Efforts to create state offices to support employee ownership transitions moving forward
Several state-led efforts are advancing employee ownership legislation. Among them:
California: A bill (SB 1407) has been introduced in the California Senate to create an employee ownership program within the Governor’s Office of Business and Economic Development (Go-Biz). The dedicated hub would educate stakeholders about worker ownership, assist business owners and workers in navigating available resources, provide funding for technical assistance, and streamline and reduce barriers to the existing business transition process. The bill establishes two grant programs: one focuses on outreach and technical assistance to expand awareness of employee ownership among business owners and business service providers while the other would provide partial support for feasibility studies for business transitions to employee ownership. The bill is being supported by the Worker-Owned Recovery California (WORC) and Ownership America.
Massachusetts: An “Act Enabling the Massachusetts Center for Employee Ownership” (H.511) has been reported out of the state legislature’s Economic Development and Emerging Technologies Committee and is currently being heard by Ways and Means. The legislation would make the Center for Employee Ownership a permanent part of the Massachusetts Office of Business Development. Its mandate would be to create an environment in which employee ownership can expand and thrive across the state. Specifically it would be responsible for education and outreach to key stakeholders, for research and evaluation that could assess the impact on businesses and workers in the Commonwealth, and for providing grants to facilitate employee ownership transitions.
The Massachusetts legislation would make the Center for Employee Ownership a permanent part of the Massachusetts Office of Business Development.
Minnesota: A bill (HF 3733) to help build community wealth in Minnesota would create a low-interest loan program to support employee ownership, community land trusts, or cooperatives focused on providing wealth-building opportunities for historically disadvantaged groups, including people of color, women, disabled veterans, and low-income workers. The bill calls for the state to appropriate $15 million in 2023 to provide grants to partner organizations to make the loans, which would be priced at not more than the prime rate. State support for the loan could be for up to $2.5 million. Up to 10 percent of the funds could be used for technical assistance. Half the principal payments would go to a community wealth-building account the state would create to provide ongoing funding.
Pennsylvania: The Pennsylvania Center for Employee Ownership (PaCEO) has been working on several fronts to strengthen the state’s support for employee ownership. Among its legislative priorities for 2022 is creation of a state Office of Employee Ownership. A floor vote to fund the office is expected to go the floor sometime in April.
Additionally, the PA State House passed a bill to amend the state’s tax code to incentivize employee ownership transitions. Pennsylvania is one of only a small number of states that do not currently mirror the federal Section 1042 rules. By making an election under Section 1042, sellers of C corporations can defer 100 percent of capital gains tax when selling to their employees in an ESOP. The bill (PA HB-285), which has a good chance of passage this session, would adopt the same rules under state law.
Finally, the city of Pittsburgh has allocated $120,000 to the Pittsburgh Citywide Task Force on Employee Ownership, which launched right before the COVID-19 pandemic. The taskforce is awaiting word on matching funding from Allegheny County.