No official summary available for this bill.
[Congressional Bills 118th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3383 Introduced in House (IH)]
<DOC>
118th CONGRESS
1st Session
H. R. 3383
To amend the Small Business Investment Act of 1958 to establish an
employee equity investment facility, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
May 16, 2023
Mr. Phillips (for himself, Mr. Moore of Utah, Ms. Houlahan, Mr. Johnson
of South Dakota, Ms. Tokuda, Mr. Fitzpatrick, Mr. Pocan, and Mr.
Meuser) introduced the following bill; which was referred to the
Committee on Small Business
_______________________________________________________________________
A BILL
To amend the Small Business Investment Act of 1958 to establish an
employee equity investment facility, and for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Employee Equity Investment Act of
2023''.
SEC. 2. EMPLOYEE EQUITY INVESTMENT FACILITY.
(a) Definitions.--Section 103 of the Small Business Investment Act
of 1958 (15 U.S.C. 662) is amended--
(1) in paragraph (19), by striking ``and'' at the end;
(2) in paragraph (20), by striking the period at the end
and inserting a semicolon; and
(3) by adding at the end the following:
``(21) the term `covered investment' means, with respect to
an investment in a covered small business concern--
``(A) the provision of capital to finance the sale
of an ownership interest of a covered small business
concern, including a covered small business concern
created as a result of a corporate divestiture, to an
employee stock ownership plan or eligible worker-owned
cooperative if such sale results in--
``(i) the employee stock ownership plan or
eligible worker-owned cooperative,
respectively, holding a majority interest of
the outstanding stock of the covered small
business concern; and
``(ii) with respect to such a sale to an
employee stock ownership plan, the appointment
of an independent trustee for the transaction;
or
``(B) the provision of capital to finance a covered
small business concern if--
``(i) an employee stock ownership plan or
eligible worker-owned cooperative holds a
majority interest of the outstanding stock of
the covered small business concern, prior to
and immediately following the provision of
capital; and
``(ii) the provision of capital does not
reduce the percentage of stock of the covered
small business concern held by the employee
stock ownership plan or eligible worker-owned
cooperative (as applicable), excluding any
synthetic equity;
``(22) the term `covered small business concern'--
``(A) means a small business concern; and
``(B) with respect to an employee equity investment
company that is not a Protege EEIC, includes an entity
that is not more than 300 percent larger than the size
standards established for categorizing a business
concern as a small business concern under section 3(a)
of the Small Business Act (15 U.S.C. 632(a));
``(23) the term `eligible worker-owned cooperative' has the
meaning given that term in section 1042(c) of the Internal
Revenue Code of 1986;
``(24) the term `employee equity investment company' means
a small business investment company--
``(A) that identifies at the time of application
for licensure under section 301 an intent to be
licensed as an employee equity investment company; and
``(B) for which--
``(i) not less than 75 percent of the total
capital managed by the investment firm shall be
invested in covered investments;
``(ii) not less than 50 percent of the
total capital managed by the investment firm
shall be invested in covered investments
described in paragraph (21)(A);
``(iii) covered investment returns are
obtained from debt, synthetic equity, or a
combination thereof, including returns obtained
from cash interest, payment-in-kind interest,
and stock warrants; and
``(iv) any investment that is not a covered
investment is an investment in a small business
concern;
``(25) the term `employee stock ownership plan' has the
meaning given that term in section 4975(e) of the Internal
Revenue Code of 1986;
``(26) the term `independent trustee' means a trustee
that--
``(A) is in the profession of serving as a
fiduciary for employee stock ownership plans;
``(B) has never--
``(i) performed services for or on behalf
of any party selling an ownership interest in
the covered small business concern to the
employee stock ownership plan involved in the
transaction the trustee is considering; or
``(ii) been a director, officer, or
employee of the covered small business concern;
``(C) has not performed services for or on behalf
of the covered small business concern at any time
during the 5-year period ending on the date of
execution of the transaction the trustee is
considering, unless such services solely consisted of
acting as a fiduciary of an employee benefit plan
(including an employee stock ownership plan) under the
Employee Retirement Income Security Act of 1974 (29
U.S.C. 1001 et seq.);
``(D) has not performed services related to the
