IB 

Union Calendar No. 494 

115TH CONGRESS 

2D SESSION H. R. 5236 

[Report No. 115–645] 

To expand opportunities available to employee-owned business concerns 

through Small Business Administration loan programs, and for other 

purposes. 

IN THE HOUSE OF REPRESENTATIVES 

MARCH 8, 2018 

Ms. VELA ́ZQUEZ introduced the following bill; which was referred to the 

Committee on Small Business 

APRIL 24, 2018 

Reported with an amendment, committed to the Committee of the Whole 

House on the State of the Union, and ordered to be printed 

[Strike out all after the enacting clause and insert the part printed in italic] 

[For text of introduced bill, see copy of bill as introduced on March 8, 2018] 


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A BILL 

To expand opportunities available to employee-owned business concerns through Small Business Administration 

loan programs, and for other purposes. 


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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 ‘‘Main Street Employee 

5 Ownership Act of 2018’’. 

6 SEC. 2. DEFINITIONS. 

7 In this Act— 

8 (1) the terms ‘‘Administration’’ and ‘‘Adminis9 trator’’ means the Small Business Administration 

10 and the Administrator thereof, respectively; 

11 (2) the term ‘‘cooperative’’ means an entity that 

12 is determined to be a cooperative by the Adminis13 trator, in accordance with applicable Federal and 

14 State laws and regulations; 

15 (3) the term ‘‘employee-owned business concern’’ 

16 means— 

17 (A) a cooperative in which employees are el18 igible for membership; and 

19 (B) a qualified employee trust; 

20 (4) the terms ‘‘qualified employee trust’’ and 

21 ‘‘small business concern’’ have the meanings given 

22 those terms in section 3 of the Small Business Act (15 

23 U.S.C. 632); and 

24 (5) the term ‘‘small business development center’’ 

25 means a small business development center described 


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1 in section 21 of the Small Business Act (15 U.S.C. 

2 648). 

3 SEC. 3. EXPANSION OF 7(A) LOANS. 

4 (a) IN GENERAL.—Section 7(a) of the Small Business 

5 Act (15 U.S.C. 636(a)) is amended— 

6 (1) in paragraph (15)— 

7 (A) in subparagraph (A)— 

8 (i) by striking ‘‘this subsection to 

9 qualified employee trusts’’ and inserting 

10 ‘‘this subsection— 

11 ‘‘(i) to qualified employee trusts’’; 

12 (ii) in clause (i), as so designated— 

13 (I) by inserting ‘‘, and for any 

14 transaction costs associated with pur15 chasing,’’ after ‘‘purchasing’’; 

16 (II) by striking the period at the 

17 end and inserting ‘‘; and’’; and 

18 (iii) by adding at the end the fol19 lowing: 

20 ‘‘(ii) to a small business concern under a 

21 plan approved by the Administrator, if the pro22 ceeds from the loan are only used to make a loan 

23 to a qualified employee trust, and for any trans24 action costs associated with making that loan, 

25 that results in the qualified employee trust ownVerDate Sep 11 2014 20:49 Apr 24, 2018 Jkt 079200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6203 E:\BILLS\H5236.RH H5236

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1 ing at least 51 percent of the small business con2 cern.’’; 

3 (B) in subparagraph (B)— 

4 (i) in the matter preceding clause (i), 

5 by inserting ‘‘or by the small business con6 cern’’ after ‘‘the trustee of such trust’’; 

7 (ii) in clause (ii), by striking ‘‘and’’ at 

8 the end; 

9 (iii) in clause (iii), by striking the pe10 riod at the end and inserting ‘‘, and’’; and 

11 (iv) by adding at the end the following: 

12 ‘‘(iv) with respect to a loan made to a trust, 

13 or to a cooperative in accordance with para14 graph (35)— 

15 ‘‘(I) a seller of the small business con16 cern may remain involved as an officer, di17 rector, or key employee of the small business 

18 concern when a qualified employee trust or 

19 cooperative has acquired 100 percent of 

20 ownership of the small business concern; 

21 and 

22 ‘‘(II) any seller of the small business 

23 concern who remains as an owner of the 

24 small business concern, regardless of the 

25 percentage of ownership interest, shall be reVerDate Sep 11 2014 20:49 Apr 24, 2018 Jkt 079200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6203 E:\BILLS\H5236.RH H5236

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1 quired to provide a personal guarantee by 

2 the Administration.’’; and 

3 (C) by adding at the end the following: 

4 ‘‘(F) A small business concern that makes a loan 

5 to a qualified employee trust under subparagraph 

6 (A)(ii) is not required to contain the same terms and 

7 conditions as the loan made to the small business con8 cern that is guaranteed by the Administration under 

9 such subparagraph. 

