H.R. 3105

[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 3105 Introduced in House (IH)]

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119th CONGRESS
1st Session
H. R. 3105

To amend the Internal Revenue Code of 1986 and the Small Business Act 
to expand the availability of employee stock ownership plans in S 
corporations, and for other purposes.

_______________________________________________________________________

IN THE HOUSE OF REPRESENTATIVES

April 30, 2025

Mr. Kelly of Pennsylvania (for himself, Mr. Panetta, Mr. Estes, Mr. 
Schneider, Mrs. Miller of West Virginia, Mr. Davis of Illinois, Mr. 
Moore of Utah, and Ms. Sewell) introduced the following bill; which was 
referred to the Committee on Ways and Means, and in addition to the 
Committees on Small Business, and Education and Workforce, for a period 
to be subsequently determined by the Speaker, in each case for 
consideration of such provisions as fall within the jurisdiction of the 
committee concerned

_______________________________________________________________________

A BILL

To amend the Internal Revenue Code of 1986 and the Small Business Act 
to expand the availability of employee stock ownership plans in S 
corporations, 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 ``Promotion and Expansion of Private 
Employee Ownership Act of 2025''.

SEC. 2. FINDINGS.

Congress finds that--
(1) on January 1, 1998--nearly 25 years after the Employee 
Retirement Income Security Act of 1974 was enacted and the 
employee stock ownership plan (hereafter in this section 
referred to as an ``ESOP'') was created--employees were first 
permitted to be owners of subchapter S corporations pursuant to 
the Small Business Job Protection Act of 1996 (Public Law 104-
188);
(2) with the passage of the Taxpayer Relief Act of 1997 
(Public Law 105-34), Congress designed incentives to encourage 
businesses to become ESOP-owned S corporations;
(3) since that time, several thousand companies have become 
ESOP-owned S corporations, creating an ownership interest for 
several million Americans in companies in every State in the 
country, in industries ranging from heavy manufacturing to 
construction to services;
(4) while estimates show that 40 percent of working 
Americans have no formal retirement account at all, every 
United States worker who is an employee-owner of an S 
corporation company through an ESOP has a valuable qualified 
retirement savings account;
(5) recent studies have shown that employees of ESOP-owned 
S corporations enjoy greater job stability than employees of 
comparable companies;
(6) studies also show that employee-owners of S corporation 
ESOP companies have amassed meaningful retirement savings 
through their S ESOP accounts that will give them the means to 
retire with dignity;
(7) under the Small Business Act (15 U.S.C. 631 et seq.) 
and the regulations promulgated by the Administrator of the 
Small Business Administration, a small business concern that 
was eligible under the Small Business Act for the numerous 
preferences of the Act is denied treatment as a small business 
concern after an ESOP acquires more than 49 percent of the 
business, even if the number of employees, the revenue of the 
small business concern, and the racial, gender, or other 
criteria used under the Act to determine whether the small 
business concern is eligible for benefits under the Act remain 
the same, solely because of the acquisition by the ESOP; and
(8) it is the goal of Congress to both preserve and foster 
employee ownership of S corporations through ESOPs.

SEC. 3. FULL DEFERRAL OF TAX FOR CERTAIN SALES OF EMPLOYER STOCK TO 
EMPLOYEE STOCK OWNERSHIP PLAN SPONSORED BY S CORPORATION.

(a) Acceleration of Deferral.--Section 114(c) of the SECURE 2.0 Act 
of 2022 is amended by striking ``December 31, 2027'' and inserting 
``the date of the enactment of the Promotion and Expansion of Private 
Employee Ownership Act of 2025''.
(b) Repeal of Limitation.--
(1) In general.--Section 1042 of the Internal Revenue Code 
of 1986, as amended by section 114 of the SECURE 2.0 Act of 
2022, is amended by striking subsection (h).
(2) Effective date.--The amendment made by paragraph (1) 
shall apply to sales after the date of the enactment of this 
Act.

SEC. 4. DEPARTMENT OF THE TREASURY TECHNICAL ASSISTANCE OFFICE.

(a) Establishment Required.--Before the end of the 90-day period 
beginning on the date of enactment of this Act, the Secretary of the 
Treasury shall establish the S Corporation Employee Ownership 
Assistance Office to foster increased employee ownership of S 
corporations.
(b) Duties of the Office.--The S Corporation Employee Ownership 
Assistance Office shall provide--
(1) education and outreach to inform companies and 
individuals about the possibilities and benefits of employee 
ownership of S corporations; and
(2) technical assistance to assist S corporations in 
sponsoring employee stock ownership plans.

SEC. 5. SMALL BUSINESS AND EMPLOYEE STOCK OWNERSHIP.

(a) In General.--The Small Business Act (15 U.S.C. 631 et seq.) is 
amended--
(1) by redesignating section 49 as section 50; and
(2) by inserting after section 48 the following:

``SEC. 49. EMPLOYEE STOCK OWNERSHIP PLANS.

``(a) Definitions.--In this section--
``(1) the term `ESOP' means an employee stock ownership 
plan, as defined in section 4975(e)(7) of the Internal Revenue 
Code of 1986; and
``(2) the term `ESOP business concern' means a business 
concern that was a small business concern eligible for a loan, 
preference, or other program under this Act before the date on 
which more than 49 percent of the business concern was acquired 
by an ESOP.
``(b) Continued Eligibility.--In determining whether an ESOP 
business concern qualifies as a small business concern for purposes of 
a loan, preference, or other program under this Act, each ESOP 
participant shall be treated as directly owning his or her 
proportionate share of the stock in the ESOP business concern owned by 
the ESOP.''.
(b) Effective Date.--The amendments made by this section shall take 
effect on January 1 of the first calendar year beginning after the date 
of the enactment of this Act.

