 

7 ownership plan which is maintained— 

8 ‘‘(i) the employer maintaining the 

9 plan, or 

10 ‘‘(ii) any member of a controlled 

11 group of corporations (within the meaning 

12 of section 409(l)(4)) of which the employer 

13 described in clause (i) is a member. 

14 ‘‘(7) VOTING RIGHTS OF EMPLOYER SECURI15 TIES.—A loan shall not be treated as a securities ac16 quisition loan for purposes of this section unless— 

17 ‘‘(A) the employee stock ownership plan 

18 meets the requirements of section 409(e)(2) 

19 with respect to all employer securities acquired 

20 by, or transferred to, the plan in connection 

21 with such loan (without regard to whether or 

22 not the employer has a registration-type class of 

23 securities), and 


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1 ‘‘(B) no stock described in section 

2 409(l)(3) is acquired by, or transferred to, the 

3 plan in connection with such loan unless— 

4 ‘‘(i) such stock has voting rights 

5 equivalent to the stock to which it may be 

6 converted, and 

7 ‘‘(ii) the requirements of subpara8 graph (A) are met with respect to such 

9 voting rights. 

10 ‘‘(c) EMPLOYEE STOCK OWNERSHIP PLAN.— 

11 ‘‘(1) IN GENERAL.—For purposes of this sec12 tion, the term ‘employee stock ownership plan’ has 

13 the meaning given to such term by section 

14 4975(e)(7). 

15 ‘‘(2) ELIGIBLE WORKER-OWNED COOPERATIVES

16 INCLUDED.—For purposes of this section and sec17 tions 4978B, 6042, and 7872, such term shall also 

18 include an eligible worker-owned cooperative (as de19 fined in section 1042(c)). 

20 ‘‘(d) APPLICATION WITH SECTION 483 AND ORIGI21 NAL ISSUE DISCOUNT RULES.—In applying section 483 

22 and subpart A of part V of subchapter P to any obligation 

23 to which this section applies, appropriate adjustments 

24 shall be made to the applicable Federal rate to take into 

25 account the exclusion under subsection (a). 


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1 ‘‘(e) PERIOD TO WHICH INTEREST EXCLUSION AP2 PLIES.— 

3 ‘‘(1) IN GENERAL.—In the case of— 

4 ‘‘(A) an original securities acquisition loan, 

5 and 

6 ‘‘(B) any securities acquisition loan (or se7 ries of such loans) used to refinance the origi8 nal securities acquisition loan, 

9 subsection (a) shall apply only to interest accruing 

10 during the excludable period with respect to the 

11 original securities acquisition loan. 

12 ‘‘(2) EXCLUDABLE PERIOD.—For purposes of 

13 this subsection, the term ‘excludable period’ means, 

14 with respect to any original securities acquisition 

15 loan— 

16 ‘‘(A) IN GENERAL.—The 7-year period be17 ginning on the date of such loan. 

18 ‘‘(B) LOANS DESCRIBED IN SUBSECTION

19 (b)(1)(A).—If the term of an original securities 

20 acquisition loan described in subsection 

21 (b)(1)(A) is greater than 7 years, the term of 

22 such loan. This subparagraph shall not apply to 

23 a loan described in subsection (b)(3)(B). 

24 ‘‘(3) ORIGINAL SECURITIES ACQUISITION

25 LOAN.—For the purposes of this subsection, the 


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1 term ‘original securities acquisition loan’ means a 

2 securities acquisition loan described in subparagraph 

3 (A) or (B) of subsection (b)(1).’’. 

4 (b) CONFORMING AMENDMENTS.— 

5 (1) Subparagraph (B) of section 291(e)(1) of 

6 the Internal Revenue Code of 1986 is amended by 

7 redesignating clause (iv) as clause (v) and by insert8 ing after clause (iii) the following new clause: 

9 ‘‘(iv) SPECIAL RULES FOR OBLIGA10 TIONS TO WHICH SECTION 133 APPLIES.— 

11 In the case of an obligation to which sec12 tion 133 applies, interest on such obliga13 tion shall not be treated as exempt from 

14 taxation for purposes of this subpara15 graph.’’. 