transaction the trustee is considering, for or on
behalf of--
``(i) the employee equity investment
company that is preparing to or has already
allocated capital to the covered small
business; or
``(ii) any other entity that is structuring
or financing the transaction for any party
other than the employee stock ownership plan;
and
``(E) does not have a familial or corporate
relationship (such as a parent-subsidiary relationship)
to any person or entity described in subparagraph (B),
(C), or (D);
``(27) the term `independent financial advisor' means a
financial or valuation advisor that--
``(A) is in the profession of serving as a
financial or valuation advisor for transactions
involving employee stock ownership plans;
``(B) has never--
``(i) performed services, including a
preliminary valuation, for or on behalf of--
``(I) any party selling an
ownership interest in the covered small
business concern to the employee stock
ownership plan involved in the
transaction the advisor is evaluating;
or
``(II) the covered small business
concern, unless the services were
provided solely to an existing employee
stock ownership plan sponsored by the
covered small business concern; or
``(ii) been a director, officer, or
employee of the covered small business concern;
``(C) has not performed services related to the
transaction the advisor is evaluating, including a
preliminary valuation, for or on behalf of--
``(i) the employee equity investment
company that is preparing to or has already
allocated capital to the covered small
business; or
``(ii) any other entity that is structuring
or financing the transaction for any party
other than the employee stock ownership plan;
and
``(D) does not have a familial or corporate
relationship (such as a parent-subsidiary relationship)
to any of person or entity described in subparagraph
(B) or (C);
``(28) the term `non-EEIC company' means a small business
investment company that--
``(A) is licensed under section 301;
``(B) is selected to receive leverage from the
facility established under section 321; and
``(C) is not an employee equity investment company;
``(29) the term `outstanding stock' means shares of stock,
including synthetic equity;
``(30) the term `Protege EEIC' means an entity licensed
under section 301 as an employee equity investment company and
selected in accordance with section 322(c)--
``(A) for which the managers of the firm have a
documented record of successful business experience;
and
``(B) that has an investment track record that does
not meet the requirements to be licensed under section
301; and
``(31) the term `synthetic equity' has the meaning given
that term in section 409(p)(6) of the Internal Revenue Code of
1986.''.
(b) Employee Equity Investment Facility.--Part A of title III of
the Small Business Investment Act of 1958 (15 U.S.C. 681 et seq.) is
amended by adding at the end the following:
``SEC. 321. EMPLOYEE EQUITY INVESTMENT FACILITY.
``(a) Definition of Facility.--In this section, the term `facility'
means the facility established under subsection (b).
``(b) Establishment.--The Administrator, acting through the
Associate Administrator of the Office of Investment and Innovation of
the Administration, shall establish and carry out a facility to provide
leverage to licensed employee equity investment companies and non-EEIC
companies for the purpose of encouraging covered investments.
``(c) Application.--
``(1) In general.--An investment firm desiring to
participate in the facility shall submit to the Administrator
an application--
``(A) to be licensed to participate in the facility
as an employee equity investment company (including as
a Protege EEIC); or
``(B) to be selected to participate as a non-EEIC
company.
``(2) Rolling basis.--The Administrator shall accept
applications under paragraph (1) on a rolling basis.
``(3) Electronic submissions.--The Administrator shall
allow an applicant under this section to electronically submit
any document required by this section and to provide an
electronic signature for any signature that is required on such
a document.
``(4) Application process.--An investment firm shall
identify an intent to be licensed as an employee equity
investment company at the time the investment firm applies to
be licensed as a small business investment company under
section 301.
``(d) Provisional Approval.--The Administrator may provide
provisional approval for a license to participate in the facility as an
employee equity investment company for a period not to exceed 1 year to
an investment firm submitting an application under subsection (c)--
``(1) that does not meet the minimum private capital
requirements under section 302 necessary for licensing under
section 301 at the time of application;
``(2) that states an intent to more effectively raise
capital commitments in private markets with a license; and
``(3) that states an intent to more precisely request the
desired amount of leverage contingent on securing capital from
private market investors.
