A new bill in Colorado, HB24-1157, would provide statutory authority for the Colorado Employee Ownership Office, which Governor Jared Polis created in 2020 through an executive order. The bill would make the office permanent. The office provides technical assistance, coordinates with other agencies, and conducts outreach. 

In addition, the bill would create a refundable tax credit for up to $50,000 per year for companies with an employee ownership plan, defined as an ESOP, employee ownership trust, worker cooperative, or equity grants or rights given directly to at least 20% of a company’s workforce where those workers hold 20% or more of the company’s fully diluted securities. Under existing law, companies converting to ESOP ownership can already get a tax credit for up to $150,000; for worker cooperatives and other plans, the maximum is 50% of costs up to $40,000. Conversions to other qualified forms of employee ownership now also qualify for a credit of up to 50% of the costs, up to a maximum credit of $25,000. The existing law also provides a tax credit of 50% of the costs, up to a maximum credit of $25,000, for a qualified employee-owned business expanding its employee ownership by at least 20%.

Massachusetts bill SB1783 provides that a corporation can deduct 50% of the capital gains it receives from the sale of not less than 49% of the stock in a closely held company with 500 or fewer employees. This would be the first time corporations could get a tax incentive to sell to an ESOP (as opposed to deductions for contributions and dividends, or the S corporation ESOP tax shield).