Fiscal Note Summary — 1743 HB, Employee Ownership (Multiple Agency, 2/13/2023)
Summary
Multiple Agency Fiscal Note Summary for bill number 1743 HB, titled Employee ownership, followed by individual fiscal notes. The summary lists the Department of Revenue with estimated cash receipts of (229,000) for 2023-25 and the Department of Commerce with estimated operating expenditures of 1,754,384 for 2023-25. Its total estimated operating expenditures for 2023-25 are 2,253,584. The Department of Revenue note states that the department will use the standard process to adopt a new rule on employee ownership. The summary is marked Final 2/13/2023.
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Multiple Agency Fiscal Note Summary
Bill Number: 1743 HB Title: Employee ownership
Estimated Cash Receipts
Agency Name 2023-25 2025-27 2027-29
GF-State NGF-Outlook Total GF-State NGF-Outlook Total GF-State NGF-Outlook Total
Office of State Non-zero but indeterminate cost and/or savings. Please see discussion.
Treasurer
Department of (229,000) (229,000) (229,000) (852,000) (852,000) (852,000) (925,000) (925,000) (925,000)
Revenue
Total $ (229,000) (229,000) (229,000) (852,000) (852,000) (852,000) (925,000) (925,000) (925,000)
Estimated Operating Expenditures
Agency Name 2023-25 2025-27 2027-29
FTEs GF-State NGF-Outlook Total FTEs GF-State NGF-Outlook Total FTEs GF-State NGF-Outlook Total
Joint Legislative .0 15,700 15,700 15,700 .1 17,800 17,800 17,800 .2 77,300 77,300 77,300
Audit and Review
Committee
Office of State .0 0 0 0 .0 0 0 0 .0 0 0 0
Treasurer
Department of 3.7 1,754,384 1,754,384 1,754,384 3.7 1,455,106 1,455,106 1,455,106 3.7 1,162,306 1,162,306 1,162,306
Commerce
Department of 1.3 483,500 483,500 483,500 .2 41,800 41,800 41,800 .2 41,800 41,800 41,800
Revenue
Total $ 5.0 2,253,584 2,253,584 2,253,584 4.0 1,514,706 1,514,706 1,514,706 4.1 1,281,406 1,281,406 1,281,406
Estimated Capital Budget Expenditures
Agency Name 2023-25 2025-27 2027-29
FTEs Bonds Total FTEs Bonds Total FTEs Bonds Total
Joint Legislative Audit .0 0 0 .0 0 0 .0 0 0
and Review Committee
Office of State Treasurer .0 0 0 .0 0 0 .0 0 0
Department of Commerce .0 0 0 .0 0 0 .0 0 0
Department of Revenue .0 0 0 .0 0 0 .0 0 0
Total $ 0.0 0 0 0.0 0 0 0.0 0 0
Estimated Capital Budget Breakout
FNPID 66793
:
FNS029 Multi Agency rollup
Prepared by: Cheri Keller, OFM Phone: Date Published:
(360) 584-2207 Final 2/13/2023
FNPID 66793
:
FNS029 Multi Agency rollup
Individual State Agency Fiscal Note
Bill Number: 1743 HB Title: Employee ownership Agency: 014-Joint Legislative Audit
and Review Committee
Part I: Estimates
No Fiscal Impact
Estimated Cash Receipts to:
NONE
Estimated Operating Expenditures from:
FY 2024 FY 2025 2023-25 2025-27 2027-29
FTE Staff Years 0.0 0.0 0.0 0.1 0.2
Account
General Fund-State 001-1 11,200 4,500 15,700 17,800 77,300
Total $ 11,200 4,500 15,700 17,800 77,300
Estimated Capital Budget Impact:
NONE
The cash receipts and expenditure estimates on this page represent the most likely fiscal impact. Factors impacting the precision of these estimates,
and alternate ranges (if appropriate), are explained in Part II.
Check applicable boxes and follow corresponding instructions:
If fiscal impact is greater than $50,000 per fiscal year in the current biennium or in subsequent biennia, complete entire fiscal note
X
form Parts I-V.
If fiscal impact is less than $50,000 per fiscal year in the current biennium or in subsequent biennia, complete this page only (Part I).
Capital budget impact, complete Part IV.
Requires new rule making, complete Part V.
