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Mini-cast 92: Federal ESOP Legislation Proposed

Bret Keisling discusses legislation proposed by Sen. Ron Johnson (R-WI) that would provide grants to new or expanding ESOPs. Also, a heartfelt thanks to all of our guests and listeners as we celebrate surpassing 50,000 total listens to our podcast and mini-cast episodes.

You can read the full text of the proposed legislation here.


Mini-cast 92 Transcript

Announcer: 00:03 Welcome to the ESOP Mini-cast, a great way to wrap up the week.

Bret Keisling: 00:13 Hello, my friends. Thank you for listening. My name is Bret Keisling and as it says on my business cards, I'm a passionate advocate for employee ownership. There's exciting ESOP news out of Washington, DC as earlier this week, Wisconsin, Senator Ron Johnson introduced legislation titled "The Temporary Federal ESOP Program" [Correction: "Temporary Federal ESOP Grant Program Act"]. We'll spend a few minutes today talking about the proposed legislation and what it will do, and won't do.

Bret Keisling: 00:40 First, I want to take a moment and share some very exciting news for us here at the podcast. As this episode is being released on July 24th, 2020, we've exceeded 50,000 total listens to The ESOP podcast and Mini-cast since we began in September, 2017. I'm extremely excited and proud to reach this important milestone and I'm very grateful to the team members past and present who've helped produce two podcast episodes every week for almost three years. I'm also very grateful for the dozens of employee owners and EO professionals, practitioners, and advocates who have appeared as guests on the podcast. And we certainly know we wouldn't have reached this milestone without you, the listener. So thank you for your continued support. We can't wait to hit a hundred thousand listens and continue to bring you all of the stories and news that help support and promote employee ownership and ESOPs. So again, thank you so much for listening and helping us reach this milestone.

Bret Keisling: 01:42 Now back to Washington DC; Senator Ron Johnson, who's a Republican from Wisconsin has been a long time supporter of employee ownership. Wisconsin, as you may know, has a very strong history of promoting employee ownership and ESOPs and it's also the home to our very talented friends at ESOP Partners. Now, if enacted, the temporary federal ESOP program would provide funding to companies that either create or expand an ESOP. So this particular program would not apply to non-ESOP forms of employee ownership or to companies that are already 100% ESOP.

Bret Keisling: 02:19 For companies that do qualify, however, the legislation would provide significant financial incentives to create or expand its ESOP. Companies are eligible to receive grants in the amount of $20,000 per employee owner as well as $50,000 towards the cost of an ESOP transaction.

Bret Keisling: 02:36 As you're probably aware, when an ESOP is formed or expanded the company has to have the ability to buy shares from selling shareholders. Obviously the funds used to pay for the shares can't be used for any other purpose. Under the temporary federal ESOP program, the grant would provide the funds to pay for the shares. It would also require the company to use an amount equal to the grant for capital investment in or replacement and maintenance of fixed assets, including manufacturing equipment and tools, computers, land, buildings, facilities, health, and safety equipment, and other similar investments. The $20,000 grant is for each employee who either becomes a new participant in the creation of an ESOP or whose current ownership share increases as a result of the grant.

Bret Keisling: 03:26 This is a really smart structure. Let's say an ESOP has 100 employees. If they receive a full grant totaling $2 million that's required to be used in capital investment then there's a direct correlation between these funds and an increase in value. Simply put, if an ESOP can use $2 million in federal money to make capital investments, then the share values, and as a result, the total participants' shares, should increase by that approximately same $2 million number. This is a wonderful opportunity for again, either partial ESOPs or companies creating an ESOP for the first time. It's also likely to have more of an effect in relatively smaller companies. If a partial ESOP has a value of a hundred million dollars, for example, with 100 employees, I'm not sure the $2 million grant would create that much of an incentive. But for smaller companies where the amount of the grant is a higher percentage of the company's value, then this program, if enacted, could lead to a flurry of ESOP transactions. Let's hope so.

Bret Keisling: 04:31 Now the reality is that the legislation was just introduced and as near as I can tell has not even been assigned to committees nor have I seen any announcements of co-sponsors. So we'll keep track of the legislation as it goes through Congress and keep you up to date. And like many in the EO community, I'm really pleased that ESOPs are appearing once again in Congress.

Bret Keisling: 04:54 With that, we'll wrap up today's episode. Thank you again so much for listening and being one of our original 50,000 listeners. I hope you take care of yourself and those around you during these very challenging times. We're in this together and we're going to get through it together. This is Bret Keisling have a great day.

Bitsy McCann: 05:15 We'd love to hear from you! To contact us, find us on Facebook at KEISOP, LLC and on Twitter @ESOPPodcast. To reach Bret, with one "T", email, on LinkedIn at Bret Keisling, and most actively on Twitter at @EO_Bret. Again, that's one "T". This podcast has been produced by The KEISOP Group, technical assistance provided by Third Circle, Inc. and BitsyPlus Design. Original music composed by Max Keisling, archival podcast material edited and produced by Brian Keisling, and I'm Bitsy McCann.

Standard Disclaimer: The views expressed herein are my own and don't represent those of my own firms or the organizations to which I belong. Nothing in the podcast should be construed as guidance or advice of any kind in any field and the fact that I mentioned an organizational website or an advocate or a company on a podcast does not reflect an endorsement, but if you've heard your name or your group's name mentioned on this podcast, I'd love to have you come on and talk about it yourself.

A note on the transcript: This transcript was produced by Temi, an automated transcription service. While it has been reviewed by The ESOP Podcast, we can not guarantee the accuracy of the transcription. Please refer to the original audio when citing sources.


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