16 (2) Section 812 of such Code is amended by 

17 adding at the end the following: 

18 ‘‘(g) TREATMENT OF INTEREST PARTIALLY TAX-EX19 EMPT UNDER SECTION 133.—For purposes of this section 

20 and subsections (a) and (b) of section 807, the terms 

21 ‘gross investment income’ and ‘tax-exempt interest’ shall 

22 not include any interest received with respect to a securi23 ties acquisition loan (as defined in section 133(b)). Such 

24 interest shall not be included in life insurance gross in25 come for purposes of subsection (b)(3).’’. 


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1 (3) Paragraph (5) of section 852(b) of such 

2 Code is amended by adding at the end the following: 

3 ‘‘(C) INTEREST ON CERTAIN LOANS USED

4 TO ACQUIRE EMPLOYER SECURITIES.—For pur5 poses of this section— 

6 ‘‘(i) the applicable percentage (as de7 fined in section 133(a)(3)) of the amount 

8 of any loan held by a regulated investment 

9 company which qualifies as a securities ac10 quisition loan (as defined in section 133) 

11 shall be treated as an obligation described 

12 in section 103(a), and 

13 ‘‘(ii) such applicable percentage of the 

14 interest received on such loan shall be 

15 treated as interest excludable from gross 

16 income under section 103.’’. 

17 (4) Paragraph (2) of section 4978(b) of such 

18 Code is amended by striking subparagraphs (A) and 

19 (B) and all that follows and inserting: 

20 ‘‘(A) first, from section 133 securities (as 

21 defined in section 4978B(e)(2)) acquired during 

22 the 3-year period ending on the date of such 

23 disposition, beginning with the securities first 

24 so acquired, 


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1 ‘‘(B) second, from section 133 securities 

2 (as so defined) acquired before such 3-year pe3 riod unless such securities (or proceeds from 

4 the disposition) have been allocated to accounts 

5 of participants or beneficiaries, 

6 ‘‘(C) third, from qualified securities to 

7 which section 1042 applied acquired during the 

8 3-year period ending on the date of the disposi9 tion, beginning with the securities first so ac10 quired, and 

11 ‘‘(D) then from any other employer securi12 ties. 

13 If subsection (d) or section 4978B(d) applies to a 

14 disposition, the disposition shall be treated as made 

15 from employer securities in the opposite order of the 

16 preceding sentence.’’. 

17 (5)(A) Chapter 43 of such Code is amended by 

18 inserting before section 4979 the following new sec19 tion: 

20 ‘‘SEC. 4978B. TAX ON DISPOSITION OF EMPLOYER SECURI21 TIES TO WHICH SECTION 133 APPLIED. 

22 ‘‘(a) IMPOSITION OF TAX.—In the case of an em23 ployee stock ownership plan which has acquired section 

24 133 securities, there is hereby imposed a tax on each taxVerDate Sep 11 2014 04:34 Sep 13, 2017 Jkt 069200 PO 00000 Frm 00017 Fmt 6652 Sfmt 6201 E:\BILLS\S1788.IS S1788

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1 able event in an amount equal to the amount determined 

2 under subsection (b). 

3 ‘‘(b) AMOUNT OF TAX.— 

4 ‘‘(1) IN GENERAL.—The amount of the tax im5 posed by subsection (a) shall be equal to 10 percent 

6 of the amount realized on the disposition to the ex7 tent allocable to section 133 securities under section 

8 4978(b)(2). 

9 ‘‘(2) DISPOSITIONS OTHER THAN SALES OR EX10 CHANGES.—For purposes of paragraph (1), in the 

11 case of a disposition of employer securities which is 

12 not a sale or exchange, the amount realized on such 

13 disposition shall be the fair market value of such se14 curities at the time of disposition. 

