[Senate Report 115-436]
[From the U.S. Government Publishing Office]
Calendar No. 348
115th Congress } { Report
SENATE
2d Session } { 115-436
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SMALL BUSINESS EMPLOYEE OWNERSHIP PROMOTION ENHANCEMENT ACT OF 2017
_______
December 19, 2018.--Ordered to be printed
_______
Mr. Risch, from the Committee on Small Business and Entrepreneurship,
submitted the following
R E P O R T
[To accompany S. 1538]
[Including cost estimate of the Congressional Budget Office]
The Committee on Small Business and Entrepreneurship, to
which was referred the bill (S. 1538) to amend the Small
Business Act to establish awareness of, and technical
assistance for, the creation of employee stock ownership plans
(ESOPs), and for other purposes, having considered the same,
reports favorably thereon with an amendment in the nature of a
substitute and recommends that the bill, as amended, do pass.
I. INTRODUCTION
S. 1538 was introduced by Senator Gary C. Peters, for
himself, and Senator James E. Risch, the Committee's Chairman,
on July 12, 2017.
This bill requires the SCORE Association, a Small Business
Administration (SBA) resource partner, to establish a new
position responsible for administering informational resources
regarding ESOPs: the SCORE Employee Ownership Director. The
Director's duties include coordinating efforts for employee
ownership within SCORE chapters' nationwide and providing
technical assistance that promotes or facilitates employee
ownership plans. This role may be held by an existing SCORE
employee.
II. HISTORY (PURPOSE & NEED FOR LEGISLATION)
Currently, there is no technical assistance program at SBA
tasked with educating small business owners on ESOPs. Under an
ESOP model, employees see direct benefits from a company's
long-term success by allowing employees to share in the gains
when a business is profitable. ESOPs are commonly formed when
an owner of a privately-owned company departs the business,
often for retirement. With owners of small businesses across
the nation reaching retirement age, forming an ESOP can be an
attractive option for those who want to keep a business' legacy
in the hands of its employees. Despite the success of the ESOP
model, many small businesses are not aware of how to transition
their business to an ESOP and/or lack the necessary resources.
III. HEARINGS & ROUNDTABLES
In the 113th Congress, the Committee held a roundtable on
July 17, 2013 entitled ``Small Business Tax Reform: Making the
Tax Code Work for Entrepreneurs and Startups.'' During this
hearing, a witness, Mr. Michael Keeling, President of The ESOP
Association, advocated for policies to expand employee
ownership plans and noted that during the great recession
employee stock-owned companies laid off employees at a rate of
2.6 percent compared to conventionally-owned businesses that
laid employees off at a rate of 12 percent. During the course
of questioning, Senator Shaheen asked Mr. Keeling to share more
information on why ESOPs were better positioned to lay off
fewer employees and how they helped employees build wealth. In
his closing remarks, Mr. Keeling discussed the history of ESOPs
and how the ownership structure shares many virtues deemed
essential to a free society and democracy. Chair Landrieu
thanked Mr. Keeling for his remarks and agreed business
ownership by employees is very important and beneficial to
capitalism.
IV. DESCRIPTION OF BILL
The bill amends the Small Business Act to task the SCORE
Association with a new role in administering informational
resources regarding ESOPs. The bill establishes a position
within SCORE to lead efforts to provide information and general
technical assistance that promotes or facilitates employee
ownership plans.
V. COMMITTEE VOTE
In compliance with rule XXVI (7)(b) of the Standing Rules
of the Senate, the following vote was recorded on March 14,
2018.
A motion to adopt the Small Business Employee Ownership
Promotion Enhancement Act of 2017, a bill to amend the Small
Business Act to establish awareness of, and technical
assistance for, the creation of employee stock ownership plans,
and for other purposes, was approved unanimously by a roll call
vote as part of a manager's package. Senators Risch, Rubio,
Paul, Scott, Ernst, Inhofe, Young, Enzi, Rounds, Kennedy,
Cardin, Cantwell, Shaheen, Heitkamp, Markey, Booker, Coons,
Hirono, and Duckworth voted for the bill.
VI. COST ESTIMATE
In compliance with rule XXVI (11)(a)(1) of the Standing
Rules of the Senate, the Committee estimates the cost of the
legislation will be equal to the amounts discussed in the
following letter from the Congressional Budget Office:
U.S. Congress,
Congressional Budget Office,
Washington, DC, June 26, 2018.
Hon. James E. Risch,
Chairman, Committee on Small Business and Entrepreneurship,
U.S. Senate, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for S. 1538, the Small
Business Employee Ownership Enhancement Act of 2017.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Stephen
Rabent.
Sincerely,
Keith Hall,
Director.
Enclosure.
S. 1538--the Small Business Employee Ownership Enhancement Act of 2017
The Service Corps of Retired Executives (SCORE) program
provides access to counselors, advisors, and mentors to small
businesses through the nonprofit SCORE Association. The Small
Business Administration (SBA) pays a portion of the costs to
administer the SCORE program. S. 1538 would require SCORE to
appoint an individual to serve as the Employee Ownership
Director who would provide additional information and
assistance regarding employee ownership structures.
Using information from the SBA, CBO estimates that S. 1538
would cost less than $500,000 for the agency to implement the
requirements of the bill; such spending would be subject to the
availability of appropriated funds. Enacting S. 1538 would not
affect direct spending or revenues; therefore, pay-as-you-go
procedures do not apply.
CBO estimates that enacting S. 1538 would not increase net
direct spending or on-budget deficits in any of the four
consecutive 10-year periods beginning in 2029.
S. 1538 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act.
The CBO staff contact for this estimate is Stephen Rabent.
The estimate was reviewed by Theresa Gullo, Assistant Director
for Budget Analysis.
VII. EVALUATION OF REGULATORY IMPACT
In compliance with rule XXVI (11)(b) of the Standing Rules
of the Senate, it is the opinion of the Committee that no
significant additional regulatory impact will be incurred in
carrying out the provisions of this legislation. There will be
no additional impact on the personal privacy of companies or
individuals who utilize the services provided.
VIII. SECTION-BY-SECTION ANALYSIS
Section 1. Short title
This section provides the short title for the Act, the
``Small Business Employee Ownership Promotion Enhancement Act
of 2017''.
Sec. 2. SCORE program assistance
This section directs SCORE to appoint an individual to
serve as the SCORE Employee Ownership Director. Their duties
will include offering technical assistance, distributing
materials containing general information, and coordinating
efforts between SCORE chapters nationwide. The Director will
provide technical assistance for employee ownership options,
including employee stock ownership plans, cooperatives, and
other approaches that the Director deems appropriate. The
Director will also provide statistics, including regional
statistics from a SCORE chapter, on services provided to small
businesses that may potentially undertake a form of employee
ownership to the Administrator and the Office of
Entrepreneurial Development.
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