IIB 

115TH CONGRESS 

2D SESSION H. R. 5236 

IN THE SENATE OF THE UNITED STATES 

MAY 9, 2018 

Received; read twice and referred to the Committee on Small Business and 

Entrepreneurship 

AN ACT 

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

loan programs, 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, 


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1 SECTION 1. SHORT TITLE. 

2 This Act may be cited as the ‘‘Main Street Employee 

3 Ownership Act of 2018’’. 

4 SEC. 2. DEFINITIONS. 

5 In this Act— 

6 (1) the terms ‘‘Administration’’ and ‘‘Adminis7 trator’’ means the Small Business Administration 

8 and the Administrator thereof, respectively; 

9 (2) the term ‘‘cooperative’’ means an entity 

10 that is determined to be a cooperative by the Admin11 istrator, in accordance with applicable Federal and 

12 State laws and regulations; 

13 (3) the term ‘‘employee-owned business con14 cern’’ means— 

15 (A) a cooperative in which employees are 

16 eligible for membership; and 

17 (B) a qualified employee trust; 

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

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

20 those terms in section 3 of the Small Business Act 

21 (15 U.S.C. 632); and 

22 (5) the term ‘‘small business development cen23 ter’’ means a small business development center de24 scribed in section 21 of the Small Business Act (15 

25 U.S.C. 648). 


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

2 (a) IN GENERAL.—Section 7(a) of the Small Busi3 ness Act (15 U.S.C. 636(a)) is amended— 

4 (1) in paragraph (15)— 

5 (A) in subparagraph (A)— 

6 (i) by striking ‘‘this subsection to 

7 qualified employee trusts’’ and inserting 

8 ‘‘this subsection— 

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

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

11 (I) by inserting ‘‘, and for any 

12 transaction costs associated with pur13 chasing,’’ after ‘‘purchasing’’; 

14 (II) by striking the period at the 

15 end and inserting ‘‘; and’’; and 

16 (iii) by adding at the end the fol17 lowing: 

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

19 plan approved by the Administrator, if the pro20 ceeds from the loan are only used to make a 

21 loan to a qualified employee trust, and for any 

22 transaction costs associated with making that 

23 loan, that results in the qualified employee trust 

24 owning at least 51 percent of the small business 

25 concern.’’; 

26 (B) in subparagraph (B)— 


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

2 by inserting ‘‘or by the small business con3 cern’’ after ‘‘the trustee of such trust’’; 

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

5 the end; 

6 (iii) in clause (iii), by striking the pe7 riod at the end and inserting ‘‘, and’’; and 

8 (iv) by adding at the end the fol9 lowing: 

10 ‘‘(iv) with respect to a loan made to a 

11 trust, or to a cooperative in accordance with 

12 paragraph (35)— 

13 ‘‘(I) a seller of the small business con14 cern may remain involved as an officer, di15 rector, or key employee of the small busi16 ness concern when a qualified employee 

17 trust or cooperative has acquired 100 per18 cent of ownership of the small business 

19 concern; and 

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

21 concern who remains as an owner of the 

22 small business concern, regardless of the 

23 percentage of ownership interest, shall be 

24 required to provide a personal guarantee 

25 by the Administration.’’; and 


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

2 ‘‘(F) A small business concern that makes a 

3 loan to a qualified employee trust under subpara4 graph (A)(ii) is not required to contain the same 

5 terms and conditions as the loan made to the small 

6 business concern that is guaranteed by the Adminis7 tration under such subparagraph. 

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

9 employee trust under this paragraph, or to a cooper10 ative in accordance with paragraph (35), the Admin11 istrator may, as deemed appropriate, elect to not re12 quire any mandatory equity to be provided by the 

13 qualified employee trust or cooperative to make the 

14 loan.’’; and 

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

16 ‘‘(35) LOANS TO COOPERATIVES.— 

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

18 term ‘cooperative’ means an entity that is de19 termined to be a cooperative by the Adminis20 trator, in accordance with applicable Federal 

21 and State laws and regulation. 

22 ‘‘(B) AUTHORITY.—The Administration 

23 shall guarantee loans made to a cooperative for 

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


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1 (b) DELEGATION OF AUTHORITY TO PREFERRED

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

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

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

5 7(a)’’ after ‘‘deferred participation loans’’. 

6 SEC. 4. SMALL BUSINESS INVESTMENT COMPANY PRO7 GRAM OUTREACH. 

8 The Administrator shall provide outreach and edu9 cational materials to companies licensed under section 

10 301(c) of the Small Business Investment Act of 1958 (15 

11 U.S.C. 681(c)) to increase the use of funds to make invest12 ments in company transitions to employee-owned business 

13 concerns. 

14 SEC. 5. SMALL BUSINESS MICROLOAN PROGRAM OUT15 REACH. 

16 The Administrator shall provide outreach and edu17 cational materials to intermediaries under section 7(m) of 

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

19 the use of funds to make loans to employee-owned busi20 ness concerns, including transitions to employee-owned 

21 business concerns. 

22 SEC. 6. SMALL BUSINESS DEVELOPMENT CENTER OUT23 REACH AND ASSISTANCE. 

24 (a) ESTABLISHMENT.—The Administrator shall es25 tablish a Small Business Employee Ownership and CoVerDate Sep 11 2014 01:56 May 11, 2018 Jkt 079200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H5236.RFS H5236

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1 operatives Promotion Program to offer technical assist2 ance and training on the transition to employee ownership 

3 through cooperatives and qualified employee trusts. 

