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.”

Why?
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.

2018 Mid-Term Elections Update

A quick glance at the results of the mid-term elections might leave one feeling that the ESOP community will face challenging days ahead. Certainly the retirement and defeat of key ESOP advocates in Congress—primarily in the House, where tax laws originate—pose a challenge. But there is good news too.

The “Bad” News

First, let’s look at the more challenging news.

We will lose some crucial, long-time ESOP Advocates next year.

In particular, three key friends of the ESOP community—and influential members of the House tax committee—won’t be returning to Congress in 2019: Representatives Erik Paulsen (R-MN) and Peter Roskam of (R-IL) were defeated in their re-election bids. Rep. Dave Reichert of (R-WA) retired.

Another major loss: Representative Virginia Foxx (R-NC)—the Chair the House Committee with jurisdiction over the Department of Labor and a longtime supporter of ESOPs—will lose her influential post when the Democrats take control of the House in January.

On the key Senate tax committee that will be involved with ERISA law changes, three ESOP champions will not return: Senators Dean Heller (R-NV) and Claire McCaskill of (D-MI) were not re-elected; Sen. Orin Hatch (R-UT) will retire.

Sen. Hatch’s departure also will be felt on the Senate Committee that has jurisdiction over the Department of Labor.

On the more positive side, turnover in other key Senate committees was less pronounced than in the House.

Support Continues to Grow

While we will be bidding farewell to many elected officials who have supported ESOPs so well, we also are greeting a host of new supporters.

In 2018, 39 new ESOP supporters emerged: 30 in the House and 9 in the Senate. Of these new supporters, the vast majority (33) will return to Congress in 2019.

This year our ESOP advocates in Congress took several actions that provided a strong show of support for ESOPs.

In October, at the start of Employee Ownership Month, 27 influential members of the House of Representatives wrote a letter urging President Trump to rein in the DOL’s overzealous and unfair enforcement of regulations that apply to ESOP companies.

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In August, the Main Street Employee Ownership Act was signed into law. The measure is designed to makes it easier for small companies to make use of the Small Business Administration’s 7(a) program to finance their transition to become employee-owned businesses, such as ESOPs.

Moving Forward

The number of ESOP advocates gained in 2018 is a testament to you, our members. By visiting elected officials in Washington, and—more importantly–inviting them to visit you in their home districts, you provide an indelible, first-hand view into the world of employee ownership. That kind of experience turns doubters into believers, and believers into staunch supporters.

If we continue to show members of Congress what employee ownership looks like, our supporters on Capitol Hill will continue to grow—and they will continue to take on prominent positions in the key House and Senate committees.

The net result: Positive ESOPs laws will remain—and perhaps even expand—into 2019 and beyond but only with your continued efforts and outreach.

Maintaining Momentum on HR 2096

Two more Congressional representatives recently joined the list of co-sponsors for pro-ESOP bill HR 2096: Joyce Beatty of Ohio and Todd Rokita or Indiana.

This is excellent progress toward our goal of 100 co-sponsors for this important piece of legislation!

To see the latest legislative update video from Michael Keeling, President of The ESOP Association, click here.

 

Nebraska Governor Pete Ricketts proclaims October to be Employee Stock Ownership Plan Month

Nebraska Governor Pete Ricketts officially proclaims October to be Employee Stock Ownership Plan Month in the State of Nebraska during a ceremony held in Lincoln, Nebraska on October 14, 2105.  The Communications Team from Travel and Transport, Inc. met with the Governor to accept the Proclamation.

ESOP Proclamation Proclamation

Senator Ron Johnson visits Sentry Equipment Corporation

Senator Ron Johnson (R-WI) visited Sentry Equipment Corporation, Oconomowoc, WI, on October 12, 2015.  During his visit Senator Johnson met with the Sentry Equipment Corporation management team, had a quick shop tour, and then addressed well over 100 employee owners.

Pictured left to right:  Brian Baker, President & CEO, Sentry Equipment Corporation and Wisconsin Senator Ron Johnson.
Pictured left to right: Brian Baker, President & CEO of Sentry Equipment Corporation and United States Senator for Wisconsin Ron Johnson.

 

 

Precision Pulley and Idler (PPI), Pella, IA, hosts Congressional visit

Precision Pulley and Idler (PPI), Pella, IA, hosted a Congressional visit with Congressman Steve King on Friday, October 2, 2015. During his visit Congressman King toured a KOFAB plant (division of PPI) in Algona, IA.

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Pictured left to right: Gary Schiltz; PPI, Congressman Steve King, and Tim Wolf; PPI.

Pennsylvania State Representative Kerry Benninghoff issues a resolution declaring October employee ownership month in the state of Pennsylvania

Penn Rep Kerry Benninghoff - Restek IIPenn 2015 Proclamation

On October 1, 2015, Pennsylvania State Representative Kerry Benninghoff presents the employee owners of RESTEK Corporation, Bellefonte, PA., with a Resolution declaring October employee ownership month in the state of Pennsylvania.

Iowa Governor Terry Branstad proclaims October to be Employee Ownership Month

Iowa Governor Terry Branstad officially proclaims October to be Employee Ownership Month in the State of Iowa during an official signing ceremony held at the Governor’s office on September 29, 2015. The signing was witnessed by several Iowa/Nebraska Chapter members.

Iowa Governor Terry Branstad officially proclaims October to be Employee Ownership Month in the State of Iowa
Iowa Governor Terry Branstad officially proclaims October to be Employee Ownership Month in the State of Iowa.

2015 Iowa October ESOP Month Proclamtion

A proclamation is an easy way to alert your elected officials to ESOPs in their community, district, or state. A proclamation is issued by a legislative body designating an official observance of Employee Ownership Month. You can ask your mayor, state representative, or governor to issue a proclamation.

New Jersey State Bill on ESOPs Moves Forward

The New Jersey Assembly is moving forward with a state bill on ESOPs. The bill, A4021, would “Provide gross income tax exclusion for capital gains from sale of certain employer securities by qualified business that result in net positive benefit to the State.”

ESOP Association President, J. Michael Keeling, said, “This is a positive for the ESOP community and the state of New Jersey.”

August 2015 Link List

2015 Employee Ownership Month Poster Available

2015 Employee Ownership Month Kit Available!

ESOP Association President Visits Omni Cable

ESOP Company News Part 7: Congressman Reid Ribble Visits Hatco Corporation

Moving to the Offense. Touchdown for ESOPs on the Horizon?

ESOP Company News Part 6: ComSonics Meets with Congressman Goodlatte

August 2015  ESOP Report Published

ESOP Company News Part 5: Restek Meets with Congressman Glenn Thompson

August 2015 Outside Board Registry Available

ESOP Company News Part 4: PPI Meets with Senator Joni Ernst

ESOP Company news Part 3: Travel and Transport Meets with Congressman Ashford

ESOP Company News Part 2: Representative Grothman Visits Priority Sign

ESOP Company News: Omni Cable Celebrates Vesting Day

ABCs of ESOPs — Are You an ESOP Guru? Be One!