10 ‘‘(G) With respect to a loan made to a qualified 

11 employee trust under this paragraph, or to a coopera12 tive in accordance with paragraph (35), the Adminis13 trator may, as deemed appropriate, elect to not re14 quire any mandatory equity to be provided by the 

15 qualified employee trust or cooperative to make the 

16 loan.’’; and 

17 (2) by adding at the end the following: 

18 ‘‘(35) LOANS TO COOPERATIVES.— 

19 ‘‘(A) DEFINITION.—In this paragraph, the 

20 term ‘cooperative’ means an entity that is deter21 mined to be a cooperative by the Administrator, 

22 in accordance with applicable Federal and State 

23 laws and regulation. 


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1 ‘‘(B) AUTHORITY.—The Administration 

2 shall guarantee loans made to a cooperative for 

3 the purpose described in paragraph (15).’’. 

4 (b) DELEGATION OF AUTHORITY TO PREFERRED

5 LENDERS.—Section 5(b)(7) of the Small Business Act (15 

6 U.S.C. 634(b)(7)) is amended by inserting ‘‘, including 

7 loans guaranteed under paragraph (15) or (35) of section 

8 7(a)’’ after ‘‘deferred participation loans’’. 

9 SEC. 4. SMALL BUSINESS INVESTMENT COMPANY PROGRAM 

10 OUTREACH. 

11 The Administrator shall provide outreach and edu12 cational materials to companies licensed under section 

13 301(c) of the Small Business Investment Act of 1958 (15 

14 U.S.C. 681(c)) to increase the use of funds to make invest15 ments in company transitions to employee-owned business 

16 concerns. 

17 SEC. 5. SMALL BUSINESS MICROLOAN PROGRAM OUT18 REACH. 

19 The Administrator shall provide outreach and edu20 cational materials to intermediaries under section 7(m) of 

21 the Small Business Act (15 U.S.C. 636(m)) to increase the 

22 use of funds to make loans to employee-owned business con23 cerns, including transitions to employee-owned business 

24 concerns. 


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1 SEC. 6. SMALL BUSINESS DEVELOPMENT CENTER OUT2 REACH AND ASSISTANCE. 

3 (a) ESTABLISHMENT.—The Administrator shall estab4 lish a Small Business Employee Ownership and Coopera5 tives Promotion Program to offer technical assistance and 

6 training on the transition to employee ownership through 

7 cooperatives and qualified employee trusts. 

8 (b) SMALL BUSINESS DEVELOPMENT CENTERS.— 

9 (1) IN GENERAL.—In carrying out the program 

10 established under subsection (a), the Administrator 

11 shall enter into agreements with small business devel12 opment centers under which the centers shall— 

13 (A) provide access to information and re14 sources on employee ownership through coopera15 tives or qualified employee trusts as a business 

16 succession strategy; 

17 (B) conduct training and educational ac18 tivities; and 

19 (C) carry out the activities described in sub20 paragraph (U) of section 21(c)(3) of the Small 

21 Business Act (15 U.S.C. 648(c)(3)). 

22 (2) ADDITIONAL SERVICES.—Section 21(c)(3) of 

23 the Small Business Act (15 U.S.C. 648(c)(3)) is 

24 amended— 

25 (A) in subparagraph (S), by striking ‘‘and’’ 

26 at the end; 


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1 (B) in subparagraph (T), by striking the 

2 period at the end and inserting ‘‘; and’’; and 

3 (C) by adding at the end the following: 

4 ‘‘(U) encouraging and assisting the provision of 

5 succession planning to small business concerns with a 

6 focus on transitioning to cooperatives, as defined in 

7 section 7(a)(35), and qualified employee trusts (collec8 tively referred to in this subparagraph as ‘employee9 owned business concerns’), including by— 

10 ‘‘(i) providing training to individuals to 

11 promote the successful management, governance, 

12 or operation of a business purchased by those in13 dividuals in the formation of an employee-owned 

14 business concern; 

15 ‘‘(ii) assisting employee-owned business con16 cerns that meet applicable size standards estab17 lished under section 3(a) with education and 

18 technical assistance with respect to financing 

19 and contracting programs administered by the 

20 Administration; 

21 ‘‘(iii) coordinating with lenders on con22 ducting outreach on financing through programs 

23 administered by the Administration that may be 

24 used to support the transition of ownership to 

25 employees; 


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1 ‘‘(iv) supporting small business concerns in 

2 exploring or assessing the possibility of 

3 transitioning to an employee-owned business 

4 concern; and 

5 ‘‘(v) coordinating with the cooperative de6 velopment centers of the Department of Agri7 culture, the land grant extension network, the 

8 Manufacturing Extension Partnership, commu9 nity development financial institutions, em10 ployee ownership associations and service pro11 viders, and local, regional and national coopera12 tive associations.’’. 

