[Congressional Record Volume 164, Number 74 (Tuesday, May 8, 2018)]
[House]
[Pages H3810-H3812]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




               MAIN STREET EMPLOYEE OWNERSHIP ACT OF 2018

  Mr. CHABOT. Mr. Speaker, I move to suspend the rules and pass the 
bill (H.R. 5236) to expand opportunities available to employee-owned 
business concerns through Small Business Administration loan programs, 
and for other purposes, as amended.
  The Clerk read the title of the bill.
  The text of the bill is as follows:

                               H.R. 5236

       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 ``Main Street Employee 
     Ownership Act of 2018''.

     SEC. 2. DEFINITIONS.

       In this Act--
       (1) the terms ``Administration'' and ``Administrator'' 
     means the Small Business Administration and the Administrator 
     thereof, respectively;
       (2) the term ``cooperative'' means an entity that is 
     determined to be a cooperative by the Administrator, in 
     accordance with applicable Federal and State laws and 
     regulations;
       (3) the term ``employee-owned business concern'' means--
       (A) a cooperative in which employees are eligible for 
     membership; and
       (B) a qualified employee trust;
       (4) the terms ``qualified employee trust'' and ``small 
     business concern'' have the meanings given those terms in 
     section 3 of the Small Business Act (15 U.S.C. 632); and
       (5) the term ``small business development center'' means a 
     small business development center described in section 21 of 
     the Small Business Act (15 U.S.C. 648).

     SEC. 3. EXPANSION OF 7(A) LOANS.

       (a) In General.--Section 7(a) of the Small Business Act (15 
     U.S.C. 636(a)) is amended--
       (1) in paragraph (15)--
       (A) in subparagraph (A)--
       (i) by striking ``this subsection to qualified employee 
     trusts'' and inserting ``this subsection--
       ``(i) to qualified employee trusts'';
       (ii) in clause (i), as so designated--

       (I) by inserting ``, and for any transaction costs 
     associated with purchasing,'' after ``purchasing'';
       (II) by striking the period at the end and inserting ``; 
     and''; and

       (iii) by adding at the end the following:
       ``(ii) to a small business concern under a plan approved by 
     the Administrator, if the proceeds from the loan are only 
     used to make a loan to a qualified employee trust, and for 
     any transaction costs associated with making that loan, that 
     results in the qualified employee trust owning at least 51 
     percent of the small business concern.'';
       (B) in subparagraph (B)--
       (i) in the matter preceding clause (i), by inserting ``or 
     by the small business concern'' after ``the trustee of such 
     trust'';
       (ii) in clause (ii), by striking ``and'' at the end;
       (iii) in clause (iii), by striking the period at the end 
     and inserting ``, and''; and
       (iv) by adding at the end the following:
       ``(iv) with respect to a loan made to a trust, or to a 
     cooperative in accordance with paragraph (35)--
       ``(I) a seller of the small business concern may remain 
     involved as an officer, director, or key employee of the 
     small business concern when a qualified employee trust or 
     cooperative has acquired 100 percent of ownership of the 
     small business concern; and
       ``(II) any seller of the small business concern who remains 
     as an owner of the small business concern, regardless of the 
     percentage of ownership interest, shall be required to 
     provide a personal guarantee by the Administration.''; and
       (C) by adding at the end the following:
       ``(F) A small business concern that makes a loan to a 
     qualified employee trust under subparagraph (A)(ii) is not 
     required to contain the same terms and conditions as the loan 
     made to the small business concern that is guaranteed by the 
     Administration under such subparagraph.
       ``(G) With respect to a loan made to a qualified employee 
     trust under this paragraph, or to a cooperative in accordance 
     with paragraph (35), the Administrator may, as deemed 
     appropriate, elect to not require any mandatory equity to be 
     provided by the qualified employee trust or cooperative to 
     make the loan.''; and
       (2) by adding at the end the following:
       ``(35) Loans to cooperatives.--
       ``(A) Definition.--In this paragraph, the term 
     `cooperative' means an entity that is determined to be a 
     cooperative by the Administrator, in accordance with 
     applicable Federal and State laws and regulation.
       ``(B) Authority.--The Administration shall guarantee loans 
     made to a cooperative for the purpose described in paragraph 
     (15).''.
       (b) Delegation of Authority to Preferred Lenders.--Section 
     5(b)(7) of the Small Business Act (15 U.S.C. 634(b)(7)) is 
     amended by inserting ``, including loans guaranteed under 
     paragraph (15) or (35) of section 7(a)'' after ``deferred 
     participation loans''.

     SEC. 4. SMALL BUSINESS INVESTMENT COMPANY PROGRAM OUTREACH.

       The Administrator shall provide outreach and educational 
     materials to companies licensed under section 301(c) of the 
     Small Business Investment Act of 1958 (15 U.S.C. 681(c)) to 
     increase the use of funds to make investments in company 
     transitions to employee-owned business concerns.