Legislative Contact: Cassie Jones Phone: 360-786-7303 Date: 02/03/2023
Agency Preparation: Dana Lynn Phone: 360-786-5177 Date: 02/06/2023
Agency Approval: Eric Thomas Phone: 360 786-5182 Date: 02/06/2023
OFM Review: Gaius Horton Phone: (360) 819-3112 Date: 02/07/2023
Form FN (Rev 1/00) 182,224.00 Request # 35-1
FNS063 Individual State Agency Fiscal Note 1 Bill # 1743 HB
Part II: Narrative Explanation
II. A - Brief Description Of What The Measure Does That Has Fiscal Impact
Significant provisions of the bill and any related workload or policy assumptions that have revenue or expenditure impact on the responding agency by
section number.
The bill creates a new B&O tax preference for costs related to converting a qualifying business to a worker-owned
cooperative, employee ownership trust, or employee stock ownership plan.
TAX PERFORMANCE STATEMENT DETAILS
SECTION 4 provides a tax preference performance statement that categorizes the preference as intended to induce certain
designated behavior by taxpayers, as indicated under RCW 82.32.808(2)(a).
The specific public policy objective is stated to encourage business owners to create an employee stock ownership plan or
employee ownership trust, or to convert to a worker-owned cooperative that allows the company to share ownership with
their employees without requiring employees to invest their own money.
If a review finds that the number of businesses in the state offering such plans or ones that have converted to
worker-owned cooperatives has increased because of the tax credit, the Legislature intends the Legislative Auditor to
recommend extending the expiration date of the preference.
JLARC staff is to access and use any relevant data collected by the state.
REST OF BILL AND TAX PREFERENCE DETAILS
SECTION 1 is a new section noting legislative findings on encouraging employee ownership structures.
SECTION 2 creates a new section in chapter 43.330 RCW establishing the Washington employee ownership program to
support businesses considering a sale to an employee ownership structure and defining terms.
SECTION 3 creates a new section in chapter 43.330 RCW detailing membership requirements for the Washington
employee ownership commission, and its responsibilities.
SECTION 5 is a new section in chapter 82.04 RCW allowing businesses to take a credit against their B&O tax for costs
related to converting a qualifying business to a worker-owned cooperative, employee ownership trust, or an employee stock
ownership plan. The credit is equal to: a) Up to 50% of conversion costs not exceeding $25,000 for converting to a
worker-owned cooperative or an employee ownership trust; or b) Up to 50% of conversion costs not exceeding $100,000
for converting to an employee stock ownership plan.
Details on credit use are provided. Total annual credits statewide are capped at $2 million. Credits are authorized on a
first-in-time basis. Further administrative details and definitions are provided. No credits can be claimed on returns for tax
periods on or after July 1, 2030. The section expires July 1, 2030.
SECTION 6 is a new section in chapter 43.330 RCW creating the employee ownership revolving loan program with the
state treasurer.
SECTION 7 notes sections 4 and 5 (tax preference details) take effect July 1, 2024.
II. B - Cash receipts Impact
Cash receipts impact of the legislation on the responding agency with the cash receipts provisions identified by section number and when appropriate, the
detail of the revenue sources. Description of the factual basis of the assumptions and the method by which the cash receipts impact is derived. Explanation
of how workload assumptions translate into estimates. Distinguished between one time and ongoing functions.
Employee ownership 014-Joint Legislative Audit and Review Committee
Form FN (Rev 1/00) 182,224.00 Request # 35-1
FNS063 Individual State Agency Fiscal Note 2 Bill # 1743 HB
II. C - Expenditures
Agency expenditures necessary to implement this legislation (or savings resulting from this legislation), with the provisions of the legislation that result in
the expenditures (or savings) identified by section number. Description of the factual basis of the assumptions and the method by which the expenditure
impact is derived. Explanation of how workload assumptions translate into cost estimates. Distinguished between one time and ongoing functions.
JLARC staff would contact and work with the Department of Revenue and other appropriate agencies or organizations
immediately after passage of the bill to ensure project contacts are established and any other necessary data for JLARC
staff’s future evaluation needs are identified and collected. JLARC will likely review the preference in 2028.
The expenditure detail reflects work conducted to prepare for the future review of the preference as well conducting the
review in 2027-2028.