``(e) Combined Leverage.--The Administrator may not provide
leverage to employee equity investment companies and non-EEIC companies
under the facility in a total amount that is more than $5,000,000,000
for a fiscal year. Not more than 20 percent of such total amount may be
provided to non-EEIC companies.
``(f) Transaction Requirements.--
``(1) In general.--With respect to a covered investment
described in section 103(21)(A) involving a sale to an employee
stock ownership plan, an independent trustee for the employee
stock ownership plan shall be appointed before the execution of
the covered investment for a period of time that is sufficient
for the independent trustee to fully evaluate the proposed
transaction.
``(2) Fairness opinion.--An independent trustee appointed
under paragraph (1) shall obtain a fairness opinion on the
proposed covered investment from an independent financial
advisor, which shall evaluate whether the price, terms, and
cost of financing of the proposed covered investment are
financially fair to the employee stock ownership plan.
``(g) Prohibitions.--
``(1) Financing.--
``(A) In general.--An employee of a covered small
business concern may not provide personal financing of
any kind for a covered investment, including through a
wage concession or rollover of a retirement plan.
``(B) Exceptions.--Subparagraph (A) shall not apply
to--
``(i) financing provided by an employee for
the sale of an ownership interest held by the
employee in a covered small business concern;
or
``(ii) employee capital contributions or
membership fees paid by members of an eligible
worker-owned cooperative, if such amounts are
reasonable and customary and not used for the
purchase of the covered small business concern.
``(2) Control.--An employee equity investment company or
non-EEIC company shall not exercise control over a covered
small business concern in which the employee equity investment
company or non-EEIC company, respectively, has made a covered
investment.
``(h) Employee Allocations.--With respect to a covered investment
described in section 103(21)(A) made by an employee equity investment
company that involves an employee stock ownership plan, the employee
stock ownership plan shall include a requirement that in the event of a
sale to a third party of the covered small business concern in which
the covered investment is made, the proceeds that the employee stock
ownership plan receives from the sale shall be distributed as though
all shares of stock held by the employee stock ownership plan prior to
the sale were fully allocated.
``(i) Recirculation of Shares.--
``(1) Share count.--With respect to a covered investment
described in section 103(21)(A) made by an employee equity
investment company that involves an employee stock ownership
plan, the number of shares held by the employee stock ownership
plan on the final date of each plan year shall not be less than
the number of shares held by the employee stock ownership plan
on the execution date of the covered investment.
``(2) Limitation.--The requirements under paragraph (1)
shall apply only with respect to the period during which the
employee equity investment company has an interest in the
covered small business concern.
``(3) Exception.--The requirement under paragraph (1) may
be waived by the independent trustee for the applicable
employee stock ownership plan.
``(j) Independent Trustees.--With respect to a covered investment
described in section 103(21)(A) made by an employee equity investment
company that involves an employee stock ownership plan, the employee
stock ownership plan shall have an independent trustee during the
period that the employee equity investment company has an interest in
the covered small business concern.
``(k) Smaller Enterprises.--
``(1) In general.--Except as provided in paragraph (2),
section 303(d) shall not apply to employee equity investment
companies.
``(2) Protegee eeics.--Section 303(d) shall apply to a
Protege EEIC.
