Thoughts and ideas from MASSCEO
Legislative Update: Pro-ESOP Bills Need Action
July 22, 2019 at 12:00 AM

Lawmakers on both sides of the aisle understand the power of employee-owned business. Companies owned by employee stock ownership plans (ESOPs) are proven to offer their employees stable, high-quality employment and valuable retirement accounts. Worker ownership is a model well worth promoting—but it’s one our current tax code isn’t equipped to encourage. So what can Congress do to expand employee ownership, and how can you help make it happen?

Legislative update

Here’s the good news: lawmakers from both major parties have sponsored legislation aiming to promote ESOPs in the United States. In January, Republican Senator Pat Toomey of Kansas introduced Senate Bill 177 to amend the Internal Revenue Code of 1986, where it will be considered by the Senate Finance Committee. The bill proposes to defer taxes on sales of employer stock in S-corporations to ESOPs. It also directs the Department of the Treasury to establish an “S Corporation Assistance Employee Ownership Assistance Office” to educate and provide technical assistance to small business owners building ESOPs for their employees. 30 Senators have cosponsored S. 177 to date: 15 Democrats, 13 Republicans, and 2 independents.

In the House of Representatives, Democratic Representative Ron Kind of Wisconsin sponsored H.R. 2258, S. 177’s companion. Among the bill’s 19 cosponsors, 10 are Republicans and 9 are Democrats.

Another legislative package, known as the WORK Act, consists of 2 bills introduced to the House and Senate in late May. S. 1666, introduced to the Senate Committee on Health, Education, Labor, and Pensions by Senator Bernie Sanders of Vermont, has 7 Democratic cosponsors. H.R. 3007, its House companion, has just one cosponsor in addition to Democrat Mark Pocan, the primary sponsor.

The bills are a crucial first step in expanding Americans’ access to the benefits of the ESOP model. But they won’t be passed without a sustained effort stretching beyond the halls of Capitol Hill. Predictive intelligence firm Skopos Labs estimates that none of the four bills currently under review has a greater than 5% chance of passage into law.

Our lawmakers shouldn’t squander this opportunity to extend the benefits of employee ownership to more workers than ever before. We urge each member of the Massachusetts delegation to cosponsor these bills and chart a course for businesses across the country to extend ownership to their employees. We aren’t there yet—none of the Massachusetts delegation has signed on in support of H.R. 2258 or S. 177. But we can all lend our voices to the growing call for a healthier, more inclusive economy. Tell your legislators that employee ownership matters.