I 
108TH CONGRESS 
1ST SESSION 
H. R. 913
To amend the Internal Revenue Code of 1986 to provide incentives for 
the ownership and control of corporations by employees. 
IN THE HOUSE OF REPRESENTATIVES 
FEBRUARY 25, 2003
Mr. ROHRABACHER introduced the following bill; which was referred to the 
Committee on Ways and Means 
A BILL 
To amend the Internal Revenue Code of 1986 to provide 
incentives for the ownership and control of corporations 
by employees.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Employee Ownership 
Act of 2003’’. 
SEC. 2. OWNERSHIP POLICY FOR THE UNITED STATES. 
(a) FINDINGS.—The Congress finds that—
(1) there is considerable evidence that em-
ployee-owned and employee-controlled corporations
are more productive and provide more wealth to 
their employees than corporations not so owned, and 
(2) the workplace experience of employee-owned 
and employee-controlled corporations is proven to 
foster greater appreciation of the economic system of 
the United States that relies on ownership of private 
property and capitalism. 
(b) POLICY.—It is the policy of the United States 
that by the year 2010, 30 percent of all United States 
corporations are owned and controlled by employees of the 
corporations. 
SEC. 3. TAX INCENTIVES RELATING TO EMPLOYEE-OWNED 
AND 
EMPLOYEE-CONTROLLED 
CORPORA-
TIONS. 
(a) TRUST OF EMPLOYEE-OWNED AND EMPLOYEE-
CONTROLLED
CORPORATION
EXEMPT
FROM
TAX-
ATION.—
(1) IN GENERAL.—Section 501(c) of the Inter-
nal Revenue Code of 1986 (relating to list of exempt 
organizations) is amended by adding at the end the 
following new paragraph: 
‘‘(29)(A) employee-owned and employee-con-
trolled corporation trust. 
‘‘(B) For purposes of subparagraph (A), the 
term ‘employee-owned and employee-controlled cor-
poration trust’ means a trust which has as its pri-
mary assets the employer securities (within the 
meaning of section 409(l)) of an employee-owned 
and employee-controlled corporation.’’. 
(2) EMPLOYEE-OWNED
AND
EMPLOYEE-CON-
TROLLED CORPORATION DEFINED.—Subsection (a) 
of section 7701 of such Code (relating to definitions) 
is amended by adding at the end the following new 
paragraph: 
‘‘(48) EMPLOYEE-OWNED AND EMPLOYEE-CON-
TROLLED
CORPORATION.—The 
term 
‘employee-
owned and employee-controlled corporation’ means a 
corporation in which—
‘‘(A) more than 50 percent of the voting 
stock of such corporation is held by a trust for 
the benefit of the employees of that corporation, 
‘‘(B) in all matters requiring the vote of 
stock, including the election of the board of di-
rectors of the corporation, the trustee of such 
trust is obligated to vote the stock held in trust 
and allocated to participants in the trust in the 
manner in which the participants direct, on the 
basis of 1-employee 1-vote, and to vote any 
stock not so allocated as if it were so allocated,
‘‘(C) at least 25 employees of such cor-
poration are participants in and beneficiaries of 
such trust, 
‘‘(D) a minimum of 90 percent of the em-
ployees who work at least 1,000 hours annually 
for such corporation are participants in such 
trust, and 
‘‘(E) the trustee administers such trust for 
the benefit of the employees of such corporation 
and complies with all requirements of this title 
relating to employee stock ownership plans (as 
defined in section 4975(e)(7)) pertaining to 
independent appraisal of shares not readily 
tradable and distribution of those shares.’’. 
(b) NO TAX ON CORPORATE INCOME OF EMPLOYEE-
OWNED AND EMPLOYEE-CONTROLLED CORPORATION.—
Subsection (a) of section 11 of such Code (relating to cor-
porations in general) is amended by inserting before the 
period at the end the following: ‘‘(other than any em-
ployee-owned and employee-controlled corporation)’’. 
(c) EXCLUSION OF INCOME FROM SALE OF EM-
PLOYEE-OWNED
AND
EMPLOYEE–CONTROLLED
COR-
PORATION STOCK BY EMPLOYEE OWNER.—
(1) IN GENERAL.—Part III of subchapter B of 
chapter 1 of such Code (relating to items specifically
excluded from gross income) is amended by redesig-
nating section 140 as section 140A and by inserting 
after section 139 the following new section: 
‘‘SEC. 140. INCOME FROM EMPLOYEE OWNER SALE OF EM-
PLOYER 
SECURITIES 
DISTRIBUTED 
FROM 
EMPLOYEE-OWNED 
AND 
EMPLOYEE-CON-
TROLLED CORPORATION TRUST. 
‘‘(a) IN GENERAL.—In the case of an individual, 
gross income shall not include any proceeds from the 
qualified sale of employer securities. 
‘‘(b) QUALIFIED SALE OF EMPLOYER SECURITIES.—
The term ‘qualified sale of employer securities’ means the 
sale of employer securities (as defined in section 409(l)) 
which were distributed to a participant in the employee-
owned and employee-controlled corporation trust to—
‘‘(1) an employee of the employee-owned and 
employee-controlled corporation which issued such 
securities, 
‘‘(2) such corporation, or 
‘‘(3) such trust.’’. 
(2) CLERICAL AMENDMENT.—The table of sec-
tions for part III of subchapter B of chapter 1 of 
such Code is amended by striking the item relating 
to section 140 and inserting after the item relating 
to section 139 the following new items:
‘‘Sec. 140. Income from employee owner sale of employer securi-
ties distributed from employee-owned and employee-
controlled corporation trust. 
‘‘Sec. 140A. Cross references to other Acts.’’.
(d) RECEIPT OF STOCK IN AN EMPLOYEE OWNED 
AND CONTROLLED CORPORATION DURING 3-YEAR TRAN-
SITION PERIOD.—Section 83 of such Code (relating to 
property transferred in connection with performance of 
services) is amended by adding at the end the following 
new subsection: 
‘‘(i) RECEIPT OF STOCK IN AN EMPLOYEE OWNED 
AND CONTROLLED CORPORATION DURING 3-YEAR TRAN-
SITION PERIOD.—
‘‘(1) IN GENERAL.—In the case of an employee, 
this section shall not apply to the transfer in lieu of 
compensation of employer securities in an employer 
owned and controlled corporation during the 3-year 
period beginning on the effective date of the election 
of a corporation to become an employee owned and 
controlled corporation. 
‘‘(2) EXCEPTION.—If, on the day after the end 
of the 3-year period referred to in paragraph (1), 
such corporation is not an employee owned and con-
trolled corporation, paragraph (1) shall not apply 
and the following sum shall be included in the gross 
income of such employee: