Last week, House Ways and Means Committee members Dave Reichert (R-WA), Ron Kind (D-WI), Erik Paulsen (R-MN), Earl Blumenauer (D-OR), Pat Tiberi (R-OH), Richard Neal (D-MA), Charles Boustany (R-LA) and Bill Pascrell (D-NJ), introduced bipartisan legislation in the House designed to spur more employee-ownership in private industry. Congressman Tiberi and Congressman Neal serve respectively as the lead Republican and lead Democrat of the tax subcommittee of the Ways and Means Committee. This lends tremendous weight to an already popular bipartisan bill.
This is the House companion to a Senate version of this legislation which was introduced last year by Senate Finance Committee Members Ben Cardin (D-MD) and Pat Roberts (R-KS). The only difference between the two bills is that the House bill includes a provision which would allow banks to deduct 50 percent of the interest income received on loans made to an ESOP or an S corporation sponsoring an ESOP to purchase S corporation stock for the ESOP. The Senate bill, S.742, currently has 18 cosponsors; 10 Democrats, 7 Republicans, and 1 Independent.
Lead Republican sponsor Reichert said of the legislation, “At a time when almost half of American workers lack retirement accounts, the S ESOP structure lets employees share in the capital as owners of their companies and provides workers meaningful retirement accounts.”
Representative Kind added, “This bill empowers companies to become employee-owned, create new employee-owners, and helps provide retirement security to more American workers. Growing our economy and adding jobs is a priority and employee-ownership is a proven model to do just that.”
The provisions in H.R. 4837, the Promotion and Expansion of Private Employee Ownership Act of 2014, would help more Americans attain a secure retirement through incentivizing S corporation ESOPS. This bill, identical to the one introduced last Congress which garnered 97 bipartisan House cosponsors, is ESCA’s primary legislative vehicle to build support among Members of Congress for both preserving and encouraging the further promotion of employee ownership.
Specifically, the bill includes provisions to:
- Enable owners of S corporations to sell their stock to an ESOP;
- Encourage the flow of bank capital to ESOP-owned S corporations;
- Provide needed technical assistance for companies that may be interested in forming an S ESOP;
- Ensure small businesses that become ESOPs retain their SBA certification; and
- Affirm the importance of preserving the S ESOP structure in the Internal Revenue Code.
Steve Smith, Chair of ESCA, commented on the introduction of the House bill by saying, “There has been a lot of discussion of late to the effect that owners of capital may be benefitting at the expense of workers. We applaud this bipartisan effort to promote a structure that allows hard working workers to also own their companies’ capital, giving them rewarding jobs where they have “skin-in-the-game” and building retirement savings.”