SB 478 — An Act establishing the Office of Employee Ownership within the Department of Community and Economic Development; establishing the Employee Ownership Advisory Board; establishing the Main Street Employee Ownership Grant Program; and providing technical and financial assistance to employee-owned enterprises.

PRINTER'S NO.   441

                   THE GENERAL ASSEMBLY OF PENNSYLVANIA



                        SENATE BILL
                        No. 478
                                                Session of
                                                  2025

     INTRODUCED BY FARRY, PENNYCUICK, FONTANA, LAUGHLIN, TARTAGLIONE,
        KEARNEY, STEFANO AND PISCIOTTANO, MARCH 20, 2025

     REFERRED TO COMMUNITY, ECONOMIC AND RECREATIONAL DEVELOPMENT,
        MARCH 20, 2025


                                   AN ACT
 1   Establishing the Office of Employee Ownership within the
 2      Department of Community and Economic Development;
 3      establishing the Main Street Employee Ownership Grant
 4      Program; and providing technical and financial assistance to
 5      employee-owned enterprises.
 6      The General Assembly of the Commonwealth of Pennsylvania
 7   hereby enacts as follows:
 8   Section 1.   Short title.
 9      This act shall be known and may be cited as the Employee
10   Ownership Assistance Program Act.
11   Section 2.   Definitions.
12      The following words and phrases when used in this act shall
13   have the meanings given to them in this section unless the
14   context clearly indicates otherwise:
15      "Department."   The Department of Community and Economic
16   Development of the Commonwealth.
17      "Employee-owned enterprise."     One of the following:
18          (1)   A business that meets all of the following
19      conditions:
 1              (i)    The business is organized as:
 2                     (A)   an eligible worker-owned cooperative as
 3              defined under 26 U.S.C. § 1042 (relating to sales of
 4              stock to employee stock ownership plans or certain
 5              cooperatives); or
 6                     (B)   a corporation in which the employees own the
 7              stock of the corporation through an employee stock
 8              ownership plan, within the meaning of 26 U.S.C. §
 9              4975(e)(7) (relating to tax on prohibited
10              transactions).
11              (ii)    The following apply to voting rights and shares
12        of the business:
13                     (A)   A majority of the voting rights of the
14              business are held by employees and all employees who
15              have stock allocated to them are entitled to vote.
16                     (B)   Shares of the business are voted in such a
17              manner that the vote of the majority of the employees
18              of the business controls the vote of the majority of
19              shares.
20                     (C)   Voting rights on corporate matters for
21              shares held in a trust for the employees of the
22              business shall pass through to those employees, at
23              least to the extent required by the pass-through
24              voting requirements under 26 U.S.C. § 864(c)(4)(D)
25              (relating to definitions and special rules).
26              (iii)    The majority of the members of the board of
27        directors of the business are elected by the employees.
28        (2)   A business that is organized in a manner determined
29    by the secretary to involve substantial employee
30    participation.

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 1            (3)   An employee-ownership trust.
 2      "Employee-ownership group."      A corporation or other entity,
 3   including a labor union formed by or on behalf of the current or
 4   former employees of an industrial or commercial firm or facility
 5   located in this Commonwealth for the purpose of assuming
 6   ownership or control of the firm or facility and operating it as
 7   an employee-owned enterprise.
 8      "Employee-ownership trust."      Company stock or profit sharing
 9   being held by a trustee on behalf of the company's employees
10   with employees receiving a percentage of ongoing profits or
11   401(k) retirement plans throughout employment without receiving
12   an equity stake in the company.
13      "Local administrative agency."        An organization that enters
14   into a written agreement with the department to administer
15   technical and financial assistance under this act, including:
16            (1)   A municipality.
17            (2)   A local development district of the Appalachian
18      Regional Commission.
19            (3)   A certified economic development organization
20      certified by The Pennsylvania Industrial Development
21      Authority under 64 Pa.C.S. § 1123 (relating to certification
22      of economic development organizations).
23            (4)   A nonprofit economic development organization
24      designated by the secretary.
25      "Office."     The Office of Employee Ownership established under
26   section 3(a).
27      "Secretary."     The Secretary of Community and Economic
28   Development of the Commonwealth.
29   Section 3.     Office of Employee Ownership.
30      (a)   Establishment and purpose.--

