I 

118TH CONGRESS 

1ST SESSION H. R. 5011 

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. 

IN THE HOUSE OF REPRESENTATIVES 

JULY 27, 2023 

Mr. KELLY of Pennsylvania (for himself, Mr. BLUMENAUER, Mr. WENSTRUP, 

Mrs. MILLER of West Virginia, Mr. ESTES, Mr. PASCRELL, Mr. DAVIS

of Illinois, and Ms. SEWELL) introduced the following bill; which was referred to the Committee on Ways and Means, and in addition to the 

Committees on Small Business, and Education and the Workforce, for a 

period to be subsequently determined by the Speaker, in each case for 

consideration of such provisions as fall within the jurisdiction of the committee concerned 

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 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 ‘‘Promotion and Expan5 sion of Private Employee Ownership Act of 2023’’. 


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1 SEC. 2. FINDINGS. 

2 Congress finds that— 

3 (1) on January 1, 1998—nearly 25 years after 

4 the Employee Retirement Income Security Act of 

5 1974 was enacted and the employee stock ownership 

6 plan (hereafter in this section referred to as an 

7 ‘‘ESOP’’) was created—employees were first per8 mitted to be owners of subchapter S corporations 

9 pursuant to the Small Business Job Protection Act 

10 of 1996 (Public Law 104–188); 

11 (2) with the passage of the Taxpayer Relief Act 

12 of 1997 (Public Law 105–34), Congress designed in13 centives to encourage businesses to become ESOP14 owned S corporations; 

15 (3) since that time, several thousand companies 

16 have become ESOP-owned S corporations, creating 

17 an ownership interest for several million Americans 

18 in companies in every State in the country, in indus19 tries ranging from heavy manufacturing to tech20 nology development to services; 

21 (4) while estimates show that 40 percent of 

22 working Americans have no formal retirement ac23 count at all, every United States worker who is an 

24 employee-owner of an S corporation company 

25 through an ESOP has a valuable qualified retire26 ment savings account; 


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1 (5) recent studies have shown that employees of 

2 ESOP-owned S corporations enjoy greater job sta3 bility than employees of comparable companies; 

4 (6) studies also show that employee-owners of S 

5 corporation ESOP companies have amassed mean6 ingful retirement savings through their S ESOP ac7 counts that will give them the means to retire with 

8 dignity; 

9 (7) under the Small Business Act (15 U.S.C. 

10 631 et seq.) and the regulations promulgated by the 

11 Administrator of the Small Business Administration, 

12 a small business concern that was eligible under the 

13 Small Business Act for the numerous preferences of 

14 the Act is denied treatment as a small business con15 cern after an ESOP acquires more than 49 percent 

16 of the business, even if the number of employees, the 

17 revenue of the small business concern, and the ra18 cial, gender, or other criteria used under the Act to 

19 determine whether the small business concern is eli20 gible for benefits under the Act remain the same, 

21 solely because of the acquisition by the ESOP; and 

22 (8) it is the goal of Congress to both preserve 

23 and foster employee ownership of S corporations 

24 through ESOPs. 


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1 SEC. 3. FULL DEFERRAL OF TAX FOR CERTAIN SALES OF 

2 EMPLOYER STOCK TO EMPLOYEE STOCK 

3 OWNERSHIP PLAN SPONSORED BY S COR4 PORATION. 

5 (a) ACCELERATION OF DEFERRAL.—Section 114(c) 

6 of the SECURE 2.0 Act of 2022 is amended by striking 

7 ‘‘December 31, 2027’’ and inserting ‘‘the date of the en8 actment of the Promotion and Expansion of Private Em9 ployee Ownership Act of 2023’’. 

10 (b) REPEAL OF LIMITATION.— 

11 (1) IN GENERAL.—Section 1042 of the Internal 

12 Revenue Code of 1986, as amended by section 114 

13 of the SECURE 2.0 Act of 2022, is amended by 

14 striking subsection (h). 

15 (2) EFFECTIVE DATE.—The amendment made 

16 by paragraph (1) shall apply to sales after the date 

17 of the enactment of this Act. 

18 SEC. 4. DEPARTMENT OF THE TREASURY TECHNICAL AS19 SISTANCE OFFICE. 

20 (a) ESTABLISHMENT REQUIRED.—Before the end of 

21 the 90-day period beginning on the date of enactment of 

22 this Act, the Secretary of the Treasury shall establish the 

23 S Corporation Employee Ownership Assistance Office to 

24 foster increased employee ownership of S corporations. 

25 (b) DUTIES OF THE OFFICE.—The S Corporation 

26 Employee Ownership Assistance Office shall provide— 


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1 (1) education and outreach to inform companies 

2 and individuals about the possibilities and benefits of 

3 employee ownership of S corporations; and 

4 (2) technical assistance to assist S corporations 

5 in sponsoring employee stock ownership plans. 

6 SEC. 5. SMALL BUSINESS AND EMPLOYEE STOCK OWNER7 SHIP. 

8 (a) IN GENERAL.—The Small Business Act (15 

9 U.S.C. 631 et seq.) is amended— 

10 (1) by redesignating section 49 as section 50; 

11 and 

12 (2) by inserting after section 48 the following: 

13 ‘‘SEC. 49. EMPLOYEE STOCK OWNERSHIP PLANS. 

14 ‘‘(a) DEFINITIONS.—In this section— 

15 ‘‘(1) the term ‘ESOP’ means an employee stock 

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

17 the Internal Revenue Code of 1986; and 

18 ‘‘(2) the term ‘ESOP business concern’ means 

19 a business concern that was a small business con20 cern eligible for a loan, preference, or other program 

21 under this Act before the date on which more than 

22 49 percent of the business concern was acquired by 

23 an ESOP. 

24 ‘‘(b) CONTINUED ELIGIBILITY.—In determining 

25 whether an ESOP business concern qualifies as a small 


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1 business concern for purposes of a loan, preference, or 

2 other program under this Act, each ESOP participant 

3 shall be treated as directly owning his or her proportionate 

4 share of the stock in the ESOP business concern owned 

5 by the ESOP.’’. 

6 (b) EFFECTIVE DATE.—The amendments made by 

7 this section shall take effect on January 1 of the first cal8 endar year beginning after the date of the enactment of 

9 this Act. 

10 SEC. 6. ESTABLISHMENT OF THE ADVOCATE FOR EM11 PLOYEE OWNERSHIP. 

12 (a) IN GENERAL.—Subtitle A of title III of the Em13 ployee Retirement Income Security Act of 1974 (29 

14 U.S.C. 1201 et seq.) is amended by adding at the end 

15 the following: 

16 ‘‘SEC. 3005. ADVOCATE FOR EMPLOYEE OWNERSHIP. 

17 ‘‘(a) IN GENERAL.—The Secretary of Labor shall ap18 point an Advocate for Employee Ownership within the 

19 Employee Ownership Initiative established under section 

20 346(b)(1) of the SECURE 2.0 Act of 2022 (division T 

21 of the Consolidated Appropriations Act, 2023 (Public Law 

22 117–328)). The appointment shall be made without regard 

23 to the provisions of title 5, United States Code, relating 

24 to appointments in the competitive service or Senior Exec25 utive Service. 


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1 ‘‘(b) DUTIES.—The Advocate for Employee Owner2 ship shall— 

3 ‘‘(1) consult with the head of the Employee 

4 Ownership Initiative established under section 

5 346(b)(1) of the SECURE 2.0 Act of 2022 (division 

6 T of the Consolidated Appropriations Act, 2023 

7 (Public Law 117–328)); 

8 ‘‘(2) act as a liaison between the Department of 

9 Labor, employee ownership advocates, employers 

10 considering employee ownership, workers interested 

11 in employee ownership, and other stakeholders, in12 cluding employee stock ownership plan sponsors and 

13 participants; 

14 ‘‘(3) provide public education and assistance re15 lated to the expansion of employee ownership 

16 through the establishment and maintenance of prac17 tices that promote employee ownership, including the 

18 use of employee stock ownership plans; 

19 ‘‘(4) provide assistance for purposes of resolving 

20 a dispute with the Department of Labor to any em21 ployee stock ownership plan sponsor, fiduciary, or 

22 participant and help facilitate communication be23 tween such entities and the Department of Labor for 

24 such purposes; 


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1 ‘‘(5) in consultation with the S Corporation 

