Ownership investment facility

(a) Definition of facility In this section, the term facility means the facility established under subsection (b). (b) Establishment The Secretary shall establish and carry out a facility to provide leverage to licensed ownership investment companies for the purpose of encouraging covered investments. (c) Combined leverage The Secretary may not provide leverage to ownership investment companies under the facility in a total amount that is greater than $5,000,000,000 for a fiscal year. Not more than 20 percent of such total amount may be provided to Protégé OIC companies for a fiscal year. (d) Transaction requirements (1) In general With respect to a covered investment described in section 2(6)(A) involving a sale to an employee stock ownership plan, an independent trustee for the employee stock ownership plan shall be appointed by the covered business concern before the execution of the covered investment for a period of time that is sufficient for the independent trustee to fully evaluate the proposed transaction. (2) Fairness opinion With respect to the scope of appointment under paragraph (1), an independent trustee appointed under paragraph (1) shall obtain a fairness opinion on the proposed covered investment from an independent financial advisor, which shall evaluate whether the price, terms, and cost of financing of the proposed covered investment are financially fair to the employee stock ownership plan. (e) Prohibitions (1) Financing (A) In general An employee of a covered business concern may not provide personal financing of any kind for a covered investment, including through a wage concession or rollover of a retirement plan. (B) Exceptions Subparagraph (A) shall not apply to— (i) financing provided by an employee for the sale of an ownership interest held by the employee in a covered business concern; or (ii) employee capital contributions or membership fees paid by members of an eligible worker-owned cooperative, if such amounts are reasonable and customary and not used for the purchase of the covered business concern. (2) Control An ownership investment company shall not exercise control over a covered business concern in which the ownership investment company has made a covered investment. (f) Employee allocations With respect to a covered investment described in section 2(6)(A) made by an ownership investment company that involves an employee stock ownership plan, the employee stock ownership plan shall include a requirement that in the event of a sale to a third party of the covered business concern in which the covered investment is made, the proceeds that the employee stock ownership plan receives from the sale shall be distributed as though all shares of stock held by the employee stock ownership plan prior to the sale were fully allocated based on each participant's compensation, as defined under section 415(c)(3) of the Internal Revenue Code of 1986. (g) Recirculation of shares (1) Share count With respect to a covered investment described in section 2(6)(A) made by an ownership investment company that involves an employee stock ownership plan, the number of shares held by the employee stock ownership plan on the final date of each plan year shall not be less than the number of shares held by the employee stock ownership plan on the execution date of the covered investment. (2) Limitation The requirements under paragraph (1) shall apply only with respect to the period during which the ownership investment company has an interest in the covered business concern. (3) Exception The requirement under paragraph (1) may be waived by the independent trustee for the applicable employee stock ownership plan. (h) Independent trustees With respect to a covered investment described in section 2(6)(A) made by an ownership investment company that involves an employee stock ownership plan, the employee stock ownership plan shall have an independent trustee during the period that the ownership investment company has an interest in the covered business concern. (i) Subsidiary LLCs With respect to any covered investment made by an ownership investment company that involves an employee stock ownership plan, a subsidiary LLC may be permitted to be established, provided that the following requirements are met: (1) ESOP majority interest The employee stock ownership plan exercises a majority interest in the subsidiary LLC as a result of the sale or provision of capital. (2) S corporation board governance The board governance of the subsidiary LLC resides exclusively at the level of the S corporation by which the subsidiary LLC is owned. (3) Profits interest The profits interest or any type of similar arrangements, including phantom stock and any deferred bonus plan related to equity in the subsidiary LLC, complies with section 409(p) of the Internal Revenue Code of 1986. (4) Event protection The requirements of subsection (f) apply at the level of the subsidiary LLC. (j) Procedures related to a sale of a covered business concern (1) In general Subject to paragraph (2), an ownership investment company shall require as a condition of making a covered investment described in section 2(6)(A) involving an employee stock ownership plan that— (A) before any stock sale or the execution of any corporate matter listed in section 409(e)(3) of the Internal Revenue Code of 1986, the employee stock ownership plan