Pro-ESOP Legislation

With the introduction of H.R. 2096 and S. 1212, we’ve shared a lot legislative information in the past few weeks. Following up on those efforts, we thought we would share the Washington Report column from the May 2015 ESOP Report, the newsletter of The ESOP Association, that provides additional information. More information about the ESOP Report is here.

As in past Congresses since 1990, key ESOP champions have introduced bills that would encourage the creation and operation of private company ESOPs.

First, on April 29, 2015, Congressman David Reichert (R-WA, 8th District), introduced H.R. 2096, Promotion and Expansion of Private Employee Ownership Act of 2015, joined by seven other members of the House tax committee, so that the eight original sponsor and co-sponsors were four Republicans and four Democrats — a sign of the continued bi-partisan support for employee stock ownership through the ESOP model. His three Republican colleagues were Representatives Charles Boustany (R-LA, 3rd District), Erik Paulsen (R-MN, 3rd District), and Pat Tiberi (R-OH, 12th District). The four Democrats joining their tax committee colleagues were Representatives Earl Blumenauer (D-OR, 3rd District), Bill Pascrell (D-NJ, 9th District), Ron Kind (D-WI, 3rd District), and Richard Neal (D-MA, 1st District). (When the Democrats were the majority in the House, Representative Kind was the so-called “lead” sponsor.)

Similar legislation was introduced eight years ago.

It has four provisions: 1. To permit sellers of S stock to an ESOP to utilize Internal Revenue Code Section 1042, as sellers of C stock to an ESOP can do, if the stock is not publicly traded; 2. Provide that a lender to an ESOP may exclude 50% of its interest income from the loan if the loan is to an S corporation, and the ESOP holds 50% or more of the shares at the close of the transaction; 3. Establishes an office in the Department of Treasury to assist S corporations establish and maintain its ESOP in accordance with the sometimes difficult laws governing allocations of ESOP stock in an S corporation; and 4. Ensure that a small business that qualifies for a Small Business Administration preference — so-called 8A preference does not lose that preference if it becomes 50% or more owned by an ESOP.

Since introduction on April 29th, the following members of Congress have joined these eight: Representatives Brad Ashford (D-NE, 2nd District), Robert Dold (R-IL, 10th District), and Gwen Moore (D-WI, 4th District).

The Senate legislation was introduced on May 6th, S. 1212, and the primary sponsor, Senator Ben Cardin (D-MD), was joined on May 6 by 12 other Senate colleagues: Senators Pat Roberts (R-KS), Sheldon Whitehouse (D-RI), Mike Crapo (R-ID), John Thune (R-SD), Al Franken (D-MN), Debbie Stabenow (D-MI), Heidi Heitkamp (D-ND), Patrick Leahy (D-VT), Roy Blunt (R-MO), James Risch (R-ID), Kelly Ayotte (R-NH), Susan Collins (R-ME), and Amy Klobuchar (D-MN). On May 11th, Senator Tammy Baldwin (D-WI) joined the group of bi-partisan Senators. On May 14th, Bernie Sanders (I-VT) joined as a co-sponsor. On May 18th, Senators Mark Kirk (R-IL) and Angus King, Jr. (I-ME) joined as co-sponsors.

Senator Cardin has led the introduction of this pro-ESOP bill for the past eight years.

WHY CARE?: Some ESOP advocate may wonder why they should care, as it seems one, the Congress is doing nothing, and two, these pro-ESOP provisions have never been given a hearing or serious consideration in any prior tax bill in the past eight years.

Two big reasons: Congress will sooner or later, maybe this year, maybe three to four years from now, send a massive tax reform bill to the President, whoever he or she may be. To protect ESOPs, to win in the tax reform effort, the best defense is a good offense. Having these men and women sponsor a pro-ESOP position, many on the tax committees that will write a tax bill repealing or reducing many special tax rules, stand up for ESOPs, and for having more ESOPs, means that they are much more likely to be “for” good ESOP laws when they are challenged in the tax reform review.

Secondly, the major pro-ESOP provision adopted in the last 20 years was first introduced in a bill like H.R. 2096 and S. 1212 eight years before Congress adopted legislation permitting S corporations to have an ESOP. In other words, it took over eight years for the 1990 S ESOP proposal to finally be adopted by the Congress and sent to the President. It is not farfetched as more and more women and men in Congress endorse something like having S corporations eligible for 1042 treatment to make its way into a big tax bill as the support grows.