SEC. 6. ESTABLISHMENT OF THE ADVOCATE FOR EMPLOYEE OWNERSHIP.

(a) In General.--Subtitle A of title III of the Employee Retirement 
Income Security Act of 1974 (29 U.S.C. 1201 et seq.) is amended by 
adding at the end the following:

``SEC. 3005. ADVOCATE FOR EMPLOYEE OWNERSHIP.

``(a) In General.--The Secretary of Labor shall appoint an Advocate 
for Employee Ownership within the Employee Ownership Initiative 
established under section 346(b)(1) of the SECURE 2.0 Act of 2022 
(division T of the Consolidated Appropriations Act, 2023 (Public Law 
117-328)). The appointment shall be made without regard to the 
provisions of title 5, United States Code, relating to appointments in 
the competitive service or Senior Executive Service.
``(b) Duties.--The Advocate for Employee Ownership shall--
``(1) consult with the head of the Employee Ownership 
Initiative established under section 346(b)(1) of the SECURE 
2.0 Act of 2022 (division T of the Consolidated Appropriations 
Act, 2023 (Public Law 117-328));
``(2) act as a liaison between the Department of Labor, 
employee ownership advocates, employers considering employee 
ownership, workers interested in employee ownership, and other 
stakeholders, including employee stock ownership plan sponsors 
and participants;
``(3) provide public education and assistance related to 
the expansion of employee ownership through the establishment 
and maintenance of practices that promote employee ownership, 
including the use of employee stock ownership plans;
``(4) provide assistance for purposes of resolving a 
dispute with the Department of Labor to any employee stock 
ownership plan sponsor, fiduciary, or participant and help 
facilitate communication between such entities and the 
Department of Labor for such purposes;
``(5) in consultation with the S Corporation Employee 
Ownership Assistance Office of the Department of the Treasury 
established under section 4 of the Promotion and Expansion of 
Private Employee Ownership Act of 2025, identify and recommend 
potential legislative and administrative changes, including 
related to access to capital issues, to increase practices that 
promote employee ownership plans, including the use of employee 
stock ownership plans; and
``(6) coordinate with other Federal agencies, including the 
Administrator of the Small Business Administration, the 
Secretary of the Treasury, and the Secretary of Commerce, and 
State and local governments on outreach and education to inform 
employees and employers about the possibilities and benefits of 
employee ownership as a business ownership succession planning 
option.
``(c) Consultation and Input.--The Secretary shall solicit advice 
and input from the Advocate for Employee Ownership in developing 
regulations or interpretations of this Act that relate to employee 
stock ownership plans.
``(d) Compensation.--The Advocate for Employee Ownership shall be 
entitled to compensation at the same rate as the rate of basic pay in 
effect for a position at level V of the Executive Schedule under 
section 5316 of title 5, United States Code.
``(e) Annual Report.--
``(1) In general.--Not later than December 31 of each 
calendar year beginning after the date of enactment of this 
section, the Advocate for Employee Ownership shall submit a 
report to the Committee on Health, Education, Labor, and 
Pensions of the Senate and the Committee on Education and 
Workforce of the House of Representatives on the activities of 
the Office of the Advocate for Employee Ownership during the 
fiscal year ending during such calendar year, including the 
contents described in paragraph (2).
``(2) Content.--Each report submitted under paragraph (1) 
shall--
``(A) summarize the assistance requests received by 
the Advocate for Employee Ownership during the fiscal 
year ending during the calendar year of such report;
``(B) describe the activities, including the 
activities described under paragraphs (3) and (4) of 
subsection (b), and evaluate the effectiveness of the 
Advocate for Employee Ownership during such fiscal 
year;
``(C) describe any significant problems the 
Advocate for Employee Ownership has identified during 
such fiscal year and ways to mitigate such problems;
``(D) contain recommendations for any 
administrative or legislative action that may be 
appropriate to resolve barriers to, and to incentivize, 
practices that promote employee ownership, including 
the use of employee stock ownership plans; and
``(E) describe progress related to employee 
ownership in businesses in the United States.
``(3) Concurrent submission.--The Advocate for Employee 
Ownership shall submit a copy of each report submitted under 
paragraph (1) to the Secretary of Labor, and any other 
appropriate official, at the same time such report is submitted 
under paragraph (1).
``(4) Public availability.--The Advocate for Employee 
Ownership shall make a copy of each report submitted under 
paragraph (1) available to the public.
``(5) Definition of employee stock ownership plan.--For 
purposes of this section, the term `employee stock ownership 
plan' has the meaning given the term in section 4975(e)(7) of 
the Internal Revenue Code of 1986.
``(f) Authorization of Appropriations.--There is authorized to be 
appropriated such sums as may be necessary to carry out subsection 
(d).''.
(b) Clerical Amendment.--The table of contents in section 1 of the 
Employee Retirement Income Security Act of 1974 (29 U.S.C. 1001 note) 
is amended by inserting after the item relating to section 3004 the 
following new item:

``Sec. 3005. Advocate for employee ownership.''.
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