Title: Main Street Employee Ownership Act of 2018
Policy area: Commerce

Summary:
Main Street Employee Ownership Act of 2018
This bill amends the Small Business Act to expand the authority of the Small Business Administration (SBA) to guarantee loans for qualified employee trusts of a small business to purchase the stock of that business. Specifically, the bill allows the guaranteed loan to also cover transactions costs associated with purchasing the stock. In addition, it allows loans to a small business to be guaranteed if the loan proceeds will: (1) be used to provide loans to a qualified employee trust of the small business to purchase the business's stock, and (2) result in the trust owning at least 51% of the business's stock. The SBA must guarantee loans to cooperatives in which employees are eligible for membership for such stock purchases.
The SBA shall: (1) provide outreach and educational materials to licensed small business investment companies to increase investment in transitions to employee-owned businesses, and (2) establish a Small Business Employee Ownership and Cooperative Promotion Program to offer technical assistance and training on the transition to employee ownership through cooperatives and qualified employee trusts.
The Administrator of the SBA shall coordinate an interagency working group on employee-owned businesses.

[Congressional Bills 115th Congress]
[From the U.S. Government Publishing Office]
[S. 2786 Introduced in Senate (IS)]

<DOC>






115th CONGRESS
  2d Session
                                S. 2786

 To expand opportunities to available employee-owned business concerns 
  through Small Business Administration loan programs, and for other 
                               purposes.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             April 26, 2018

 Mrs. Gillibrand (for herself, Mr. Young, Mr. Risch, Mrs. Shaheen, Mr. 
  Booker, Ms. Collins, and Mr. Cardin) introduced the following bill; 
 which was read twice and referred to the Committee on Small Business 
                          and Entrepreneurship

_______________________________________________________________________

                                 A BILL


 
 To expand opportunities to available employee-owned business concerns 
  through Small Business Administration loan programs, 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 ``Main Street Employee Ownership Act 
of 2018''.

SEC. 2. DEFINITIONS.

    In this Act--
            (1) the terms ``Administration'' and ``Administrator'' mean 
        the Small Business Administration and the Administrator 
        thereof, respectively;
            (2) the term ``cooperative'' has the meaning given the term 
        in section 7(a)(35) of the Small Business Act, as added by 
        section 3;
            (3) the term ``employee-owned business concern'' means--
                    (A) a cooperative; 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), as amended 
        by this Act; and
            (5) the term ``small business development center'' means a 
        small business development center described 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 Business 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 
                                purchasing,'' after ``purchasing''; and
                                    (II) by striking the period at the 
                                end and inserting ``; and''; and
                            (iii) by adding at the end the following:
                    ``(ii) to a small business concern under a plan 
                approved by the Administrator, if the proceeds 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 concern'' 
                        after ``the trustee of such trust'';
                            (ii) in clause (ii), by striking ``and'' at 
                        the end;
                            (iii) in clause (iii), by striking the 
                        period at the end and inserting ``, and''; and
                            (iv) by adding at the end the following:
                    ``(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 
                        concern may remain involved as an officer, 
                        director, or key employee of the small business 
                        concern when a qualified employee trust or 
                        cooperative has acquired 100 percent 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 subparagraph (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 
        Administration under such subparagraph.
            ``(G) With respect to a loan made to a qualified employee 
        trust under this paragraph, or to a cooperative in accordance 
        with paragraph (35), the Administrator may, as determined 
        appropriate by the Administrator, elect to not require 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 determined to be 
                a cooperative by the Administrator, in accordance with 
                applicable Federal and State laws and regulations.
                    ``(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 PROGRAM OUTREACH.

    The Administrator shall provide outreach and educational 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 investments in company transitions to employee-owned business 
concerns.

SEC. 5. SMALL BUSINESS MICROLOAN PROGRAM OUTREACH.

    The Administrator shall provide outreach and educational 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 business concerns, including transitions to employee-owned 
business concerns.

SEC. 6. SMALL BUSINESS DEVELOPMENT CENTER OUTREACH AND ASSISTANCE.

    (a) Establishment.--The Administrator shall establish a Small 
Business Employee Ownership and Cooperatives Promotion Program to offer 
technical assistance 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 development centers under which 
        the centers shall--
                    (A) provide access to information and resources on 
                employee ownership through cooperatives or qualified 
                employee trusts as a business succession strategy;
                    (B) conduct training and educational activities; 
                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 
                `employee-owned business concerns'), including by--
                            ``(i) providing training to individuals to 
                        promote the successful management, governance, 
                        or operation of a business purchased by those 
                        individuals in the formation of an employee-
                        owned business concern;
                            ``(ii) assisting employee-owned business 
                        concerns that meet applicable size standards 
                        established 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 
                        conducting outreach on financing through 
                        programs administered by the Administration 
                        that may be used to support the transition of 
                        ownership 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 
                        development centers of the Department of 
                        Agriculture, the land grant extension network, 
                        the Manufacturing Extension Partnership, 
                        community development financial institutions, 
                        employee ownership associations and service 
                        providers, and local, regional and national 
                        cooperative 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 designee 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, cooperative, and small business 
        organizations; and
            (3) publish a report on the activities of the interagency 
        working group that is indexed and maintained for public review.
    (b) Meetings.--The interagency working group described in 
subsection (a) shall meet in person or via electronic resources at such 
times as determined necessary by the Administrator, but not less 
frequently than biannually.

SEC. 8. AMENDMENT TO REPORT TO CONGRESS ON STATUS OF EMPLOYEE-OWNED 
              FIRMS.

    Section 7(a)(15) of the Small Business Act (15 U.S.C. 636(a)(15)), 
as amended by this Act, is amended--
            (1) in subparagraph (E), by striking ``Administration.'' 
        and inserting ``Administration, which shall include--
                    ``(i) the total number of loans made to 
                cooperatives and qualified employee trusts 
                (collectively referred to in this subparagraph as 
                `employee-owned business concerns') that were 
                guaranteed by the Administrator under this section or 
                section 502 of the Small Business Investment Act of 
                1958 (15 U.S.C. 696), including the number of loans 
                made--
                            ``(I) to small business concerns owned and 
                        controlled by socially and economically 
                        disadvantaged individuals; and
                            ``(II) to cooperatives;
                    ``(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 individuals; and
                            ``(II) to cooperatives; and
                    ``(iii) any outreach and educational activities 
                conducted by the Administration with respect to 
                employee-owned business concerns.''; and
            (2) by adding at the end the following:
            ``(H) In this paragraph--
                    ``(i) the term `cooperative' has the meaning given 
                the term in paragraph (35); and
                    ``(ii) the term `small business concern owned and 
                controlled by socially and economically disadvantaged 
                individuals' has the meaning given the term in section 
                8(d)(3)(C).''.

SEC. 9. REPORT ON COOPERATIVE LENDING.

    (a) Sense of Congress.--It is the sense of Congress that 
cooperatives have a unique business structure and are unable to access 
the lending programs of the Administration effectively due to loan 
guarantee requirements that are incompatible with the business 
structure of cooperatives.
    (b) Study and Report.--
            (1) Study.--The Administrator, in coordination with 
        lenders, stakeholders, and Federal agencies, shall study and 
        recommend practical alternatives 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 developed under paragraph (1) and 
        a plan to implement those recommendations.

SEC. 10. AMENDMENT TO DEFINITION OF QUALIFIED EMPLOYEE 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 conducted in accordance with 
                        section 409(e) of the Internal Revenue Code of 
                        1986; and''.
                                 <all>