Employee Equity Investment Act of 2023

Subjects: Commerce


<html><body><pre>[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[S. 1618 Introduced in Senate (IS)]

&lt;DOC&gt;






118th CONGRESS
  1st Session
                                S. 1618

  To amend the Small Business Investment Act of 1958 to establish an 
      employee equity investment facility, and for other purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                              May 16, 2023

 Mr. Van Hollen (for himself, Mr. Rubio, Ms. Baldwin, Mr. Young, Mrs. 
 Shaheen, and Mr. Braun) introduced the following bill; which was read 
       twice and referred to the Committee on Small Business and 
                            Entrepreneurship

_______________________________________________________________________

                                 A BILL


 
  To amend the Small Business Investment Act of 1958 to establish an 
      employee equity investment facility, and for other purposes.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Employee Equity Investment Act of 
2023''.

SEC. 2. EMPLOYEE EQUITY INVESTMENT FACILITY.

    (a) Definitions.--Section 103 of the Small Business Investment Act 
of 1958 (15 U.S.C. 662) is amended--
            (1) in paragraph (19), by striking ``and'' at the end;
            (2) in paragraph (20), by striking the period at the end 
        and inserting a semicolon; and
            (3) by adding at the end the following:
            ``(21) the term `covered investment' means, with respect to 
        an investment in a covered small business concern--
                    ``(A) the provision of capital to finance the sale 
                of an ownership interest of a covered small business 
                concern, including a covered small business concern 
                created as a result of a corporate divestiture, to an 
                employee stock ownership plan or eligible worker-owned 
                cooperative if such sale results in--
                            ``(i) the employee stock ownership plan or 
                        eligible worker-owned cooperative, 
                        respectively, holding a majority interest of 
                        the outstanding stock of the covered small 
                        business concern; and
                            ``(ii) with respect to such a sale to an 
                        employee stock ownership plan, the appointment 
                        of an independent trustee for the transaction; 
                        or
                    ``(B) the provision of capital to finance a covered 
                small business concern if--
                            ``(i) an employee stock ownership plan or 
                        eligible worker-owned cooperative holds a 
                        majority interest of the outstanding stock of 
                        the covered small business concern, prior to 
                        and immediately following the provision of 
                        capital; and
                            ``(ii) the provision of capital does not 
                        reduce the percentage of stock of the covered 
                        small business concern held by the employee 
                        stock ownership plan or eligible worker-owned 
                        cooperative (as applicable), excluding any 
                        synthetic equity;
            ``(22) the term `covered small business concern'--
                    ``(A) means a small business concern; and
                    ``(B) with respect to an employee equity investment 
                company that is not a Protege EEIC, includes an entity 
                that is not more than 300 percent larger than the size 
                standards established for categorizing a business 
                concern as a small business concern under section 3(a) 
                of the Small Business Act (15 U.S.C. 632(a));
            ``(23) the term `eligible worker-owned cooperative' has the 
        meaning given that term in section 1042(c) of the Internal 
        Revenue Code of 1986;
            ``(24) the term `employee equity investment company' means 
        a small business investment company--
                    ``(A) that identifies at the time of application 
                for licensure under section 301 an intent to be 
                licensed as an employee equity investment company; and
                    ``(B) for which--
                            ``(i) not less than 75 percent of the total 
                        capital managed by the investment firm shall be 
                        invested in covered investments;
                            ``(ii) not less than 50 percent of the 
                        total capital managed by the investment firm 
                        shall be invested in covered investments 
                        described in paragraph (21)(A);
                            ``(iii) covered investment returns are 
                        obtained from debt, synthetic equity, or a 
                        combination thereof, including returns obtained 
                        from cash interest, payment-in-kind interest, 
                        and stock warrants; and
                            ``(iv) any investment that is not a covered 
                        investment is an investment in a small business 
                        concern;
            ``(25) the term `employee stock ownership plan' has the 
        meaning given that term in section 4975(e) of the Internal 
        Revenue Code of 1986;
            ``(26) the term `independent trustee' means a trustee 
        that--
                    ``(A) is in the profession of serving as a 
                fiduciary for employee stock ownership plans;
                    ``(B) has never--
                            ``(i) performed services for or on behalf 
                        of any party selling an ownership interest in 
                        the covered small business concern to the 
                        employee stock ownership plan involved in the 
                        transaction the trustee is considering; or
                            ``(ii) been a director, officer, or 
                        employee of the covered small business concern;
                    ``(C) has not performed services for or on behalf 
                of the covered small business concern at any time 
                during the 5-year period ending on the date of 
                execution of the transaction the trustee is 
                considering, unless such services solely consisted of 
                acting as a fiduciary of an employee benefit plan 
                (including an employee stock ownership plan) under the 
                Employee Retirement Income Security Act of 1974 (29 
                U.S.C. 1001 et seq.);
                    ``(D) has not performed services related to the 
                transaction the trustee is considering, for or on 
                behalf of--
                            ``(i) the employee equity investment 
                        company that is preparing to or has already 
                        allocated capital to the covered small 
                        business; or
                            ``(ii) any other entity that is structuring 
                        or financing the transaction for any party 
                        other than the employee stock ownership plan; 
                        and
                    ``(E) does not have a familial or corporate 
                relationship (such as a parent-subsidiary relationship) 
                to any person or entity described in subparagraph (B), 
                (C), or (D);
            ``(27) the term `independent financial advisor' means a 
        financial or valuation advisor that--
                    ``(A) is in the profession of serving as a 
                financial or valuation advisor for transactions 
                involving employee stock ownership plans;
                    ``(B) has never--
                            ``(i) performed services, including a 
                        preliminary valuation, for or on behalf of--
                                    ``(I) any party selling an 
                                ownership interest in the covered small 
                                business concern to the employee stock 
                                ownership plan involved in the 
                                transaction the advisor is evaluating; 
                                or
                                    ``(II) the covered small business 
                                concern, unless the services were 
                                provided solely to an existing employee 
                                stock ownership plan sponsored by the 
                                covered small business concern; or
                            ``(ii) been a director, officer, or 
                        employee of the covered small business concern;
                    ``(C) has not performed services related to the 
                transaction the advisor is evaluating, including a 
                preliminary valuation, for or on behalf of--
                            ``(i) the employee equity investment 
                        company that is preparing to or has already 
                        allocated capital to the covered small 
                        business; or
                            ``(ii) any other entity that is structuring 
                        or financing the transaction for any party 
                        other than the employee stock ownership plan; 
                        and
                    ``(D) does not have a familial or corporate 
                relationship (such as a parent-subsidiary relationship) 
                to any of person or entity described in subparagraph 
                (B) or (C);
            ``(28) the term `non-EEIC company' means a small business 
        investment company that--
                    ``(A) is licensed under section 301;
                    ``(B) is selected to receive leverage from the 
                facility established under section 321; and
                    ``(C) is not an employee equity investment company;
            ``(29) the term `outstanding stock' means shares of stock, 
        including synthetic equity;
            ``(30) the term `Protege EEIC' means an entity licensed 
        under section 301 as an employee equity investment company and 
        selected in accordance with section 322(c)--
                    ``(A) for which the managers of the firm have a 
                documented record of successful business experience; 
                and
                    ``(B) that has an investment track record that does 
                not meet the requirements to be licensed under section 
                301; and
            ``(31) the term `synthetic equity' has the meaning given 
        that term in section 409(p)(6) of the Internal Revenue Code of 
        1986.''.
    (b) Employee Equity Investment Facility.--Part A of title III of 
the Small Business Investment Act of 1958 (15 U.S.C. 681 et seq.) is 
amended by adding at the end the following:

``SEC. 321. EMPLOYEE EQUITY INVESTMENT FACILITY.

    ``(a) Definition of Facility.--In this section, the term `facility' 
means the facility established under subsection (b).
    ``(b) Establishment.--The Administrator, acting through the 
Associate Administrator of the Office of Investment and Innovation of 
the Administration, shall establish and carry out a facility to provide 
leverage to licensed employee equity investment companies and non-EEIC 
companies for the purpose of encouraging covered investments.
    ``(c) Application.--
            ``(1) In general.--An investment firm desiring to 
        participate in the facility shall submit to the Administrator 
        an application--
                    ``(A) to be licensed to participate in the facility 
                as an employee equity investment company (including as 
                a Protege EEIC); or
                    ``(B) to be selected to participate as a non-EEIC 
                company.
            ``(2) Rolling basis.--The Administrator shall accept 
        applications under paragraph (1) on a rolling basis.
            ``(3) Electronic submissions.--The Administrator shall 
        allow an applicant under this section to electronically submit 
        any document required by this section and to provide an 
        electronic signature for any signature that is required on such 
        a document.
            ``(4) Application process.--An investment firm shall 
        identify an intent to be licensed as an employee equity 
        investment company at the time the investment firm applies to 
        be licensed as a small business investment company under 
        section 301.
    ``(d) Provisional Approval.--The Administrator may provide 
provisional approval for a license to participate in the facility as an 
employee equity investment company for a period not to exceed 1 year to 
an investment firm submitting an application under subsection (c)--
            ``(1) that does not meet the minimum private capital 
        requirements under section 302 necessary for licensing under 
        section 301 at the time of application;
            ``(2) that states an intent to more effectively raise 
        capital commitments in private markets with a license; and
            ``(3) that states an intent to more precisely request the 
        desired amount of leverage contingent on securing capital from 
        private market investors.
    ``(e) Combined Leverage.--The Administrator may not provide 
leverage to employee equity investment companies and non-EEIC companies 
under the facility in a total amount that is more than $5,000,000,000 
for a fiscal year. Not more than 20 percent of such total amount may be 
provided to non-EEIC companies.
    ``(f) Transaction Requirements.--
            ``(1) In general.--With respect to a covered investment 
        described in section 103(21)(A) involving a sale to an employee 
        stock ownership plan, an independent trustee for the employee 
        stock ownership plan shall be appointed before the execution of 
        the covered investment for a period of time that is sufficient 
        for the independent trustee to fully evaluate the proposed 
        transaction.
            ``(2) Fairness opinion.--An independent trustee appointed 
        under paragraph (1) shall obtain a fairness opinion on the 
        proposed covered investment from an independent financial 
        advisor, which shall evaluate whether the price, terms, and 
        cost of financing of the proposed covered investment are 
        financially fair to the employee stock ownership plan.
    ``(g) Prohibitions.--
            ``(1) Financing.--
                    ``(A) In general.--An employee of a covered small 
                business concern may not provide personal financing of 
                any kind for a covered investment, including through a 
                wage concession or rollover of a retirement plan.
                    ``(B) Exceptions.--Subparagraph (A) shall not apply 
                to--
                            ``(i) financing provided by an employee for 
                        the sale of an ownership interest held by the 
                        employee in a covered small business concern; 
                        or
                            ``(ii) employee capital contributions or 
                        membership fees paid by members of an eligible 
                        worker-owned cooperative, if such amounts are 
                        reasonable and customary and not used for the 
                        purchase of the covered small business concern.
            ``(2) Control.--An employee equity investment company or 
        non-EEIC company shall not exercise control over a covered 
        small business concern in which the employee equity investment 
        company or non-EEIC company, respectively, has made a covered 
        investment.
    ``(h) Employee Allocations.--With respect to a covered investment 
described in section 103(21)(A) made by an employee equity investment 
company that involves an employee stock ownership plan, the employee 
stock ownership plan shall include a requirement that in the event of a 
sale to a third party of the covered small business concern in which 
the covered investment is made, the proceeds that the employee stock 
ownership plan receives from the sale shall be distributed as though 
all shares of stock held by the employee stock ownership plan prior to 
the sale were fully allocated.
    ``(i) Recirculation of Shares.--
            ``(1) Share count.--With respect to a covered investment 
        described in section 103(21)(A) made by an employee equity 
        investment company that involves an employee stock ownership 
        plan, the number of shares held by the employee stock ownership 
        plan on the final date of each plan year shall not be less than 
        the number of shares held by the employee stock ownership plan 
        on the execution date of the covered investment.
            ``(2) Limitation.--The requirements under paragraph (1) 
        shall apply only with respect to the period during which the 
        employee equity investment company has an interest in the 
        covered small business concern.
            ``(3) Exception.--The requirement under paragraph (1) may 
        be waived by the independent trustee for the applicable 
        employee stock ownership plan.
    ``(j) Independent Trustees.--With respect to a covered investment 
described in section 103(21)(A) made by an employee equity investment 