15 ‘‘(c) TAXABLE EVENT.—For purposes of this section, 

16 the term ‘taxable event’ means any of the following dis17 positions: 

18 ‘‘(1) DISPOSITIONS WITHIN 3 YEARS.—Any dis19 position of any employer securities by an employee 

20 stock ownership plan within 3 years after such plan 

21 acquired section 133 securities if— 

22 ‘‘(A) the total number of employer securi23 ties held by such plan after such disposition is 

24 less than the total number of employer securi25 ties held after such acquisition, or 


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1 ‘‘(B) except to the extent provided in regu2 lations, the value of employer securities held by 

3 such plan after the disposition is 50 percent or 

4 less of the total value of all employer securities 

5 as of the time of the disposition. 

6 For purposes of subparagraph (B), the aggregation 

7 rule of section 133(b)(6)(D) shall apply. 

8 ‘‘(2) STOCK DISPOSED OF BEFORE ALLOCA9 TION.—Any disposition of section 133 securities to 

10 which paragraph (1) does not apply if— 

11 ‘‘(A) such disposition occurs before such 

12 securities are allocated to accounts of partici13 pants or their beneficiaries, and 

14 ‘‘(B) the proceeds from such disposition 

15 are not so allocated. 

16 ‘‘(d) SECTION NOT TO APPLY TO CERTAIN DISPOSI17 TIONS.— 

18 ‘‘(1) IN GENERAL.—This section shall not apply 

19 to any disposition described in paragraph (1), (3), or 

20 (4) of section 4978(d). 

21 ‘‘(2) CERTAIN REORGANIZATIONS.—For pur22 poses of this section, any exchange of section 133 se23 curities for employer securities of another corpora24 tion in any reorganization described in section 

25 368(a)(1) shall not be treated as a disposition, but 


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1 the employer securities received shall be treated as 

2 section 133 securities and as having been held by 

3 the plan during the period the securities which were 

4 exchanged were held. 

5 ‘‘(3) FORCED DISPOSITION OCCURRING BY OP6 ERATION OF STATE LAW.—Any forced disposition of 

7 section 133 securities by an employee stock owner8 ship plan occurring by operation of a State law shall 

9 not be treated as a disposition. This paragraph shall 

10 only apply to securities which, at the time the securi11 ties were acquired by the plan, were regularly traded 

12 on an established securities market. 

13 ‘‘(4) COORDINATION WITH OTHER TAXES.— 

14 This section shall not apply to any disposition which 

15 is subject to tax under section 4978 or section 

16 4978A (as in effect on the day before its repeal). 

17 ‘‘(e) DEFINITIONS AND SPECIAL RULES.—For pur18 poses of this section— 

19 ‘‘(1) LIABILITY FOR PAYMENT OF TAXES.—The 

20 tax imposed by this section shall be paid by the em21 ployer. 

22 ‘‘(2) SECTION 133 SECURITIES.—The term ‘sec23 tion 133 securities’ means employer securities ac24 quired by an employee stock ownership plan in a 

25 transaction to which section 133 applied. 


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1 ‘‘(3) DISPOSITION.—The term ‘disposition’ in2 cludes any distribution. 

3 ‘‘(4) ORDERING RULES.—For ordering rules for 

4 dispositions of employer securities, see section 

5 4978(b)(2).’’. 

6 (B) The table of sections for chapter 43 of such 

7 Code is amended by inserting before the item relat8 ing to section 4979 the following new item: 

‘‘Sec. 4978B. Tax on disposition of employer securities to which section 133 

applied.’’. 

9 (6) Subsection (e) of section 6047 of such Code 

10 is amended by striking paragraphs (1) and (2) and 

11 inserting the following new paragraphs: 

12 ‘‘(1) any employer maintaining, or the plan ad13 ministrator (within the meaning of section 414(g)) 

14 of, an employee stock ownership plan— 

15 ‘‘(A) which acquired stock in a transaction 

16 to which section 133 applies, or 

17 ‘‘(B) which holds stock with respect to 

18 which section 404(k) applies to dividends paid 

19 on such stock, 

20 ‘‘(2) any person making or holding a loan to 

21 which section 133 applies, or 

22 ‘‘(3) both such employer or plan administrator 

23 and such person,’’. 