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 1            (1)   The Office of Employee Ownership is established in
 2      the department.
 3            (2)   The office shall:
 4                  (i)    Serve as an advocate for improving government
 5            knowledge and support for well-designed, broad-based
 6            profit-sharing and ownership stakes.
 7                  (ii)    Increase awareness of how agency programs
 8            affect companies with profit-sharing and ownership stake
 9            programs.
10                  (iii)    Promote legislative or regulatory changes
11            necessary to ensure that government policies encourage
12            the adoption of existing and emerging sharing programs.
13      (b)   Gubernatorial appointment.--The Governor shall appoint
14   an employee ownership advocate. The employee ownership advocate
15   shall be an individual who by reason of training, experience or
16   attainment is qualified to represent the interest of employee-
17   owned enterprises. The following apply to the employee ownership
18   advocate:
19            (1)   No individual who serves as an employee ownership
20      advocate shall, while serving in the position, engage in any
21      business, vocation or other employment, or have other
22      interests, inconsistent with the individual's official
23      responsibilities.
24            (2)   The individual serving as an employee ownership
25      advocate may not seek or accept employment or render
26      beneficial services for compensation with any person or
27      corporation, as defined in 66 Pa.C.S. § 102 (relating to
28      definitions), during the tenure of the appointment and for a
29      period of two years after the appointment is served or
30      terminated.

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 1            (3)   An individual who is appointed to the position of
 2      employee ownership advocate may not seek election or accept
 3      appointment to any public office during the tenure as the
 4      employee ownership advocate and for a period of two years
 5      after the appointment is served or terminated.
 6            (4)   The employee ownership advocate shall oversee the
 7      office and the programs established in this act.
 8      (c)   Duties.--The office shall aid and guide businesses on
 9   the benefits and formation of an employee-owned enterprise by
10   providing outreach, education and technical assistance. The
11   office shall:
12            (1)   Establish a robust and wide-reaching network of
13      technical support for businesses wishing to convert to
14      employee-owned enterprises.
15            (2)   Prepare and make publicly accessible in print and on
16      the office's publicly accessible Internet website information
17      to educate and guide business owners and employees in this
18      Commonwealth on the benefits and formation of employee-owned
19      enterprises.
20            (3)   Educate businesses and communities across this
21      Commonwealth on the economic and community benefits of
22      employee-owned enterprises.
23            (4)   Identify barriers to the development and advancement
24      of employee-owned enterprises and recommend State actions and
25      resources to remove barriers.
26            (5)   Gather and maintain statistics on all employee-owned
27      enterprises in place across this Commonwealth.
28            (6)   Evaluate and submit a report by December 31 of each
29      year to the Community, Economic and Recreational Development
30      Committee of the Senate and the Commerce Committee of the

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 1      House of Representatives. Each report must include:
 2                  (i)    The results of the office's efforts, impacts and
 3            benefits.
 4                  (ii)    A list of all employee-owned enterprises in
 5            this Commonwealth and the counties in which the employee-
 6            owned enterprises are located.
 7                  (iii)    Recommendations on the most effective
 8            utilization of Commonwealth funding to encourage the
 9            formation of employee-owned enterprises.
10                  (iv)    Other information deemed necessary by the
11            employee ownership advocate.
12            (7)   Select and fund a Pennsylvania 501(c)(3) nonprofit
13      organization defined under 26 U.S.C. § 501(c)(3) (relating to
14      exemption from tax on corporations, certain trusts, etc.)
15      with well-established knowledge of employee-owned enterprises
16      to work with the office and the department to ensure the
17      execution requirements under this act.
18   Section 4.     Technical and financial assistance program.
19      The office shall establish a technical and financial
20   assistance program to promote the development of employee-owned
21   enterprises.
22   Section 5.     Technical assistance.
23      (a)   Authorization to allocate money.--The office may
24   allocate or distribute money to local administrative agencies
25   for the purpose of providing grants and loans to employee-
26   ownership groups in industrial facilities and commercial
27   facilities, as those terms are defined in section 3 of the act
28   of August 23, 1967 (P.L.251, No.102), known as the Economic
29   Development Financing Law, for technical assistance to develop
30   or improve an employee-owned enterprise.

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 1      (b)   Eligibility.--
 2            (1)   An employee-ownership group shall be eligible for
 3      assistance if the employees in the employee-ownership group
 4      are employed by, formerly employed by or affiliated with one
 5      of the following:
 6                  (i)    An existing firm facing a threat of substantial
 7            layoffs or a plant closing and investigating a
 8            reorganization of all or some portion of the firm's
 9            business activity, at sites located within this
10            Commonwealth, as an employee-owned enterprise.
11                  (ii)    An existing firm, not necessarily facing a
12            threat of substantial layoffs or a plant closing but
13            considering a conversion to an employee-owned enterprise
14            and seeking professional services to accomplish the
15            conversion if conversion to employee ownership will
16            create new jobs or retain existing jobs at sites in this
17            Commonwealth.
18                  (iii)    An existing firm which currently has some form
19            of employee ownership and requires professional services
20            to ensure success of the employee-owned enterprise in the
21            effort to create new jobs or retain existing jobs at
22            sites in this Commonwealth.
23            (2)   For purposes of this subsection, the term "existing
24      firm" shall include an ongoing concern, the assets of an
25      existing company or the assets of a company that has been
26      closed for no more than one year as of the date of
27      application for the feasibility study loan.
28      (c)   Use of awarded money.--An employee-ownership group may
29   be awarded sums of money for the following purposes:
30            (1)   Feasibility studies to investigate a reorganization

