New Jersey Bill Would Encourage Employee Ownership

The deputy speaker of the New Jersey Assembly, Upendra Chivukula (D), and Assemblywoman Holly Schepisis (R) have introduced Assembly Bill 2911, which would create a state income tax exclusion for qualified sales of stock to an ESOP or worker cooperative. The bill intends to avoid sales of New Jersey-based businesses to out-of-state buyers, noting that such outside sales often result in "the loss of jobs in this State and can be harmful to the fabric of local communities." Qualified businesses include S corporations, privately held companies with fewer than 500 employees, and eligible worker-owned cooperatives.

The bill includes an innovative provision to ensure that it is revenue-neutral to the New Jersey government: "The gross income tax exclusion will be contingent upon the qualified business receiving pre-transaction certification from the New Jersey Economic Development Authority that considering the gross income tax forgone from the exclusion of income, that the transaction will result in the retention of full-time jobs in the qualified business in this State and will yield a net positive benefit to the State."

The bill is gathering bipartisan support, and the New Jersey Assembly will host hearings in the next few months. Any New Jersey companies that have used or are considering using a rollover transaction and are willing to speak should contact Loren Rodgers ([email protected]; 510-208-1307). Joseph Blasi and Douglas Kruse, two professors from Rutgers University, a New Jersey state university, have assisted with research on the legislation.