S.1512: A bill to amend the Internal Revenue Code of 1986 and the Small Business Act to expand the availability of employee stock ownership plans in S corporations, and for other purposes was introduced on September 6, 2011, by Sen. Benjamin Cardin [D-MD],and is currently co-sponsored by Sen. Pat Roberts [R-KS] and Sen. Olympia Snowe [R-ME]. It has been referred to the Senate Finance committee.

The ESOP Association strongly supports the bill. Here is a press release:

WASHINGTON, Sept. 7, 2011 /PRNewswire-USNewswire/ -- The ESOP Association expresses strong support for S. 1512, introduced September 6, 2011 by a bi-partisan group of Senators: Senators Benjamin Cardin (D-MD), Pat Roberts (R-KS), and Olympia J. Snowe (R-ME).

"What is important is these Senators recognize that our national ESOP policy, while modest, is responsible for millions of locally controlled jobs in high performing companies that ensure employees are securing a good retirement by being part of our globalized economy," stated ESOP Association President J. Michael Keeling.

S. 1512 will: 1.) permit owners of S stock to sell the stock to an ESOP and defer the capital gains tax on his/her gain if the proceeds are reinvested in the equities of U.S. operating corporations as owners of C corporations stock have done under IRC 1042 since 1984; 2.) establish an office in the Department of Treasury to provide technical assistance to S corporations with ESOPs; 3.) provide that a small business, S or C, eligible for one of the many programs provided by the Small Business Administration to remain eligible for SBA programs if the company becomes owned 50% or more by an ESOP, and the workforce remains the same or nearly the same as before the establishment of the 50% ownership by employees through the ESOP.

The text of the legistlation is not yet available.