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1 (7) Subsection (f) of section 7872 of such Code 

2 is amended by adding at the end the following new 

3 paragraph: 

4 ‘‘(12) SPECIAL RULE FOR CERTAIN EMPLOYER

5 SECURITY LOANS.—This section shall not apply to 

6 any loan between a corporation (or any member of 

7 the controlled group of corporations which includes 

8 such corporation) and an employee stock ownership 

9 plan described in section 4975(e)(7) to the extent 

10 that the interest rate on such loan is equal to the 

11 interest rate paid on a related securities acquisition 

12 loan (as described in section 133(b)) to such cor13 poration.’’. 

14 (8) The table of sections for part III of sub15 chapter B of chapter 1 of such Code is amended by 

16 inserting after the item relating to section 132 the 

17 following new item: 

‘‘Sec. 133. Interest on certain loans used to acquire employer securities.’’. 

18 (c) EFFECTIVE DATE.—The amendments made by 

19 this section shall apply to original securities acquisition 

20 loans (as defined in section 133(e)(3) of the Internal Rev21 enue Code of 1986 (and loans refinancing such loans)) 

22 made after the date of the enactment of this Act. 


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1 SEC. 5. EMPLOYEE STOCK OWNERSHIP REQUIREMENTS 

2 FOR USE OF PERFORMANCE EXCEPTION TO 

3 LIMITATION OF DEDUCTIBILITY OF EXECU4 TIVE COMPENSATION; EXPANSION OF PUB5 LICLY HELD CORPORATION DEFINITION. 

6 (a) LIMITATION ON USE OF PERFORMANCE EXCEP7 TION.— 

8 (1) IN GENERAL.—Section 162(m) of the Inter9 nal Revenue Code of 1986 is amended by adding at 

10 the end the following new paragraph: 

11 ‘‘(7) EMPLOYEE STOCK OWNERSHIP REQUIRE12 MENTS FOR USE OF PERFORMANCE EXCEPTION.— 

13 ‘‘(A) IN GENERAL.—The exception under 

14 paragraph (4)(C) shall not apply to any remu15 neration payable by a publicly held corporation 

16 for any taxable year unless the corporation has 

17 in effect at all times during the year a qualified 

18 employee stock program. 

19 ‘‘(B) QUALIFIED EMPLOYEE STOCK PRO20 GRAM.—For purposes of this paragraph, the 

21 term ‘qualified employee stock program’ means, 

22 with respect to any corporation, a program of 

23 the corporation under which— 

24 ‘‘(i) employees of the corporation 

25 other than highly compensated employees 

26 (within the meaning of section 414(q)) 


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1 hold nonforfeitable rights to at least 5 per2 cent of— 

3 ‘‘(I) either each class of out4 standing stock of the corporation 

5 issuing the employer securities or the 

6 total value of all outstanding stock of 

7 the corporation, and 

8 ‘‘(II) the voting rights of the 

9 total outstanding voting shares of 

10 stock of the corporation, 

11 ‘‘(ii) any stock (or any right with re12 spect to such stock) taken into account 

13 with respect to an employee under clause 

14 (i) is provided to the employee as an em15 ployer contribution and at no cost to the 

16 employee, and 

17 ‘‘(iii) the providing of such stock or 

18 right by the corporation is not in lieu of 

19 any other remuneration payable to such 

20 employee. 

21 If a program includes the granting at no cost 

22 to employees of stock options under which em23 ployees may purchase stock through the exer24 cise of the options, the cost to the employee of 

25 such purchase shall not be taken into account 


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1 in determining whether the program meets the 

2 requirements of clause (ii). 

3 ‘‘(C) FAILURE TO RETAIN MINIMUM STOCK

4 INTEREST.— 

5 ‘‘(i) IN GENERAL.—Notwithstanding 

6 subparagraph (A), paragraph (4)(C) shall 

7 not apply to any remuneration payable by 

8 a corporation with a qualified employee 

9 stock program during any period employ10 ees do not own stock meeting the require11 ments of subparagraph (B)(i). 

12 ‘‘(ii) EXCEPTION.—To the extent pro13 vided by the Secretary, clause (i) shall not 

14 apply to any period if, within 90 days of 

15 the first date on which the failure occurred 

16 (or such longer period not in excess of 180 

17 days as the Secretary may prescribe), the 

18 employees are given stock which results in 

19 the program meeting the requirements of 

20 subparagraph (B)(i). 

