House Members Introduce Pro-ESOP Legislation

On March 29, Congressman Ron Kind (D-WI) introduced the "Promotion and Expansion of Private Employee Ownership Act of 2011." The bill is cosponsored by Reps. David G. Reichert (R-WA), Charles W. Boustany, Jr. (R-LA), Earl Blumenauer (D-OR), Erik Paulsen (R-MN), and Bill Pascrell (D-NJ).

The bill would:

• allow owners of stock in an S corporation to have the same opportunity as owners of C corporation stock currently have to defer taxation on gains made from the sale to a qualifying ESOP;
• permit lenders to S corporations with 50% or more ownership through an ESOP to exclude 50% of the interest from the loan if used to acquire stock for the ESOP;
• set up an office in the Department of the Treasury to provide technical assistance to S corporations with ESOPs; and
• provide that companies that are 50% or more owned by an ESOP that were previously qualified under one of the various Small Business Administration set-aside programs (the most important of these are for minority- and woman-owned companies) to continue to qualify if, after the ESOP gaining 50% or more ownership, the workforce remains substantially the same.

Similar legislation has been introduced in prior Congresses. While bills such as these rarely pass as is, elements can be incorporated into larger tax bills.