     SEC. 5. SMALL BUSINESS MICROLOAN PROGRAM OUTREACH.

       The Administrator shall provide outreach and educational 
     materials to intermediaries under section 7(m) of the Small 
     Business Act (15 U.S.C. 636(m)) to increase the use of funds 
     to make loans to employee-owned business concerns, including 
     transitions to employee-owned business concerns.

     SEC. 6. SMALL BUSINESS DEVELOPMENT CENTER OUTREACH AND 
                   ASSISTANCE.

       (a) Establishment.--The Administrator shall establish a 
     Small Business Employee Ownership and Cooperatives Promotion 
     Program to offer technical assistance and training on the 
     transition to employee ownership through cooperatives and 
     qualified employee trusts.
       (b) Small Business Development Centers.--
       (1) In general.--In carrying out the program established 
     under subsection (a), the Administrator shall enter into 
     agreements with small business development centers under 
     which the centers shall--
       (A) provide access to information and resources on employee 
     ownership through cooperatives or qualified employee trusts 
     as a business succession strategy;
       (B) conduct training and educational activities; and
       (C) carry out the activities described in subparagraph (U) 
     of section 21(c)(3) of the Small Business Act (15 U.S.C. 
     648(c)(3)).
       (2) Additional services.--Section 21(c)(3) of the Small 
     Business Act (15 U.S.C. 648(c)(3)) is amended--
       (A) in subparagraph (S), by striking ``and'' at the end;
       (B) in subparagraph (T), by striking the period at the end 
     and inserting ``; and''; and
       (C) by adding at the end the following:
       ``(U) encouraging and assisting the provision of succession 
     planning to small business concerns with a focus on 
     transitioning to cooperatives, as defined in section 
     7(a)(35), and qualified employee trusts (collectively 
     referred to in this subparagraph as `employee-owned business 
     concerns'), including by--
       ``(i) providing training to individuals to promote the 
     successful management, governance, or operation of a business 
     purchased by those individuals in the formation of an 
     employee-owned business concern;
       ``(ii) assisting employee-owned business concerns that meet 
     applicable size standards established under section 3(a) with 
     education and technical assistance with respect to financing 
     and contracting programs administered by the Administration;
       ``(iii) coordinating with lenders on conducting outreach on 
     financing through programs administered by the Administration 
     that may be used to support the transition of ownership to 
     employees;
       ``(iv) supporting small business concerns in exploring or 
     assessing the possibility of transitioning to an employee-
     owned business concern; and
       ``(v) coordinating with the cooperative development centers 
     of the Department of Agriculture, the land grant extension 
     network, the Manufacturing Extension Partnership, community 
     development financial institutions, employee ownership 
     associations and service providers, and local, regional and 
     national cooperative associations.''.

     SEC. 7. INTERAGENCY WORKING GROUP.

       (a) In General.--Not later than 90 days after the date of 
     enactment of this Act, the Administrator (or a designee of 
     the Administrator) shall coordinate and chair an interagency 
     working group, which shall--
       (1) develop recommendations on how Federal programs can 
     promote, support, and increase the number of employee-owned 
     business concerns;
       (2) ensure coordination with Federal agencies and national 
     and local employee ownership, cooperative, and small business 
     organizations; and
       (3) publish a report on the activities of the interagency 
     working group that is indexed and maintained for public 
     review.
       (b) Meetings.--The interagency working group shall meet at 
     such times as determined necessary by the, but not less than 
     biannually. Such meetings may occur in person or via 
     electronic resources.

     SEC. 8. AMENDMENT TO REPORT TO CONGRESS ON STATUS OF 
                   EMPLOYEE-OWNED FIRMS.

       Section 7(a)(15)(E) of the Small Business Act (15 U.S.C. 
     636(a)(15)(E)) is amended by striking

[[Page H3811]]

     ``Administration.'' and inserting ``Administration, which 
     shall include--
       ``(i) the total number of loans made to employee-owned 
     business concerns that were guaranteed by the Administrator 
     under section 7(a) of the Small Business Act (15 U.S.C. 
     636(a)) or section 502 of the Small Business Investment Act 
     of 1958 (15 U.S.C. 696), including the number of loans made--

       ``(I) to small business concerns owned and controlled by 
     socially and economically disadvantaged individuals; and
       ``(II) to cooperatives in which employees are eligible for 
     membership;

       ``(ii) the total number of financings made to employee-
     owned business concerns by companies licensed under section 
     301(c) of the Small Business Investment Act of 1958 (15 
     U.S.C. 696(c)), including the number of financings made--

       ``(I) to small business concerns owned and controlled by 
     socially and economically disadvantaged individuals; and
       ``(II) to cooperatives in which employees are eligible for 
     membership; and

       ``(iii) any outreach and educational activities conducted 
     by the Administration with respect to employee-owned business 
     concerns.''.

