II 118th CONGRESS 1st Session S. 2515 IN THE SENATE OF THE UNITED STATES July 26, 2023 Mr. Cardin (for himself, Mr. Daines , Ms. Stabenow , Mr. Crapo , Mr. Brown , Mr. Grassley , Mr. Van Hollen , Mr. Barrasso , Ms. Klobuchar , Mr. Young , Mr. Tester , Mr. Cassidy , Mr. Booker , Mrs. Blackburn , Ms. Smith , Mr. Risch , Mr. Sanders , Ms. Collins , Mr. King , Mr. Moran , Mr. Reed , and Mr. Welch ) introduced the following bill; which was read twice and referred to the Committee on Finance 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. Short title This Act may be cited as the Promotion and Expansion of Private Employee Ownership Act of 2023 . 2. Findings Congress finds that— (1) on January 1, 1998—nearly 25 years after the Employee Retirement Income Security Act of 1974 was enacted and the employee stock ownership plan (hereafter in this section referred to as an ESOP ) was created—employees were first permitted to be owners of subchapter S corporations pursuant to the Small Business Job Protection Act of 1996 ( Public Law 104–188 ); (2) with the passage of the Taxpayer Relief Act of 1997 ( Public Law 105–34 ), Congress designed incentives to encourage businesses to become ESOP-owned S corporations; (3) since that time, several thousand companies have become ESOP-owned S corporations, creating an ownership interest for several million Americans in companies in every State in the country, in industries ranging from heavy manufacturing to technology development to services; (4) while estimates show that 40 percent of working Americans have no formal retirement account at all, every United States worker who is an employee-owner of an S corporation company through an ESOP has a valuable qualified retirement savings account; (5) recent studies have shown that employees of ESOP-owned S corporations enjoy greater job stability than employees of comparable companies; (6) studies also show that employee-owners of S corporation ESOP companies have amassed meaningful retirement savings through their S ESOP accounts that will give them the means to retire with dignity; (7) under the Small Business Act ( 15 U.S.C. 631 et seq. ) and the regulations promulgated by the Administrator of the Small Business Administration, a small business concern that was eligible under the Small Business Act for the numerous preferences of the Act is denied treatment as a small business concern after an ESOP acquires more than 49 percent of the business, even if the number of employees, the revenue of the small business concern, and the racial, gender, or other criteria used under the Act to determine whether the small business concern is eligible for benefits under the Act remain the same, solely because of the acquisition by the ESOP; and (8) it is the goal of Congress to both preserve and foster employee ownership of S corporations through ESOPs. 3. Full deferral of tax for certain sales of employer stock to employee stock ownership plan sponsored by S corporation (a) Acceleration of deferral Section 114(c) of the SECURE 2.0 Act of 2022 is amended by striking December 31, 2027 and inserting the date of the enactment of the Promotion and Expansion of Private Employee Ownership Act of 2023 . (b) Repeal of limitation (1) In general Section 1042 of the Internal Revenue Code of 1986, as amended by section 114 of the SECURE 2.0 Act of 2022, is amended by striking subsection (h). (2) Effective date The amendment made by paragraph (1) shall apply to sales after the date of the enactment of this Act. 4. Department of the Treasury Technical Assistance Office (a) Establishment required Before the end of the 90-day period beginning on the date of enactment of this Act, the Secretary of the Treasury shall establish the S Corporation Employee Ownership Assistance Office to foster increased employee ownership of S corporations. (b) Duties of the office The S Corporation Employee Ownership Assistance Office shall provide— (1) education and outreach to inform companies and individuals about the possibilities and benefits of employee ownership of S corporations; and (2) technical assistance to assist S corporations in sponsoring employee stock ownership plans. 5. Small business and employee stock ownership (a) In general The Small Business Act ( 15 U.S.C. 631 et seq. ) is amended— (1) by redesignating section 49 as section 50; and (2) by inserting after section 48 the following: 49. Employee stock ownership plans (a) Definitions In this section— (1) the term ESOP means an employee stock ownership plan, as defined in section 4975(e)(7) of the Internal Revenue Code of 1986; and (2) the term ESOP business concern means a business concern that was a small business concern eligible for a loan, preference, or other program under this Act before the date on which more than 49 percent of the business concern was acquired by an ESOP. (b) Continued eligibility In determining whether an ESOP business concern qualifies as a small business concern for purposes of a loan, preference, or other program under this Act, each ESOP participant shall be treated as directly owning his or her proportionate share of the stock in the ESOP business concern owned by the ESOP. . (b) Effective date The amendments made by this section shall take effect on January 1 of the first calendar year beginning after the date of the enactment of this Act. 6. Establishment of the advocate for employee