Fiscal Note — 1743 HB, Employee Ownership (Joint Legislative Audit and Review Committee)
Summary
Individual State Agency Fiscal Note for bill number 1743 HB, titled Employee ownership, from agency 014, the Joint Legislative Audit and Review Committee. Part I checks No Fiscal Impact and lists General Fund-State operating expenditures of 15,700 for 2023-25. The narrative states that 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. It describes a tax performance statement for the preference.
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“Fiscal Note — 1743 HB, Employee Ownership (Joint Legislative Audit and Review Committee).”
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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: Phone: Date:
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
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