Empowering Employees Through Stock Ownership Act

Floor Speech

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Mr. POLIS. Mr. Speaker, I want to thank Rep. Paulsen and Rep. Crowley for bringing H.R. 5719, the Empowering Employees through Stock Ownership Act, to the floor. This is important legislation that will help start-ups attract and retain employees by allowing employees to obtain an ownership stake in those companies without facing cost- prohibitive tax bills.

Often, privately held start-ups provide employees stock ownership options as part of their compensation package. Under current law, employees that receive company shares as part of their compensation package must pay the taxes on the value of those shares taxes immediately, long before the employees realize the economic benefit of those shares.

This bill would allow employees to defer the tax on stock shares that companies provide employees as part of their compensation package for seven years or until the company can sell their stock on publically traded exchanges. Additionally, it would increase access to company equity for lower-wage earners.

Studies have shown that closely held companies that combine employee ownership with employee workplace participation programs have a positive impact on employee productivity and improve overall company performance.

Employees working for businesses in my district such as Neighborland and hobbyDB--both located in Boulder--have expressed their support for this bill and will be able to take advantage of its tax benefits.

Other types of employee-ownership models have helped businesses have a higher growth rate and stay in business. Employee-ownership models are good for the company, the employees, and the community.
In Colorado, there are approximately 118 businesses that use employee-owned businesses that promote employee ownership through stock option plans or ESOPs.

A good example of a successful ESOP is Fire Safety Services. The owner, Jeff wanted to be able to offer his employees a stake in the business and converted his business to an ESOP. This allowed him to create a succession plan so the business can remain locally owned. Jeff noted that after the conversion, employee morale was up and sales were up.

The New Belgium Brewery, located in Ft. Collins is also an ESOP. From the perspective of the employees, New Belgium has a culture of personal and collective growth--the employees are concerned about the professional growth of their colleagues and also have a vested stake in the management and economic health of the company.

The bill before us will make it easier for employees in other privately-held companies to participate in the growth of their company.

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