``(l) Procedures Related to a Sale of a Covered Small Business
Concern.--
``(1) In general.--Subject to paragraph (2), an employee
equity investment company shall require as a condition of
making a covered investment described in section 103(21)(A)
involving an employee stock ownership plan that--
``(A) before any stock sale or the execution of any
corporate matter listed in section 409(e)(3) of the
Internal Revenue Code of 1986, the employee stock
ownership plan shall--
``(i) appoint an independent trustee for
the transaction; and
``(ii) require that the independent trustee
obtain a fairness opinion from an independent
financial advisor, which shall evaluate whether
the price, terms, and cost of financing of the
proposed covered investment are financially
fair to the employee stock ownership plan; and
``(B) the employee stock ownership plan requires
that--
``(i) in addition to the corporate matters
listed in section 409(e)(3) of the Internal
Revenue Code of 1986, each participant or
beneficiary in the employee stock ownership
plan is entitled to direct the employee stock
ownership plan as to the manner in which voting
rights under securities of the employer which
are allocated to the account of such
participant or beneficiary are to be exercised
with respect to the approval or disapproval of
any stock sale;
``(ii) the requirements of section
409(e)(3) of the Internal Revenue Code of 1986
and clause (i) of this subparagraph shall be
met using the procedures described in section
409(e)(5) of the Internal Revenue Code of 1986;
``(iii) unless the parties agree otherwise,
with respect to unallocated shares, the
independent trustee shall be directed to vote
or tender such unallocated shares in the same
proportion as allocated shares for which the
independent trustee has received voting or
tender instructions from participants in the
employee stock ownership plan; and
``(iv) with respect to allocated shares
that the independent trustee does not receive
voting or tender instructions from participants
in the employee stock ownership plan, the
independent trustee shall have voting
discretion over such shares.
``(2) Voting discretion.--Nothing in paragraph (1)(B) shall
limit the ability of an independent trustee to exercise voting
discretion in accordance with the fiduciary obligations of the
independent trustee under the Employee Retirement Income
Security Act of 1974 (29 U.S.C. 1001 et seq.).
``(3) Limitation.--The requirements under paragraph (1)
shall apply only with respect to the period during which the
employee equity investment company has an interest in the
covered small business concern.
``(m) Reports.--In addition to the reporting requirements in
310(b), each employee equity investment company (including each Protege
EEIC licensed to operate as an employee equity investment company) and
each non-EEIC company that has outstanding leverage received from the
facility shall submit to the Administrator an annual report, which
shall include, for the year covered by the report, the following
information, disaggregated by covered investments made under
subparagraph (A) and (B) of section 103(21):
``(1) Whether the covered investment was made with respect
to an employee stock ownership plan or eligible worker-owned
cooperative.
``(2) For an employee stock ownership plan--
``(A) the effective date of the plan;
``(B) the number of active plan participants;
``(C) the number of employees of the covered small
business concern for which the employee stock ownership
plan is established;
``(D) the total value of employer securities, as
determined by an independent appraiser hired by the
independent trustee of the employee stock ownership
plan;
``(E) the total plan assets;
``(F) the total contributions during the plan year;
``(G) the total distributions during the plan year;
``(H) the median account asset balance; and
``(I) demographic information of plan participants,
disaggregated by race, gender, and State.
``(3) For an eligible worker-owned cooperative--
``(A) the number of member-owners;
``(B) the number of employees of the covered small
business concern for which the eligible worker-owned
cooperative is established;
``(C) the total value of employer securities;
``(D) the aggregate assets of all membership
accounts of the cooperative;
``(E) the median membership account balance; and
``(F) demographic information of membership base,
disaggregated by race, gender, and State.
``(n) Implementation Milestones.--
``(1) In general.--Not later than 180 days after the date
of enactment of this section, the Administrator shall begin
accepting applications to be licensed to participate in the
facility as an employee equity investment company (including as
a Protege EEIC).
``(2) Exclusion of leverage.--Not later than 1 year after
the date of enactment of this section, the Administrator shall
begin excluding from the calculation of outstanding leverage,
as described in section 303(b)(2)(F), covered investments
described in clause (iii) of such section.
``(3) License timeline.--Not later than 1 year after the
date of enactment of this section, the Administrator shall
approve the first tranche of licenses to participate in the
facility as an employee equity investment company (including as
a Protege EEIC) with respect to applicants that satisfy the
applicable eligibility criteria.
``(o) Sunset.--
``(1) Definition.--In this subsection, the term `sunset
date' means the first day of the twentieth calendar year that
begins after the date on which the Administrator approves the
first license to participate in the facility as an employee
equity investment company (including as a Protege EEIC).