13 SEC. 7. INTERAGENCY WORKING GROUP. 

14 (a) IN GENERAL.—Not later than 90 days after the 

15 date of enactment of this Act, the Administrator (or a des16 ignee of the Administrator) shall coordinate and chair an 

17 interagency working group, which shall— 

18 (1) develop recommendations on how Federal 

19 programs can promote, support, and increase the 

20 number of employee-owned business concerns; 

21 (2) ensure coordination with Federal agencies 

22 and national and local employee ownership, coopera23 tive, and small business organizations; and 


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1 (3) publish a report on the activities of the inter2 agency working group that is indexed and main3 tained for public review. 

4 (b) MEETINGS.—The interagency working group shall 

5 meet at such times as determined necessary by the, but not 

6 less than biannually. Such meetings may occur in person 

7 or via electronic resources. 

8 SEC. 8. AMENDMENT TO REPORT TO CONGRESS ON STATUS 

9 OF EMPLOYEE-OWNED FIRMS. 

10 Section 7(a)(15)(E) of the Small Business Act (15 

11 U.S.C. 636(a)(15)(E)) is amended by striking ‘‘Adminis12 tration.’’ and inserting ‘‘Administration, which shall in13 clude— 

14 ‘‘(i) the total number of loans made to 

15 employee-owned business concerns that were 

16 guaranteed by the Administrator under sec17 tion 7(a) of the Small Business Act (15 

18 U.S.C. 636(a)) or section 502 of the Small 

19 Business Investment Act of 1958 (15 U.S.C. 

20 696), including the number of loans made— 

21 ‘‘(I) to small business concerns 

22 owned and controlled by socially and 

23 economically disadvantaged individ24 uals; and 


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1 ‘‘(II) to cooperatives in which em2 ployees are eligible for membership; 

3 ‘‘(ii) the total number of financings 

4 made to employee-owned business concerns 

5 by companies licensed under section 301(c) 

6 of the Small Business Investment Act of 

7 1958 (15 U.S.C. 696(c)), including the 

8 number of financings made— 

9 ‘‘(I) to small business concerns 

10 owned and controlled by socially and 

11 economically disadvantaged individ12 uals; and 

13 ‘‘(II) to cooperatives in which em14 ployees are eligible for membership; 

15 and 

16 ‘‘(iii) any outreach and educational 

17 activities conducted by the Administration 

18 with respect to employee-owned business 

19 concerns.’’. 

20 SEC. 9. REPORT ON COOPERATIVE LENDING. 

21 (a) SENSE OF CONGRESS.—It is the sense of Congress 

22 that cooperatives have a unique business structure and are 

23 unable to access the lending programs of the Administration 

24 effectively due to loan guarantee requirements that are in25 compatible with the business structure of cooperatives. 


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1 (b) STUDY AND REPORT.— 

2 (1) STUDY.—The Administrator, in coordination 

3 with lenders, stakeholders, and Federal agencies, shall 

4 study and recommend practical alternatives for co5 operatives that will satisfy the loan guarantee re6 quirements of the Administration. 

7 (2) REPORT.—Not later than 120 days after the 

8 date of enactment of this Act, the Administrator shall 

9 submit to Congress the recommendations developed 

10 under paragraph (1) and a plan to implement such 

11 recommendations. 

12 SEC. 10. AMENDMENT TO DEFINITION OF QUALIFIED EM13 PLOYEE TRUST. 

14 Section 3(c)(2)(A)(ii) of the Small Business Act (15 

15 U.S.C. 632(c)(2)(A)(ii)) is amended to read as follows: 

16 ‘‘(ii) which provides that each participant 

17 is entitled to direct the plan trustee as to the 

18 manner of how to vote the qualified employer se19 curities (as defined in section 4975(e)(8) of the 

20 Internal Revenue Code of 1986), which are allo21 cated to the account of such participant with re22 spect to a corporate matter which (by law or 

23 charter) must be decided by a vote conducted in 

24 accordance with section 409(e) of the Internal 

25 Revenue Code of 1986; and’’. 


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Union Calendar No. 494 

115TH CONGRESS 

2D SESSION H. R. 5236 

[Report No. 115–645] 

A BILL 

To expand opportunities available to employeeposes. Administration loan programs, and for other pur- owned business concerns through Small Business 

APRIL 24, 2018 

Reported with an amendment, committed to the Comand ordered to be printed mittee of the Whole House on the State of the Union, 


daltland on DSKBBV9HB2PROD with BILLS