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The Employee Ownership Report

NewsletterConcisely written for leaders in employee ownership companies and for service providers in the field, the NCEO's bimonthly newsletter, the Employee Ownership Report, is the most efficient way to stay informed about legal issues, current events, best practices, breaking research, management approaches, and communications ideas for employee ownership companies.

Available exclusively to NCEO members, the Employee Ownership Report is delivered in hard copy and all issues back to 1997 are available in the members-only area of the Web site.

Nonmembers are invited to read the sample article below from the current issue of the newsletter. Every time a new issue appears, the sample article on this page will be replaced by one from the new issue. Join online for only $90 to receive the Employee Ownership Report and all our other membership benefits.

Read a sample issue of the entire newsletter (September-October 2015).

Sample Article from the July-August 2017 Issue:

Federal, State, and Municipal Legislative Roundup

Legislators at all levels of government have written and advanced bills to support employee ownership during 2017, and more bills are in process. These federal, state, and municipal bills are interesting not only for the impact they might have on the creation of more employee ownership, but also because the sponsors and supporters of the various legislative efforts are remarkably bipartisan.

U.S. Congress

On April 4, the House passed the Encouraging Employee Ownership Act (H.R.1343) by a vote of 331 to 87. The bill would ease current Securities and Exchange Commission rules, making it easier for private companies to provide stock-based compensation to employees. The bill would increase to $20 million the current $5 million cap on the amount of stock closely held companies can award employees before triggering certain SEC reporting requirements. The amount would be indexed for inflation annually. The bill was received in the Senate as S.488, sponsored by Sen. Pat Toomey (R-PA) and referred to the Committee on Banking, Housing, and Urban Affairs.

Reps. David Reichert (R-WA) and Ron Kind (D-WI) re-introduced The Promotion and Expansion of Private Employee Ownership Act (H.R.2092), which would extend capital gains deferrals for sales of S corporation stock to an ESOP, encourage bank lending to ESOPs, and protect SBA certification for ESOP-owned companies.

Separately, Sens. Bernie Sanders (I-VT), Patrick Leahy (D-VT), Kirsten Gillibrand (D-NY), and Maggie Hassan (D-NH) introduced two bills to support employee ownership. The first, the WORK Act (S.1081), would provide $45 million to establish and support state employee ownership centers, modeled after the Vermont Employee Ownership Center. A companion bill (H.R.2387) was introduced in the House by Rep. Jared Polis (D-CO).

The second bill (S.1082) would create a U.S. Employee Ownership Bank, designed to provide $500 million in incentivized loans to support the creation of ESOPs and worker cooperatives. In the House, Rep. Peter DeFazio (D-OR) sponsored a companion bill (H.R.2357).

Finally, the Expanding Employee Ownership Act (H.R.1792), introduced by Rep. Dana Rohrbacher (R-CA), would reduce taxation on equity compensation grants, with the provision that each employee would only be able to exclude an amount equal to the smallest grant received by an employee. In addition, employees would need to retain the shares for 10 years.

State Legislation

On May 18, Colorado Gov. John Hickenlooper signed into law H.B.1214. The bill, passed by the state legislature on April 25, creates a revolving-loan program to be operated by the Colorado Office of Economic Development and International Trade, to be funded by gifts and donations. The bill also requires that the OEDIT train its employees to be sufficiently knowledgeable about employee ownership to be able to recommend it when appropriate and to promote it in their materials.

The bill was sponsored by state Rep. James Coleman (D-Aurora) and Rep. Jack Tate (R-Centennial), who said, "Anything we can do to encourage ownership helping facilitate getting folks on the path of wealth creation, I think it's a good thing." The Rocky Mountain Center for Employee Ownership helped promote the bill.

As reported in our March-April 2017 newsletter, the Missouri legislature passed H.B.2030, the Stock Ownership Tax Deduction Act, which allowed a state-level deduction for 50% of the net capital gains on qualified sales of stock to an ESOP. The bill went into effect on January 1, 2017, and two days later, the first company, PFSbrands, became 100%-ESOP owned, citing the legislation.

In Pennsylvania, Rep. Daryl Metcalfe (R-Butler County) and Sen. Stewart Greenleaf (R-Montgomery County) have created joint legislation (H.B.1289) to mirror federal law as it applies to the deferral of capital gains taxation for sales of C corporation stock to an ESOP (the "1042 election"). The Pennsylvania Center for Employee Ownership, which has supported the bill, requests that Pennsylvania employee-owners contact their elected representatives to support the bill.


Letitia James, the public advocate for New York City, has proposed that the city both provide education for business owners about employee ownership and facilitate financing for employee ownership transactions. In a policy brief, she writes:
New York State loses approximately 60,500 jobs a year when small businesses with fewer than 100 employees close their doors for good. While many businesses close because of rising rents or failed business plans, in New York State we estimate that 3,700 businesses close each year simply because of the owner's retirement. As a result 13,260 New Yorkers lose their jobs annually. New York City could avoid some of these job losses through a little-known but proven strategy to retain jobs and build assets for workers: transitioning to employee ownership.
James' proposal would create a Succession Planning Unit within the city's Small Business Services office, which would be responsible for education and outreach, and would have the capacity to conduct feasibility studies.

The City of Boston has a new program to "build and grow your worker cooperative or employee-owned firm." The program plans to provide technical support and capital, encourage conversions, and develop promising industrial sectors.