This tax preference review may require additional resources. The audit will be conducted and presented to JLARC
consistent with the processes used for other tax preference reviews. Based on all tax preference legislation that is passed,
JLARC may subsequently determine that it can absorb the costs for this proposed bill in its base budget, if the workload of
other enacted tax preference legislation does not exceed current staffing. JLARC will assess all of the tax preference
reviews mandated in the 2023 legislative session.
This audit will require an estimated 5 audit months.
JLARC Audit Months: JLARC calculates its staff resources in "Audit Months" to estimate the time and effort to undertake
and complete its studies. An "Audit Month" reflects a JLARC analyst’s time for a month, together with related
administrative, support, and goods/services costs. JLARC’s anticipated 2021-23 costs are calculated at approximately
$22,100 per audit month.
Part III: Expenditure Detail
III. A - Operating Budget Expenditures
Account Account Title Type FY 2024 FY 2025 2023-25 2025-27 2027-29
001-1 General Fund State 11,200 4,500 15,700 17,800 77,300
Total $ 11,200 4,500 15,700 17,800 77,300
III. B - Expenditures by Object Or Purpose
FY 2024 FY 2025 2023-25 2025-27 2027-29
FTE Staff Years 0.1 0.2
A-Salaries and Wages 7,200 2,900 10,100 11,500 50,000
B-Employee Benefits 2,300 900 3,200 3,600 15,800
C-Professional Service Contracts
E-Goods and Other Services 1,500 600 2,100 2,400 10,500
G-Travel 200 100 300 300 1,000
J-Capital Outlays
M-Inter Agency/Fund Transfers
N-Grants, Benefits & Client Services
P-Debt Service
S-Interagency Reimbursements
T-Intra-Agency Reimbursements
9-
Total $ 11,200 4,500 15,700 17,800 77,300
Employee ownership 014-Joint Legislative Audit and Review Committee
Form FN (Rev 1/00) 182,224.00 Request # 35-1
FNS063 Individual State Agency Fiscal Note 3 Bill # 1743 HB
III. C - Operating FTE Detail: List FTEs by classification and corresponding annual compensation. Totals need to agree with total FTEs in
Part I and Part IIIA
Job Classification Salary FY 2024 FY 2025 2023-25 2025-27 2027-29
Research Analyst 126,694 0.1 0.2
Support staff 89,671 0.1
Total FTEs 0.1 0.2
III. D - Expenditures By Program (optional)
NONE
Part IV: Capital Budget Impact
IV. A - Capital Budget Expenditures
NONE
IV. B - Expenditures by Object Or Purpose
NONE
IV. C - Capital Budget Breakout
Acquisition and construction costs not reflected elsewhere on the fiscal note and description of potential financing methods.
NONE
IV. D - Capital FTE Detail: FTEs listed by classification and corresponding annual compensation. Totals agree with total FTEs in Part IVB.
NONE
Part V: New Rule Making Required
Provisions of the bill that require the agency to adopt new administrative rules or repeal/revise existing rules.
Employee ownership 014-Joint Legislative Audit and Review Committee
Form FN (Rev 1/00) 182,224.00 Request # 35-1
FNS063 Individual State Agency Fiscal Note 4 Bill # 1743 HB
Individual State Agency Fiscal Note
Bill Number: 1743 HB Title: Employee ownership Agency: 090-Office of State Treasurer
Part I: Estimates
No Fiscal Impact
Estimated Cash Receipts to:
Non-zero but indeterminate cost and/or savings. Please see discussion.
Estimated Operating Expenditures from:
NONE
Estimated Capital Budget Impact:
NONE
The cash receipts and expenditure estimates on this page represent the most likely fiscal impact. Factors impacting the precision of these estimates,
and alternate ranges (if appropriate), are explained in Part II.
Check applicable boxes and follow corresponding instructions:
If fiscal impact is greater than $50,000 per fiscal year in the current biennium or in subsequent biennia, complete entire fiscal note
form Parts I-V.
X If fiscal impact is less than $50,000 per fiscal year in the current biennium or in subsequent biennia, complete this page only (Part I).
Capital budget impact, complete Part IV.
Requires new rule making, complete Part V.