company that involves an employee stock ownership plan, the employee 
stock ownership plan shall have an independent trustee during the 
period that the employee equity investment company has an interest in 
the covered small business concern.
    ``(k) Smaller Enterprises.--
            ``(1) In general.--Except as provided in paragraph (2), 
        section 303(d) shall not apply to employee equity investment 
        companies.
            ``(2) Protegee eeics.--Section 303(d) shall apply to a 
        Protege EEIC.
    ``(l) Procedures Related to a Sale of a Covered Small Business 
Concern.--
            ``(1) In general.--Subject to paragraph (2), an employee 
        equity investment company shall require as a condition of 
        making a covered investment described in section 103(21)(A) 
        involving an employee stock ownership plan that--
                    ``(A) before any stock sale or the execution of any 
                corporate matter listed in section 409(e)(3) of the 
                Internal Revenue Code of 1986, the employee stock 
                ownership plan shall--
                            ``(i) appoint an independent trustee for 
                        the transaction; and
                            ``(ii) require that the independent trustee 
                        obtain a fairness opinion from an independent 
                        financial advisor, which shall evaluate whether 
                        the price, terms, and cost of financing of the 
                        proposed covered investment are financially 
                        fair to the employee stock ownership plan; and
                    ``(B) the employee stock ownership plan requires 
                that--
                            ``(i) in addition to the corporate matters 
                        listed in section 409(e)(3) of the Internal 
                        Revenue Code of 1986, each participant or 
                        beneficiary in the employee stock ownership 
                        plan is entitled to direct the employee stock 
                        ownership plan as to the manner in which voting 
                        rights under securities of the employer which 
                        are allocated to the account of such 
                        participant or beneficiary are to be exercised 
                        with respect to the approval or disapproval of 
                        any stock sale;
                            ``(ii) the requirements of section 
                        409(e)(3) of the Internal Revenue Code of 1986 
                        and clause (i) of this subparagraph shall be 
                        met using the procedures described in section 
                        409(e)(5) of the Internal Revenue Code of 1986;
                            ``(iii) unless the parties agree otherwise, 
                        with respect to unallocated shares, the 
                        independent trustee shall be directed to vote 
                        or tender such unallocated shares in the same 
                        proportion as allocated shares for which the 
                        independent trustee has received voting or 
                        tender instructions from participants in the 
                        employee stock ownership plan; and
                            ``(iv) with respect to allocated shares 
                        that the independent trustee does not receive 
                        voting or tender instructions from participants 
                        in the employee stock ownership plan, the 
                        independent trustee shall have voting 
                        discretion over such shares.
            ``(2) Voting discretion.--Nothing in paragraph (1)(B) shall 
        limit the ability of an independent trustee to exercise voting 
        discretion in accordance with the fiduciary obligations of the 
        independent trustee under the Employee Retirement Income 
        Security Act of 1974 (29 U.S.C. 1001 et seq.).
            ``(3) Limitation.--The requirements under paragraph (1) 
        shall apply only with respect to the period during which the 
        employee equity investment company has an interest in the 
        covered small business concern.
    ``(m) Reports.--In addition to the reporting requirements in 
310(b), each employee equity investment company (including each Protege 
EEIC licensed to operate as an employee equity investment company) and 
each non-EEIC company that has outstanding leverage received from the 
facility shall submit to the Administrator an annual report, which 
shall include, for the year covered by the report, the following 
information, disaggregated by covered investments made under 
subparagraph (A) and (B) of section 103(21):
            ``(1) Whether the covered investment was made with respect 
        to an employee stock ownership plan or eligible worker-owned 
        cooperative.
            ``(2) For an employee stock ownership plan--
                    ``(A) the effective date of the plan;
                    ``(B) the number of active plan participants;
                    ``(C) the number of employees of the covered small 
                business concern for which the employee stock ownership 
                plan is established;
                    ``(D) the total value of employer securities, as 
                determined by an independent appraiser hired by the 
                independent trustee of the employee stock ownership 
                plan;
                    ``(E) the total plan assets;
                    ``(F) the total contributions during the plan year;
                    ``(G) the total distributions during the plan year;
                    ``(H) the median account asset balance; and
                    ``(I) demographic information of plan participants, 
                disaggregated by race, gender, and State.
            ``(3) For an eligible worker-owned cooperative--
                    ``(A) the number of member-owners;
                    ``(B) the number of employees of the covered small 
                business concern for which the eligible worker-owned 
                cooperative is established;
                    ``(C) the total value of employer securities;
                    ``(D) the aggregate assets of all membership 
                accounts of the cooperative;
                    ``(E) the median membership account balance; and
                    ``(F) demographic information of membership base, 
                disaggregated by race, gender, and State.
    ``(n) Implementation Milestones.--