     SEC. 9. REPORT ON COOPERATIVE LENDING.

       (a) Sense of Congress.--It is the sense of Congress that 
     cooperatives have a unique business structure and are unable 
     to access the lending programs of the Administration 
     effectively due to loan guarantee requirements that are 
     incompatible with the business structure of cooperatives.
       (b) Study and Report.--
       (1) Study.--The Administrator, in coordination with 
     lenders, stakeholders, and Federal agencies, shall study and 
     recommend practical alternatives for cooperatives that will 
     satisfy the loan guarantee requirements of the 
     Administration.
       (2) Report.--Not later than 120 days after the date of 
     enactment of this Act, the Administrator shall submit to 
     Congress the recommendations developed under paragraph (1) 
     and a plan to implement such recommendations.

     SEC. 10. AMENDMENT TO DEFINITION OF QUALIFIED EMPLOYEE TRUST.

       Section 3(c)(2)(A)(ii) of the Small Business Act (15 U.S.C. 
     632(c)(2)(A)(ii)) is amended to read as follows:
       ``(ii) which provides that each participant is entitled to 
     direct the plan trustee as to the manner of how to vote the 
     qualified employer securities (as defined in section 
     4975(e)(8) of the Internal Revenue Code of 1986), which are 
     allocated to the account of such participant with respect to 
     a corporate matter which (by law or charter) must be decided 
     by a vote conducted in accordance with section 409(e) of the 
     Internal Revenue Code of 1986; and''.

  The SPEAKER pro tempore. Pursuant to the rule, the gentleman from 
Ohio (Mr. Chabot) and the gentlewoman from New York (Ms. Velazquez) 
each will control 20 minutes.
  The Chair recognizes the gentleman from Ohio.


                             General Leave

  Mr. CHABOT. Mr. Speaker, I ask unanimous consent that all Members may 
have 5 legislative days within which to revise and extend their remarks 
and include extraneous material on the bill under consideration.
  The SPEAKER pro tempore. Is there objection to the request of the 
gentleman from Ohio?
  There was no objection.
  Mr. CHABOT. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, ownership structures of businesses come in numerous 
shapes and sizes. Whether they follow a traditional model or an 
employee-owned structure, small businesses across the Nation continue 
to face a difficult lending environment.
  Although the SBA bridges the gap for many of the Nation's small 
firms, 100-percent-employee-owned firms face uncertainty as they 
navigate the SBA's 7(a) Loan Program.
  To strengthen the 7(a) Loan Program for employee-owned small 
businesses and worker cooperatives, Ranking Member Velazquez introduced 
H.R. 5236, the Main Street Employee Ownership Act of 2018.
  In order to provide clarity for program participants, H.R. 5236 would 
update reporting statistics to ensure accurate data is captured.
  The bill also codifies ownership transition plans.
  Additionally, H.R. 5236 requires the SBA's resource partners to have 
educational material available to explain the nuances of these uniquely 
structured businesses.
  Although the requirements for personal guarantees within the 7(a) 
Loan Program prove challenging to some of these business structures, 
H.R. 5236 importantly preserves this hallmark and requires the SBA to 
work with industry representatives to develop ways to satisfy the 
guarantee while reducing its burdens.
  Employee-owned small businesses are an important part of the small 
business ecosystem. We must continue to streamline the processes and 
procedures in place at the SBA for all small businesses. H.R. 5236, Ms. 
Velazquez's legislation, is a step in the right direction that provides 
clarity for employee-owned small businesses and worker cooperatives.
  Mr. Speaker, I want to thank the ranking member, Ms. Velazquez, who 
has spearheaded this legislation.
  I urge my colleagues to vote ``yes'' on H.R. 5236, and I reserve the 
balance of my time.
  Ms. VELAZQUEZ. Mr. Speaker, I yield myself such time as I may 
consume.
  Mr. Speaker, I rise in support of H.R. 5236, the Main Street Employee 
Ownership Act, a commonsense measure to improve SBA's lending and 
training programs to enable employees to purchase the companies they 
work for.
  As baby boomers near retirement, the country faces a substantial 
dilemma: Roughly half of privately held companies are owned by baby 
boomers, and fewer than 15 percent have a formal exit plan in place. 
And while it is wonderful to think that family members will take over 
the business, this is a relatively rare occurrence. Some will be bought 
out; others will close. This will have significant secondary economic 
impacts that will ripple through our local communities.
  Mr. Speaker, I have been working with Senator Gillibrand's office to 
help address this looming problem.
  The bill before us will reward workers and invest in our Main Street 
economy by improving the lending landscape for employee-owned 
businesses, such as employee stock ownership plans and co-ops.
  There are 7,000 such companies in existence all over the Nation, 
contributing to our local communities and economies. However, 
businesses seeking to transition to employee-owned status face 
difficulty in obtaining adequate capital to cover the oftentimes 
prohibitive costs.
  The SBA was authorized to loan to ESOPs in 1979. Unfortunately, this 
tool has rarely been used due to misunderstanding of the business 
structure and cumbersome transition requirements.
  This bill seeks to align common industry practices with SBA protocols 
to encourage more lending to ESOPs and co-ops. By codifying current SBA 
standards of practice and easing some burdensome guarantee 
restrictions, it is my hope we will keep local enterprises in their 
communities, saving jobs along the way and preventing economic 
dislocation for many workers.
  Mr. Speaker, I urge Members to support this legislation, and I 
reserve the balance of my time.
  Mr. CHABOT. Mr. Speaker, I reserve the balance of my time.
  Ms. VELAZQUEZ. Mr. Speaker, I yield 2 minutes to the gentleman from 
Colorado (Mr. Polis).
  Mr. POLIS. Mr. Speaker, I thank the gentlewoman from New York for 
yielding me time.
  Mr. Speaker, I rise in support of H.R. 5236, the Main Street 
Employment Act of 2018, that will help employee-owned companies.
  Employee ownership is an important part of helping workers build 
wealth. In addition to the income gap in this country, we also have a 
wealth gap. When a company does well, everybody should do well, not 
just the investors.
  This bill helps promote employee-owned businesses by making changes 
to the Small Business Administration's loan program that helps 
employee-owned businesses access capital. It is currently a barrier in 
the rules that actually gives a disadvantage to employee-owned 
businesses, when, as a society, as a Nation, we should be encouraging 
employee ownership.
  The SBA Loan Guarantee Program is often the only financing that many 
small businesses can get early on to get off the ground. This bill 
would open up SBA lending for cooperatives, which we often call co-ops, 
and also strengthens the lending program for ESOPs, which is another 
form of employee-owned company.
  There is a very successful ESOP in the district I am honored to 
represent called New Belgium Brewery that makes among the best beer in 
the world.