``(2) Termination of authority.--On and after the sunset
date, the Administrator may not license an entity to
participate in the facility as an employee equity investment
company (including as a Protege EEIC) or select an entity to
participate in the facility as a non-EEIC company.
``(3) Continued participation by existing entities.--
Nothing in paragraph (2) shall be construed to prohibit--
``(A) an employee equity investment company from
continuing to draw leverage on and after the sunset
date that was committed to the entity through the
facility before the sunset date; or
``(B) a non-EEIC company from continuing to receive
an exclusion in the calculation of outstanding leverage
by the Administrator, as described in section
303(b)(2)(F), for covered investments described in
clause (iii) of such section made to a covered small
business before the sunset date.
``(4) Application.--The Administrator shall not consider
paragraph (2) as a factor in the decision to license an entity
to participate in the facility as an employee equity investment
company (including as a Protege EEIC) or to select an entity to
participate in the facility as a non-EEIC company before the
sunset date.''.
(c) Employee Equity Investment Company Procedures.--Title III of
the Small Business Investment Act of 1958 (15 U.S.C. 681 et seq.) is
amended--
(1) in section 301(c) (15 U.S.C. 681(c)), by striking
paragraph (3) and inserting the following:
``(3) Matters considered.--
``(A) In general.--In reviewing and processing any
application under this subsection, the Administrator--
``(i) shall determine whether--
``(I) the applicant meets the
requirements of subsections (a) and (c)
of section 302; and
``(II) the management of the
applicant is qualified and has the
knowledge, experience, and capability
necessary to comply with this Act;
``(ii) shall take into consideration--
``(I) the need for and availability
of financing for small business
concerns in the geographic area in
which the applicant is to commence
business;
``(II) the general business
reputation of the owners and management
of the applicant; and
``(III) the probability of
successful operations of the applicant,
including adequate profitability and
financial soundness;
``(iii) shall not take into consideration
any projected shortage or unavailability of
leverage; and
``(iv) shall give first priority to an
applicant that is located in an underlicensed
State with below median financing, as
determined by the Administrator.
``(B) Additional matters considered for employee
equity investment companies.--
``(i) Investment track record.--Except as
provided in clause (ii), an applicant for a
license to operate as an employee equity
investment company shall submit to the
Administrator proof that the managers of the
applicant have a track record of managing
investments, including structured investments,
realized or unrealized, in an employee stock
ownership plan or eligible worker-owned
cooperative.
``(ii) Advisory requirement.--An applicant
that does not have an investment track record
described in clause (i) or that is a Protege
EEIC shall submit to the Administrator evidence
that the applicant has retained or will retain
a legal, accounting, or financial advisory firm
with at least 5 years of experience in
structuring employee stock ownership plans or
eligible worker-owned cooperatives.
``(iii) Limitation.--The Administrator may
not reject an applicant for a license to
operate as an employee equity investment
company solely because the applicant lacks a
sufficient track record in realized investments
if the applicant demonstrates an otherwise
successful investment track record that
includes unrealized covered investments.''; and
(2) in section 303(b)(2) (15 U.S.C. 683(b)(2))--
(A) in subparagraph (A), in the matter preceding
clause (i), by striking ``The maximum'' and inserting
``Except as provided otherwise in this paragraph, the
maximum''; and
(B) by adding at the end the following--
``(E) Employee equity investment companies.--
``(i) In general.--Except as provided in
subparagraph (G), the maximum amount of
outstanding leverage made available to any 1
employee equity investment company may not
exceed the lesser of--
``(I) 100 percent of the private
capital of such company; or
``(II) $350,000,000.
``(ii) Multiple licenses under common
control.--The maximum amount of outstanding
leverage made available to 2 or more employee
equity investment companies that are commonly
controlled (as determined by the Administrator)
and not under capital impairment may not exceed
$700,000,000.
``(F) Non-EEIC company employee ownership
investments.--
``(i) In general.--A non-EEIC company may
access leverage from the facility established
under section 321 in addition to any leverage
such non-EEIC company is otherwise eligible to
receive solely for the purpose described in
clause (ii) and subject to the limitation under
clause (iv).