4 (b) SMALL BUSINESS DEVELOPMENT CENTERS.— 

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

6 established under subsection (a), the Administrator 

7 shall enter into agreements with small business de8 velopment centers under which the centers shall— 

9 (A) provide access to information and re10 sources on employee ownership through co11 operatives or qualified employee trusts as a 

12 business succession strategy; 

13 (B) conduct training and educational ac14 tivities; and 

15 (C) carry out the activities described in 

16 subparagraph (U) of section 21(c)(3) of the 

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

18 (2) ADDITIONAL SERVICES.—Section 21(c)(3) 

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

20 amended— 

21 (A) in subparagraph (S), by striking 

22 ‘‘and’’ at the end; 

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

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

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


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

2 succession planning to small business concerns with 

3 a focus on transitioning to cooperatives, as defined 

4 in section 7(a)(35), and qualified employee trusts 

5 (collectively referred to in this subparagraph as ‘em6 ployee-owned business concerns’), including by— 

7 ‘‘(i) providing training to individuals to 

8 promote the successful management, govern9 ance, or operation of a business purchased by 

10 those individuals in the formation of an em11 ployee-owned business concern; 

12 ‘‘(ii) assisting employee-owned business 

13 concerns that meet applicable size standards es14 tablished under section 3(a) with education and 

15 technical assistance with respect to financing 

16 and contracting programs administered by the 

17 Administration; 

18 ‘‘(iii) coordinating with lenders on con19 ducting outreach on financing through pro20 grams administered by the Administration that 

21 may be used to support the transition of owner22 ship to employees; 

23 ‘‘(iv) supporting small business concerns in 

24 exploring or assessing the possibility of 


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1 transitioning to an employee-owned business 

2 concern; and 

3 ‘‘(v) coordinating with the cooperative de4 velopment centers of the Department of Agri5 culture, the land grant extension network, the 

6 Manufacturing Extension Partnership, commu7 nity development financial institutions, em8 ployee ownership associations and service pro9 viders, and local, regional and national coopera10 tive associations.’’. 

11 SEC. 7. INTERAGENCY WORKING GROUP. 

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

13 date of enactment of this Act, the Administrator (or a des14 ignee of the Administrator) shall coordinate and chair an 

15 interagency working group, which shall— 

16 (1) develop recommendations on how Federal 

17 programs can promote, support, and increase the 

18 number of employee-owned business concerns; 

19 (2) ensure coordination with Federal agencies 

20 and national and local employee ownership, coopera21 tive, and small business organizations; and 

22 (3) publish a report on the activities of the 

23 interagency working group that is indexed and main24 tained for public review. 


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1 (b) MEETINGS.—The interagency working group 

2 shall meet at such times as determined necessary by the, 

3 but not less than biannually. Such meetings may occur 

4 in person or via electronic resources. 

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

6 OF EMPLOYEE-OWNED FIRMS. 

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

8 U.S.C. 636(a)(15)(E)) is amended by striking ‘‘Adminis9 tration.’’ and inserting ‘‘Administration, which shall in10 clude— 

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

12 employee-owned business concerns that 

13 were guaranteed by the Administrator 

14 under section 7(a) of the Small Business 

15 Act (15 U.S.C. 636(a)) or section 502 of 

16 the Small Business Investment Act of 

17 1958 (15 U.S.C. 696), including the num18 ber of loans made— 

19 ‘‘(I) to small business concerns 

20 owned and controlled by socially and 

21 economically disadvantaged individ22 uals; and 

23 ‘‘(II) to cooperatives in which 

24 employees are eligible for membership; 


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1 ‘‘(ii) the total number of financings 

2 made to employee-owned business concerns 

3 by companies licensed under section 301(c) 

4 of the Small Business Investment Act of 

5 1958 (15 U.S.C. 696(c)), including the 

6 number of financings made— 

7 ‘‘(I) to small business concerns 

8 owned and controlled by socially and 

9 economically disadvantaged individ10 uals; and 

11 ‘‘(II) to cooperatives in which 

12 employees are eligible for membership; 

13 and 

14 ‘‘(iii) any outreach and educational 

15 activities conducted by the Administration 

16 with respect to employee-owned business 

17 concerns.’’. 

18 SEC. 9. REPORT ON COOPERATIVE LENDING. 

19 (a) SENSE OF CONGRESS.—It is the sense of Con20 gress that cooperatives have a unique business structure 

21 and are unable to access the lending programs of the Ad22 ministration effectively due to loan guarantee require23 ments that are incompatible with the business structure 

24 of cooperatives. 

25 (b) STUDY AND REPORT.— 


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1 (1) STUDY.—The Administrator, in coordina2 tion with lenders, stakeholders, and Federal agen3 cies, shall study and recommend practical alter4 natives for cooperatives that will satisfy the loan 

5 guarantee requirements of the Administration. 

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

7 the date of enactment of this Act, the Administrator 

8 shall submit to Congress the recommendations devel9 oped under paragraph (1) and a plan to implement 

10 such recommendations. 

11 SEC. 10. AMENDMENT TO DEFINITION OF QUALIFIED EM12 PLOYEE TRUST. 

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

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

15 ‘‘(ii) which provides that each participant 

16 is entitled to direct the plan trustee as to the 

17 manner of how to vote the qualified employer 

18 securities (as defined in section 4975(e)(8) of 

19 the Internal Revenue Code of 1986), which are 

20 allocated to the account of such participant 

21 with respect to a corporate matter which (by 

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1 ducted in accordance with section 409(e) of the 

2 Internal Revenue Code of 1986; and’’. 

Passed the House of Representatives May 8, 2018. 

Attest: KAREN L. HAAS, 

Clerk. 


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