Promotion and Expansion of Private Employee Ownership Act of 2025
- Sponsor
- Sen. Daines, Steve [R-MT]
- Committees
- Finance Committee (primary)
- Last action
- Jul 24, 2025
Bottom line
The bill aims to substantially boost employee ownership in S corporations by removing key financial and administrative barriers, thereby fostering retirement savings and strengthening small businesses.
What it actually does
This bill significantly expands the availability and attractiveness of Employee Stock Ownership Plans (ESOPs) for S corporations. It accelerates and removes limitations on tax deferrals for S corporation owners selling to ESOPs, establishes new technical assistance offices within the Treasury and Labor Departments, and ensures that small businesses transitioning to majority ESOP ownership retain their eligibility for Small Business Administration programs.
Proponents argue
Supporters argue that this legislation will empower more American workers with ownership stakes in their companies, leading to greater job stability, increased retirement savings, and a dignified retirement. They contend that by removing disincentives and providing crucial support, the bill will facilitate business succession for retiring owners and strengthen the economy through a more engaged workforce.
Opponents contend
While the bill enjoys broad bipartisan support, potential critics might raise concerns about the fiscal impact of expanded tax deferrals, arguing that it could lead to significant federal revenue loss or disproportionately benefit wealthy business owners. Some might also question the efficiency of establishing new federal offices rather than leveraging existing resources.
The bill is concise and clearly structured, making it accessible for an informed reader to evaluate its provisions within a reasonable timeframe.
Section 3
Accelerate and Expand Tax Deferral for ESOP Sales
This section amends the SECURE 2.0 Act of 2022 to accelerate the effective date for full tax deferral on sales of employer stock to S corporation ESOPs to the date of enactment. Crucially, it also repeals subsection (h) of Section 1042 of the Internal Revenue Code, which previously limited the amount of gain that could be deferred. This makes it significantly more financially attractive for owners of S corporations to sell their businesses to an ESOP by allowing them to defer all capital gains tax on such sales.
Supporters argue
Supporters argue this provision removes a significant financial barrier for business owners considering selling to an ESOP, thereby encouraging more employee-owned businesses and increasing retirement savings opportunities for workers.
Critics contend
Critics might argue that this provision could lead to substantial federal tax revenue loss, potentially benefiting wealthy business owners through tax deferral without sufficient oversight, and could be seen as a costly tax expenditure.
Tradeoffs
This provision balances the goal of promoting employee ownership and providing business succession options with potential impacts on federal tax revenue through expanded deferrals.
Section 4
Establish S Corporation Employee Ownership Assistance Office
This section mandates the Secretary of the Treasury to establish an S Corporation Employee Ownership Assistance Office within 90 days of the bill's enactment. The new office will be responsible for providing education and outreach to inform companies and individuals about the possibilities and benefits of employee ownership in S corporations, as well as offering technical assistance to S corporations in sponsoring ESOPs.
Section 5
Preserve Small Business Eligibility for ESOP-Owned Concerns
This section amends the Small Business Act to ensure that a business concern that was previously eligible as a small business does not lose that status solely because an ESOP acquires more than 49 percent of its ownership. It clarifies that for purposes of determining small business qualification for loans, preferences, or other programs, each ESOP participant shall be treated as directly owning their proportionate share of the stock in the ESOP business concern.
Section 6
Create Advocate for Employee Ownership within Department of Labor
This section amends the Employee Retirement Income Security Act of 1974 (ERISA) to establish an Advocate for Employee Ownership within the Department of Labor's Employee Ownership Initiative. The Advocate will serve as a liaison, provide public education and assistance, help resolve disputes with the DOL, recommend legislative and administrative changes to increase employee ownership, and coordinate with other federal and state agencies. The Advocate is also required to submit annual reports to Congress on their activities and recommendations.