Washington at Work

Another new ESOP bill was proposed in the Senate last week

In Brief: Two United States senators - one Republican, and one Democrat - have proposed a bill that would streamline the expansion or creation of S- corps structured as ESOPs. 

The Details: The bill would aim to incentivize and eliminate barriers to S-corps increasing their ESOP stake or transitioning to an ESOP structure. Firstly, the new legislation would provide deferral benefits for owners who sell their stock to an ESOP. It would also have safeguards for businesses to maintain their SBA credentials and provide technical advice and know- how for corporations who are unsure of how to transition to or incorporate employee ownership into their company structure. Finally, the Bill would create the role of Employee Ownership Advocate at the Department of Labor. The position would be responsible for reviewing new ESOP regulations and supporting existing ESOPs as well as advocating for the growth of ESOPs throughout the nation. 

Why It Matters: In addition to lack of general awareness, the employee ownership movement is harmed by bureaucratic and occasionally archaic regulations which make it difficult for companies to structure themselves as ESOPs. These bureaucratic hoops affect S-corporations looking to expand an already existing ESOP, as well as new corporations looking to include an ESOP in their initial structure. Eliminating these barriers to ESOP growth and creation will likely increase the number of corporations interested in the structure. The bipartisan nature of the effort also highlights the growing popularity of employee ownership legislation on both sides of the aisle. 

What’s Next: The bill was read twice before the Senate on July 26th, 2023 and subsequently referred to the Senate Finance Committee. 

Go Deeper: Read more about the proposed legislation here.

Image Credit: Photo by Joakim Honkasalo on Unsplash