SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Main Street Employee 
Ownership Act of 2018’’. 
SEC. 2. DEFINITIONS. 
In this Act— 
(1) the terms ‘‘Administration’’ and ‘‘Adminis-
trator’’ means the Small Business Administration 
and the Administrator thereof, respectively; 
(2) the term ‘‘cooperative’’ means an entity 
that is determined to be a cooperative by the Admin-
istrator, in accordance with applicable Federal and 
State laws and regulations; 
(3) the term ‘‘employee-owned business con-
cern’’ means— 
(A) a cooperative in which employees are 
eligible for membership; and 
(B) a qualified employee trust; 
(4) the terms ‘‘qualified employee trust’’ and 
‘‘small business concern’’ have the meanings given 
those terms in section 3 of the Small Business Act 
(15 U.S.C. 632); and 
(5) the term ‘‘small business development cen-
ter’’ means a small business development center de-
scribed in section 21 of the Small Business Act (15 
U.S.C. 648).
SEC. 3. EXPANSION OF 7(A) LOANS. 
(a) IN GENERAL.—Section 7(a) of the Small Busi-
ness Act (15 U.S.C. 636(a)) is amended— 
(1) in paragraph (15)— 
(A) in subparagraph (A)— 
(i) by striking ‘‘this subsection to 
qualified employee trusts’’ and inserting 
‘‘this subsection— 
‘‘(i) to qualified employee trusts’’; 
(ii) in clause (i), as so designated— 
(I) by inserting ‘‘, and for any 
transaction costs associated with pur-
chasing,’’ after ‘‘purchasing’’; 
(II) by striking the period at the 
end and inserting ‘‘; and’’; and 
(iii) by adding at the end the fol-
lowing: 
‘‘(ii) to a small business concern under a 
plan approved by the Administrator, if the pro-
ceeds from the loan are only used to make a 
loan to a qualified employee trust, and for any 
transaction costs associated with making that 
loan, that results in the qualified employee trust 
owning at least 51 percent of the small business 
concern.’’; 
(B) in subparagraph (B)—
(i) in the matter preceding clause (i), 
by inserting ‘‘or by the small business con-
cern’’ after ‘‘the trustee of such trust’’; 
(ii) in clause (ii), by striking ‘‘and’’ at 
the end; 
(iii) in clause (iii), by striking the pe-
riod at the end and inserting ‘‘, and’’; and 
(iv) by adding at the end the fol-
lowing: 
‘‘(iv) with respect to a loan made to a 
trust, or to a cooperative in accordance with 
paragraph (35)— 
‘‘(I) a seller of the small business con-
cern may remain involved as an officer, di-
rector, or key employee of the small busi-
ness concern when a qualified employee 
trust or cooperative has acquired 100 per-
cent of ownership of the small business 
concern; and 
‘‘(II) any seller of the small business 
concern who remains as an owner of the 
small business concern, regardless of the 
percentage of ownership interest, shall be 
required to provide a personal guarantee 
by the Administration.’’; and
(C) by adding at the end the following: 
‘‘(F) A small business concern that makes a 
loan to a qualified employee trust under subpara-
graph (A)(ii) is not required to contain the same 
terms and conditions as the loan made to the small 
business concern that is guaranteed by the Adminis-
tration under such subparagraph. 
‘‘(G) With respect to a loan made to a qualified 
employee trust under this paragraph, or to a cooper-
ative in accordance with paragraph (35), the Admin-
istrator may, as deemed appropriate, elect to not re-
quire any mandatory equity to be provided by the 
qualified employee trust or cooperative to make the 
loan.’’; and 
(2) by adding at the end the following: 
‘‘(35) LOANS TO COOPERATIVES.— 
‘‘(A) DEFINITION.—In this paragraph, the 
term ‘cooperative’ means an entity that is de-
termined to be a cooperative by the Adminis-
trator, in accordance with applicable Federal 
and State laws and regulation. 
