Washington Senate Bill Report SB 5096 (Jan. 10, 2023)
- Issuer
- Congressional materials
- Document type
- Report
- Date
- 2023-01-12
- Case
- 2023 01 12 A30312 D247244 Bill Report 5096 Sba Bfgt 23
Summary
A Senate Bill Report on SB 5096, an act relating to expanding employee ownership, prepared by staff of the Senate Committee on Business, Financial Services, Gaming & Trade as of January 10, 2023, with committee activity listed for 1/12/23. The report describes employee ownership structures, including ESOPs, employee ownership trusts and cooperatives. It summarizes the bill's creation of the Washington Employee Ownership Program within the Department of Commerce and an eleven-member Washington Employee Ownership Commission to oversee it. It also describes a business and occupation tax credit beginning July 1, 2024, capped at $2 million per year, of up to 50 percent of conversion costs, not to exceed $25,000 for cooperatives or trusts or $100,000 for an ESOP. The report lists the sponsors as Senators Padden and Pedersen.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
Full text
SENATE BILL REPORT
SB 5096
As of January 10, 2023
Title: An act relating to expanding employee ownership.
Brief Description: Concerning employee ownership.
Sponsors: Senators Padden and Pedersen.
Brief History:
Committee Activity: Business, Financial Services, Gaming & Trade: 1/12/23.
Brief Summary of Bill
• Creates the Washington Employee Ownership Program (program) at the
Department of Commerce to offer technical support, and other services,
to certain businesses considering certain employee ownership structures.
• Forms the Washington Employee Ownership Commission to oversee the
program.
• Provides a business and occupation tax credit for costs related to
converting a qualifying business to an employee ownership structure.
SENATE COMMITTEE ON BUSINESS, FINANCIAL SERVICES, GAMING & TRADE
Staff: Kellee Gunn (786-7429)
Background: Employee Ownership Structures. Employee ownership refers to the
arrangement where no one person has the most shares or control over an organization.
Some of the most common forms of employee ownership include Employee Stock
Ownership Plans (ESOPs), Employee Ownership Trusts (EOTs), and Cooperatives (Co-
ops).
Employee Stock Ownership Plans. ESOPs are recognized under federal tax law as a
This analysis was prepared by non-partisan legislative staff for the use of legislative
members in their deliberations. This analysis is not part of the legislation nor does it
constitute a statement of legislative intent.
Senate Bill Report -1- SB 5096
qualified defined contribution retirement plan. The ESOP must be designed to invest
primarily in qualifying employer securities and meet certain other requirements. The IRS
and United States Department of Labor share jurisdiction over some ESOP features.
Employee Ownership Trusts. EOTs are not recognized as a retirement plan under federal
law. An EOT is a perpetual trust, in which employees may receive certain financial benefits
and governance rights.
Cooperatives. Co-ops are member-owned business entities in which worker-owners have a
controlling interest, and who elect the governing body on a one-member-one-vote basis.
Summary of Bill: Washington Employee Ownership Program. The Washington
Employee Ownership Program (program) is created to support efforts of businesses
considering sale to an employee ownership structure. The program is administered within
the Department of Commerce (Commerce) and overseen by the Washington Employee
Ownership Commission (Commission).
The program must offer technical support, and other services, to certain qualified businesses
considering certain employee ownership structures. To receive program support, a business
must be headquartered in Washington State.
Subject to successful federal funding for this specific purpose, the program must establish a
revolving loan program to assist existing small businesses in financing a transition to
employee ownership. Certain requirements regarding who can receive the loan and what
the loan may be used for are established.
Commerce must report to the Legislature on the program by December 1st each year and
include recommendations for improvement and barriers for businesses considering
employee ownership structures. The first report must include the rules and guidelines for
the administration of the program, developed by the Commission.
Washington Employee Ownership Commission. The Commission is created to develop and
supervise the program.
The Commission shall consist of the following eleven members:
• one member from each of the two major caucuses of the House of Representatives,
appointed by the Speaker of the House;
• one member from each of the two major caucuses of the Senate, appointed by the
President of the Senate; and
• seven of the following members appointed by the Governor:
1. one representative of a small business using an employee ownership structure,
with an initial four-year term;
2. one representative of a large business using an employee ownership structure,
with an initial four-year term;
Senate Bill Report -2- SB 5096
3. one representative of a statewide business association, with an initial two-year
term;
4. one economic development expert from the private sector, with an initial four-
year term;
5. one representative from a financial institution with expertise in transitions to
employee ownership, with an initial two-year term;
6. one economic development expert from the public sector, with an initial four-
year term; and
7. one representative from Commerce, with an initial four-year term.
The Commerce representative shall chair the first meeting, until a chair is elected. All
gubernatorial appointments must first be nominated from recognized organizations that
represent the entities or interests identified. After initial appointments, all members shall
serve four-year terms and hold office until successors are appointed.
The Commission shall develop, in consultation with Commerce, the rules and guidelines for
the administration of the program.
Business and Occupations Tax Credit. Beginning July 1, 2024, a business and occupation
tax credit for costs related to converting a qualifying business to an employee ownership
structure is established. The total amount of credits may not exceed $2 million per year and
are available on a first-in-time basis. Unused credit may be carried over up to 12 months
from the end of the tax reporting period in which the credit was earned.
Qualified businesses may receive up to:
• 50 percent of the conversion costs, not to exceed $25,000, to a worker-owner
cooperative or an employee ownership trust; or
• 50 percent of the conversion costs, not to exceed $100,000, to an ESOP.
This bill includes a tax preference performance statement. The Legislature’s specific public
policy objective is to encourage business owners to create an employee ownership plan or
employee ownership trust or convert to a worker-owner cooperative. If the review finds
that the number of employee ownership structures has increased, then the Legislature
intends for the Joint Legislative Audit and Review Committee to recommend extending the
expiration date of the tax preference.
Appropriation: None.
Fiscal Note: Requested on December 29, 2022.
Creates Committee/Commission/Task Force that includes Legislative members: Yes.
Effective Date: The bill contains several effective dates. Please refer to the bill.
Senate Bill Report -3- SB 5096
File and source
- File
- 2023-01-12_a30312_d247244_bill-report-5096-sba-bfgt-23.pdf
- Size
- 9,924 bytes
- SHA-256
- 3d959ce666901ab38bb85fd7a60dcc90655ef9e12d86984e529690b16ad11837
- Original
- app.leg.wa.gov