Empowering Small-business Ownership Participation Act; ESOP Act
Summary
H.R. 6492, also known as the Empowering Small-business Ownership Participation Act or the ESOP Act, proposes an amendment to Section 874 of the National Defense Authorization Act for Fiscal Year 2022. The bill aims to modify the percentage of outstanding stock that must be held through an employee stock ownership plan (ESOP) for the Department of Defense's pilot program incentivizing contracting with employee-owned businesses.
Specifically, the bill seeks to change the requirement from 'wholly-owned' to 'owned,' and from '100 percent' to 'not less than 30 percent.' This adjustment intends to broaden the scope of eligible businesses for the pilot program.
The bill was introduced in the House of Representatives on December 5, 2025, by Mr. Mills and was referred to the Committee on Armed Services.
Expected Effects
The primary effect of this bill would be to lower the threshold for employee ownership required for businesses to participate in the Department of Defense's pilot program. This change could potentially increase the number of small businesses eligible for defense contracts.
By reducing the ownership percentage, the bill may encourage more businesses to adopt ESOPs. This could lead to broader employee ownership and participation in company profits.
Potential Benefits
- Increased opportunities for small businesses to secure Department of Defense contracts.
- Potential for greater employee ownership and participation in company success.
- Could incentivize the formation and growth of employee-owned businesses.
- May lead to improved employee morale and productivity due to shared ownership.
- Could foster a more equitable distribution of wealth within participating companies.
Potential Disadvantages
- Potential for reduced control and influence by employees in companies where ownership is less than 100%.
- Risk that lowering the ownership threshold could dilute the benefits intended for employee-owned businesses.
- Possible administrative complexities and oversight challenges in managing the revised program.
- There may be unintended consequences related to the valuation and management of ESOPs with lower ownership percentages.
- The effectiveness of the pilot program may be difficult to measure with the changed ownership requirements.
Constitutional Alignment
The bill appears to align with the Constitution, particularly the General Welfare Clause (Preamble), as it aims to promote economic opportunities for small businesses and their employees. Article I, Section 8 grants Congress the power to provide for the common defense and general welfare of the United States, which this bill supports through incentivizing employee-owned businesses in defense contracting.
Furthermore, the bill does not appear to infringe upon any specific individual rights or liberties protected by the Bill of Rights. The changes proposed are related to the structure and operation of a government program, and do not directly impact fundamental constitutional principles.
However, the specific implementation and oversight of the program would need to ensure fairness and equal opportunity, consistent with the principles of due process and equal protection.
Impact Assessment: Things You Care About ⓘ
This action has been evaluated across 19 key areas that matter to you. Scores range from 1 (highly disadvantageous) to 5 (highly beneficial).