``(ii) Purpose.--The purpose described in
this clause is for the purpose of making
covered investments described in section
103(21)(B) (excluding synthetic equity).
``(iii) Outstanding leverage.--Subject to
the limitation under clause (iv), in
calculating the outstanding leverage of a non-
EEIC company for purposes of subparagraphs
(A)(ii) and (B), the Administrator shall
exclude the amount of leverage outstanding to
covered small business concerns for a covered
investment described in section 103(21)(B)
(excluding synthetic equity) made by such non-
EEIC company.
``(iv) Limitation.--The amount of leverage
provided under clause (i) that is excluded
under clause (iii) may not exceed $50,000,000.
``(G) Protege eeics.--The maximum amount of
outstanding leverage made available under the facility
established under section 321 to any 1 Protege EEIC may
not to exceed the lesser of--
``(i) 100 percent of the private capital of
the Protege EEIC; or
``(ii) $100,000,000.''.
(d) Conforming Amendment.--Section 308(g) of the Small Business
Investment Act of 1958 (15 U.S.C. 687(g)) is amended by adding at the
end the following:
``(4) In its annual report for the year ending on December 31,
2023, and in each succeeding annual report made pursuant to section
10(a) of the Small Business Act, the Administration shall include full
and detailed aggregate data regarding--
``(A) employee stock ownership plans created by an employee
equity investment company, including--
``(i) the total number of active plan participants;
``(ii) the total number of employees of the covered
small business concerns with such employee stock
ownership plans;
``(iii) the total value of employer securities, as
determined by the independent appraisers hired by the
independent trustee of each employee stock ownership
plan;
``(iv) the total plan assets;
``(v) the total contributions during the plan year;
``(vi) the total distributions during the plan
year;
``(vii) the median account asset balance; and
``(viii) demographic information of plan
participants, disaggregated by race, gender, State;
``(B) eligible worker-owned cooperatives created by
employee equity investment companies, including--
``(i) the number of member-owners;
``(ii) the total number of employees of the covered
small business concern with such eligible worker-owned
cooperatives;
``(iii) the total value of employer securities;
``(iv) the assets of all membership accounts;
``(v) the median membership account balance; and
``(vi) demographic information of membership base,
disaggregated by race, gender, and State; and
``(C) non-EEIC companies that received leverage from the
facility, including--
``(i) the total amount of such leverage excluded by
the Administrator pursuant to section 321(e)(3)(C);
``(ii) the number of employee stock ownership plans
and eligible worker-owned cooperatives that received
capital from a non-EEIC company during the year covered
by the report; and
``(iii) the geographic location of each employee
stock ownership plan and eligible worker-owned
cooperative described in clause (ii).''.
SEC. 3. PROTEGE EEIC PROGRAM.
Part A of title III of the Small Business Investment Act of 1958
(15 U.S.C. 681 et seq.), as amended by section 2, is further amended by
adding at the end the following:
``SEC. 322. PROTEGE EEIC PROGRAM.
``(a) Establishment.--The Administrator shall establish a program
to be known as the `Protege EEIC Program' under which a manager with
substantial experience in operating small business investment companies
may enter into a written agreement approved by the Administrator to
provide guidance and assistance to a Protege EEIC with respect to--
``(1) applying for a license for the Protege EEIC to
operate as an employee equity investment company; and
``(2) management of the employee equity investment company
after licensure.
``(b) Application.--After entering into a written agreement
described in subsection (a), the Protege EEIC shall apply for a license
under section 301.
``(c) Selection.--The Administrator may grant a license to a
Protege EEIC to operate as an employee equity investment company under
section 301 based on the investment track record of one or more of the
managers that have entered into a written agreement described in
subsection (a) with the applicant Protege EEIC.