21 ‘‘(D) STOCK.—For purposes of this para22 graph— 

23 ‘‘(i) IN GENERAL.—The term ‘stock’ 

24 means stock other than stock described in 

25 section 1504(a)(4). 


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•S 1788 IS

1 ‘‘(ii) TREATMENT OF CERTAIN

2 RIGHTS.—The Secretary may provide that 

3 warrants, options, contracts to acquire 

4 stock, convertible debt interests and other 

5 similar interests be treated as stock for 1 

6 or more purposes under subparagraph (A). 

7 ‘‘(E) AGGREGATION RULE.—For purposes 

8 of determining whether the stock ownership re9 quirements of subparagraph (B)(i) are met, a 

10 controlled group of corporations (within the 

11 meaning of section 409(l)(4)) may elect to treat 

12 all members of the group as 1 corporation. 

13 ‘‘(F) EXCEPTION FOR EXISTING BINDING

14 CONTRACTS.—This paragraph shall not apply to 

15 any remuneration payable under a written bind16 ing contract which was in effect on April 1, 

17 2017, and which was not modified thereafter in 

18 any material respect before such remuneration 

19 is paid.’’. 

20 (2) CONFORMING AMENDMENT.—Subparagraph 

21 (C) of section 162(m)(4) of such Code is amended 

22 by striking ‘‘The term’’ and inserting ‘‘Subject to 

23 paragraph (7), the term’’. 


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•S 1788 IS

1 (b) DEFINITION OF PUBLICLY HELD CORPORA2 TION.—Paragraph (2) of section 162(m) is amended to 

3 read as follows: 

4 ‘‘(2) PUBLICLY HELD CORPORATION.—For pur5 poses of this subsection, the term ‘publicly held cor6 poration’ means any corporation which— 

7 ‘‘(A) qualifies as an issuer the securities of 

8 which are registered under section 12 of the Se9 curities Exchange Act of 1934, or 

10 ‘‘(B) is required to file reports under sec11 tion 15(d) of such Act.’’. 

12 (c) EFFECTIVE DATE.—The amendments made by 

13 this section shall apply to taxable years beginning after 

14 the date of the enactment of this Act. 

15 SEC. 6. OFFICE OF EMPLOYEE OWNERSHIP AND WORKER 

16 EMPOWERMENT. 

17 (a) ESTABLISHMENT.—There is established within 

18 the National Economic Council the Office of Employee 

19 Ownership and Worker Empowerment. 

20 (b) DUTIES.—The Office of Employee Ownership and 

21 Worker Empowerment established under subsection (a) 

22 shall— 

23 (1) provide educational and technical assistance 

24 at no cost to small businesses, as defined by the AdVerDate Sep 11 2014 04:34 Sep 13, 2017 Jkt 069200 PO 00000 Frm 00027 Fmt 6652 Sfmt 6201 E:\BILLS\S1788.IS S1788

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•S 1788 IS

1 ministrator of the Small Business Administration, 

2 that are attempting to establish employee ownership; 

3 (2) raise awareness of profit sharing to compa4 nies and employees, including ESOPs; and 

5 (3) not later than 180 days after the date of 

6 enactment of this Act, submit to Congress a report 

7 on any barriers to employee ownership in companies. 

8 (c) STAFF.— 

9 (1) IN GENERAL.—The Director of the National 

10 Economic Council may, without regard to the civil 

11 service laws (including regulations), appoint and ter12 minate such personnel as may be necessary to enable 

13 the Office of Employee Ownership and Worker Em14 powerment to carry out this section. 

15 (2) COMPENSATION.—The Director of the Na16 tional Economic Council may fix the compensation 

17 of personnel without regard to chapter 51 and sub18 chapter III of chapter 53 of title 5, United States 

19 Code, relating to classification of positions and Gen20 eral Schedule pay rates, except that the rate of pay 

21 for personnel may not exceed the rate payable for 

22 level V of the Executive Schedule under section 5316 

23 of that title. 

Æ 


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