ESOPs: Built to Last, No Matter the Election Results

By J. Michael Keeling, ESOP Association President

As I travel and visit with ESOP fans, I hear some concern that our longtime supporters in Congress are moving on, due to electoral defeat, retirement, or moving into new public offices outside of Congress. The fear is that legislative and regulatory support for ESOPs has been weakened, or at least is less certain.

There is no question that the defeat of ESOP advocates—such as former Representatives Erik Paulsen (R-MN) and Peter Roskam (R-IL), who served as senior members of the extremely important House tax committee—is not a welcome development for ESOPs.
The retirement of the Chair of the Senate tax committee, Senator Orrin Hatch (R-UT), and defeat of Senators Dean Heller (R-NV) and Claire McCaskill (D-MO) is not great news for ESOP support. Another concern: With Republicans now in the minority in the House, strong ESOP Champion Rep. Virginia Foxx (R-NC) no longer chairs the House committee that oversees the Department of Labor and how it regulates ESOPs.

The list could go on.

Do these changes in the Congress bode troublesome days for ESOPs?
I say “no.”

The past is prologue, even though it is not always perfectly repeated. And a look at our past shows that ESOPs have staying power and always attract new champions to replace those who have moved on.

In recent days, I have reviewed ESOP Association newsletter articles I have written going back to 1982. What did I see in these 37 years of articles?

I saw many super ESOP champions in the House who were defeated in their bids for re-election, or who sought offices outside of Congress, or who decided it was time to move on to a new chapter in their lives. I saw the same developments in the Senate.

And still ESOPs survived and thrived. For example, in the 1980s and 1990s, particularly in the House and sometimes because of Administration proposals, our community faced proposals that would have reduced or even eliminated laws that benefit ESOP creation and operations. These proposals were debated, and—thanks to the support of our ESOP advocates on the Hill—they were rejected.

Our community has thrived because of the help of the women and men who have served on Capitol Hill. And we have survived after they left Capitol Hill for other endeavors.
Some of the many ESOP Congressional advocates—from both chambers and both parties—who have helped ESOPs over the years include: Anthony (D), Pickle (D), Rangel (D), Nancy Johnson (R), Ramstad (R), Packwood (R), Snowe (R), Dole (R), Breaux (D), Binghaman (D), Landrew (D). The list could go on and on, including literally hundreds of former members of Congress and ESOP supporters from 1981 through 2018.
Why did these individuals support ESOPs? Was it because The ESOP Association paid super-duper lobbyists or DC swamp dwellers to “tell” them to support ESOPs? No, of course not.

The past is prologue, even though it is not always perfectly repeated. And a look at our past shows that ESOPs have staying power and always attract new champions to replace those who have moved on. -JMK

Was it because The ESOP Association PAC gave $500 to $10,000 per election cycle to the women and men in Congress who publicly supported positive ESOP law? Again, the answer is no.

It was because the leaders of ESOP companies asked their elected officials to visit their businesses so they could learn for themselves what being an ESOP means.
Over the years I have attended literally hundreds of fundraising events for ESOP advocates in Congress. More times than I can remember, they saw my name badge and recognized the name of The ESOP Association, and their faces brightened. “ESOPS are special!” they would tell me sincerely.

ESOPs thrive in the legislative arena because of you and your fellow ESOP participants—whether you are machine operators or CEOs—showing outsiders, such as members of Congress, what working in an ESOP company is like. The result is a palpable feeling, and it impresses Senators and Representatives more than anything we in Washington can do.
Members of Congress come and go. The ESOP spirit remains.

So memorable was the panic that set in among leaders of the ESOP world when the “Godfather of ESOP law,” the late Senator Russell Long (D-LA), announced he would retire at the end of 1986.

The women and men involved with The ESOP Association at that time were alarmed—to say the least—almost begging the Senator to stay. They feared that if their champion retired, all his good work on behalf of ESOPs would be undone.

Senator Long’s response was: “If ESOPs cannot survive when I am gone, they do not deserve to exist.”

And what happened? ESOPs not only survived, they actually gained additional favor in the law. Take note of the law that passed in the late 1990s that permitted S corporation ESOPs to exist and to avoid paying any Federal taxes.

We will miss our friends who are no longer in Congress. But as Russell Long knew, ESOPs will continue for the simple reason that they deserve to do so.

This site uses Akismet to reduce spam. Learn how your comment data is processed.