Promotion and Expansion of Private Employee Ownership Act of 2025
The Promotion and Expansion of Private Employee Ownership Act of 2025 aims to expand private employee ownership by making it easier for S-corporation businesses to adopt employee stock ownership plans (ESOPs), accelerating and broadening tax rules that support selling stock to ESOPs, and creating new government offices and roles to promote and assist employee ownership. Key changes include extending and broadening tax deferral for sellers who sell employer stock to ESOPs at S-corporations, establishing a Treasury office to assist S-corp ESOPs, updating Small Business Act rules to treat ESOP-owned businesses more favorably for eligibility, and creating an Advocate for Employee Ownership within the Department of Labor to coordinate outreach, education, and dispute resolution. The bill also explicitly emphasizes preserving and expanding employee ownership in S corporations as a national priority. In short, if enacted, the bill would (1) make ESOPs more affordable and easier to use in S-corporations, (2) ensure continued small-business eligibility when ESOPs own a large share, and (3) add a new federal advocate and office to support employee ownership nationwide.
Key Points
- 1Full deferral of tax for certain sales to ESOPs in S corporations; accelerate and broaden tax rules
- 2- Replaces a prior deadline for full tax deferral with the date of enactment, and removes a limitation in current law (1042) that previously restricted deferral, applying to sales after enactment.
- 3- This means more sellers of employer stock to ESOPs in S-corporations could defer taxes fully, without previously existing timing or limitation constraints.
- 4Treasury establishes a dedicated S Corporation Employee Ownership Assistance Office
- 5- Within 90 days of enactment, the Secretary of the Treasury must create this office to promote employee ownership in S-corporations.
- 6- Responsibilities include educating companies and individuals about ESOPs and providing technical assistance to help S corporations sponsor ESOPs.
- 7Small Business Act updated to recognize ESOPs and protect eligibility
- 8- Creates a new ESOP-specific section and defines what constitutes an ESOP business concern.
- 9- Ensures ESOP participants are treated as directly owning their share when determining eligibility for SBA programs, so ESOP-owned firms can still access loans and other benefits.
- 10- Effective date: January 1 of the first calendar year after enactment.
- 11Advocate for Employee Ownership created within the Department of Labor
- 12- A new Advocate for Employee Ownership will be appointed to lead outreach, education, and coordination across federal agencies and with states.
- 13- Duties include resolving disputes with the Department of Labor related to ESOPs, coordinating with Treasury and SBA, and issuing annual reports on progress and barriers to employee ownership.
- 14- Compensation tied to a high-level federal pay scale; annual reports required; public availability of reports.
- 15Overall policy goal and findings
- 16- The bill frames ESOPs in S corporations as a meaningful path to broad-based retirement savings and job stability, with the aim of preserving and expanding employee ownership across industries.