``(d) Requirements for Managers.--If a manager enters into a
written agreement described under subsection (a)--
``(1) the manager may hold a minority financial interest in
the employee equity investment company that is to be managed by
the Protege EEIC;
``(2) the otherwise applicable maximum amount of
outstanding leverage that may be made available to any one
licensed company of the manager under section 303(b)(2)(A)
shall be increased by $17,500,000; and
``(3) the otherwise applicable maximum amount of
outstanding leverage that may be made available to any two or
more licensed companies that are commonly controlled by the
manager under section 303(b)(2)(B) shall be increased by
$35,000,000.''.
SEC. 4. OFFICE OF EMPLOYEE OWNERSHIP.
Part A of title III of the Small Business Investment Act of 1958
(15 U.S.C. 681 et. seq.), as amended by section 3, is further amended
by adding at the end the following:
``SEC. 323. OFFICE OF EMPLOYEE OWNERSHIP.
``(a) Establishment.--There is established in the Administration an
Office of Employee Ownership (in this section referred to as the
`Office') which shall be responsible for--
``(1) developing expertise in employee stock ownership
plans and eligible worker-owned cooperatives; and
``(2) assisting small business concerns in processes
relating to a sale of such concerns to an employee stock
ownership plan or eligible worker-owned cooperative.
``(b) Duties.--The Office shall--
``(1) provide outreach and educational materials to small
business investment companies about the facility established
under section 321;
``(2) maintain and publish a list of legal, accounting, or
financial advisory firms with at least 5 years of experience in
structuring employee stock ownership plans or eligible worker-
owned cooperatives;
``(3) establish a Small Business Employee Ownership and
Cooperatives Promotion Program to offer technical assistance
and training to employee-owned business concerns (as defined in
section 21(c)(3)(U) of the Small Business Act (15 U.S.C.
648(c)(3)(U)) on the transition to employee ownership;
``(4) coordinate with small business development centers on
implementing the requirements relating to employee-owned
business concerns under section 21(c)(3) of the Small Business
Act (15 U.S.C. 648(c)(3)); and
``(5) coordinate with leaders in the field, as determined
by the Administrator, to develop outreach and educational
materials on employee ownership in multiple languages.''.
SEC. 5. MODIFYING UNCONDITIONAL OWNERSHIP AND CONTROL REQUIREMENTS FOR
CERTAIN EMPLOYEE-OWNED SMALL BUSINESS CONCERNS.
(a) Report on Ownership and Control Through an Employee Stock
Ownership Plan or Eligible Worker-Owned Cooperative Relating to Set-
Aside Procurement.--
(1) Definitions.--In this subsection--
(A) the term ``Administrator'' means the
Administrator of the Small Business Administration;
(B) the term ``eligible worker-owned cooperative''
has the meaning given that term in section 1042(c) of
the Internal Revenue Code of 1986; and
(C) the term ``employee stock ownership plan'' has
the meaning given that term in section 4975(e) of the
Internal Revenue Code of 1986.
(2) Sense of congress.--It is the sense of Congress that--
(A) employee stock ownership plans and eligible
worker-owned cooperatives have unique ownership
structures that create barriers to accessing set-aside
procurement programs due to unconditional ownership and
control requirements; and
(B) the ownership structures of an employee stock
ownership plan or an eligible worker-owned cooperative
should not prevent an otherwise eligible entity from
accessing set-aside procurement programs.
(3) Study and report.--
(A) Study.--The Administrator, in coordination with
stakeholders, including women-owned small business
third-party certifiers and relevant Federal agencies,
shall study and recommend alternatives to unconditional
ownership and control requirements for employee stock
ownership plans and eligible worker-owned cooperatives
that would enable access to set-aside procurement
programs.
(B) Report.--Not later than 180 days after the date
of enactment of this Act, the Administrator shall
submit to Congress the recommendations developed under
subparagraph (A) and a plan to implement the
recommendations for all set-aside procurement programs,
including identifying any applicable statutory changes
necessary to implement such recommendations.
(b) Rulemaking.--Not later than 180 days after the submission of
the report required under subsection (a)(3)(B), the Administrator of
the Small Business Administration shall issue or revise any applicable
rules to carry out the recommendations formed in the report.