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 1      or new incorporation as an employee-owned enterprise. At a
 2      minimum, the feasibility study shall:
 3                  (i)    Assess the market value and demand for the
 4            product produced by the plant affected by the closing or
 5            layoff.
 6                  (ii)    Assess the market value and demand for other
 7            products that could be manufactured or assembled at the
 8            plant affected by the closing or layoff.
 9                  (iii)    Evaluate the production costs to be incurred
10            if the plant were to be operated by the employee-
11            ownership group.
12                  (iv)    Determine whether there exists in the affected
13            area and in the employee-ownership group the desire and
14            capacity to create a new production entity and to become
15            competitive.
16            (2)   Professional services to implement a feasibility
17      study and other professional services to develop or ensure
18      the success of an employee-owned enterprise.
19      (d)   Repayment of awarded money.--Money awarded to an
20   employee-ownership group under subsection (c) is subject to the
21   following repayment conditions:
22            (1)   If the enterprise studied is purchased or improved
23      by the employee-ownership group, the sum of money awarded
24      will constitute a loan and the employee-ownership group shall
25      repay the entire amount of the loan, with interest, in a lump
26      sum at the closing of the purchase of the company or within
27      one year after the date of the release of the loan by the
28      office, whichever occurs later. The amount of the loan repaid
29      shall be returned to the office for the purpose of issuing
30      additional loans. The interest paid on the loan shall be used

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 1      by the office for administrative costs associated with
 2      administering this act.
 3            (2)   If the enterprise studied is not purchased by the
 4      employee-ownership group within one year after the completion
 5      of the feasibility study, the applicant shall submit a final
 6      report concerning the feasibility of repaying the awarded
 7      money.
 8            (3)   The office shall evaluate the employee-ownership
 9      group's final report under paragraph (2) to determine if
10      repayment is feasible. If the office determines that the
11      employee-ownership group is unable to repay the sum of
12      awarded money, the amount of money that was awarded to the
13      employee-ownership group will constitute a grant. If the
14      office determines that the employee-ownership group is able
15      to repay some or all of the money awarded, the amount of
16      money that was awarded to the employee-ownership group will
17      constitute a loan.
18      (e)   Other conditions.--
19            (1)   The applicant shall provide evidence that there is a
20      prospect for recovery and future job growth or job retention
21      in applications under subsection (b)(1)(i) or a substantial
22      prospect of job growth or job retention in applications under
23      subsection (b)(1)(ii) and (iii).
24            (2)   Maximum State participation shall be 50% of the
25      total cost of the technical assistance and the maximum loan
26      size shall be $100,000.
27   Section 6.     Financial assistance.
28      (a)   Authorization to allocate funds.--The office may
29   allocate or distribute money to local administrative agencies
30   for the purpose of providing loans and loan guarantees to

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 1   employee-owned enterprises reorganizing industrial facilities,
 2   manufacturing facilities and agricultural enterprises as defined
 3   in section 3 of the act of May 17, 1956 (1955 P.L.1609, No.537),
 4   known as the Pennsylvania Industrial Development Authority Act,
 5   for the development of employee-owned enterprises.
 6      (b)   Eligibility.--
 7            (1)   Eligibility for assistance shall be limited to an
 8      employee-ownership group reorganizing an existing enterprise
 9      which is facing a threat of substantial layoffs or a plant
10      closing and adequate private financing is not available.
11            (2)   For purposes of this subsection, the term "existing
12      enterprise" includes an ongoing concern, the assets of an
13      existing company or the assets of a company which has been
14      closed for no more than one year as of the date of completion
15      of a feasibility study.
16      (c)   Use of assistance.--Eligible project costs shall include
17   land and buildings, machinery and equipment and working capital
18   secured by accounts receivable and inventory.
19      (d)   Debt instruments.--The financial subsidy provided should
20   be the minimum necessary to accommodate the borrower's financial
21   needs. Debt instruments shall include either or both of the
22   following:
23            (1)   Loans, including deferred interest and principal
24      payments.
25            (2)   Loan guarantees.
26      (e)   Security.--
27            (1)   Loans shall be secured by lien positions on
28      collateral at the highest level of priority which can
29      accommodate the borrower's ability to raise sufficient debt
30      and equity capital.