            ``(1) In general.--Not later than 180 days after the date 
        of enactment of this section, the Administrator shall begin 
        accepting applications to be licensed to participate in the 
        facility as an employee equity investment company (including as 
        a Protege EEIC).
            ``(2) Exclusion of leverage.--Not later than 1 year after 
        the date of enactment of this section, the Administrator shall 
        begin excluding from the calculation of outstanding leverage, 
        as described in section 303(b)(2)(F), covered investments 
        described in clause (iii) of such section.
            ``(3) License timeline.--Not later than 1 year after the 
        date of enactment of this section, the Administrator shall 
        approve the first tranche of licenses to participate in the 
        facility as an employee equity investment company (including as 
        a Protege EEIC) with respect to applicants that satisfy the 
        applicable eligibility criteria.
    ``(o) Sunset.--
            ``(1) Definition.--In this subsection, the term `sunset 
        date' means the first day of the twentieth calendar year that 
        begins after the date on which the Administrator approves the 
        first license to participate in the facility as an employee 
        equity investment company (including as a Protege EEIC).
            ``(2) Termination of authority.--On and after the sunset 
        date, the Administrator may not license an entity to 
        participate in the facility as an employee equity investment 
        company (including as a Protege EEIC) or select an entity to 
        participate in the facility as a non-EEIC company.
            ``(3) Continued participation by existing entities.--
        Nothing in paragraph (2) shall be construed to prohibit--
                    ``(A) an employee equity investment company from 
                continuing to draw leverage on and after the sunset 
                date that was committed to the entity through the 
                facility before the sunset date; or
                    ``(B) a non-EEIC company from continuing to receive 
                an exclusion in the calculation of outstanding leverage 
                by the Administrator, as described in section 
                303(b)(2)(F), for covered investments described in 
                clause (iii) of such section made to a covered small 
                business before the sunset date.
            ``(4) Application.--The Administrator shall not consider 
        paragraph (2) as a factor in the decision to license an entity 
        to participate in the facility as an employee equity investment 
        company (including as a Protege EEIC) or to select an entity to 
        participate in the facility as a non-EEIC company before the 
        sunset date.''.
    (c) Employee Equity Investment Company Procedures.--Title III of 
the Small Business Investment Act of 1958 (15 U.S.C. 681 et seq.) is 
amended--
            (1) in section 301(c) (15 U.S.C. 681(c)), by striking 
        paragraph (3) and inserting the following:
            ``(3) Matters considered.--
                    ``(A) In general.--In reviewing and processing any 
                application under this subsection, the Administrator--
                            ``(i) shall determine whether--
                                    ``(I) the applicant meets the 
                                requirements of subsections (a) and (c) 
                                of section 302; and
                                    ``(II) the management of the 
                                applicant is qualified and has the 
                                knowledge, experience, and capability 
                                necessary to comply with this Act;
                            ``(ii) shall take into consideration--
                                    ``(I) the need for and availability 
                                of financing for small business 
                                concerns in the geographic area in 
                                which the applicant is to commence 
                                business;
                                    ``(II) the general business 
                                reputation of the owners and management 
                                of the applicant; and
                                    ``(III) the probability of 
                                successful operations of the applicant, 
                                including adequate profitability and 
                                financial soundness;
                            ``(iii) shall not take into consideration 
                        any projected shortage or unavailability of 
                        leverage; and
                            ``(iv) shall give first priority to an 
                        applicant that is located in an underlicensed 
                        State with below median financing, as 
                        determined by the Administrator.
                    ``(B) Additional matters considered for employee 
                equity investment companies.--
                            ``(i) Investment track record.--Except as 
                        provided in clause (ii), an applicant for a 
                        license to operate as an employee equity 
                        investment company shall submit to the 
                        Administrator proof that the managers of the 
                        applicant have a track record of managing 
                        investments, including structured investments, 
                        realized or unrealized, in an employee stock 
                        ownership plan or eligible worker-owned 
                        cooperative.
                            ``(ii) Advisory requirement.--An applicant 
                        that does not have an investment track record 
                        described in clause (i) or that is a Protege 
                        EEIC shall submit to the Administrator evidence 
                        that the applicant has retained or will retain 
                        a legal, accounting, or financial advisory firm 
                        with at least 5 years of experience in 
                        structuring employee stock ownership plans or 
                        eligible worker-owned cooperatives.
                            ``(iii) Limitation.--The Administrator may 
                        not reject an applicant for a license to 