To Do List: Consider contacting your Senators and Representatives if they are not listed above, and respectfully ask that they get on the bandwagon for ESOPs.

NEWS: Pro-ESOP Bill, S. 1212, Introduced in Senate

The ESOP Association sent out the following press release today.

For Immediate Release: May 11, 2015

Pro-ESOP Bill, S. 1212, Introduced in Senate

May 11, 2015 (Washington, DC) – The ESOP Association expresses strong support for S. 1212, introduced on May 6, 2015 by Senator Ben Cardin (D-MD) and co-sponsored by 13 Senators.

S. 1212 would amend the Internal Revenue Code of 1986 and the Small Business Act to expand the availability of employee stock ownership plans (ESOPs) in S corporations in America. S. 1212 is the Senate companion bill to H.R. 2096 which was introduced on April 29, 2015 by Congressmen David G. Reichert (R-WA).

“Needless to say, it is extremely pleasing to see these Senate leaders, representing bi-partisanship, stand up for employee stock ownership through ESOPs. The ESOP Association notes its appreciation for these members who have joined in support of employee ownership and taken the lead to address issues that relate to increasing ownership shares among average pay Americans,” stated ESOP Association President, J. Michael Keeling. “Research proves that ESOPs are more profitable, more productive, and provide sustainable jobs. We need policies to encourage employee stock ownership, and the proposed policies in S. 1212, should address core social issues such as adequate retirement security and making sure working Americans have an ownership stake in our capitalistic system.”

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The ESOP Association is the national trade association for companies with employee stock ownership plans (ESOPs) and the leading voice in America for employee ownership. The core cause of The ESOP Association is the belief that employee ownership will improve American competitiveness, increase productivity through greater employee participation, and strengthen our free enterprise economy. More information: website – www.esopassociation.org and blog – www.esopassociationblog.org.

 

More Information:

Amy Gwiazdowski

202/293-2971

amy@esopassociation.org

@ESOPAssociation

NEWS: Pro-ESOP Bill, H.R. 2096, Introduced in House

The ESOP Association sent out the following release this morning.

esop-logo-large1.jpgFor Immediate Release: April 30, 2015

Pro-ESOP Bill, H.R. 2096, Introduced in House

April 30, 2015 (Washington, DC) – The ESOP Association expresses strong support for H.R. 2096, introduced on April 29, 2015 by Congressmen David G. Reichert (R-WA), Ron Kind (D-WI), Pat Tiberi (R-OH), Richard E. Neal (D-MA), Erik Paulsen (R-MN), Earl Blumenauer (D-OR), Charles W. Boustany, Jr. (R-LA), and Bill Pascrell, Jr. (D-NJ).

H.R. 2096 would amend the Internal Revenue Code of 1986 and the Small Business Act to expand the availability of employee stock ownership plans (ESOPs) in S corporations in America.

“Research proves that ESOPs are more profitable, more productive, and provide sustainable jobs. We need policies to encourage employee stock ownership, and the proposed policies in H.R. 2096, should address core social issues such as adequate retirement security and making sure working Americans have an ownership stake in our capitalistic system,” stated ESOP Association President, J. Michael Keeling.

Keeling continued, “It is extremely pleasing to see this bi-partisan group of members of the House Ways and Means Committee stand up for employee stock ownership through ESOPs. The ESOP Association notes its appreciation for these members who have joined in support of employee ownership and taken the lead to address issues that relate to increasing ownership shares among average pay Americans.”

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The ESOP Association is the national trade association for companies with employee stock ownership plans (ESOPs) and the leading voice in America for employee ownership. The core cause of The ESOP Association is the belief that employee ownership will improve American competitiveness, increase productivity through greater employee participation, and strengthen our free enterprise economy. More information: website – www.esopassociation.org and blog – www.esopassociationblog.org.

More Information:

Amy Gwiazdowski

202/293-2971

amy@esopassociation.org

@ESOPAssociation

Pro-ESOP Bill Introduced in House

The ESOP Association sent out the following release today. We are also sharing the information with readers here.

For Immediate Release: June 12, 2014

Pro-ESOP Bill Introduced in House

June 12, 2014 (Washington, DC) – The ESOP Association expresses strong support for H.R. 4837, the Promotion and Expansion of Private Employee Ownership Act, introduced June 11, 2014 by Congressmen David G. Reichert (R-WA), Ron Kind (D-WI), Earl Blumenauer (D-OR), Charles W. Boustany, Jr. (R-LA), Richard E. Neal (D-MA), Bill Pascrell, Jr. (D-NJ), Erik Paulsen (R-MN), and Pat Tiberi (R-OH).