(c) Grace Period.--
(1) Small business concerns owned and controlled by
socially and economically disadvantaged individuals.--Section
8(a) of the Small Business Act (15 U.S.C. 637(a)) is amended by
adding at the end the following:
``(22) Concerns owned by employee stock ownership plans or
eligible worker-owned cooperatives.--
``(A) In general.--For the purposes of determining
ownership and control of a concern under this
subsection for award of a contract through a
competition restricted to small business concerns owned
and controlled by socially and economically
disadvantaged individuals, any interest in such concern
held by an employee stock ownership plan or an eligible
worker-owned cooperative shall be treated in the same
manner as an interest held by the socially and
economically disadvantaged individuals upon whom
eligibility is based if--
``(i) such concern was a socially and
economically disadvantaged small business
concern prior to the sale to an employee stock
ownership plan or an eligible worker-owned
cooperative; and
``(ii) the chief corporate officer and a
majority of the board of directors of such
concern are socially and economically
disadvantaged individuals.
``(B) Applicability.--The requirements of
subparagraph (A) shall apply for the 2-year period
beginning on the date on which the majority of the
stock of such concern was acquired by an employee stock
ownership plan or eligible worker-owned cooperative.''.
(d) Small Business Concerns Owned and Controlled by Women.--Section
8(m) of the Small Business Act (15 U.S.C. 637(m)) is amended by adding
at the end the following:
``(9) Concerns owned by employee stock ownership plans or
eligible worker-owned cooperatives.--
``(A) In general.--Notwithstanding any other
provision of law, for the purposes of determining
ownership and control of a concern under this
subsection for award of a contract through a
competition restricted to small business concerns owned
and controlled by women, any interest in such concern
held by an employee stock ownership plan or an eligible
worker-owned cooperative, shall be treated in the same
manner as an interest held by the women upon whom
eligibility is based if--
``(i) such concern was a small business
concern owned and controlled by women prior to
the sale to an employee stock ownership plan or
an eligible worker-owned cooperative; and
``(ii) the chief corporate officer and a
majority of the board of directors of such
concern are women.
``(B) Applicability.--The requirements of
subparagraph (A) shall apply for the 2-year period
beginning on the date on which the majority of the
stock of such concern was acquired by an employee stock
ownership plan or eligible worker-owned cooperative.''.
(e) Small Business Concerns Owned and Controlled by Service-
Disabled Veterans.--Section 36 of the Small Business Act (15 U.S.C.
657f) by adding at the end the following:
``(j) Concerns Owned by Employee Stock Ownership Plans or Eligible
Worker-Owned Cooperatives.--
``(1) In general.--Notwithstanding any other provision of
law, for the purposes of determining ownership and control of a
concern under this section for award of a contract through a
competition restricted to small business concerns owned and
controlled by service-disabled veterans, any interest in such
concern held by an employee stock ownership plan or an eligible
worker-owned cooperative, shall be treated in the same manner
as an interest held by the service-disabled veterans upon whom
eligibility is based if--
``(A) such concern was a small business concern
owned and controlled by service-disabled veterans prior
to the sale to an employee stock ownership plan or an
eligible worker-owned cooperative; and
``(B) the chief corporate officer and a majority of
the board of directors of such concern are service-
disabled veterans.
``(2) Applicability.--The requirements of paragraph (1)
shall apply for the 2-year period beginning on the date on
which the majority of the stock of such concern was acquired by
an employee stock ownership plan or eligible worker-owned
cooperative.''.
(f) Definitions.--Section 3 of the Small Business Act is amended by
adding at the end the following:
``(gg) Employee Stock Ownership Plan.--In this Act, the term
`employee stock ownership plan' has the meaning given that term in
section 4975(e)(7) of the Internal Revenue Code of 1986 (26 U.S.C.
4975(e)(7)).
``(hh) Eligible Worker-Owned Cooperative.--In this Act, the term
`eligible worker-owned cooperative' has the meaning given that term in
section 1042(c) of the Internal Revenue Code of 1986.''.
<all>
Introduced in House
Introduced in House
Referred to the House Committee on Small Business.
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