Legislative Contact: Cassie Jones Phone: 360-786-7303 Date: 02/03/2023
Agency Preparation: Dan Mason Phone: (360) 902-8990 Date: 02/06/2023
Agency Approval: Dan Mason Phone: (360) 902-8990 Date: 02/06/2023
OFM Review: Amy Hatfield Phone: (360) 280-7584 Date: 02/07/2023
Form FN (Rev 1/00) 182,124.00 Request # 058-1
FNS063 Individual State Agency Fiscal Note 1 Bill # 1743 HB
Part II: Narrative Explanation
II. A - Brief Description Of What The Measure Does That Has Fiscal Impact
Significant provisions of the bill and any related workload or policy assumptions that have revenue or expenditure impact on the responding agency by
section number.
HB 1743 creates the employee ownership revolving loan program account, coupled with the general fund as the recipient of
the earnings from investments under RCW 43.79A.040(4).
II. B - Cash receipts Impact
Cash receipts impact of the legislation on the responding agency with the cash receipts provisions identified by section number and when appropriate, the
detail of the revenue sources. Description of the factual basis of the assumptions and the method by which the cash receipts impact is derived. Explanation
of how workload assumptions translate into estimates. Distinguished between one time and ongoing functions.
Projected cash flows are currently unavailable; therefore, estimated earnings from investments are indeterminable.
There may be an impact on the debt service limitation calculation. Changes to the earnings credited to the general fund
impacts, by an equal amount, general state revenues.
II. C - Expenditures
Agency expenditures necessary to implement this legislation (or savings resulting from this legislation), with the provisions of the legislation that result in
the expenditures (or savings) identified by section number. Description of the factual basis of the assumptions and the method by which the expenditure
impact is derived. Explanation of how workload assumptions translate into cost estimates. Distinguished between one time and ongoing functions.
Part III: Expenditure Detail
III. A - Operating Budget Expenditures
NONE
III. B - Expenditures by Object Or Purpose
NONE
III. C - Operating FTE Detail: FTEs listed by classification and corresponding annual compensation. Totals agree with total FTEs in Part I
and Part IIIA.
NONE
III. D - Expenditures By Program (optional)
NONE
Part IV: Capital Budget Impact
IV. A - Capital Budget Expenditures
NONE
IV. B - Expenditures by Object Or Purpose
NONE
IV. C - Capital Budget Breakout
Acquisition and construction costs not reflected elsewhere on the fiscal note and description of potential financing methods.
NONE
Employee ownership 090-Office of State Treasurer
Form FN (Rev 1/00) 182,124.00 Request # 058-1
FNS063 Individual State Agency Fiscal Note 2 Bill # 1743 HB
IV. D - Capital FTE Detail: FTEs listed by classification and corresponding annual compensation. Totals agree with total FTEs in Part IVB.
NONE
Part V: New Rule Making Required
Provisions of the bill that require the agency to adopt new administrative rules or repeal/revise existing rules.
Employee ownership 090-Office of State Treasurer
Form FN (Rev 1/00) 182,124.00 Request # 058-1
FNS063 Individual State Agency Fiscal Note 3 Bill # 1743 HB
Individual State Agency Fiscal Note
Bill Number: 1743 HB Title: Employee ownership Agency: 103-Department of Commerce
Part I: Estimates
No Fiscal Impact
Estimated Cash Receipts to:
NONE
Estimated Operating Expenditures from:
FY 2024 FY 2025 2023-25 2025-27 2027-29
FTE Staff Years 3.7 3.7 3.7 3.7 3.7
Account
General Fund-State 001-1 876,831 877,553 1,754,384 1,455,106 1,162,306
Total $ 876,831 877,553 1,754,384 1,455,106 1,162,306
Estimated Capital Budget Impact:
NONE
The cash receipts and expenditure estimates on this page represent the most likely fiscal impact. Factors impacting the precision of these estimates,
and alternate ranges (if appropriate), are explained in Part II.
Check applicable boxes and follow corresponding instructions:
If fiscal impact is greater than $50,000 per fiscal year in the current biennium or in subsequent biennia, complete entire fiscal note
X
form Parts I-V.
If fiscal impact is less than $50,000 per fiscal year in the current biennium or in subsequent biennia, complete this page only (Part I).
Capital budget impact, complete Part IV.
Requires new rule making, complete Part V.