H.R. 4837 is similar to S. 742, which was introduced in early 2013 by a bi-partisan group of Senators led by Senator Ben Cardin (D-MD). H.R. 4837 would amend the Internal Revenue Code of 1986 and the Small Business Act to expand the availability of employee stock ownership plans (ESOPs) in S corporations.

“Research proves that ESOPs are more profitable, more productive, and provide sustainable jobs. We need policies to encourage employee stock ownership, and the proposed policies in H.R. 4837, modest in approach, should address core social issues such as adequate retirement security and making sure working Americans have an ownership stake in our capitalistic system,” stated ESOP Association President, J. Michael Keeling.

Keeling continued, “It is extremely pleasing to see these House members, all members of the House Ways and Means Committee, four Republicans and four Democrats, stand up for employee stock ownership through ESOPs. The ESOP Association notes its appreciation for the leadership role of its ally in the employee ownership community, the Employee-Owned S Corporations of America, in championing this new pro-ESOP legislation.”

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The ESOP Association is the national trade association for companies with employee stock ownership plans (ESOPs) and the leading voice in America for employee ownership. The core cause of The ESOP Association is the belief that employee ownership will improve American competitiveness, increase productivity through greater employee participation, and strengthen our free enterprise economy. More information: website – www.esopassociation.org and blog – www.esopassociationblog.org.

Senator Kelly Ayotte Seeks Cosponsors for S. 273

On February 11, 2013, Senator Kelly Ayotte (R-NH) introduced S. 273, a bill to modify the definition of fiduciary under the Employee Retirement Income Security Act of 1974 to exclude appraisers of employee stock ownership plans (ESOPs). This bill is a response to the Department of Labor’s (DOL) proposed anti-ESOP regulation mandating all private ESOP company appraisers be ERISA fiduciaries.

The bill is cosponsored by:

Senator Roy Blunt (R-MO)

Senator Susan M. Collins (R-ME)

Senator Amy Klobuchar (D-MN)

Senator Mary L. Landrieu (D-LA)

Senator Mitch McConnell (R-KY)

On June 27, 2013, Senator Ayotte sent the following Dear Colleague letter regarding S. 273 seeking cosponsors.

Ayotte Dear Colleague Ltr 1

Ayotte Dear Colleague Ltr 2You can also view the letter here: Dear Colleague Letter.

For additional information about S. 273, please see:

Senator Kelly Ayotte speaking to The ESOP Association’s New England Chapter’s Super Regional Board of Directors/Trustees Conference

Senator Kelly Ayotte Renews Work to Protect Employee Ownership: Introduces Pro-ESOP Bill, S. 273

News: Pro-ESOP Bill Introduced in the House; Bill Aims to Protect ESOPs

ESOP Association News

The ESOP Association sent out the following press release this afternoon. We are sharing with readers here.

For Immediate Release: May 17, 2013

For More Information: Amy Gwiazdowski, 202/293-2971, amy AT esopassociation.org

Pro-ESOP Bill Introduced in the House; Bill Aims to Protect ESOPs 

May 17, 2013 (Washington, DC) – Congressmen Brett S. Guthrie (R-KY), David Loebsack (D-IA), and Congresswoman Lynn Jenkins (R-KS) introduced H.R. 2041, a bill to modify the definition of fiduciary under the Employee Retirement Income Security Act of 1974 to make clear appraisers of employee stock ownership plans (ESOPs) are not ERISA fiduciaries.

H.R. 2041 is the companion bill to S. 273 introduced by Senator Kelly Ayotte in February 2013. This bill is a response to the Department of Labor’s (DOL) proposed anti-ESOP regulation mandating all private ESOP company appraisers be ERISA fiduciaries.

While the original proposal was withdrawn, if any regulation was finalized to make appraisers ERISA fiduciaries, there would be extreme confusion over whether the appraiser or the trustee[s], and other current fiduciaries, make the decisions about acquisition of shares on behalf of average pay employees. More troubling, it would leave private ESOP companies open to lawsuits by aggressive class action trial lawyers. Leaders at the DOL say a new proposal will be issued sometime in 2013. It is expected DOL will not alter the proposed regulation’s mandate that all appraisers of ESOP stock be ERISA fiduciaries.

