January 11, 2023

Promising New Employee Ownership Bills at State Level

NCEO founder and senior staff member

State legislation on employee ownership is gaining momentum, with bills passed in Colorado during 2021 and in Massachusetts and California during 2022. Two new bills have attracted important support in Washington and Tennessee, and bills will be introduced soon in Texas, Minnesota, and Pennsylvania. The bills in Washington and Tennessee were introduced in the past week, as described below.

New Washington State Bill Would Create the Most Comprehensive State Program Yet

Washington State bill S.B. 5096, “An act relating to expanding employee ownership,” would create the most ambitious state employee ownership program yet. It includes the following provisions:

  • Creates a state employee ownership program with a director housed in the state Department of Commerce. The program would provide outreach and technical services to help promote ESOPs, worker cooperatives, and employee ownership trusts (EOTs).
  • Creates an appointed commission to oversee the project. It would include four members of the legislature (one Republican and one Democrat from each house), five people from the private sector (two from employee ownership businesses, one from a business association, one private-sector economic development expert, and one from a financial institution with employee ownership transition experience), and two from the public sector (one public-sector economic development expert and one from the Department of Commerce).
  • Establishes a feasibility assessment and implementation tax credit for ESOPs, worker co-ops, and EOTs of up to 50% of the first $100,000 for ESOPs and $25,000 for worker coops and EOTs. The total amount of credits is capped at $2 million per year.
  • Creates a revolving loan fund that would directly support financing for ESOP or worker cooperative conversion transactions. This funding would be contingent on federal funds being available for this purpose. The State Small Business Credit Initiative (SSBCI) could be one such program, and the bill specifies that SSBCI funds could be used for this purpose.

The bill was scheduled for a hearing on January 12.

Tennessee Employee Ownership Bill Reintroduced

In 2022, the "Employee Ownership, Empowerment, and Expansion Act” was introduced in the Tennessee House and Senate late in the session and not acted on. The bill (SB0085 and HB0154) has now been reintroduced. As with the Washington State bill, the bill would provide a feasibility assessment and implementation tax credit for ESOPs, worker co-ops, and EOTs of up to 50% of the first $100,000 for ESOPs and $25,000 for worker coops and EOTs. The sponsors (both Republicans) are Pat Marsh in the House and Page Walley in the Senate.

It also would make employee-owned companies eligible for the same contracting preferences as minority-owned, woman-owned, service-disabled veteran-owned, and disability-owned businesses. Supporters of the bill tell us it has a good chance to pass.