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 1            (2)   When the obligation of a firm is guaranteed, the
 2      financial institution holding the obligation shall adequately
 3      secure the obligation.
 4            (3)   The office shall require collateral against loans or
 5      loan guarantees awarded under this act.
 6            (4)   The office may determine collateral per application.
 7      (f)   Loan limits.--
 8            (1)   The maximum loan or guarantee is $1,500,000 per
 9      firm.
10            (2)   The amount of a loan shall not exceed 25% of the
11      total project costs and guarantees shall not exceed 25% of
12      the total loan value.
13            (3)   The term of the loan shall be the shortest,
14      consistent with the needs of the firm, but no longer than 20
15      years.
16      (g)   Equity requirement.--A significant equity investment by
17   the employee-ownership group equal to at least 10% of the
18   project cost and including substantial participation by at least
19   two-thirds of the members of the employee-ownership group is
20   required to qualify for the loan or guarantee.
21      (h)   Feasibility study.--The office may not approve
22   assistance without a feasibility study demonstrating a
23   substantial prospect for job retention or future job growth and
24   a business plan, including steps to facilitate labor-management
25   cooperation. General adherence to the feasibility study is
26   required for an eligible employee-ownership group to receive a
27   loan or loan guarantee under this section.
28   Section 7.     Criteria for evaluating applications.
29      The local administrative agencies and the office shall
30   evaluate an application under section 6 based on the following

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 1   criteria:
 2            (1)   Number of jobs retained or created in relation to
 3      the size of the loan. The loan shall not exceed a cost of
 4      $15,000 per job created or retained.
 5            (2)   Ability of the applicant to repay the loan and the
 6      likelihood of retaining or creating jobs.
 7            (3)   Evidence of other private financial commitments.
 8            (4)   Evidence that, without the financial assistance,
 9      other Federal, State or local public and private investment
10      would be insufficient to finance the employee-owned
11      enterprise.
12            (5)   The extent to which a firm employs a significant
13      number of employees or represents a significant portion of
14      employment in the community.
15            (6)   Additional criteria specified by guidelines or
16      regulations of the department.
17   Section 8.     Main Street Employee Ownership Grant Program.
18      (a)   Establishment.--The Main Street Employee Ownership Grant
19   Program is established within the office to provide grants to
20   businesses that are eligible under subsection (b).
21      (b)   Eligibility.--A business is eligible for grants under
22   this section if the business:
23            (1)   Has fewer than 100 employees.
24            (2)   Is a retail establishment.
25      (c)   Use of grant.--Grant money awarded may be used by an
26   eligible business to:
27            (1)   Acquire a business to be an employee-owned
28      enterprise.
29            (2)   Convert a business to an employee-owned enterprise.
30            (3)   Provide support for technical assistance, such as

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 1      the proper management of an employee-owned enterprise, best
 2      business practices or other assistance approved by the
 3      office.
 4      (d)   Limitation and approval.--Grant awards may not exceed
 5   $35,000. If a business is approved for a grant under this
 6   section, the business shall have an automatic approval for
 7   financial assistance under section 6.
 8   Section 9.   Administration.
 9      (a)   Responsibility of local administrative agencies.--Local
10   administrative agencies shall promote the employee ownership
11   program and the Main Street Employee Ownership Grant Program by
12   soliciting applications, evaluating applications and making
13   preliminary decisions on both technical assistance and financial
14   assistance. Not more than 2% of the money appropriated for the
15   purpose of this act may be used by local administrative agencies
16   for the purpose of administering these programs.
17      (b)   Approval by employee ownership advocate.--The employee
18   ownership advocate shall have full responsibility for final
19   approval of all applications for assistance.
20      (c)   Advances.--The office may make money advances to local
21   administrative agencies for the purpose of making loans, loan
22   guarantees or grants consistent with this act. Advances under
23   this section must be repaid to the office when the loan or loan
24   guarantee is repaid by the borrower.
25      (d)   Loan and loan guarantee fees.--Local administrative
26   agencies may establish and charge reasonable fees for processing
27   loans or loan guarantees under section 6, with the approval of
28   the secretary.
29      (e)   Rules and regulations.--The secretary may adopt and
30   promulgate rules and regulations, statements of policy or forms,