“The DOL needs to wake up to the fact that private company ESOPs have tremendous positive records of sustaining jobs as evidenced during the Great Recession. As we’ve said before, research proves that ESOPs, and companies with other forms of employee stock ownership, provide more sustainable employment. According to the 2010 General Social Survey, employee stock owned companies laid off employees at a rate of 2.6% in 2010, whereas the rate for conventionally-owned companies was 12.1%. Bottom-line, ESOP companies’ employees, in the aggregate, save Uncle Sam $7 for every dollar Uncle Sam spent promoting employee ownership,” stated ESOP Association President, J. Michael Keeling.

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The ESOP Association is the national trade association for companies with employee stock ownership plans (ESOPs) and the leading voice in America for employee ownership. The core cause of The ESOP Association is the belief that employee ownership will improve American competitiveness, increase productivity through greater employee participation, and strengthen our free enterprise economy. More information: website – www.esopassociation.org and blog – www.esopassociationblog.org.

ESOP Association News: Pro-ESOP Bill Introduced in Senate

ESOP Association News

The ESOP Association sent out the following press release today. We’re sharing with our blog readers.

For immediate release: April 18, 2013

 Pro-ESOP Bill Introduced in Senate

April 18, 2013 (Washington, DC) – The ESOP Association expresses strong support for S.742, the Promotion and Expansion of Private Employee Ownership Act of 2013, introduced April 17, 2013 by Senator Ben Cardin (D-MD) and co-sponsored by a bi-partisan group of Senators including, Roy Blunt (R-MO), Amy Klobuchar (D-MN), Mary L. Landrieu (D-LA), Pat Roberts (R-KS), Debbie Stabenow (D-MI), and John Thune (R-SD).

S. 742 would amend the Internal Revenue Code of 1986 and the Small Business Act to expand the availability of employee stock ownership plans (ESOPs) in S corporations and expand opportunities for existing S ESOP corporations.

“Needless to say, it is extremely pleasing to see these Senate leaders, representing bi-partisanship, stand up for employee stock ownership through ESOPs, in contrast to the Administration’s position that ESOPs do not benefit employees, their companies, and our nation if a company has more than $5 million in revenue per year,” said ESOP Association President, J. Michael Keeling. “Research proves that ESOPs, and companies with other forms of employee stock ownership, provide more sustainable employment. For example, according to the 2010 General Social Survey, employee stock owned companies laid off employees at a rate of 2.6% in 2010, whereas the rate for conventionally-owned companies was 12.1%. We need policies to encourage employee stock ownership, and new policies, such as S. 742, to increase ownership among more working Americans.”

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The ESOP Association is the national trade association for companies with employee stock ownership plans (ESOPs) and the leading voice in America for employee ownership. The core cause of The ESOP Association is the belief that employee ownership will improve American competitiveness, increase productivity through greater employee participation, and strengthen our free enterprise economy. More information: website – www.esopassociation.org and blog – www.esopassociationblog.org.

Senator Sanders Introduces Legislation to Support ESOPs and Employee Ownership

On Monday, July 23, 2012,  Senator Bernard Sanders (I-VT) co-sponsored by his colleagues Patrick Leahy (D-VT), Sherrod Brown (D-OH), Richard Blumenthal (D-CT), and Daniel Akaka (D-HI) introduced the WORK Act (S. 3421) and the U.S. Employee Ownership Bank Act (S. 3419).

The WORK (Worker Ownership, Readiness and Knowledge) Act would promote employee ownership and employee participation in company decision making. According to the legislation, “…the bill would authorize the Department of Labor to provide education and outreach, training, grants, and technical support to local and state programs dedicated to the promotion of employee ownership and participation.”

The second bill, the U.S. Employee Ownership Bank Act, would provide loans and loan guarantees to employees to purchase a business through an ESOP or a worker owned cooperative. It would provide federal loans and loan guarantees for the expansion of employee ownership.

Senator Sanders held a press conference on the 23rd in Burlington, VT to announce the introduction of the legislation. You can read the Senator’s release and comments here.

“Senator Sanders and his colleagues are to be commended for their support of ESOPs and employee ownership in the U.S.,” said ESOP Association President J. Michael Keeling. “The ESOP community needs to ask Senators to join Senators Sanders, Leahy, Brown, and Blumenthal in their support of ESOPs. We are grateful to Senator Sanders for his consistent voice for over a decade in support of employee ownership.”