U.S. Sen. Thom Tillis (R-NC) and U.S. Rep. Mike Kelly (R-PA) offered bipartisan and bicameral legislation on Tuesday that would provide support to small businesses by allowing them to offer Employee Stock Ownership Plans (ESOPs) to their workers.
Offering ESOPs to thousands of U.S. employees would add value to corporate equity, improve employee retention and facilitate small business growth, the senator’s office said. However, Internal Revenue Service (IRS) regulations currently limit the ability of public companies traded on non-exchange markets to offer ESOPs to their workers.
“The current limitations placed on certain small businesses by not allowing them to offer employees ownership is costly to both businesses and employees,” said Sen. Tillis. “This bipartisan legislation would change the law to ensure we allow these qualified small businesses to offer their employees a stake in the company they work for.”
On Feb. 11, Sen. Tillis introduced the bipartisan ESOP Fairness Act, S. 3270, with U.S. Sen. Gary Peters (D-MI). In the U.S. House, U.S. Rep. Brian Higgins (D-NY) sponsored H.R. 5851 with Rep. Kelly signing on as the original cosponsor.
For ESOP purposes, public companies quoted on non-exchange markets must treat their stock as “private,” and outdated regulations require those companies to establish the value of their securities through an independent appraisal, a statement from Sen. Tillis’ office said.
The legislation would update the meaning of “established securities market,” the statement said, and if enacted would allow hundreds of companies to offer ESOPs to employees.
“The fast path to financial prosperity for working Americans is through ownership of property and businesses,” said Rep. Kelly. “We can make a difference right now by allowing small and medium-sized businesses to include employee ownership stake in their compensation. It’s a no-brainer, a win-win, and we can do it right now by passing this bipartisan plan.”