ownership (a) In general Subtitle A of title III of the Employee Retirement Income Security Act of 1974 ( 29 U.S.C. 1201 et seq. ) is amended by adding at the end the following: 3005. Advocate for employee ownership (a) In general The Secretary of Labor shall appoint an Advocate for Employee Ownership within the Employee Ownership Initiative established under section 346(b)(1) of the SECURE 2.0 Act of 2022 (division T of the Consolidated Appropriations Act, 2023 ( Public Law 117–328 )). The appointment shall be made without regard to the provisions of title 5, United States Code, relating to appointments in the competitive service or Senior Executive Service. (b) Duties The Advocate for Employee Ownership shall— (1) consult with the head of the Employee Ownership Initiative established under section 346(b)(1) of the SECURE 2.0 Act of 2022 (division T of the Consolidated Appropriations Act, 2023 ( Public Law 117–328 )); (2) act as a liaison between the Department of Labor, employee ownership advocates, employers considering employee ownership, workers interested in employee ownership, and other stakeholders, including employee stock ownership plan sponsors and participants; (3) provide public education and assistance related to the expansion of employee ownership through the establishment and maintenance of practices that promote employee ownership, including the use of employee stock ownership plans; (4) provide assistance for purposes of resolving a dispute with the Department of Labor to any employee stock ownership plan sponsor, fiduciary, or participant and help facilitate communication between such entities and the Department of Labor for such purposes; (5) in consultation with the S Corporation Employee Ownership Assistance Office of the Department of the Treasury established under section 4 of the Promotion and Expansion of Private Employee Ownership Act of 2023 , identify and recommend potential legislative and administrative changes, including related to access to capital issues, to increase practices that promote employee ownership plans, including the use of employee stock ownership plans; and (6) coordinate with other Federal agencies, including the Administrator of the Small Business Administration, the Secretary of the Treasury, and the Secretary of Commerce, and State and local governments on outreach and education to inform employees and employers about the possibilities and benefits of employee ownership as a business ownership succession planning option. (c) Consultation and input The Secretary shall solicit advice and input from the Advocate for Employee Ownership in developing regulations or interpretations of this Act that relate to employee stock ownership plans. (d) Compensation The Advocate for Employee Ownership shall be entitled to compensation at the same rate as the rate of basic pay in effect for a position at level V of the Executive Schedule under section 5316 of title 5, United States Code. (e) Annual report (1) In general Not later than December 31 of each calendar year beginning after the date of enactment of this section, the Advocate for Employee Ownership shall submit a report to the Committee on Health, Education, Labor, and Pensions of the Senate and the Committee on Education and the Workforce of the House of Representatives on the activities of the Office of the Advocate for Employee Ownership during the fiscal year ending during such calendar year, including the contents described in paragraph (2). (2) Content Each report submitted under paragraph (1) shall— (A) summarize the assistance requests received by the Advocate for Employee Ownership during the fiscal year ending during the calendar year of such report; (B) describe the activities, including the activities described under paragraphs (3) and (4) of subsection (b), and evaluate the effectiveness of the Advocate for Employee Ownership during such fiscal year; (C) describe any significant problems the Advocate for Employee Ownership has identified during such fiscal year and ways to mitigate such problems; (D) contain recommendations for any administrative or legislative action that may be appropriate to resolve barriers to, and to incentivize, practices that promote employee ownership, including the use of employee stock ownership plans; and (E) describe progress related to employee ownership in businesses in the United States. (3) Concurrent submission The Advocate for Employee Ownership shall submit a copy of each report submitted under paragraph (1) to the Secretary of Labor, and any other appropriate official, at the same time such report is submitted under paragraph (1). (4) Public availability The Advocate for Employee Ownership shall make a copy of each report submitted under paragraph (1) available to the public. (5) Definition of employee stock ownership plan For purposes of this section, the term employee stock ownership plan has the meaning given the term in section 4975(e)(7) of the Internal Revenue Code of 1986. (f) Authorization of appropriations There is authorized to be appropriated such sums as may be necessary to carry out subsection (d). . (b) Clerical amendment The table of contents in section 1 of the Employee Retirement Income Security Act of 1974 ( 29 U.S.C. 1001 note) is amended by inserting after the item relating to section 3004 the following new item: Sec. 3005. Advocate for employee ownership. .