Legislative Contact: Cassie Jones Phone: 360-786-7303 Date: 02/03/2023
Agency Preparation: Karen McArthur Phone: 360-725-4027 Date: 02/07/2023
Agency Approval: Jason Davidson Phone: 360-725-5080 Date: 02/07/2023
OFM Review: Gwen Stamey Phone: (360) 790-1166 Date: 02/09/2023
Form FN (Rev 1/00) 182,275.00 Request # 162-700-1
FNS063 Individual State Agency Fiscal Note 1 Bill # 1743 HB
Part II: Narrative Explanation
II. A - Brief Description Of What The Measure Does That Has Fiscal Impact
Significant provisions of the bill and any related workload or policy assumptions that have revenue or expenditure impact on the responding agency by
section number.
Section 2 creates the Washington employee ownership program in the Department of Commerce (department) and directs
the department how to implement the program. By December 1st of each year, the department must submit report to the
legislature on program activities. The first report must include rules and guidelines for the administration of the program.
Section 3 creates the Washington employee ownership commission (commission) to exercise the powers to develop and
oversee the program. One representative from the department will chair the first meeting prior to the election of a chair.
The commission in consultation with the director shall development rules and guidelines to administer the program.
Section 6 creates the employee ownership revolving loan program account at the state treasury to be used only for the
purpose of the program.
II. B - Cash receipts Impact
Cash receipts impact of the legislation on the responding agency with the cash receipts provisions identified by section number and when appropriate, the
detail of the revenue sources. Description of the factual basis of the assumptions and the method by which the cash receipts impact is derived. Explanation
of how workload assumptions translate into estimates. Distinguished between one time and ongoing functions.
II. C - Expenditures
Agency expenditures necessary to implement this legislation (or savings resulting from this legislation), with the provisions of the legislation that result in
the expenditures (or savings) identified by section number. Description of the factual basis of the assumptions and the method by which the expenditure
impact is derived. Explanation of how workload assumptions translate into cost estimates. Distinguished between one time and ongoing functions.
To complete this work the department estimates the following will be needed.
0.20 FTE WMS Small Business Finance and Community Support Managing Director (420 hours) to provide leadership,
oversight, supervision, rules coordination and decision-making over-all elements of the program.
1.0 FTE Commerce Specialist 4 (2,088 hours) to function as an agency expert for the program. Create and work with a
network of technical support and service providers to work with businesses considering employee ownership structures;
work with state agencies regarding regulations and programs that affect employee-owned business; create partnership with
relevant private, nonprofit, and public organizations to promote employee ownership benefits and successful models; work
with the department of financial institutions and other appropriate entities to shape and implement program guidance; look
for and apply for federal funding to establish a revolving loan program to assist business in the transition to employee
ownership.
1.0 FTE Commerce Specialist 3 (2,088 hours) to provide program data analysis and research to the Commerce Specialist 4
in the creation of the program, procure and manage contracts, review and process payments to vendors.
1.0 FTE Administrative Assistant 2 (2,088 hours) to provide administrative support and procedural guidance for the program,
schedule commission meetings, data collection, and aid in applying for federal funds.
Salaries and Benefits:
FY24: $344,965
FY25-FY29: $356,780 each fiscal year
Professional Service Contracts:
The department assumes $300,000 ($250 per hour x 1,200 hours) in FY24-FY26 to contract with firms as provided for in
Section 2(3) for the purpose of the program and for translation services.
Employee ownership 103-Department of Commerce
Form FN (Rev 1/00) 182,275.00 Request # 162-700-1
FNS063 Individual State Agency Fiscal Note 2 Bill # 1743 HB
FY24-FY26: $300,000 each fiscal year
Goods, Services, Equipment and Travel:
FY24: $118,373
FY25-FY27: $103,392 per fiscal year
FY28: $110,592
FY29: $103,392
Intra-Agency Reimbursements:
FY24: $113,493
FY25-FY29: $117,381 each fiscal year
*Note: Standard goods and services costs include supplies and materials, employee development and training, Attorney
General costs, central services charges and agency administration. Agency administration costs (e.g., payroll, HR, IT) are
funded under a federally approved cost allocation plan.
===================================
Total Costs:
FY24: $876,831
FY25-FY26: $877,553 per fiscal year
FY27: $577,553
FY28: $584,753
FY29: $577,553
Part III: Expenditure Detail
III. A - Operating Budget Expenditures
Account Account Title Type FY 2024 FY 2025 2023-25 2025-27 2027-29
001-1 General Fund State 876,831 877,553 1,754,384 1,455,106 1,162,306
Total $ 876,831 877,553 1,754,384 1,455,106 1,162,306
III. B - Expenditures by Object Or Purpose
FY 2024 FY 2025 2023-25 2025-27 2027-29
FTE Staff Years 3.7 3.7 3.7 3.7 3.7
A-Salaries and Wages 253,781 261,394 515,175 522,788 522,788
B-Employee Benefits 91,184 95,386 186,570 190,772 190,772
C-Professional Service Contracts 300,000 300,000 600,000 300,000
E-Goods and Other Services 97,373 97,392 194,765 194,784 194,784
G-Travel 6,000 6,000 12,000 12,000 12,000
J-Capital Outlays 15,000 15,000 7,200
M-Inter Agency/Fund Transfers
N-Grants, Benefits & Client Services
P-Debt Service
S-Interagency Reimbursements
T-Intra-Agency Reimbursements 113,493 117,381 230,874 234,762 234,762
9-
Total $ 876,831 877,553 1,754,384 1,455,106 1,162,306
Employee ownership 103-Department of Commerce
Form FN (Rev 1/00) 182,275.00 Request # 162-700-1
FNS063 Individual State Agency Fiscal Note 3 Bill # 1743 HB
III. C - Operating FTE Detail: List FTEs by classification and corresponding annual compensation. Totals need to agree with total FTEs in
Part I and Part IIIA
Job Classification Salary FY 2024 FY 2025 2023-25 2025-27 2027-29
Administrative Assistant 2 51,302 1.0 1.0 1.0 1.0 1.0
Commerce Specialist 3 86,159 1.0 1.0 1.0 1.0 1.0
Commerce Specialist 4 90,523 1.0 1.0 1.0 1.0 1.0
Financial Services - Indirect 111,168 0.5 0.5 0.5 0.5 0.5
WMS Band 2 128,983 0.2 0.2 0.2 0.2 0.2
Total FTEs 3.7 3.7 3.7 3.7 3.7
III. D - Expenditures By Program (optional)
NONE
Part IV: Capital Budget Impact
IV. A - Capital Budget Expenditures
NONE
IV. B - Expenditures by Object Or Purpose
NONE
IV. C - Capital Budget Breakout
Acquisition and construction costs not reflected elsewhere on the fiscal note and description of potential financing methods.
NONE
IV. D - Capital FTE Detail: FTEs listed by classification and corresponding annual compensation. Totals agree with total FTEs in Part IVB.
NONE
Part V: New Rule Making Required
Provisions of the bill that require the agency to adopt new administrative rules or repeal/revise existing rules.
Employee ownership 103-Department of Commerce
Form FN (Rev 1/00) 182,275.00 Request # 162-700-1
FNS063 Individual State Agency Fiscal Note 4 Bill # 1743 HB
Department of Revenue Fiscal Note
Bill Number: 1743 HB Title: Employee ownership Agency: 140-Department of Revenue
Part I: Estimates
No Fiscal Impact
Estimated Cash Receipts to:
Account FY 2024 FY 2025 2023-25 2025-27 2027-29
GF-STATE-State (229,000) (229,000) (852,000) (925,000)
01 - Taxes 05 - Bus and Occup Tax
Total $ (229,000) (229,000) (852,000) (925,000)
Estimated Expenditures from:
FY 2024 FY 2025 2023-25 2025-27 2027-29
FTE Staff Years 2.4 0.2 1.3 0.2 0.2
Account
GF-STATE-State 001-1 462,600 20,900 483,500 41,800 41,800
Total $ 462,600 20,900 483,500 41,800 41,800
Estimated Capital Budget Impact:
NONE
The cash receipts and expenditure estimates on this page represent the most likely fiscal impact. Factors impacting the precision of these estimates,
and alternate ranges (if appropriate), are explained in Part II.
Check applicable boxes and follow corresponding instructions:
If fiscal impact is greater than $50,000 per fiscal year in the current biennium or in subsequent biennia, complete entire fiscal note
X
form Parts I-V.
If fiscal impact is less than $50,000 per fiscal year in the current biennium or in subsequent biennia, complete this page only (Part I).
Capital budget impact, complete Part IV.
X Requires new rule making, complete Part V.
Legislative Contact: Cassie Jones Phone:
360-786-7303 Date: 02/03/2023
Agency Preparation: Sara del Moral Phone:
360-534-1525 Date: 02/08/2023
Agency Approval: Marianne McIntosh Phone:
360-534-1505 Date: 02/08/2023
OFM Review: Cheri Keller Phone:
(360) 584-2207 Date: 02/08/2023
Request # 1743-1-1
Form FN (Rev 1/00) 182,494.00 1 Bill # 1743 HB
FNS062 Department of Revenue Fiscal Note
Part II: Narrative Explanation
II. A - Brief Description Of What The Measure Does That Has Fiscal Impact
Significant provisions of the bill and any related workload or policy assumptions that have revenue or expenditure impact on the responding agency by
section number.
This fiscal note addresses sections 4 and 5 of the bill, which impact the Department of Revenue (department).
CURRENT LAW:
The business and occupation (B&O) tax is a gross receipts tax. It is measured on the value of products, gross proceeds of
sale, or gross income of each business. The tax rate varies by classification. Rates for the major classifications range from
0.471% to 1.750%. Preferential rates are available for certain activities.
Several credits against the B&O tax are available. However, state law does not allow a credit for the cost of converting a
business to an employee-owned structure.
PROPOSAL:
A credit against the B&O tax is provided for each qualifying business that converts to using any of the following employee
ownership structures:
- employee stock ownership plan (ESOP)
- worker-owned cooperative
- employee ownership trust
For each business that converts to using an ESOP, the credit is equal to the greater of the following:
- 50% of conversion costs
- $100,000
For each business converting to a worker-owned cooperative or employee ownership trust, the credit is equal to the greater
of the following:
- 50% of conversion costs
- $25,000
Each business may carry over unused credit to subsequent tax periods, as long it does so within 12 months of conversion.
Statewide, the total amount of credits authorized is $2 million for each calendar year.
“Conversion costs” means amounts spent on accounting, legal and other professional services to pay for a feasibility study
and/or a transition to an employee-owned structure.
“Qualified business” means an entity that is:
- subject to the B&O tax
- does not already have one of employee-owned structures for which the credit is available
- approved by the department for the credit.
The credit expires on July 1, 2030.
EFFECTIVE DATE:
The bill takes effect 90 days after final adjournment of the session, except for the sections that create the credit, which take
effect on July 1, 2024.
Request # 1743-1-1
Form FN (Rev 1/00) 182,494.00 2 Bill # 1743 HB
FNS062 Department of Revenue Fiscal Note
II. B - Cash receipts Impact
Cash receipts impact of the legislation on the responding agency with the cash receipts provisions identified by section number and when appropriate,
the detail of the revenue sources. Description of the factual basis of the assumptions and the method by which the cash receipts impact is derived.
Explanation of how workload assumptions translate into estimates. Distinguished between one time and ongoing functions.
ASSUMPTIONS:
- The department conducts significant outreach about the credit, leading to a greater number of conversions.
- The number of businesses annually converting to employee ownership is:
- 13 during the first year the credit is available
- 15 for subsequent years
- All converting businesses use the credit.
- For each converted business that uses the credit, the credit equals:
- $45,000 for an employee stock ownership plan
- $25,000 for a worker-owned cooperative
- Businesses using the credit in Washington are similar to Colorado businesses granted a credit for conversions during 2022
with regards to annual revenues and type of employee ownership.
- The B&O tax base grows as forecasted by the Economic and Revenue Forecast Council.
- Currently, tribes with compacts receive a share of certain business and occupation taxes (RCW 43.06.523). Under this
proposal the amount of revenue shared with tribes and local governments may decline.
DATA SOURCES:
- Colorado Office of Economic Development and International Trade
- Economic and Revenue Forecast Council, November 2022 forecast
- National Center for Employee Ownership
REVENUE ESTIMATES:
This bill decreases state revenues by an estimated $229,000 in the 11 months of impacted collections in fiscal year 2025, and
by $417,000 in fiscal Year 2026, the first full year of impacted collections.
STATE GOVERNMENT IMPACT:
State Government (cash basis, $000):
FY 2024 - $ 0
FY 2025 - ($ 229)
FY 2026 - ($ 417)
FY 2027 - ($ 435)
FY 2028 - ($ 453)
FY 2029 - ($ 472)
LOCAL GOVERNMENT IMPACT:
Local Government, if applicable (cash basis, $000): None
II. C - Expenditures
Agency expenditures necessary to implement this legislation (or savings resulting from this legislation), with the provisions of the legislation that result in
the expenditures (or savings) identified by section number. Description of the factual basis of the assumptions and the method by which the expenditure
impact is derived. Explanation of how workload assumptions translate into cost estimates. Distinguished between one time and ongoing functions.