  This bill also creates a small business employee ownership and 
cooperative program, which helps employers and employees understand how 
to create employee-owned businesses, providing some of the help for 
succession planning, coordinating with other programs

[[Page H3812]]

to help employee-owned businesses succeed.
  Employee-owned businesses are anchor businesses in our communities. 
They provide good, stable jobs and help employees build value and 
wealth over time and participate in the governance of the company. They 
align the incentives of workers with owners and management and are good 
for overall economic productivity as well.
  This bill builds on the bipartisan language that I helped secure in 
the omnibus appropriations bill directing the SBA to encourage employee 
ownership. Passing this bill will make those changes in the 1-year 
spending bill that expires September 30 permanent.
  Mr. Speaker, I encourage all Members to support this very important 
piece of bipartisan legislation.
  Ms. VELAZQUEZ. Mr. Speaker, I yield myself the balance of my time.
  Mr. Speaker, there is no question that we need to support our Main 
Street small businesses, especially those that fall outside of 
traditional business structures. H.R. 5236 does just that by requiring 
more training and clarifying lending protocols.
  Today's bill is endorsed by at least 25 organizations, including 
America's SBDCs, the American Sustainable Business Council, the 
Association for Enterprise Opportunity, ESCA, and a variety of co-ops 
and employee-owner associations.
  Mr. Speaker, I would like to thank Justin Pelletier and Jon Cardinal 
for their tireless work on this complex topic.
  Mr. Speaker, I urge Members to support this bill, and I yield back 
the balance of my time.
  Mr. CHABOT. Mr. Speaker, I yield myself such time as I may consume.
  Mr. Speaker, I will conclude by saying that employee-owned businesses 
really populate the streets and neighborhoods of many cities across 
this Nation. They are unique in form but face many of the same hurdles 
that other small businesses face.
  H.R. 5236 streamlines how employee-owned businesses operate under the 
important rules of the SBA 7(a) Loan Program. While preserving 
important characteristics of the program, H.R. 5236 will help employee-
owned businesses as they seek capital to grow, expand, and create much-
needed jobs.
  Mr. Speaker, I want to again thank and commend the ranking member, 
Ms. Velazquez, for her leadership on this legislation.
  I would urge my colleagues to support H.R. 5236, and I yield back the 
balance of my time.
  The SPEAKER pro tempore (Mr. Hill). The question is on the motion 
offered by the gentleman from Ohio (Mr. Chabot) that the House suspend 
the rules and pass the bill, H.R. 5236, as amended.
  The question was taken; and (two-thirds being in the affirmative) the 
rules were suspended and the bill, as amended, was passed.
  A motion to reconsider was laid on the table.

                          ____________________