‘‘(B) 
AUTHORITY.—The 
Administration 
shall guarantee loans made to a cooperative for 
the purpose described in paragraph (15).’’.
(b) DELEGATION
OF AUTHORITY
TO PREFERRED 
LENDERS.—Section 5(b)(7) of the Small Business Act (15 
U.S.C. 634(b)(7)) is amended by inserting ‘‘, including 
loans guaranteed under paragraph (15) or (35) of section 
7(a)’’ after ‘‘deferred participation loans’’. 
SEC. 4. SMALL BUSINESS INVESTMENT COMPANY PRO-
GRAM OUTREACH. 
The Administrator shall provide outreach and edu-
cational materials to companies licensed under section 
301(c) of the Small Business Investment Act of 1958 (15 
U.S.C. 681(c)) to increase the use of funds to make invest-
ments in company transitions to employee-owned business 
concerns. 
SEC. 5. SMALL BUSINESS MICROLOAN PROGRAM OUT-
REACH. 
The Administrator shall provide outreach and edu-
cational materials to intermediaries under section 7(m) of 
the Small Business Act (15 U.S.C. 636(m)) to increase 
the use of funds to make loans to employee-owned busi-
ness concerns, including transitions to employee-owned 
business concerns. 
SEC. 6. SMALL BUSINESS DEVELOPMENT CENTER OUT-
REACH AND ASSISTANCE. 
(a) ESTABLISHMENT.—The Administrator shall es-
tablish a Small Business Employee Ownership and Co-
operatives Promotion Program to offer technical assist-
ance and training on the transition to employee ownership 
through cooperatives and qualified employee trusts. 
(b) SMALL BUSINESS DEVELOPMENT CENTERS.— 
(1) IN GENERAL.—In carrying out the program 
established under subsection (a), the Administrator 
shall enter into agreements with small business de-
velopment centers under which the centers shall— 
(A) provide access to information and re-
sources on employee ownership through co-
operatives or qualified employee trusts as a 
business succession strategy; 
(B) conduct training and educational ac-
tivities; and 
(C) carry out the activities described in 
subparagraph (U) of section 21(c)(3) of the 
Small Business Act (15 U.S.C. 648(c)(3)). 
(2) ADDITIONAL
SERVICES.—Section 21(c)(3) 
of the Small Business Act (15 U.S.C. 648(c)(3)) is 
amended— 
(A) in subparagraph (S), by striking 
‘‘and’’ at the end; 
(B) in subparagraph (T), by striking the 
period at the end and inserting ‘‘; and’’; and 
(C) by adding at the end the following:
‘‘(U) encouraging and assisting the provision of 
succession planning to small business concerns with 
a focus on transitioning to cooperatives, as defined 
in section 7(a)(35), and qualified employee trusts 
(collectively referred to in this subparagraph as ‘em-
ployee-owned business concerns’), including by— 
‘‘(i) providing training to individuals to 
promote the successful management, govern-
ance, or operation of a business purchased by 
those individuals in the formation of an em-
ployee-owned business concern; 
‘‘(ii) assisting employee-owned business 
concerns that meet applicable size standards es-
tablished under section 3(a) with education and 
technical assistance with respect to financing 
and contracting programs administered by the 
Administration; 
‘‘(iii) coordinating with lenders on con-
ducting outreach on financing through pro-
grams administered by the Administration that 
may be used to support the transition of owner-
ship to employees; 
‘‘(iv) supporting small business concerns in 
exploring 
or 
assessing 
the 
possibility 
of
transitioning to an employee-owned business 
concern; and 
‘‘(v) coordinating with the cooperative de-
velopment centers of the Department of Agri-
culture, the land grant extension network, the 
Manufacturing Extension Partnership, commu-
nity development financial institutions, em-
ployee ownership associations and service pro-
viders, and local, regional and national coopera-
tive associations.’’. 
SEC. 7. INTERAGENCY WORKING GROUP. 