ASSUMPTIONS:
This bill affects less than 20 taxpayers annually.
FIRST YEAR COSTS:
The department will incur total costs of $462,600 in fiscal year 2024. These costs include:
Request # 1743-1-1
Form FN (Rev 1/00) 182,494.00 3 Bill # 1743 HB
FNS062 Department of Revenue Fiscal Note
Labor Costs - Time and effort equate to 2.4 FTEs.
- Adopt one new administrative rule.
- Set up, program and test computer systems for a new credit type. This includes a new credit ID and associated return
processing and system indicator codes, a new E-file worksheet, and modifications to reports and data files.
- Gathering requirements, implementation meetings, documentation, and testing of system changes due to new credit.
- Assist taxpayers with reporting questions and respond to inquiries via email, web message, and paper correspondence.
Object Costs - $132,000.
- Computer system changes, including contract programming.
SECOND YEAR COSTS:
The department will incur total costs of $20,900 in fiscal year 2025. These costs include:
Labor Costs - Time and effort equate to 0.2 FTE.
- Continued computer system testing, monitoring and maintenance for new credit.
- Process returns, verify credits taken and all associated work items, including issuing assessments for return errors and
underpayments.
ONGOING COSTS:
Ongoing costs for the 2026-27 biennium equal $41,800 and include similar activities described in the second-year costs. Time
and effort equate to 0.2 FTE.
Part III: Expenditure Detail
III. A - Expenditures by Object Or Purpose
FY 2024 FY 2025 2023-25 2025-27 2027-29
FTE Staff Years 2.4 0.2 1.3 0.2 0.2
A-Salaries and Wages 208,000 13,500 221,500 27,000 27,000
B-Employee Benefits 68,600 4,500 73,100 9,000 9,000
C-Professional Service Contracts 132,000 132,000
E-Goods and Other Services 37,100 2,300 39,400 4,600 4,600
J-Capital Outlays 16,900 600 17,500 1,200 1,200
Total $ $462,600 $20,900 $483,500 $41,800 $41,800
III. B - Detail: FTEs listed by classification and corresponding annual compensation. Totals agree with total FTEs in Part I and Part IIIA.
Job Classification Salary FY 2024 FY 2025 2023-25 2025-27 2027-29
EMS BAND 4 126,619 0.0 0.0
EMS BAND 5 147,919 0.0 0.0
EXCISE TAX EX 3 61,632 0.1 0.1 0.1 0.1 0.1
IT SYS ADM-JOURNEY 92,844 1.6 0.8
MGMT ANALYST4 73,260 0.6 0.1 0.4 0.1 0.1
TAX POLICY SP 2 75,120 0.0 0.0
TAX POLICY SP 3 85,020 0.1 0.0
TAX POLICY SP 4 91,524 0.0 0.0
WMS BAND 3 107,685 0.0 0.0
Total FTEs 2.4 0.2 1.4 0.2 0.2
Request # 1743-1-1
Form FN (Rev 1/00) 182,494.00 4 Bill # 1743 HB
FNS062 Department of Revenue Fiscal Note
III. C - Expenditures By Program (optional)
NONE
Part IV: Capital Budget Impact
IV. A - Capital Budget Expenditures
NONE
IV. B - Expenditures by Object Or Purpose
NONE
IV. C - Capital Budget Breakout
Acquisition and construction costs not reflected elsewhere on the fiscal note and description of potential financing methods.
NONE
Part V: New Rule Making Required
Provisions of the bill that require the agency to adopt new administrative rules or repeal/revise existing rules.
Should this legislation become law, the department will use the standard process to adopt WAC 458-20-NEW, titled: "New
rule on employee ownership". Persons affected by this rulemaking would include qualifying businesses that convert to
worker-owned cooperatives, employee ownership trusts, or employee stock ownership plans.
Request # 1743-1-1
Form FN (Rev 1/00) 182,494.00 5 Bill # 1743 HB
FNS062 Department of Revenue Fiscal Note
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