2 Employee Ownership Assistance Office of the De3 partment of the Treasury established under section 

4 4 of the Promotion and Expansion of Private Em5 ployee Ownership Act of 2023, identify and rec6 ommend potential legislative and administrative 

7 changes, including related to access to capital issues, 

8 to increase practices that promote employee owner9 ship plans, including the use of employee stock own10 ership plans; and 

11 ‘‘(6) coordinate with other Federal agencies, in12 cluding the Administrator of the Small Business Ad13 ministration, the Secretary of the Treasury, and the 

14 Secretary of Commerce, and State and local govern15 ments on outreach and education to inform employ16 ees and employers about the possibilities and bene17 fits of employee ownership as a business ownership 

18 succession planning option. 

19 ‘‘(c) CONSULTATION AND INPUT.—The Secretary 

20 shall solicit advice and input from the Advocate for Em21 ployee Ownership in developing regulations or interpreta22 tions of this Act that relate to employee stock ownership 

23 plans. 

24 ‘‘(d) COMPENSATION.—The Advocate for Employee 

25 Ownership shall be entitled to compensation at the same 


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1 rate as the rate of basic pay in effect for a position at 

2 level V of the Executive Schedule under section 5316 of 

3 title 5, United States Code. 

4 ‘‘(e) ANNUAL REPORT.— 

5 ‘‘(1) IN GENERAL.—Not later than December 

6 31 of each calendar year beginning after the date of 

7 enactment of this section, the Advocate for Em8 ployee Ownership shall submit a report to the Com9 mittee on Health, Education, Labor, and Pensions 

10 of the Senate and the Committee on Education and 

11 the Workforce of the House of Representatives on 

12 the activities of the Office of the Advocate for Em13 ployee Ownership during the fiscal year ending dur14 ing such calendar year, including the contents de15 scribed in paragraph (2). 

16 ‘‘(2) CONTENT.—Each report submitted under 

17 paragraph (1) shall— 

18 ‘‘(A) summarize the assistance requests re19 ceived by the Advocate for Employee Ownership 

20 during the fiscal year ending during the cal21 endar year of such report; 

22 ‘‘(B) describe the activities, including the 

23 activities described under paragraphs (3) and 

24 (4) of subsection (b), and evaluate the effectiveVerDate Sep 11 2014 06:46 Aug 15, 2023 Jkt 039200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H5011.IH H5011

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1 ness of the Advocate for Employee Ownership 

2 during such fiscal year; 

3 ‘‘(C) describe any significant problems the 

4 Advocate for Employee Ownership has identi5 fied during such fiscal year and ways to miti6 gate such problems; 

7 ‘‘(D) contain recommendations for any ad8 ministrative or legislative action that may be 

9 appropriate to resolve barriers to, and to 

10 incentivize, practices that promote employee 

11 ownership, including the use of employee stock 

12 ownership plans; and 

13 ‘‘(E) describe progress related to employee 

14 ownership in businesses in the United States. 

15 ‘‘(3) CONCURRENT SUBMISSION.—The Advocate 

16 for Employee Ownership shall submit a copy of each 

17 report submitted under paragraph (1) to the Sec18 retary of Labor, and any other appropriate official, 

19 at the same time such report is submitted under 

20 paragraph (1). 

21 ‘‘(4) PUBLIC AVAILABILITY.—The Advocate for 

22 Employee Ownership shall make a copy of each re23 port submitted under paragraph (1) available to the 

24 public. 


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1 ‘‘(5) DEFINITION OF EMPLOYEE STOCK OWNER2 SHIP PLAN.—For purposes of this section, the term 

3 ‘employee stock ownership plan’ has the meaning 

4 given the term in section 4975(e)(7) of the Internal 

5 Revenue Code of 1986. 

6 ‘‘(f) AUTHORIZATION OF APPROPRIATIONS.—There 

7 is authorized to be appropriated such sums as may be nec8 essary to carry out subsection (d).’’. 

9 (b) CLERICAL AMENDMENT.—The table of contents 

10 in section 1 of the Employee Retirement Income Security 

11 Act of 1974 (29 U.S.C. 1001 note) is amended by insert12 ing after the item relating to section 3004 the following 

13 new item: 

‘‘Sec. 3005. Advocate for employee ownership.’’. 

Æ 


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