                        operate as an employee equity investment 
                        company solely because the applicant lacks a 
                        sufficient track record in realized investments 
                        if the applicant demonstrates an otherwise 
                        successful investment track record that 
                        includes unrealized covered investments.''; and
            (2) in section 303(b)(2) (15 U.S.C. 683(b)(2))--
                    (A) in subparagraph (A), in the matter preceding 
                clause (i), by striking ``The maximum'' and inserting 
                ``Except as provided otherwise in this paragraph, the 
                maximum''; and
                    (B) by adding at the end the following--
                    ``(E) Employee equity investment companies.--
                            ``(i) In general.--Except as provided in 
                        subparagraph (G), the maximum amount of 
                        outstanding leverage made available to any 1 
                        employee equity investment company may not 
                        exceed the lesser of--
                                    ``(I) 100 percent of the private 
                                capital of such company; or
                                    ``(II) $350,000,000.
                            ``(ii) Multiple licenses under common 
                        control.--The maximum amount of outstanding 
                        leverage made available to 2 or more employee 
                        equity investment companies that are commonly 
                        controlled (as determined by the Administrator) 
                        and not under capital impairment may not exceed 
                        $700,000,000.
                    ``(F) Non-EEIC company employee ownership 
                investments.--
                            ``(i) In general.--A non-EEIC company may 
                        access leverage from the facility established 
                        under section 321 in addition to any leverage 
                        such non-EEIC company is otherwise eligible to 
                        receive solely for the purpose described in 
                        clause (ii) and subject to the limitation under 
                        clause (iv).
                            ``(ii) Purpose.--The purpose described in 
                        this clause is for the purpose of making 
                        covered investments described in section 
                        103(21)(B) (excluding synthetic equity).
                            ``(iii) Outstanding leverage.--Subject to 
                        the limitation under clause (iv), in 
                        calculating the outstanding leverage of a non-
                        EEIC company for purposes of subparagraphs 
                        (A)(ii) and (B), the Administrator shall 
                        exclude the amount of leverage outstanding to 
                        covered small business concerns for a covered 
                        investment described in section 103(21)(B) 
                        (excluding synthetic equity) made by such non-
                        EEIC company.
                            ``(iv) Limitation.--The amount of leverage 
                        provided under clause (i) that is excluded 
                        under clause (iii) may not exceed $50,000,000.
                    ``(G) Protege eeics.--The maximum amount of 
                outstanding leverage made available under the facility 
                established under section 321 to any 1 Protege EEIC may 
                not to exceed the lesser of--
                            ``(i) 100 percent of the private capital of 
                        the Protege EEIC; or
                            ``(ii) $100,000,000.''.
    (d) Conforming Amendment.--Section 308(g) of the Small Business 
Investment Act of 1958 (15 U.S.C. 687(g)) is amended by adding at the 
end the following:
    ``(4) In its annual report for the year ending on December 31, 
2023, and in each succeeding annual report made pursuant to section 
10(a) of the Small Business Act, the Administration shall include full 
and detailed aggregate data regarding--
            ``(A) employee stock ownership plans created by an employee 
        equity investment company, including--
                    ``(i) the total number of active plan participants;
                    ``(ii) the total number of employees of the covered 
                small business concerns with such employee stock 
                ownership plans;
                    ``(iii) the total value of employer securities, as 
                determined by the independent appraisers hired by the 
                independent trustee of each employee stock ownership 
                plan;
                    ``(iv) the total plan assets;
                    ``(v) the total contributions during the plan year;
                    ``(vi) the total distributions during the plan 
                year;
                    ``(vii) the median account asset balance; and
                    ``(viii) demographic information of plan 
                participants, disaggregated by race, gender, State;
            ``(B) eligible worker-owned cooperatives created by 
        employee equity investment companies, including--
                    ``(i) the number of member-owners;
                    ``(ii) the total number of employees of the covered 
                small business concern with such eligible worker-owned 
                cooperatives;
                    ``(iii) the total value of employer securities;
                    ``(iv) the assets of all membership accounts;
                    ``(v) the median membership account balance; and
                    ``(vi) demographic information of membership base, 
                disaggregated by race, gender, and State; and
            ``(C) non-EEIC companies that received leverage from the 
        facility, including--
                    ``(i) the total amount of such leverage excluded by 
                the Administrator pursuant to section 321(e)(3)(C);
                    ``(ii) the number of employee stock ownership plans 
                and eligible worker-owned cooperatives that received 
                capital from a non-EEIC company during the year covered 
                by the report; and
                    ``(iii) the geographic location of each employee 
                stock ownership plan and eligible worker-owned 
                cooperative described in clause (ii).''.