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 1   guidelines and other procedures, forms and requirements
 2   necessary for the implementation and administration of this act.
 3   Section 10.    Indicators of program impact.
 4      (a)   Report.--On March 1 of each year of the employee
 5   ownership program's and the Main Street Employee Ownership Grant
 6   Program's existence, the employee ownership advocate shall
 7   submit a report to the Secretary of the Senate and the Chief
 8   Clerk of the House of Representatives on the impact of the
 9   programs, including:
10            (1)   Rules, guidelines or statements of policy used in
11      administering the programs.
12            (2)   The number of employee-ownership groups and firms
13      receiving assistance.
14            (3)   The number of feasibility studies which were
15      actually implemented.
16            (4)   The number of jobs retained or created and the
17      number of jobs created or retained as a result of financial
18      assistance.
19            (5)   Other information deemed necessary by the employee
20      ownership advocate.
21      (b)   Information to office.--Recipients of assistance under
22   these programs shall provide the office with the information
23   needed to fulfill the reporting requirement under subsection
24   (a).
25   Section 11.    Nondiscrimination.
26      A loan, loan guarantee, grant or other financial assistance
27   may not be made to a recipient under this act unless the
28   recipient certifies to the department, in a form satisfactory to
29   the department, that the recipient will not discriminate against
30   an employee or against an applicant for employment because of

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 1   race, religion, color, national origin, sex or age.
 2   Section 12.    Guidelines and regulations.
 3      (a)   One-year exemption from review.--In order to facilitate
 4   implementation of this act, the department may promulgate, adopt
 5   and use temporary guidelines that shall be transmitted as a
 6   notice to the Legislative Reference Bureau for publication in
 7   the next available issue of the Pennsylvania Bulletin. The
 8   guidelines shall not be subject to review under any of the
 9   following:
10            (1)   Section 612 of the act of April 9, 1929 (P.L.177,
11      No.175), known as The Administrative Code of 1929.
12            (2)   Sections 201, 202, 203, 204 and 205 of the act of
13      July 31, 1968 (P.L.769, No.240), referred to as the
14      Commonwealth Documents Law.
15            (3)   Section 204(b) of the act of October 15, 1980 (P.L.
16      950, No.164), known as the Commonwealth Attorneys Act.
17            (4)   The act of June 25, 1982 (P.L.633, No.181), known as
18      the Regulatory Review Act.
19      (b)   Expiration of exemption.--After the expiration of the
20   one-year period, all guidelines shall expire and shall be
21   replaced by regulations that shall have been promulgated,
22   adopted and published as provided by law.
23   Section 13.    Annual appropriation and funding sources.
24      (a)   Estimate of expenditures.--Before November 1 of each
25   year, the employee ownership advocate shall estimate the total
26   expenditures for the office and submit the estimate to the
27   Governor in accordance with section 610 of the act of April 9,
28   1929 (P.L.177, No.175), known as The Administrative Code of
29   1929. At the same time the office submits the estimate to the
30   Governor, the office shall also submit the estimate to the

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 1   General Assembly. The following apply:
 2            (1)   The employee ownership advocate shall be afforded an
 3      opportunity to appear before the Governor, the Appropriations
 4      Committee of the Senate and the Appropriations Committee of
 5      the House of Representatives regarding the estimate.
 6            (2)   For each fiscal year, the office shall calculate the
 7      office's proposed appropriation by subtracting the unspent
 8      portion of the office's budget for the previous fiscal year
 9      from the total appropriation that was approved by the General
10      Assembly. The remainder shall be allocated to the department
11      for the next fiscal year.
12      (b)   Allocation of assessment.--For each fiscal year, the
13   office shall determine for the preceding calendar year the
14   amount of its expenditures directly attributable to
15   administering this act as follows:
16            (1)   Expenditures of the office directly attributable to
17      section 5.
18            (2)   Expenditures of the office directly attributable to
19      section 6.
20            (3)   Expenditures of the office directly attributable to
21      section 8.
22            (4)   Expenditures of the office directly attributable to
23      section 9.
24            (5)   Total expenditures of the office directly
25      attributable to administering this act.
26      (c)   Funding sources.--Any of the following may be used as
27   funding sources for the office for the purposes of this act:
28            (1)   Money appropriated for the purposes of this act.
29            (2)   Federal money appropriated or authorized for the
30      purposes of this act.

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 1          (3)    Money received from a State agency through an
 2      interagency agreement or memorandum of understanding.
 3          (4)    A gift or other contribution from a public or
 4      private source.
 5          (5)    Returns on money dedicated for the purposes of this
 6      act, including, but not limited to, interest on loans or loan
 7      guarantees.
 8          (6)    Any appropriation that was unspent by the end of a
 9      previous fiscal year.
10   Section 14.   Effective date.
11      This act shall take effect in 60 days.




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