shall— (i) appoint an independent trustee for the transaction; and (ii) require that the independent trustee obtain a fairness opinion from an independent financial advisor, which shall evaluate whether the price, terms, and cost of financing of the proposed covered investment are financially fair to the employee stock ownership plan; and (B) the employee stock ownership plan requires that— (i) in addition to the corporate matters listed in section 409(e)(3) of the Internal Revenue Code of 1986, each participant or beneficiary in the employee stock ownership plan is entitled to direct the employee stock ownership plan as to the manner in which voting rights under securities of the employer which are allocated to the account of such participant or beneficiary are to be exercised with respect to the approval or disapproval of any stock sale; (ii) the requirements of section 409(e)(3) of the Internal Revenue Code of 1986 and clause (i) of this subparagraph shall be met using the procedures described in section 409(e)(5) of the Internal Revenue Code of 1986; (iii) unless the parties agree otherwise, with respect to unallocated shares, the independent trustee shall be directed to vote or tender such unallocated shares in the same proportion as allocated shares for which the independent trustee has received voting or tender instructions from participants in the employee stock ownership plan; and (iv) with respect to allocated shares that the independent trustee does not receive voting or tender instructions from participants in the employee stock ownership plan, the independent trustee shall have voting discretion over such shares. (2) Voting discretion Nothing in paragraph (1)(B) shall limit the ability of an independent trustee to exercise voting discretion in accordance with the fiduciary obligations of the independent trustee under the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1001 et seq.). (3) Limitation The requirements under paragraph (1) shall apply only with respect to the period during which the ownership investment company has an interest in the covered business concern. (k) Reports Each ownership investment company (including Protégé OICs) shall submit to the Secretary an annual report, which shall include, for the year covered by the report, the following information, disaggregated by type of covered investment as described in subparagraph (A) or (B) of section 2(6), as applicable: (1) Whether the covered investment was made with respect to an employee stock ownership plan or eligible worker-owned cooperative. (2) For an employee stock ownership plan— (A) the effective date of the employee stock ownership plan; (B) the number of active employee stock ownership plan participants; (C) the number of employees of the covered business concern for which the employee stock ownership plan is established; (D) the total value of employer securities, as determined by an independent appraiser hired by the independent trustee of the employee stock ownership plan; (E) the total employee stock ownership plan assets; (F) the total contributions during the employee stock ownership plan year; (G) the total distributions during the employee stock ownership plan year; (H) the median account asset balance; and (I) demographic information of employee stock ownership plan participants, disaggregated by race, gender, and State, to the extent available. (3) For an eligible worker-owned cooperative— (A) the number of member-owners; (B) the number of employees of the covered business concern for which the eligible worker-owned cooperative is established; (C) the total value of employer securities; (D) the aggregate assets of all membership accounts of the eligible worker-owned cooperative; (E) the median membership account balance; and (F) demographic information of membership base, disaggregated by race, gender, and State, to the extent available. (l) Implementation milestones (1) In general Not later than 540 days after the date of enactment of this Act, the Secretary shall begin accepting applications to be licensed to participate in the facility as an ownership investment company. (2) License timeline Not later than 2 years after the date of enactment of this Act, the Secretary shall approve the first tranche of licenses to participate in the facility as an ownership investment company with respect to applicants that satisfy the applicable eligibility criteria. (m) Sunset (1) Definition In this subsection, the term sunset date means the first day of the 20th calendar year that begins after the date on which the Secretary approves the first license to participate in the facility as an ownership investment company (including as a Protégé OIC). (2) Termination of authority On and after the sunset date, the Secretary may not license an entity to participate in the facility as an ownership investment company (including as a Protégé OIC). (3) Continued participation by existing entities Nothing in paragraph (2) shall be construed to prohibit an ownership investment company (including a Protégé OIC) from continuing to draw leverage on and after the sunset date that was committed to the entity through the facility before the sunset date. (4) Application The Secretary shall not consider paragraph (2) as a factor in the decision to license an entity to participate in the facility as an ownership investment company (including as a Protégé OIC) before the sunset date.