SEC. 3. PROTEGE EEIC PROGRAM.

    Part A of title III of the Small Business Investment Act of 1958 
(15 U.S.C. 681 et seq.), as amended by section 2, is further amended by 
adding at the end the following:

``SEC. 322. PROTEGE EEIC PROGRAM.

    ``(a) Establishment.--The Administrator shall establish a program 
to be known as the `Protege EEIC Program' under which a manager with 
substantial experience in operating small business investment companies 
may enter into a written agreement approved by the Administrator to 
provide guidance and assistance to a Protege EEIC with respect to--
            ``(1) applying for a license for the Protege EEIC to 
        operate as an employee equity investment company; and
            ``(2) management of the employee equity investment company 
        after licensure.
    ``(b) Application.--After entering into a written agreement 
described in subsection (a), the Protege EEIC shall apply for a license 
under section 301.
    ``(c) Selection.--The Administrator may grant a license to a 
Protege EEIC to operate as an employee equity investment company under 
section 301 based on the investment track record of one or more of the 
managers that have entered into a written agreement described in 
subsection (a) with the applicant Protege EEIC.
    ``(d) Requirements for Managers.--If a manager enters into a 
written agreement described under subsection (a)--
            ``(1) the manager may hold a minority financial interest in 
        the employee equity investment company that is to be managed by 
        the Protege EEIC;
            ``(2) the otherwise applicable maximum amount of 
        outstanding leverage that may be made available to any one 
        licensed company of the manager under section 303(b)(2)(A) 
        shall be increased by $17,500,000; and
            ``(3) the otherwise applicable maximum amount of 
        outstanding leverage that may be made available to any two or 
        more licensed companies that are commonly controlled by the 
        manager under section 303(b)(2)(B) shall be increased by 
        $35,000,000.''.

