California and Colorado Legislatures Consider Major Funding Proposals for ESOPs
Several California Assembly and Senate members have written letters to the leaders of the Assembly and Senate budget committees urging inclusion of a $36.5 million appropriation to fund a one-time effort to support employee ownership in the state. So far, the proposal has not generated any opposition. The Senate and Assembly letters can be found here.
The proposal would include a $1.5 million grant to a nonprofit to conduct an outreach program to business owners who are considering selling their companies to inform them about employee ownership and $35 million in loan guarantees and incentives for transition to a worker cooperative or 100% ESOP ownership. The proposal would also direct existing federal layoff aversion funds to help fund feasibility studies for employee ownership transitions.
With the support of Governor Jared Polis, Colorado Senate and House Democrats have introduced H.B. 21-1311, a bill that would make sweeping changes to Colorado tax law. Overall, the bills would raise $400 million by increasing taxes on higher-income taxpayers and spend $250 million on programs aiding lower-income residents. Democrats control both houses of the legislature. A somewhat scaled down version of the overall bill was passed by the House May 25th. It retained the employee ownership provisions, however. and now heads to the Senate.
The bill includes a provision also supported by Polis to provide $10 million annually in tax credits over the next six years to fund the professional service costs of conversions to employee ownership. The funds could be used to convert to an ESOP, an employee ownership trust, or a worker cooperative. ESOPs would qualify for a credit equal to 50% of the conversion costs up to $50,000; cooperative and employee ownership trusts could get up to $25,000.