(a) IN GENERAL.—Not later than 90 days after the 
date of enactment of this Act, the Administrator (or a des-
ignee of the Administrator) shall coordinate and chair an 
interagency working group, which shall— 
(1) develop recommendations on how Federal 
programs can promote, support, and increase the 
number of employee-owned business concerns; 
(2) ensure coordination with Federal agencies 
and national and local employee ownership, coopera-
tive, and small business organizations; and 
(3) publish a report on the activities of the 
interagency working group that is indexed and main-
tained for public review.
(b) MEETINGS.—The interagency working group 
shall meet at such times as determined necessary by the, 
but not less than biannually. Such meetings may occur 
in person or via electronic resources. 
SEC. 8. AMENDMENT TO REPORT TO CONGRESS ON STATUS 
OF EMPLOYEE-OWNED FIRMS. 
Section 7(a)(15)(E) of the Small Business Act (15 
U.S.C. 636(a)(15)(E)) is amended by striking ‘‘Adminis-
tration.’’ and inserting ‘‘Administration, which shall in-
clude— 
‘‘(i) the total number of loans made to 
employee-owned business concerns that 
were guaranteed by the Administrator 
under section 7(a) of the Small Business 
Act (15 U.S.C. 636(a)) or section 502 of 
the Small Business Investment Act of 
1958 (15 U.S.C. 696), including the num-
ber of loans made— 
‘‘(I) to small business concerns 
owned and controlled by socially and 
economically disadvantaged individ-
uals; and 
‘‘(II) to cooperatives in which 
employees are eligible for membership;
‘‘(ii) the total number of financings 
made to employee-owned business concerns 
by companies licensed under section 301(c) 
of the Small Business Investment Act of 
1958 (15 U.S.C. 696(c)), including the 
number of financings made— 
‘‘(I) to small business concerns 
owned and controlled by socially and 
economically disadvantaged individ-
uals; and 
‘‘(II) to cooperatives in which 
employees are eligible for membership; 
and 
‘‘(iii) any outreach and educational 
activities conducted by the Administration 
with respect to employee-owned business 
concerns.’’. 
SEC. 9. REPORT ON COOPERATIVE LENDING. 
(a) SENSE OF CONGRESS.—It is the sense of Con-
gress that cooperatives have a unique business structure 
and are unable to access the lending programs of the Ad-
ministration effectively due to loan guarantee require-
ments that are incompatible with the business structure 
of cooperatives. 
(b) STUDY AND REPORT.—
(1) STUDY.—The Administrator, in coordina-
tion with lenders, stakeholders, and Federal agen-
cies, shall study and recommend practical alter-
natives for cooperatives that will satisfy the loan 
guarantee requirements of the Administration. 
(2) REPORT.—Not later than 120 days after 
the date of enactment of this Act, the Administrator 
shall submit to Congress the recommendations devel-
oped under paragraph (1) and a plan to implement 
such recommendations. 
SEC. 10. AMENDMENT TO DEFINITION OF QUALIFIED EM-
PLOYEE TRUST. 
Section 3(c)(2)(A)(ii) of the Small Business Act (15 
U.S.C. 632(c)(2)(A)(ii)) is amended to read as follows: 
‘‘(ii) which provides that each participant 
is entitled to direct the plan trustee as to the 
manner of how to vote the qualified employer 
securities (as defined in section 4975(e)(8) of 
the Internal Revenue Code of 1986), which are 
allocated to the account of such participant 
with respect to a corporate matter which (by 
law or charter) must be decided by a vote con-
ducted in accordance with section 409(e) of the 
Internal Revenue Code of 1986; and’’. 
Passed the House of Representatives May 8, 2018. 
Attest: 
Clerk.
115TH CONGRESS 
2D SESSION 
H. R. 5236 
AN ACT 
To expand opportunities available to employee- 
owned business concerns through Small Business 
Administration loan programs, and for other pur-
poses.