SEC. 4. OFFICE OF EMPLOYEE OWNERSHIP.

    Part A of title III of the Small Business Investment Act of 1958 
(15 U.S.C. 681 et. seq.), as amended by section 3, is further amended 
by adding at the end the following:

``SEC. 323. OFFICE OF EMPLOYEE OWNERSHIP.

    ``(a) Establishment.--There is established in the Administration an 
Office of Employee Ownership (in this section referred to as the 
`Office') which shall be responsible for--
            ``(1) developing expertise in employee stock ownership 
        plans and eligible worker-owned cooperatives; and
            ``(2) assisting small business concerns in processes 
        relating to a sale of such concerns to an employee stock 
        ownership plan or eligible worker-owned cooperative.
    ``(b) Duties.--The Office shall--
            ``(1) provide outreach and educational materials to small 
        business investment companies about the facility established 
        under section 321;
            ``(2) maintain and publish a list of legal, accounting, or 
        financial advisory firms with at least 5 years of experience in 
        structuring employee stock ownership plans or eligible worker-
        owned cooperatives;
            ``(3) establish a Small Business Employee Ownership and 
        Cooperatives Promotion Program to offer technical assistance 
        and training to employee-owned business concerns (as defined in 
        section 21(c)(3)(U) of the Small Business Act (15 U.S.C. 
        648(c)(3)(U)) on the transition to employee ownership;
            ``(4) coordinate with small business development centers on 
        implementing the requirements relating to employee-owned 
        business concerns under section 21(c)(3) of the Small Business 
        Act (15 U.S.C. 648(c)(3)); and
            ``(5) coordinate with leaders in the field, as determined 
        by the Administrator, to develop outreach and educational 
        materials on employee ownership in multiple languages.''.

SEC. 5. MODIFYING UNCONDITIONAL OWNERSHIP AND CONTROL REQUIREMENTS FOR 
              CERTAIN EMPLOYEE-OWNED SMALL BUSINESS CONCERNS.

    (a) Report on Ownership and Control Through an Employee Stock 
Ownership Plan or Eligible Worker-Owned Cooperative Relating to Set-
Aside Procurement.--
            (1) Definitions.--In this subsection--
                    (A) the term ``Administrator'' means the 
                Administrator of the Small Business Administration;
                    (B) the term ``eligible worker-owned cooperative'' 
                has the meaning given that term in section 1042(c) of 
                the Internal Revenue Code of 1986; and
                    (C) the term ``employee stock ownership plan'' has 
                the meaning given that term in section 4975(e) of the 
                Internal Revenue Code of 1986.
            (2) Sense of congress.--It is the sense of Congress that--
                    (A) employee stock ownership plans and eligible 
                worker-owned cooperatives have unique ownership 
                structures that create barriers to accessing set-aside 
                procurement programs due to unconditional ownership and 
                control requirements; and
                    (B) the ownership structures of an employee stock 
                ownership plan or an eligible worker-owned cooperative 
                should not prevent an otherwise eligible entity from 
                accessing set-aside procurement programs.
            (3) Study and report.--
                    (A) Study.--The Administrator, in coordination with 
                stakeholders, including women-owned small business 
                third-party certifiers and relevant Federal agencies, 
                shall study and recommend alternatives to unconditional 
                ownership and control requirements for employee stock 
                ownership plans and eligible worker-owned cooperatives 
                that would enable access to set-aside procurement 
                programs.
                    (B) Report.--Not later than 180 days after the date 
                of enactment of this Act, the Administrator shall 
                submit to Congress the recommendations developed under 
                subparagraph (A) and a plan to implement the 
                recommendations for all set-aside procurement programs, 
                including identifying any applicable statutory changes 
                necessary to implement such recommendations.
    (b) Rulemaking.--Not later than 180 days after the submission of 
the report required under subsection (a)(3)(B), the Administrator of 
the Small Business Administration shall issue or revise any applicable 
rules to carry out the recommendations formed in the report.
    (c) Grace Period.--
            (1) Small business concerns owned and controlled by 
        socially and economically disadvantaged individuals.--Section 
        8(a) of the Small Business Act (15 U.S.C. 637(a)) is amended by 
        adding at the end the following:
            ``(22) Concerns owned by employee stock ownership plans or 
        eligible worker-owned cooperatives.--
                    ``(A) In general.--For the purposes of determining 
                ownership and control of a concern under this 
                subsection for award of a contract through a 
                competition restricted to small business concerns owned 
                and controlled by socially and economically 
                disadvantaged individuals, any interest in such concern 
                held by an employee stock ownership plan or an eligible 
                worker-owned cooperative shall be treated in the same 
                manner as an interest held by the socially and 
                economically disadvantaged individuals upon whom 
                eligibility is based if--
                            ``(i) such concern was a socially and 
                        economically disadvantaged small business 
                        concern prior to the sale to an employee stock 
                        ownership plan or an eligible worker-owned 
                        cooperative; and
                            ``(ii) the chief corporate officer and a 
                        majority of the board of directors of such 
                        concern are socially and economically 
                        disadvantaged individuals.
                    ``(B) Applicability.--The requirements of 
                subparagraph (A) shall apply for the 2-year period 
                beginning on the date on which the majority of the 
                stock of such concern was acquired by an employee stock 
                ownership plan or eligible worker-owned cooperative.''.
    (d) Small Business Concerns Owned and Controlled by Women.--Section 
8(m) of the Small Business Act (15 U.S.C. 637(m)) is amended by adding 
at the end the following:
            ``(9) Concerns owned by employee stock ownership plans or 
        eligible worker-owned cooperatives.--
                    ``(A) In general.--Notwithstanding any other 
                provision of law, for the purposes of determining 
                ownership and control of a concern under this 
                subsection for award of a contract through a 
                competition restricted to small business concerns owned 
                and controlled by women, any interest in such concern 
                held by an employee stock ownership plan or an eligible 
                worker-owned cooperative, shall be treated in the same 
                manner as an interest held by the women upon whom 
                eligibility is based if--
                            ``(i) such concern was a small business 
                        concern owned and controlled by women prior to 
                        the sale to an employee stock ownership plan or 
                        an eligible worker-owned cooperative; and
                            ``(ii) the chief corporate officer and a 
                        majority of the board of directors of such 
                        concern are women.
                    ``(B) Applicability.--The requirements of 
                subparagraph (A) shall apply for the 2-year period 
                beginning on the date on which the majority of the 
                stock of such concern was acquired by an employee stock 
                ownership plan or eligible worker-owned cooperative.''.
    (e) Small Business Concerns Owned and Controlled by Service-
Disabled Veterans.--Section 36 of the Small Business Act (15 U.S.C. 
657f) by adding at the end the following:
    ``(j) Concerns Owned by Employee Stock Ownership Plans or Eligible 
Worker-Owned Cooperatives.--
            ``(1) In general.--Notwithstanding any other provision of 
        law, for the purposes of determining ownership and control of a 
        concern under this section for award of a contract through a 
        competition restricted to small business concerns owned and 
        controlled by service-disabled veterans, any interest in such 
        concern held by an employee stock ownership plan or an eligible 
        worker-owned cooperative, shall be treated in the same manner 
        as an interest held by the service-disabled veterans upon whom 
        eligibility is based if--
                    ``(A) such concern was a small business concern 
                owned and controlled by service-disabled veterans prior 
                to the sale to an employee stock ownership plan or an 
                eligible worker-owned cooperative; and
                    ``(B) the chief corporate officer and a majority of 
                the board of directors of such concern are service-
                disabled veterans.
            ``(2) Applicability.--The requirements of paragraph (1) 
        shall apply for the 2-year period beginning on the date on 
        which the majority of the stock of such concern was acquired by 
        an employee stock ownership plan or eligible worker-owned 
        cooperative.''.
    (f) Definitions.--Section 3 of the Small Business Act (15 U.S.C. 
632) is amended by adding at the end the following:
    ``(gg) Employee Stock Ownership Plan.--In this Act, the term 
`employee stock ownership plan' has the meaning given that term in 
section 4975(e)(7) of the Internal Revenue Code of 1986 (26 U.S.C. 
4975(e)(7)).
    ``(hh) Eligible Worker-Owned Cooperative.--In this Act, the term 
`eligible worker-owned cooperative' has the meaning given that term in 
section 1042(c) of the Internal Revenue Code of 1986.''.
                                 &lt;all&gt;
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